The final two banks to report their year-end financial results continued a trend that has seen the big banks slash their payrolls to meet threats posed by slowing revenue growth, a weak economy and rising competition from new financial players.
Toronto-Dominion Bank and Canadian Imperial Bank of Commerce concluded the fourth-quarter reporting season on Thursday, announcing large costs related to job cuts that are designed to increase efficiency in the years ahead.
"The difficult measures we took this year to permanently reduce our cost structure and increase expense discipline were necessary and effective," Bharat Masrani, TD's chief executive , said during a conference call with analysts. "The organizational review, which is largely behind us, will enhance our competitiveness by making us more agile …," he said.
TD's employee count fell by 798 in the fourth quarter and a total of 1,594 during the year, representing more than 1.9 per cent of the bank's work force. More than half of the cuts came from the bank's Canadian retail operations that are defined by branches.
At CIBC, the cuts were more modest: Its employee count fell by 184 in the fourth quarter and 223 for the full year.
The Big Six banks cut a total of 4,664 jobs in the fourth quarter, marking the biggest quarterly reduction in six years, according to data compiled by Bloomberg.
The cuts at TD and CIBC drove up employee severance costs, resulting in restructuring charges at the two banks that weighed on their quarterly results.
TD reported a charge of $349-million in the fourth quarter. It followed a similar $337-million charge in the second quarter, bringing TD's overall charge in 2015 to $686-million, representing more than half of the banking sector's total restructuring charges for the year.
CIBC reported a $211-million charge in the fourth quarter, bringing its total charge for the year to $294-million.
Kevin Glass, CIBC's chief financial officer, said in a conference call with analysts that the charge reflects "the initiatives we have been implementing to simplify our bank and better align our resources to meet the changing needs of our clients."
The figures from TD and CIBC tipped bank-wide restructuring charges in 2015 to more than $1.2-billion, which is by far the largest one-year total for the Big Six banks over the past decade.
The charges land amid clear signs that the banking sector faces economic and competitive challenges.
Banks are in the midst of making enormous investments to their technology offerings as consumers expect better online and mobile experiences, while new financial technology companies are threatening the banks' market share by offering competitive products and services of their own.
The slow Canadian economy is also presenting challenges.
"We expect the Canadian banking industry will continue to face headwinds from a low-interest-rate environment and sustained low commodity prices in 2016," said Victor Dodig, CIBC's chief executive officer.
However, both TD and CIBC reported healthy numbers to finish their respective fiscal years.
TD's fourth-quarter profit was $1.8-billion, up 5.3 per cent from last year. After making some one-time adjustments, the bank said its profit amounted to $1.14 a share, up 16 per cent from last year. For all of 2015, profit was $8-billion, up 7.7 per cent.
CIBC reported a fourth-quarter profit of $778-million. After adjustments, it said profit was $2.36 a share, up 5.4 per cent. For the full year, profit was $3.6-billion, up 12.5 per cent. The bank also raised its quarterly dividend – to $1.15 a share, up 3 cents – for its seventh dividend increase in the past eight quarters.
But, like their peers, some of the underlying trends in the fourth-quarter results were far from upbeat.
At CIBC, retail and business banking profit rose nearly 9 per cent in the fourth quarter from last year, but revenue gains lagged at less than 7 per cent.
Although TD reported a 10-per-cent gain in its Canadian retail profit, revenue rose just 1.6 per cent, suggesting that cost cutting can be an effective lever.
"We will remain relentlessly committed to improving productivity," Mr. Masrani said. "We will further simplify our processes, optimize our physical distribution cost and improve our sales efficiency."