For the year-to-date period, Royal Bank (RY) traded in a wide range of USD 88 to 104. Ahead of its earnings report last week, RY stock lost 9.5% for the month. Shares rallied at first, while TD Bank (TD) resumed its decline.
What happened?
Royal Bank posted net earnings growth from stronger results in its personal and commercial banking and insurance business. Capital Markets was flat. Net interest income increased to C$6.29B, up from $5.27B last year.
TD posted Q3 earnings that missed Wall Street consensus estimates. It set aside a massive C$766M in provision for credit losses. This is up from C$351M last year. TD stock did not react bullishly to the up to 90 million in stock buyback. That is on top of its current 30 million share repurchase plan.
Canadian banks have serious trouble ahead. The rising PCL is necessary to cover residential mortgage losses. Consumers are struggling from the over 450 bps rate hike in the year. Rates are at levels not seen in two decades.
This week, the Bank of Montreal (BMO) and Scotiabank (BNS) will post results. Watch CIBC (CM) closely. Expect those banks to raise their PCL and comment on the weak mortgage market.
