2023-05-24 13:50:12 ET
Credit losses are expected to weigh on The Toronto-Dominion Bank's ( NYSE: TD ) ( TSX: TD:CA ) FQ2 earnings, a trend seen across the Canadian banking sector this quarter.
Bank of Montreal stock slipped today after the bank's FQ2 earnings fell short of the average analyst estimate, as an uncertain economic outlook increased the company's provision for potential bad debt.
Bank of Nova Scotia, known as Scotiabank, also posted weaker-than-expected FQ2 earnings as it set aside more funds for potential bad debt and its expenses increased, offsetting an increase in net interest income.
TD Bank is scheduled to announce FQ2 earnings results on Thursday, May 25th, before market open.
The consensus EPS estimate is C$2.09 and the consensus revenue estimate is C$12.41B.
Over the last 2 years, TD has beaten EPS and revenue estimates 100% of the time.
Over the last 3 months, EPS estimates have seen 3 upward revisions and 10 downward revisions. Revenue estimates have seen 2 upward revisions and 4 downward revisions.
The company's returns have been in negative YTD amid a failed $13B acquisition of First Horizon. TD also faces lawsuits over the unrealized takeover attempt.
An increase in provisions sounds logical for FQ2.
During FQ1, TD's provision for credit losses had come in at C$690M, compared with C$617M in Q4 and C$72M in Q1 2022.
As the other major Canadian banks set aside more funds for potential bad debt amid an uncertain economic outlook, Toronto-Dominion is not expected to be an outlier.
Royal Bank of Canada ( RY ) ( RY:CA ) and Canadian Imperial Bank of Commerce ( CM ) ( CM:CA ) are other major Canadian lenders set to report their FQ2 results tomorrow before market open.
RY's consensus EPS estimate is C$2.82 and the consensus revenue estimate is C$13.18B. For CM, the consensus EPS estimate is C$1.64 and the consensus revenue estimate is C$5.68B.
Investors have their eyes set on the lenders' credit losses this quarter.
More on Canadian banks:
- Toronto-Dominion Bank: Attractive Valuation And Superior Capital Ratios
- Royal Bank Of Canada: Plummeting Home Prices Could Trigger Mortgage Default Risk Event
- Canadian Imperial Bank Of Commerce: Strong Balance Sheet And Growth Heavily Undervalued
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Credit losses expected to weigh on Toronto-Dominion Bank's FQ2 earnings