Feb 27 (Reuters) - Three of Canada's big five lenders - Royal Bank of Canada (RY.TO), TD Bank (TD.TO), and CIBC (CM.TO), - on Thursday beat analyst expectations for quarterly profit, boosted by strong wealth management and capital markets earnings.
Lower interest rates increased appetite for dealmaking, underwriting and other corporate banking activities while the wealth management business, a capital-light and fee-based business, has also boomed recently powered by as rise in the number of high net-worth individuals and increasing investments.
Income from RBC's wealth management business jumped 48% in the first quarter ended January 31, while TD's jumped 23%. Capital Markets income at RBC rose 24%, 46% at TD and 19% at CIBC.
The result comes at a time of heightened geopolitical uncertainty and an ongoing tariff threat from the U.S. government that could potentially hurt the Canadian economy, slow loan growth and pressure consumers with mortgages.
"We did take some steps to bolster our PCL (provision for credit losses) reserves to reflect this uncertainty, and this situation remains fluid, and there are many potential scenarios that could play out," CFO Kelvin Tran said in an interview.
U.S. President Donald Trump on Wednesday raised hopes for another month-long pause on steep new tariffs on imports from Mexico and Canada, saying they could take effect on April 2.
RBC and TD set aside bigger rainy day funds to shield against potential bad loans as the tariffs could impact some manufacturing and industrial loan books. RBC's provision for credit losses rose to C$1.05 billion from C$813 million a year ago and TD's reserves of C$1.21 billion grew from C$1 billion.
CIBC's reserves were down by C$12 million to C$573 million.
TD is going through a remediation program after the lender pleaded guilty to anti money-laundering lapses in its U.S. retail business that enabled drug traffickers to launder millions from selling fentanyl.
The lender was ordered to pay a $3 billion fine and has made a number of changes, including replacing its CEO, naming a new anti-money laundering chief, selling its stake in Charles Schwab and making new investments to boost its anti-money laundering systems.
"U.S. AML remediation remains our top priority... The strategic review is advancing as planned, and we have taken early action," TD's newly appointed CEO Raymond Chun said, highlighting the Schwab divestiture.
The US personal banking segment, which faces government-imposed growth limitations, reported a 61% fall in net income.
On an adjusted basis, RBC earned C$3.62 per share, compared with analysts estimate of C$3.26, according to LSEG data.
TD's adjusted earnings of C$2.02 per share were higher than the average estimate of C$1.96.
CIBC earned C$2.2 per share on an adjusted basis, surpassing the estimate of C$1.97.
Reporting by Pritam Biswas, Arasu Kannagi Basil in Bengaluru and Nivedita Balu in Toronto; Editing by Shailesh Kuber and Chizu Nomiyama
