TORONTO - Canada's biggest banks stunned the skeptics with a cumulative $7.8 billion of profit in the third quarter, as consumers maintained their borrowing habits and domestic banking results propped up weakness in some other divisions.
The performance left analysts' restrained predictions in the dust, marking an increase of 45 per cent from net income of $5.38 billion a year ago.
All five banks delivered a surprise boost to their dividends paid to shareholders. Royal Bank (TSX:RY) also boasted that its profits rose 73 per cent to a new record high.
It was quite a contrast from concerns that lending would subside during the period, while banks looked for ways to cut their costs. But several analysts say they're not convinced these bombastic results are sustainable into next year.
"Earnings from Canada face a lot of headwinds," said National Bank analyst Peter Routledge in an interview.
"I think people are starting to pull back on how much they borrow from banks, but nonetheless it certainly didn't start this quarter."
For investors looking for reliable payouts, the banks still managed to impress.
On Thursday, Royal Bank's record profits amounted to $2.24 billion, or $1.47 per share. That compared with earnings of $1.29 billion or 83 cents per share in the year-earlier period.
The bank increased its dividend by five per cent to 60 cents per share, after already boosting it earlier this year — by six per cent in the first quarter.
Barclays analyst John Aiken said in a note that Royal reported what was one of the strongest quarters, when compared to its peers.
"Royal managed to earn through a weaker capital markets quarter on the back of a strong performance within wholesale lending," he wrote.
TD Bank (TSX:TD) delivered the biggest quarterly dividend increase, lifting it seven per cent. The payout increased five cents to 77 cents.
TD reported profits of $1.7 billion, or $1.78 per share, from $1.49 billion or $1.58 a share a year ago.
Its domestic personal and commercial banking posted a record quarter, with reported net income of $864 million.
"While revenues held well in domestic banking they are continuing to be increasingly crowded by expense escalations," said Brad Smith, senior financial services analyst at Stonecap Securities in a note.
Canadian Imperial Bank of Commerce (TSX:CM) profit rose by 42 per cent in the quarter to $841 million, or $2 per share, compared with $591 million, or $1.33 a share, for the same period last year.
The bank also announced a quarterly dividend increase of four cents or 4.4 per cent per share.
Earlier this week, Bank of Montreal (TSX:BMO) raised its dividend for the first time since 2007, boosting it 2.8 per cent to 72 cents a share, on profits of $970 million.
Scotiabank (TSX:BNS) increased its quarterly dividend 3.6 per cent to 57 cents per share on $2.05 billion of profit.