Canada’s biggest banks delivered $7.8 billion of cumulative profit in Q3 2012.
Overall, consumers maintained their borrowing habits and domestic banking results propped up weaknesses in any lagging departments across the board.
The performance of the banks also left analysts’ restrained predictions in the dust, marking an increase of 45% from net income of $5.38 billion a year ago. All five banks delivered a surprise boost to their dividends paid to shareholders.
Several analysts, though, are still cautious. They say they’re not convinced these bombastic results are sustainable over the new few years.
“Earnings from Canada face a lot of headwinds,” says National Bank analyst Peter Routledge.
“People are starting to pull back on how much they borrow from banks, but nonetheless it certainly didn’t start this quarter.”
Two recent studies have shown consumer debt still hasn’t subsided—despite repeated warnings from Flaherty and Carney that interest rates will eventually rise and leave some households hard-pressed to meet borrowing obligations.
Last week, a report from TransUnion showed consumer debt is actually growing due to higher auto loans, while debt on cards and lines of credits is flat.
And last month, another consumer credit reporting agency, Equifax Canada, reported consumer indebtedness grew 3.1% year-over-year in the second quarter.
“Debt levels here are similar to what we saw in the states prior to the financial crisis,” says Tom Lewandowski, financial services analyst with Edward Jones in St. Louis.
Barclays analyst John Aiken said in a note that RBC reported one of its strongest quarters. “It managed to earn through a weaker capital markets quarter, on the back of strong performance within wholesale lending.”
Read: RBC Q3 earnings up 73%
TD Bank delivered the biggest quarterly dividend increase, lifting it 7%. The payout increased five cents to 77 cents.
“While revenues held well in domestic banking, they’re continuing to be increasingly crowded by expense escalations,” says Brad Smith, senior financial services analyst at Stonecap Securities in a note on the banks’ performances.
But, while most banks raised their dividends, National Bank chose not to follow the trend despite its rise in profits of 13% in Q3. It raised its quarterly payout three months ago, so kept it steady at 79 cents per share at close yesterday.