Canada’s CIBC and TD raises dividend by 10%, to buy back shares

Two of Canada’s big banks, Toronto-Dominion Bank (TDB) and the Canadian Imperial Bank of Commerce (CIBC) on Thursday revealed their financial results showing an increase in their quarterly payout to shareholders and share buyback plans.

Both banks raised their dividends by just over 10 per cent as TDB, Canada’s second-biggest bank announced it will raise its dividend from the previous 79 cents to 89 cents per share. While CIBC, the country’s fifth-largest bank, raised its dividend to $1.61 per share from $1.46.

TDB also released $123 million of reserves previously set aside to cover loan losses. It said it would increase its dividend by 12.7 per cent, and would buy back up to 50 million, or 2.7 per cent, of outstanding shares.

CIBC, reported 10 per cent revenue growth, but that was diminished by a 13 per cent increase in expenses. It said it will buy back up to 10 million shares, about 2.2 per cent of outstanding stock.

The bank said it expects expense growth to rise to the mid-single digits in the fiscal year 2022, but aims to deliver positive medium-term operating leverage, with revenue growth outpacing expense expansion.

“While we may have periods of negative operating leverage earlier in the year, we will target positive operating leverage across our business through the course of next year,” said Hratch Panossian, Chief Financial Officer.

Canadian credit card lending at both banks rose 3.1 per cent from the prior quarter. TDB’s business lending grew 2.6 per cent from the previous quarter, the same pace as mortgage growth. CIBC’s corporate lending grew a more muted 0.85 per cent, compared with a 3.4 per cent increase in home loans.

Earlier this week, Scotiabank and Royal Bank announced plans to increase their own payouts. Bank of Montreal is expected to report its earnings today and is also expected to raise its dividend.

Scotia announced an 11 per cent increase from 90 cents to $1 per share. Royal, on its part, raised its dividend payout from $1.08 to $1.21 — a 12 per cent increase.

The banks have been sitting on excess amounts of cash for close to two years now, as regulators forbade them from raising their payouts to shareholders in March 2020 in an attempt to conserve capital for the uncertainty to come following the Covid pandemic.

However, the banks have survived the pandemic unscathed, as borrowers have managed to stay on top of the debts for the most part. This prompted, the regulator to remove those restrictions on dividend hikes for shareholders last month.