05 September 2012

Review of Banks' Q3 2012 Earnings

Scotia Capital, 5 September 2012


• Canadian banks recorded strong Q3/12 results despite nervous and volatile market conditions and increasing concerns over a housing market correction and slower consumer loan growth.

• Third quarter earnings were ahead of forecasts, increasing 12% YOY and 5% sequentially. Earnings growth was led by strong Wholesale, with trading revenue surprisingly strong. Also, Retail performance was resilient, as volume growth offset modest margin pressure. International earnings were solid and lower taxes also contributed to the solid beat.

• ROE: 18.6%, RRWA 2.49%, CET1: 8.0%


• RY produced the largest beat, followed by BMO, CM, NA and TD. We are restricted on the shares of BNS.

• RY's beat was 11%, with BMO at 7%, CM at 6%, NA at 4%, and TD at 4%.


• Maintain Overweight recommendation based on compelling valuation, high capital and capital generation rates, superior profitability, and resilient business models.

• Reiterate 1-Sector Outperform on TD, RY, and CM. Maintain 2-Sector Perform on CWB and LB, with 3-Sector Underperform on NA and BMO. We are restricted on the shares of BNS.