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The RBC logo in Toronto on May 4. Royal Bank of Canada raised its quarterly dividend as it reported its second-quarter net income rose to $4.25 billion compared with $4.02 billion in the same quarter last year.Christopher Katsarov/The Canadian Press

Canada’s largest banks are releasing their second-quarter earnings this week and investors are expecting strong financial results.

On Wednesday, Bank of Montreal and Bank of Nova Scotia were the first of the Big Six banks to report, which cover the three months that ended April 30. CIBC, RBC and TD Bank released their results on Thursday and National Bank will round things out on Friday.

The latest results from BMO and Scotiabank marked a strong start to the banks’ earnings season, but analysts cautioned those results reflect conditions already distant in the rear-view mirror. Rising interest rates, a deteriorating economic environment marked by war in Ukraine and high inflation are increasing worries that central banks may raise rates too fast and push the economy into a recession. But the banks say they have seen few signs of such a case emerging so far.

“The macroeconomic backdrop for our key geographies remains positive,” said Scotiabank chief executive Brian Porter, on a conference call with analysts on Wednesday. “Despite the macroeconomic and geopolitical uncertainties in recent months, we are encouraged by the resilience of our businesses.”

Here’s a breakdown of the Big Six banks’ second-quarter earnings.

Bank of Montreal

Bank of Montreal BMO-T reported higher second-quarter profits on Wednesday, underpinned by robust demand for personal and commercial loans, and lower loan loss reserves than analysts anticipated.

In the second quarter, BMO earned $4.76-billion or $7.13 a share, compared with $1.3-billion or $1.91 a year earlier. The bank boosted its quarterly dividend by six cents to $1.39 per share. Adjusted profit rose 4 per cent compared with the same quarter in 2021 as higher interest rates helped increase margins on loans.

The bank reported overall loan growth of 9 per cent for the quarter from a year ago.

Central banks have been responding to rising prices by raising interest rates, leading to fears they could overstep and push the economy into a recession, but BMO says it hasn’t seen a retreat in the numbers yet.

“There’s certainly more uncertainty given some of the continued issues that we all know about, supply chain, inflation,” said David Casper, who leads North American commercial banking at BMO.

“But the demand for our clients’ products still is outstripping supply. So they’re still growing, they’re trying to keep up, and the other part of it is there continues to be, both in Canada and the U.S., more movement to onshoring, less reliance on foreign sourcing, more capital expenditure to improve productivity.”

Bank of Nova Scotia

Bank of Nova Scotia BNS-T reported higher second-quarter profit on Wednesday. Earnings increased 12 per cent compared with the same quarter a year earlier.

In the fiscal second quarter, Scotiabank earned $2.75-billion or $2.16 a share, up from $2.46-billion or $1.88 in the same quarter a year ago. Adjusted to exclude certain items, Scotiabank said it earned $2.18 a share, well above the consensus estimate of $1.98 among analysts, according to Refinitiv.

The bank increased its quarterly dividend three cents to $1.03 per share.

Meny Grauman, an analyst at Scotiabank, said in a note that while results from the quarter are by their very nature backward looking, it was encouraging not to see signs of a slowdown.

“The good news from these results is that there is no sign of recession anywhere in the numbers.”

Toronto-Dominion Bank

Toronto-Dominion Bank’s TD-T second-quarter profit beat analyst estimates thanks to growth in Canadian personal and commercial banking, improving loan margins and lower loan losses – all of which are common themes across the Big Six banks this earnings season.

TD reported its second-quarter net income totalled $3.81 billion or $2.07 a share, up 3 per cent from the year prior. However, the bank’s total profit included a one-time boost of $224-million stemming from a lawsuit settlement. After adjusting for one-time items, TD’s earnings amounted to $2.02 a share, down slightly from a year ago, but beating analyst estimates of $1.93.

Like many of its Big Six rivals, the bank also delivered strong revenue in its Canadian personal and commercial banking arm, with loan growth rising 9 per cent from a year earlier, driven by residential real estate and commercial lending. TD’s residential real estate lending business in Canada grew by 9 per cent from a year ago, while its commercial lending division grew by 16 per cent.

In the United States, TD’s retail segment also reported profit growth, albeit at a slower rate than in Canada. The U.S. division includes TD’s stake in Charles Schwab Corp., which hurt its earnings after profit from it fell 9 per cent from the year prior.

Canadian Imperial Bank of Commerce

Canadian Imperial Bank of Commerce CM-T reported Thursday that revenue climbed in the second quarter compared with last year, but earnings dipped as both spending to power growth and provisions for loan losses ate into profits at a time of increased uncertainty.

“There’s no doubt we’re all in a very fluid environment,” said chief executive officer Victor Dodig on an earnings call.

The bank still saw substantial growth with revenue of $5.38 billion, up 9 per cent from a year ago on broad-based loan and deposit growth, higher fee income and strong client-based trading activity. Revenue did, however, slip 2.3 per cent from the previous quarter.

After adjusting for special items, including costs related to CIBC’s acquisition of retailer Costco’s credit card portfolio, CIBC said it earned $1.77 a share. On average, analysts expected adjusted earnings of $1.80.

The bank raised its quarterly dividend by 2.5 cents a share to 83 cents.

Royal Bank of Canada

Royal Bank of Canada RY-T reported higher profit and raised its quarterly dividend as it sees risks related to the COVID-19 pandemic receding, which allowed it to claw back hundreds of millions of dollars in loan loss provisions.

In the fiscal second quarter, RBC earned $4.25-billion or $2.96 a share, compared with $4-billion or $2.76 in the same period last year. The bank raised its quarterly dividend by eight cents a share, or 7 per cent, to $1.28.

Provision for credit losses, which are the funds banks set aside to cover loans that could default, played a large role in RBC’s rising earnings. The bank had a net recovery of $342-million in provisions in the second quarter, whereas analysts had estimated it would add $223-million to reserves, according to Refinitiv.

RBC said that was “mainly driven by reduced uncertainty relating to the COVID-19 pandemic.” But it tempered its reserve releases because of what it called “increased downside risk, including rising inflation and interest rates.”

The bank’s revenue fell 3 per cent to $11.22-billion in the quarter, while expenses increased 1 per cent to $6.43-billion.

National Bank of Canada

National Bank of Canada NA-T reported an 11-per-cent rise in second-quarter profit on Friday and raised its quarterly dividend as all four of its main business units recorded higher earnings.

The Montreal-based bank earned $893-million, or $2.55 per share, in the quarter that ended April 30. That compared to $801-million or $2.25 per share, in the same period last year.

On average, analysts were expecting earnings of $2.27 per share, according to Refinitiv.

The bank raised its quarterly dividend by 5 cents, or 6 per cent, to 92 cents per share.

In the quarter, National Bank recorded only $3-million in provisions for credit losses. New provisions against loans that are past due were mostly offset by a recovery of provisions for loans that are still being paid back.

Profit from personal and commercial banking increased 3 per cent to $313-million. Residential mortgages were a source of strength once again, with balances up 9 per cent year over year, and commercial loans increased by 18 per cent.

With files from James Bradshaw, Tim Kiladze and The Canadian Press.

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