TD Bank, CIBC Results Echo Peers Buoyed by Lower Credit-Loss Provisions

By Robb M. Stewart

Canada's largest lenders are more optimistic about the resilience of their loan books despite continued wariness of trade policies, scaling back in the latest quarter the cash reserves they set aside to cover potential customer defaults.

The country's six biggest banks' provisions for credit losses declined in the fiscal third quarter, after a big build-up in the previous quarter over fears of possible recession amid heightened trade tensions and a barrage of tariff threats from President Trump.

The decline in provisions helped drive earnings that, except for one of the Big Six, exceeded market expectations and supported plans for the lenders to leverage solid capital positions to continue buying back shares.

Toronto-Dominion rounded out earnings season for the banks Thursday when it reported that it swung to a profit in the three months ending July 31 despite a restructuring charge to strengthen its anti-money-laundering controls. TD's credit-loss provision fell compared with the prior quarter and the same period last year, with a broad decline across its Canadian and U.S. consumer and business and government lending portfolios that the bank said reflected strong underlying credit performance.

"The Canadian and U.S. economies have shown resilience but momentum has slowed," Raymond Chun, chief executive of Canada's second-largest bank by market value, said. "These remain early days. It will likely be a long road before the full impact of tariffs is well understood."

TD, like its peers, projects a slowdown in economic growth in Canada this year and continuing sluggishness into 2026, but pointed to some signs of global tensions easing after the Trump administration reached trade agreements with several regions, such as the European Union and Japan. Canada has yet to reach a deal over Trump's tariffs, though Prime Minister Mark Carney last week said Ottawa would drop retaliatory tariffs on a raft of goods imported from the U.S. that have been in place since March, effectively matching Washington's carve-out of levies on Canadian goods compliant with the existing North American trade pact.

"TD is well positioned to manage through this period of uncertainty considering our prudent provisioning, broad diversification across products and geographies, a strong capital position and our through-the-cycle underwriting standards that have served us well through challenging conditions in the past," Chief Risk Officer Ajai Bambawale told analysts.

TD recorded net income of 3.34 billion Canadian dollars (US$2.42 billion) for its third quarter against a year-earlier loss of C$181 million when it booked hefty charges for the investigation into its U.S. anti-money-laundering program's failings. Overall revenue was 7.9% higher, at C$15.3 billion, well above the C$13.74 billion expected by analysts polled by FactSet.

Stripping out items including restructuring costs, per-share earnings came in at C$2.20 to beat the C$2.05 mean estimate of analysts.

Canadian Imperial Bank of Commerce also turned in quarterly numbers Thursday, with net income rise to C$2.09 billion for the quarter from C$1.79 billion last year. On an adjusted basis, per-share earnings increased to C$2.16, topping the C$2.01 mean estimate.

Total revenue was up 9.8%, at C$7.25 billion, beating the C$7.05 billion analysts anticipated.

"As the trade environment becomes clearer, we expect increased client activity," CIBC CEO Victor Dodig said during a call with analysts. "We're going to continue to control what we control and position CIBC for continued strength."

Dodig said the bank's excess capital position supported options and would allow the lender to launch a new share-buyback program for up to 20 million shares, after it completed its previous normal course issuer bid during the latest quarter.

The other big banks similarly plan to buy shares when market conditions permit, including Royal Bank of Canada, the largest bank in Canada and one of North America's largest. National Bank of Canada, the smallest of the Big Six, this week said its board gave the go ahead for the planned repurchase of up to roughly 2% of its total shares over a one-year period.

"Despite the uncertain environment, we are confident in our ability to generate a strong return on equity," Royal Bank CEO Dave McKay said. "We believe our well underwritten portfolio is prudently provisioned. The diversification of assets and revenue streams across client sectors, geographies, products and businesses further mitigates the impact of heightened uncertainty and volatility."

Write to Robb M. Stewart at robb.stewart@wsj.com

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August 28, 2025 12:45 ET (16:45 GMT)