The Big Six do very well: Wealth management and capital markets bright spots.

T he big six Canadian banks have now all reported their third-quarter earnings and, generally speaking, they are doing very well indeed. This time, just to change things up a bit, let’s look at them in reverse order of market capitalization.

As you will see, there is a common theme: while net interest margins are close to a four-year low, the banks are making profits from gains in asset management, investment management and in some cases consumer lending as well.

 

The average interest margin, or the difference between what banks borrow at and what they lend at, was 2.04% this past quarter, versus 2.10% a year earlier. In 2009, a record low for bank interest margins, the margin was 1.90%.

National Bank of Canada (TSX:NA), market cap $12.7 billion, made $2.39 per share in this year’s third quarter. That’s 12% more than the $2.14 per share it made in the same quarter last year.

Capital market trading and wealth management fees helped the bank make a record profit of $419 million that beat analysts’ expectations.

Canadian Imperial Bank of Commerce (TSX:CM), market cap $31.5 billion, increased its profit by 8%, generating earnings of $2.16 per share compared with $2.00 per share last year, and slightly beating expectations.

In dollars, CM made $890 million, the bank’s best third-quarter profit ever. CIBC currently has $6 billion in Aerogold card loans; however, it has just made a deal with TD, which is to become the primary issuer of Aerogold cards by the end of the year.

Bank of Montreal (TSX:BMO), market cap $41.8 billion, made $1.68 per share, a Big-Six-best 18% increase over earnings of $1.42 per share a year ago. Wealth management stood out as helping, with higher assets under management and higher transaction volume. BMO made $1.14 billion, a record and beating expectations.

Bank of Nova Scotia (TSX:BNS), market cap $69.8 billion, made $1.77 billion, beating expectations. That’s equivalent to $1.37 per share, up 11% from $1.23 per share.

Wealth management stood out for BNS as well.

Toronto-Dominion Bank (TSX:TD), market cap $80.6 billion, reported some good news and some bad news. Earnings were $1.58 per share, far surpassing analyst expectations of $1.41 per share. However, they were down 11% from earnings of $1.78 per share in the same quarter last year, when it posted record earnings.

Profit at TD was $1.53 billion, and Canadian personal and commercial banking was a bright spot, offset somewhat by a pre-announced loss of $292 million in its insurance unit from higher costs of settling personal injury automobile claims in Ontario. Floods in Southern Alberta and Toronto added another $125 million in losses related to insuring homes in those areas.

Royal Bank of Canada (TSX:RY), market cap $93.0 billion, generated a third-quarter profit of $1.52 per share, up 3% from $1.47 per share last year and beating estimates. In aggregate, that’s a profit of $2.3 billion. Canadian personal and commercial banking and wealth management posted record profits.

 

 

 

Making Money off the Banks (for a change)

Sometimes the profits that the big Canadian banks make give us pause. Take, for example, the third quarter of fiscal 2013. In just those three months, Canada’s Big Six banks made a combined profit of .$9.05 billion. That’s in just 91 days!

That’s more than $88, 461,000 per day, holidays included! $8 billion a quarter is $32 billion a year being extracted from the economy in favor of six companies. Sometimes we think the economy would be better off with some of that $32 billion left back in the economy. Sometimes we think that paying $4.00 per month just to have a chequing account (that of course doesn’t pay interest, and charges more than $4.00 if the number of debits exceeds a certain number) is a bit much.

But then we give our head a shake and think we’re just one person, and that it’s only $4.00. We don’t mind being just one person paying $4.00 per month, and other assorted bank fees and bank charges, as long as millions of other people are paying them too, and that we can somehow benefit by more than $4.00 per month if we only turn the tables a bit.

And it’s easy to do: just become a bank shareholder. And immediately, you have millions of people paying you fees, with you collec ting your share of more than $88 million per day.

Three Dividend Payout increases

It’s actually not that hard to do to make more on our bank stocks than our $4.00 monthly bank charge costs us. Especially if the banks we own keep increasing their dividends, dividends which are fuelled by the fees the banks charge.

In the third quarter, three banks announced higher payouts.

Bank of Nova Scotia (TSX:BNS) was the first to announce a dividend increase in the quarter. The new dividend of $0.62 per quarter, raised from $0.60 previously, brings the annual rate up to $2.48 per share, a 3.33% increase.

Royal Bank of Canada (TSX:RY) raised its dividend by four cents or 6.35% to $0.67 per share, or $2.68 annually, first payable on November 22, record 24 October.

Toronto-Dominion Bank (TSX:TD) upped its payout, also by four cents, to $0.85 per share or $3.40 annually, a 4.94% increase. The new rate is payable 31 October, record 3 October.

 

 

 

 

– Money Reporter

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