National and Royal Banks reported lower profits for the third quarter.
National Bank recorded a net result of 826 million in the third quarter of the current fiscal year compared to 839 million a year earlier. The drop was 2%. Diluted earnings per share went from $2.36 to $2.35. Earnings before allowances for credit losses and tax charges increased, from 1.04 billion to 1.11 billion.
President and CEO Laurent Ferreira believes third quarter results remain excellent. He attributes them to strong growth in each of the operating segments. He says the bank is in a strong position, with high levels of capital and provisions for substantial credit losses.
The Royal Bank also announced a drop in profits. It has experienced a sharp decline in activity on the capital markets and has taken provisions for possible defaults due to a deterioration in its economic outlook.
The bank made a net profit of 3.6 billion for the quarter ended July 31, against 4.3 billion a year earlier. On an adjusted basis, it stands at $2.55 per share versus $3 a year earlier.
Managing Director Dave McKay pointed to the uncertain macroeconomic environment, including inflation, supply chain constraints, geopolitical tensions, tight labor markets and climate change-related droughts as some of the contributing factors. contributing to the decline in profits. “Our market-sensitive businesses had a string of challenging results, against the backdrop of one of the most challenging environments for financial markets,” he said on a call with analysts.
Loan growth
Earnings were hit by provisions for credit losses totaling $340 million for the quarter, compared with a reversal of $540 million in the same quarter last year. McKay said provisions were cautious given the range of potential outcomes ahead, including the likelihood of a recession in North America, as central bank rate hikes push the economy further. near the end of a cycle.
McKay did not expect mortgage growth to slow in the coming quarters given the decline in activity and housing prices. He added that given the economic challenges, there will likely be fewer people eligible for future loans.
Chief risk officer Graeme Hepworth said rising rates and falling house prices were increasing the risks to the bank’s mortgage portfolio, but the most indebted borrowers, who took out mortgages on pandemic’s heady housing market, do not renew until 2025.