Surge in business loans eases mortgage growth plateau for RBC, TD
A surge in business loans at Royal Bank of Canada and Toronto-Dominion Bank is helping lessen the sting of a mortgage slowdown.
Royal Bank’s balances from business lending surged 22 per cent to $97.2 billion in the fiscal second quarter from a year earlier, the Toronto-based lender said Thursday. Growth in that area, along with a 25 per cent jump in wealth-management earnings, helped Royal Bank post profit that beat analysts’ estimates. Toronto-Dominion’s business loans rose 9.8 per cent to $71.8 billion.
“We maintained good momentum in the second quarter,” chief executive officer David McKay, 54, said in a statement. “Our businesses executed on client-focused growth strategies while continuing to demonstrate strong risk management.”
Canadian business loans at Royal Bank have accelerated at a pace exceeding 12 per cent since the second quarter of 2017, while domestic residential mortgages have hovered around 5 per cent. Home loans comprise about 55 per cent of Royal Bank’s total Canadian lending portfolio compared with 21 per cent for business loans, though mortgages have tighter margins. Toronto-Dominion has seen at least six quarters of business loan growth above 8 per cent.
“We’ve been quite focused on making sure that we have the best business bankers,” Toronto-Dominion chief financial officer Riaz Ahmed said in a phone interview. “We have focused on a number of areas where we have been under-represented, including markets outside of Ontario, agriculture, dealer financing, leasing, etc.”
Canadian banks have been anticipating a slowdown in home lending as tougher mortgage qualification rules, elevated housing prices and overextended borrowers weigh on demand.
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Royal Bank said net income for the period ended April 30 rose 9 per cent to $3.06 billion, or $2.06 a share, from $2.81 billion, or $1.85, a year earlier. Adjusted profit, which excludes some items, was $2.10 a share, the bank said. That beat the $2.05 average estimate of 14 analysts surveyed by Bloomberg.
Toronto-Dominion’s net income rose 17 per cent to $2.92 billion, or $1.54 a share, from $2.5 billion, or $1.31, the lender said in a separate statement. Adjusted profit was $1.62, exceeding the $1.50 average estimate of 13 analysts surveyed by Bloomberg.
Canadian Imperial Bank of Commerce on Wednesday posted adjusted profit that exceeded analysts’ estimates, fuelled by growth in its domestic business. Bank of Nova Scotia is scheduled to report results May 29, followed by Bank of Montreal and National Bank of Canada on May 30.