(Toronto) TD Bank expects its stake in Charles Schwab to provide the equivalent of $141 million in net profit in the first quarter.
At the same time last year, TD reported a net profit of $285 million in the first quarter thanks to its investment in Charles Schwab.
TD says adjusted net income is expected to be around $230 million, down about 30% from last year’s $328 million.
Canaccord Genuity analyst Matthew Lee says Schwab’s results were slightly better than expected, but the financial firm’s guidance for the year was disappointing.
Lee says the key takeaways from banks’ forecasts in recent days are pressure on revenues, improving financial capital markets and continued headwinds in commercial real estate lending, a trend also seen in Canada.
Mr. Lee anticipates that BMO and RBC Bank will benefit the most from improving U.S. financial markets, while TD will be most affected by the decline in U.S. net interest income.
Although banks face many similar trends on both sides of the border, Canadian consumers are far more indebted than in the United States. They are therefore more sensitive to rates, underlines Carl De Souza, head of Canadian banking services at Morningstar DBRS.
“Canadian consumers and businesses will continue to face pressure as loans continue to be rolled over at much higher rates as they mature. »
Controlling spending is a priority in the banking sector, including Citigroup which last week announced plans to cut 20,000 jobs over the next two years.
Mr. De Souza said that while Canadian banks have already taken steps to reduce expenses, including layoffs, he expects cost control to continue to be a priority and does not rule out new reductions.
“I wouldn’t say it’s completely over. What happens will depend heavily on how the economy evolves, how credit quality evolves, such as unemployment and macroeconomic variables, because there is still a lot of uncertainty. »