Overall, it was a strong quarter for Canadian banks and life insurance companies, showcasing resilience and solid performance amid macroeconomic uncertainties. The sector experienced significant earnings growth, driven by robust revenue increases in personal and commercial banking, wealth management, and international operations. Investments in technology and strategic acquisitions bolstered performance, while prudent risk management and expense discipline maintained stability. Despite facing challenges such as higher credit provisions and interest rate volatility, the banks reported increased dividends and maintained strong capital positions. The life insurance companies demonstrated growth through strategic reinsurance transactions and expansions in key markets, leveraging advancements in AI and technology to enhance service efficiency and client experience. The sector overall reflected financial health and strategic growth while remaining cautious about potential economic headwinds.

Portfolio Holdings

National Bank of Canada (TSX: NA)

Portfolio weight: 10.77%*

EPS Estimate: 2.41

Reported EPS: 2.54

“National Bank generated strong financial results for the second quarter of 2024, reflecting the disciplined execution of our strategy across business segments and the diversified earnings power of the bank. In what remains an uncertain macroeconomic environment, we are committed to maintaining our prudent approach to capital, credit, and costs and to generating long-term value for our shareholders.” – Laurent Ferreira, President and CEO.

National Bank of Canada reported a 9% increase in earnings per share to $2.54 for Q2 2024, alongside a dividend increase to $1.10, reflecting strong financial performance and capital position. The bank saw solid revenue growth in personal and commercial banking segments by 6%, and the wealth segment’s net income grew by 15% due to double-digit revenue growth. Financial markets business net income rose by 20% year over year, and ABA Bank’s (owned by National) net income grew by 16%. However, the bank anticipates an increase in delinquencies and impaired provisions, and faced challenges in Treasury activities due to interest rate volatility.

Canadian Imperial Bank of Commerce (TSX: CM)

Portfolio weight: 10.57%*

EPS Estimate: 1.64

Reported EPS: 1.75

“In the second quarter, the steady execution of our client-focused strategy across our well-diversified North American platform continued to deliver solid results and create value for our stakeholders. Our team’s ability to attract and deepen client relationships across our bank, including in high growth segments and markets is supporting our momentum. Combined with expense discipline, our robust capital position and disciplined risk management, as well as our ongoing strategic investments, we remain well positioned to navigate the current operating environment and position our bank for the future.” – Victor G. Dodig, President and CEO.

CIBC reported a strong second quarter with adjusted net income of $1.7 billion and earnings per share of $1.75, highlighting the effectiveness of its diversified business model and client-centric strategy. The bank has seen significant digital sales growth, with 40% of core banking products now sold digitally, and has maintained a leading position in equity trading and advisory among Canadian peers. Investments in AI and technology are improving operational resilience and client service, while the bank’s proactive risk management has resulted in stable credit performance across portfolios. CIBC’s U.S. operations have shown strong loan growth and strategic adjustments in commercial real estate, alongside efforts to enhance its private wealth management platform.

Manulife Financial Corporation (TSX: MFC)

Portfolio weight: 10.47%*

EPS Estimate: 0.91

Reported EPS: 0.94

“After a milestone year for Manulife, we continued to show strong momentum in 1Q24 by delivering superior results, including 20% core EPS growth, an increase of 11% in adjusted book value per common share, and record level APE sales with double-digit growth across each of our insurance segments. We again demonstrated a disciplined focus on execution by closing the largest ever LTC reinsurance transaction in the first quarter and entering the largest ever universal life reinsurance agreement in Canada. I’m excited by our momentum in the first quarter and by the opportunities ahead of us to continue generating shareholder value.” – Roy Gori, Manulife President and CEO.

Manulife Financial Corporation reported a strong start to 2024, with record insurance business growth and significant global Wealth and Asset Management net inflows. The company closed a milestone reinsurance transaction expected to release $800 million of capital. Core earnings grew by 16%, with Core Return on Equity increasing to 16.7%, surpassing the medium-term target. The acquisition of the multi-sector alternative credit manager, CQS, in April marks a strategic expansion in Europe. However, the company faces challenges in U.S. office real estate, with a 40% reduction from peak values.

