Canadian Bank Earnings Set to Beat Rising Estimates on Deal Fees, Reserve Releases

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TORONTO, May 21 Reuters Canadian banks are expected to beat analysts estimates for quarterly earnings as strength in capital markets and wealth management overrides sluggish nonmortgage loan growth, and as they release some reserves on relatively few loan losses, investors said.

Many analysts have already been revising estimates higher for secondquarter profits at Royal Bank of Canada, TorontoDominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, driven by improved credit conditions.

Analysts expect average core earnings per share for the top six lenders in the three months through April to more than double from a year ago, when they set aside nearly C11 billion 9.1 billion to cover potential bad loans. That would be 9.5 lower from the previous quarter, largely due to fewer days in the period.

BMO kicks off earnings reporting on Wednesday.

Steve Belisle, a portfolio manager at Manulife Investment Management, expects the banks to claw back some of the badloan reserves, although the amount of this remains uncertain.

Analyst estimates dont usually expect credit recoveries, Belisle said.

Capital markets businesses could post positive surprises, driven by fees on strong dealmaking and issuances even though a surge in trading revenues lifted earnings a year ago, Belisle said.

Given the upward revisions to earnings estimates, many analysts have raised their share price targets, even though the Canadian banks…

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