RBC, TD and CIBC lift profits as bank CEOs call the tariff fight manageable

Three of Canada's largest lenders reported higher third-quarter profits on Thursday, with RBC and TD topping analysts' expectations, despite a fresh escalation in the Canada-U.S. trade dispute. Royal Bank of Canada, TD Bank Group and CIBC all posted year-over-year gains for the quarter ended July 31, following results from BMO and Scotiabank earlier in the week.

Executives also sought to calm nerves about tariffs. RBC chief executive Dave McKay said the average effective tariff rate on Canadian exports "remains low at approximately six per cent," with most exports still facing no duty.

The numbers

TD's Canadian personal and commercial banking earned a record $2.10 billion, while its wholesale bank posted a record $743 million, up 87%. CIBC's reported result included about $269 million of charges tied to the announced sale of its stake in CIBC Caribbean to Butterfield.

• RBC: profit of $6.02 billion, up from $5.41 billion; adjusted earnings of $4.28 per share versus the $4.08 analysts expected, according to LSEG; revenue of $18.54 billion, up from $16.99 billion
• TD: profit of $4.62 billion, up 38% from $3.34 billion; adjusted earnings of $2.77 per share, well above the $2.47 consensus; revenue of $16.89 billion, up from $15.30 billion
• CIBC: profit of $2.41 billion, up from $2.10 billion; adjusted earnings of $2.73 per share, up from $2.16; revenue of $8.37 billion, up from $7.25 billion

Credit quality

Provisions for bad loans were mixed. RBC set aside $1.00 billion, up from $881 million a year earlier. TD's provisions fell to $917 million from $971 million, and the bank said it expects full-year provisions near the low end of its guidance range. CIBC's provisions were roughly flat at $564 million, compared with $559 million.

CIBC said it has added reserves for tariff risks, and that its most tariff-sensitive business loans account for less than 1% of its total loan portfolio. Earlier in the week, BMO's adjusted profit rose 19% and Scotiabank's profit rose to $2.95 billion; BMO's provisions for credit losses fell to $722 million from $797 million.

The counter-argument

Strong results do not remove the risks. The quarter closed on July 31, before 50% U.S. tariffs took effect on Aug. 22 and before Canada announced counter-tariffs. Job losses in exposed industries could show up in consumer and business loan performance in coming quarters.

Valuation is the other concern. Analysts viewed the results positively, but BNN Bloomberg noted that bank share prices had risen sharply this year, which can limit how much good news moves the stocks.

What it means for you

Big Six bank shares are core holdings in many Canadian portfolios and broad-market ETFs, largely for their dividends. This quarter suggests profits remain robust, but credit trends over the next few quarters will show how the trade dispute is affecting borrowers.

For investors, it can be worth checking how concentrated a portfolio is in financial stocks, since the TSX already leans heavily on banks. For borrowers, rising provisions at some lenders are a reminder to keep debt manageable if the economy slows. This is general information, not personalized advice.

Related

• Best Canadian bank stocks
• Dividend investing in Canada

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