(Reuters) -Royal Bank of Canada (RBC) and National Bank of Canada reported profits ahead of expectations on Wednesday, as the Canadian central bank’s rate hikes boosted net interest incomes and cushioned a hit from higher rainy-day funds.
The Bank of Canada hiked its key interest rate to a 15-year high in January, but the central bank had said it would hold off on further increases as long as prices eased as expected.
Still, as economic uncertainty persists, banks are building provisions in case of delays or defaults in loan repayments by borrowers who have already been squeezed by high inflation since last year.
RBC’s provisions for bad loans jumped five-fold to C$532 million ($391.49 million), while National Bank set aside C$86 million provisions, compared with a release of C$2 million last year.
While the rate hikes fueled economic turbulence, the lenders’ net interest income — the difference between the money they earn on loans and pay out on deposits — have surged from last year when the benchmark rate was near zero.
On an adjusted basis, Canada’s biggest lender RBC earned C$3.10 per share for the quarter ended Jan. 31, ahead of analysts’ average estimate of C$2.93 per share, according to Refinitiv IBES data.
National Bank’s adjusted profit of C$2.56 per share also handily beat expectations of C$2.37 per share.
Earlier, RBC’s peers CIBC and Bank of Montreal also beat estimates, while Scotiabank fell short.
($1 = 1.3589 Canadian dollars)
(Reporting by Niket Nishant and Jaiveer Shekhawat in Bengaluru; editing by Shailesh Kuber and Uttaresh Venkateshwaran)
