Canada’s RBC, TD, CIBC top profit expectations, stay cautious on trade risks #CanadaFinance

By Nivedita Balu and Arasu Kannagi Basil

(Reuters) -Three of Canada’s big five lenders – Royal Bank of Canada, TD Bank and CIBC – on Thursday beat analyst expectations for quarterly profit, but took a cautious stand as tariff and trade risks cloud economic outlook.

Heightened geopolitical uncertainty and an ongoing tariff threat from the U.S. government could potentially hurt the Canadian economy, slow loan growth and pressure consumers with mortgages.

U.S. President Donald Trump Thursday morning vowed that his proposed 25% tariffs on Mexican and Canadian goods will go into effect on March 4.

“We did take some steps to bolster our PCL (provision for credit losses) reserves to reflect this uncertainty, and this situation remains fluid, and there are many potential scenarios that could play out,” TD CFO Kelvin Tran said in an interview.

RBC and TD set aside bigger rainy day funds to shield against potential bad loans as U.S. tariffs could impact some manufacturing and industrial loan books. RBC’s provision for credit losses rose to C$1.05 billion ($727.85 million)in the first quarter ended January 31 from C$813 million a year ago and were more than analysts’ forecast of C$901.8 million, according to LSEG data.

“We are seeing signs of lower business confidence, with some of our commercial banking clients opting to delay certain investment decisions,” RBC CEO Dave McKay told analysts.

RBC’s shares fell 2% in Toronto.

“There is some clear credit deterioration observable this quarter led by commercial,” Scotiabank analyst Meny Grauman said on RBC’s results.

Grauman said the good news in TD’s results was that there were no red flags, including in the troubled U.S. market where results beat his expectations.

TD’s reserves of C$1.21 billion grew from C$1 billion, but were slightly lower than analysts’ estimate of C$1.28 billion. CIBC said reserves were down by C$12 million to C$573 million. TD and CIBC’s shares were about 0.5%.

TD is going through a remediation program after the lender pleaded guilty to anti-money laundering lapses in its U.S. retail business that enabled drug traffickers to launder millions from selling fentanyl.

The lender was ordered to pay a $3 billion fine and has made a number of changes, including replacing its CEO, naming a new anti-money laundering chief, selling its stake in Charles Schwab and making new investments to boost its anti-money laundering systems.

“There’s still much to do. This is a multi year process, but we remain unwavering in our commitment to build the AML program,” the head of TD’s US retail unit, Leo Salom, told analysts.

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