DBRS Morningstar Publishes “Large Canadian Banks Q4 2019 Earnings Round-Up: F2019 Comes to Disappointing Close with Weaker Q4 2019 Earnings”

DBRS Limited (DBRS Morningstar) published a commentary titled “Large Canadian Banks Q4 2019 Earnings Round-Up: F2019 Comes to Disappointing Close with Weaker Q4 2019 Earnings,” which discusses Q4 2019 earnings for the six large Canadian banks.

Key highlights include:

-- Collectively, earnings for the six large Canadian banks declined by 5.4% year over year (YOY) and 5.8% quarter over quarter (QOQ).
-- Linked-quarter results reflected restructuring charges at three banks, higher provisions for credit losses (PCL), and a goodwill impairment charge at CIBC.
-- Net interest margins remain under pressure, particularly in the banks’ U.S. and international businesses, reflecting a more challenging rate environment.
-- Despite a sharp rise in PCL during the quarter, overall asset quality remains sound. The PCL ratio climbed 5 basis points (bps) QOQ and 9 bps YOY to 0.39%.
-- We view this moderately higher level of PCL, particularly in the latter part of F2019, as the beginning of a return to more normalized credit losses.

“F2019 came to a disappointing close for the large Canadian banks with earnings that were weaker year over year and sequentially. Given these results and the continued uncertainty and weakening global growth, we expect earnings growth for these banks to moderate in F2020,” said Robert Colangelo, Senior Vice President, Global Financial Institutions Group. “Despite the sharp rise in PCL, we view the large Canadian banks as well positioned to absorb higher provisions.”

Notes:
A full copy of this commentary is available by contacting us at info@dbrs.com.

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