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RBC noted that its pre-tax earnings were up 7% from a year ago, and that net interest income and loan volume growth were both up in the Canadian market. The bank’s important CET1 capital ratio is 14.1%, which is considerably above the Office of the Superintendent of Financial Institution’s minimum of 11.5%. The CET1 ratio is basically the bank’s “rainy day fund” that would allow it to soak up loan losses when lending doesn’t get paid back.
Despite the excellent quarter, RBC highlighted that it wants to continue reducing employment by 1% to 2% over the next three months. RBC president and chief executive officer Dave McKay stated, “We remain focused on executing on our cost reduction strategy.”
While the news wasn’t quite as sunny over at TD, it certainly wasn’t all bad. With the termination of its deal for U.S. regional bank First Horizon Corp, TD announced that it plans to use that pile of cash to buy back 90 million shares this year.
TD CFO Kelvin Tran stated, “We have significant excess capital and we’re happy to return that back to shareholders.”
Unlike RBC, TD announced it is looking to add jobs over the next few months. With expenses up 24% on a year-over-year basis, analysts are likely to be watching for increased spending discipline from the financial services provider. Meanwhile, TD is currently boasting a CET1 ratio of 15.2%, and consequently it is well fortified for any potential downturns.
You can read more about investing in RBC and TD Bank stocks at MillionDollarJourney.ca.
Necessity tops discretionary in retail south of the border
Along with last week’s U.S. retail earnings, a fuller picture is beginning to form for retailers specializing in niche discretionary goods. They’re taking a bigger hit than retailers like Walmart and Dollar Tree. (All numbers in this section are in U.S. dollars.)
U.S. retail earnings highlights
- Lowe’s (LOW/NYSE): Earnings per share came in at $4.56 (versus $4.49 predicted), and revenues were a slight miss at $24.96 billion versus $24.99 billion predicted. Share prices were up 3% on Tuesday.
- Macy’s (M/NYSE): Earnings per share came in at $0.26 (versus $0.13 predicted), and revenues were a slight beat at $5.13 billion (versus $5.09 billion predicted). However, shares fell 14% on Tuesday, as management cut full-year sales guidance.
- Dollar Tree (DLTR/NASDAQ): Earnings per share of $0.91 (versus $0.87 predicted) and a revenue beat at $7.33 billion (versus $7.21 billion predicted). Shares were down nearly 13% despite the earnings beat on Thursday.
- Dick’s Sporting Goods (DKS/NYSE): A big miss on earnings per share at $2.82 (versus $3.81 predicted) and on revenues of $3.22 billion (versus $3.24 billion predicted). Margins were compressed due to increased shrinkage (aka: theft), as well as large discounts forced by excess inventory. Share prices collapsed by 24% on Tuesday after the announcement.
The theme for retail earnings calls over the past few weeks has been that consumers are increasingly under inflationary pressure and are looking to pare back discretionary spending on goods. This is likely music to the ears of the world’s central bankers, who are meeting in Jackson Hole this weekend.
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