WRAPUP 4-Canada's TD Bank, CIBC beat profit expectations on lower loan loss provisions

By Nivedita Balu and Ateev Bhandari

Aug 28 (Reuters) - Canadian lenders TD Bank TD.TO and CIBC CM.TO topped analysts' expectations for quarterly profit on Thursday, bolstered by lower than expected loan loss provisions and strength in their domestic businesses.

Canada's second and fifth largest banks respectively wrapped up big bank earnings for the third quarter and continued a broader trend of lower than expected provisions as some pressures from U.S.-Canada trade tensions eased, but remained cautious amid uncertainties around future tariffs.

"The caution is coming from the fact that it's (the trade deal) still being negotiated," TD's CFO Kelvin Tran told Reuters in an interview.

TD's shares, which rallied over 37% so far this year following a tumultuous 2024, were down 4%.

TD also recorded a C$262 million charge to restructure its U.S. balance sheet, as a part of government-ordered asset cap following $3 billion in penalties last year to U.S. regulators for money laundering charges.

The banks built up reserves during the second quarter, fearing a macroeconomic slowdown when trade tensions were at a peak amid U.S. President Donald Trump's tariff war threats. For Canada, the outlook has improved considerably from early April.

TD's loans to industries most exposed to policy and trade uncertainty include automotive, manufacturing and agriculture, totaling C$87 billion ($62.97 billion) or about 9% of total loans. Of those loans, C$54 billion are in Canada and C$33 billion are in the United States, the bank said.

The bank said it had built reserves of C$600 million for policy and trade uncertainty so far this year.

"In times of uncertainty, some banks may pull back on capital but we're very strong and we're very well capitalized and so we continue to be there for our customers," Tran said.

CIBC CEO Victor Dodig told analysts he expects global trade tensions may result in slower growth and higher inflation but declining interest rates could help support economic growth.

TD reported loan loss provisions - a sum of money the banks stash during times of economic uncertainty to protect themselves against bad loans - of C$971 million for the third quarter ended July 31, much lower than analysts' estimate of C$1.21 billion, according to LSEG data.

The lender earned C$2.20 per share, well above the estimate of C$2.05.

CIBC recorded provisions of C$559 million, compared with the average estimate of C$575.71 million. That, along with a 17% net income jump in its domestic business and an 87% rise in capital markets, helped beat profit estimates. CIBC earned C$2.16 per share, beating the estimate of C$2.

Jefferies analyst John Aiken, noting CIBC's growth across segments, said the bank "did not benefit from a decline in provisions to the same degree as its peers, elevating the quality of its earnings."

CIBC's shares hit a record high of C$107.13 in early trading in Toronto and were last up 1.6%.

On TD, Aiken said that "progress is being made" in TD's U.S. platform but was the one segment that came in slightly below expectations, he said.

($1 = 1.3817 Canadian dollars)