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Canadian Imperial Bank of Commerce (CM-T) and National Bank of Canada (NA-T) both reported higher-than-expected profits today, driving up shares of both lenders and raising hopes for similar results from Canada's other banks.
Also boosting shares of CIBC were expectations that it could raise its dividend sooner than had been thought after Chief Executive Gerry McCaughey suggested as much on a conference call.
Analysts had expected the bank would likely wait until next year to raise the payout, but McCaughey said the bank's strong profit means the dividend payout ratio is now in the lower end of the bank's 40-50 percent target range.
"I think therefore the topic of general dividend increases will be something we'll be discussing in 2011," he said.
He said he'd like to see the results of further quarters before any decision is made, suggesting a hike might not happen until late in the year.
Also boosting expectations for a dividend increase was the bank's announcement that it can meet stricter "Basel III" capital levels well ahead of schedule.
"I think at least from our perspective, the timeline for a dividend increase is definitely pushed forward," said John Aiken, analyst at Barclays Capital in Toronto.
Canada's banks put dividend hikes on hold when the financial crisis took hold in 2008. National Bank became the first big lender to resume increases last quarter.
The two banks' results, driven by stronger loan growth and lower loan-loss provisions, raised expectations that Canada's other four big banks, which will report quarterly results over the next two weeks, will also top estimates.
LOAN LOSSES FALL, LENDING RISES
CIBC, Canada's No. 5 bank, earned $799 million, or $1.92 a share, in its first quarter, up from $652 million, or $1.58 a share, a year earlier.
Excluding items, profit was $1.97 a share, topping analysts’ expectations for a profit of $1.77.
Provisions for credit losses fell to $209 million from $359 million due to lower write-offs in personal lending and in credit cards, where CIBC is a market leader.
Lower loan-losses have helped drive profit for Canadian banks over the past year as the economy has strengthened.
Craig Fehr, an analyst at Edward Jones, credited the better than expected profit to a combination of stronger retail lending and wholesale bank profit.
"The (loan-loss) provisions number was slightly better than I expected as well," he said.
Profit at National, Canada's No. 6 bank, rose 45 percent, topping estimates, as stronger growth in consumer and business loans more than offset a decline in trading income.
Net profit rose to $312 million, or $1.80 a share, from $215 million, or $1.22 a share, a year earlier.
Analysts had expected a per-share profit of $1.64.