Royal Bank of Canada (RY) and National Bank of Canada (NA) may be among lenders that boost dividends when they begin reporting higher second-quarter earnings tomorrow, analysts said. Royal Bank, Canada’s largest lender, may lift its quarterly payout 8 percent to 54 cents a share, the first increase in almost four years, according to Bloomberg Dividend Forecasts. National Bank may raise its dividend 7.6 percent to 71 cents, according to the forecasts, which were accurate 84 percent of the time in 2010.
Led by higher wealth-management and capital-markets fees and lower credit costs, Canada’s eight publicly traded banks may post an average 12 percent jump in profit for the period that ended April 30, said Sumit Malhotra, an analyst at Macquarie Capital Markets in Toronto. Some of the lenders began increasing dividends in December.
“Dividend growth tells you something about where the banks are today and where they’re going,” said David Atkins, vice- president of investments at Cardinal Capital Management Inc. in Winnipeg, Manitoba, which manages about C$1.6 billion ($1.65 billion) in assets, including bank shares. “Now we can start talking about traditional banking and less about ‘do they have enough capital?’.”
Spokespeople from Toronto-based Royal Bank and Montreal- based National Bank didn’t immediately have comment on potential dividend increases. Laurentian Bank of Canada (LB) and Canadian Western Bank (CWB), the country’s seventh- and eighth-largest banks, may also boost their payouts, according to the Bloomberg forecasts.
Loan Losses: Provisions for loan losses at the banks have decreased for four straight quarters, while asset-management fees will climb, bolstered by acquisitions. Royal Bank will report the first full quarter from its acquisition of U.K. money manager BlueBay Asset Management, while Bank of Nova Scotia, the third-biggest lender, will add results from its March purchase of DundeeWealth Inc.
With fewer writedowns than international competitors, Canada’s banking system has been ranked the world’s soundest for three straight years by the Geneva-based World Economic Forum. Five of its lenders were listed among the world’s 20 strongest banks by Bloomberg Markets magazine.
“Based on our review of the key datapoints we still expect that the banks will benefit from a strong quarter of market- sensitive revenue” in the second quarter, Malhotra said in a note to clients.
Bank of Montreal (BMO): Bank of Montreal, the country’s fourth-largest bank, is scheduled to be the first bank to release results tomorrow. The lender will probably post the slowest growth, with profit before one-time items of C$1.28 a share, unchanged from a year earlier, according to Robert Sedran, an analyst at CIBC World markets in Toronto.
Toronto-Dominion, the second-biggest bank, will report profit of C$1.60 a share, an 18 percent increase, when it releases results on May 26, Sedran said. CIBC will report the same day, with profit of C$1.77 a share, a 21 percent jump, while National Bank may say profit climbed 9.3 percent to C$1.64, according to CIBC estimates.