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Canada’s six biggest banks earn combined $4.56 billion

TORONTO — Strong retail banking numbers helped Canada’s six biggest banks make a combined $4.56 billion in profits in the third quarter, about 11 per cent lower than a year ago as Royal Bank pulled down the industry tally.

TORONTO — Strong retail banking numbers helped Canada’s six biggest banks make a combined $4.56 billion in profits in the third quarter, about 11 per cent lower than a year ago as Royal Bank pulled down the industry tally.

On Thursday, TD Bank (TSX:TD) was the last big bank to report its results for the quarter, with profits up 22 per cent compared with a year ago.

TD said it will boost its dividend payment by two cents, or three per cent, to 68 cents per share. It had already increased the dividend by 8.2 per cent in March.

CIBC (TSX:CM) also bumped its dividend higher earlier in the week, up three cents to 90 cents per share.

Because of Royal Bank’s $1.6-billion writedown related to the sale of its U.S. retail operations,, results for the this quarter came in below the $5.1-billion in profits reported in the same quarter of last year — even though the latest earnings were stronger overall, particularly in domestic retail banking operations.

The writedown pushed Royal (TX:RY), Canada’s largest bank, to a $92 million loss in its third quarter.

U.S. retail banking had been a thorn in RBC’s side since the U.S. housing bubble burst and hit mortgage markets hard.

Craig Fehr, a financial services analyst at Edward Jones, said earnings growth for the banks as a whole were reasonable given the environment in the past quarter, when the Canadian economy shrank.

He said banks are benefiting from their diversified businesses.

“You’re seeing RBC which has a global wealth management platform and they’re really capitalizing on growth in that avenue. Scotiabank has an international banking platform in many emerging markets — that’s an area where they can continue to deploy capital,” he said.

“It’s really an environment where we’re seeing a defined growth strategy that’s quite different across the banking landscape, so each bank is going to forge their own future here in the next several quarters in terms of defining their growth strategies.”

He added that the banks generally showed strength in domestic banking, but that the pace of growth in the segment is beginning to slow.

Barclays analyst John Aiken raised his target share price for TD from C$89 to $91 and praised the company’s U.S. operations.

“While investors may have gotten accustomed to the earnings power of its domestic retail bank, we were quite pleased to see a strong contribution from south of the border,” he wrote, looking forward to TD reporting incremental earnings contributions from its acquisition of Chrysler Financial, which closed on April 1.

TD owns about 40 per cent of TD Ameritrade (Nasdaq:AMTD), a discount brokerage based in the U.S. Midwest. The bank now has more than U.S. 1,000 branches.

TD said its overall profits rose to $1.45 billion in the third quarter, or $1.58 per share, compared with $1.18 billion or $1.29 a share in the same period a year ago.

On an adjusted basis, earnings were $1.72 or 10 cents above analyst expectations, according to Thomson Reuters.

Revenues increased to $5.35 billion from $4.74 billion.

“These are excellent results and we remain confident TD is on target to deliver its best year on record,” president and CEO Ed Clark said in a news release.

“With that said, we’re cautious about our outlook for 2012 and expect that it will still be some time before the economy strengthens. We remain focused on managing the pace at which our expenses are growing, but we will also continue to make smart investments to strengthen TD for the future.”

Canada’s second-largest bank had predicted its profit growth would pull back in the second half of the year as consumer borrowing slows and banks compete more fiercely for their business.

Last month, TD agreed to buy the Canadian MBNA credit card business of Bank of America Corp. for $7.5 billion in cash and assumed $1.1 billion in liabilities.

That bulked up TD’s position in the cards segment of the Canadian consumer debt market, an area where it has often lagged behind competitors. The purchase comes at a time when Canadians households are saddled with more debt than ever and government officials are sounding alarms about the dangers of overspending.

TD has also been pushing to grow its retail business in Canada by introducing Sunday hours at more than 300 retail branches across the country.

The bank recently said it was in advanced talks to sell its stake in Maple Leaf Sports and Entertainment — owner of the Toronto Maple Leafs and Raptors — to the Ontario Teachers’ Pension Plan.