Toronto-Dominion Bank (TSX: TD)

Portfolio weight: 10.14%*

EPS Estimate: 1.85

Reported EPS: 2.04

“TD delivered strong second quarter results, with earnings of $3.8 billion and solid momentum across our franchise. We delivered significant positive operating leverage while continuing to invest in our business, including our risk and control infrastructure.” – Bharat Masrani, President and CEO.

TD Bank reported strong Q2 2024 earnings, highlighting its robust performance and resilience across diversified business models. The bank is undertaking a comprehensive overhaul of its U.S. anti-money laundering (AML) program with a $500 million investment, addressing past deficiencies and mitigating future risks. Revenue growth of 10% year over year was driven by diversification, particularly in markets-driven business. Strategic partnerships with Google Cloud and Microsoft Azure are pivotal for TD’s technology strategy, supporting innovation in the digital banking landscape. Additionally, the bank’s U.S. retail bank and wealth management and insurance segments saw significant growth, with wholesale banking delivering record revenues for the second consecutive quarter.

Royal Bank of Canada (TSX: RY)

Portfolio weight: 10.11%*

EPS Estimate: 2.76

Reported EPS: 2.92

“This quarter marked a pivotal milestone in RBC’s long-term growth story as we completed our acquisition of HSBC Bank Canada, welcoming thousands of colleagues and clients from across the country. This historic acquisition, along with our solid results driven by our strong balance sheet, expense control and volume growth across our premium franchises, shows that RBC has the right strategy in place to continue building the bank of the future and our position as a global competitor. We’re confident in our ability to build on this momentum and keep delivering sustainable, long-term value to our clients, communities and shareholders.” – Dave McKay, President and CEO.

RBC reported a record second quarter earnings of $4 billion, with significant contributions from capital markets revenue growth and the strategic acquisition of HSBC Canada, which added approximately $75 billion of loans and deposits. Despite initial challenges, such as lower than expected margins from HSBC Canada and a slowdown in net new sales, RBC is optimistic about future recovery and synergy realization. The bank also announced a 3% increase in its quarterly dividend and plans to repurchase up to 30 million common shares. Investments in artificial intelligence in U.S. wealth management and the launch of a U.S. cash management business highlight RBC’s focus on leveraging technology and diversifying funding sources.

Bank of Nova Scotia (TSX: BNS)

Portfolio weight: 10.01%*

EPS Estimate: 1.55

Reported EPS: 1.58

“The bank delivered solid results this quarter against a backdrop of ongoing macroeconomic uncertainty, reporting positive operating leverage driven by revenue growth and continued expense discipline. We are executing on our commitment to balanced growth as our deposit momentum continues, while maintaining strong capital and liquidity metrics. I am proud to see Scotiabankers across our global footprint rallying behind our new strategy and coming together to drive our key strategic initiatives forward.” – Scott Thomson, President and CEO.

Scotiabank reported solid earnings across all business lines in Q2 2024, with notable positive deposit growth of 7% year-to-date and significant improvements in productivity ratios enhancing profitability. However, the bank faced challenges with higher credit provisions due to an uncertain macroeconomic environment and anticipates elevated credit provision in retail portfolios, expecting to be at the higher end of its 2024 PCL outlook. Despite this, the loan-to-deposit ratio improved, driven by substantial deposit growth, and the bank successfully reduced its wholesale funding. International banking delivered strong results, contributing significantly to net earnings, while challenges in Canadian banking were noted with a 4% decrease in earnings year-over-year.

Bank of Montreal (TSX: BMO)

Portfolio weight: 10.87%*

EPS Estimate: 2.76

Reported EPS: 2.59

“This quarter, we achieved strong pre-provision, pre-tax earnings growth and positive operating leverage, driven by continued momentum in Canadian personal and commercial banking and strengthening performance in our Capital Markets and wealth businesses. We’ve delivered on our commitments with expenses down, compared with last year and last quarter. Our balance sheet strength is evident in a CET1 ratio above 13%, robust customer deposit growth and appropriate provisioning for the credit environment, which continues to be impacted by prolonged high interest rates and a slowing economy,” – Darryl White, CEO.

Bank of Montreal announced a dividend increase of 4 cents, up 5% over last year, reflecting confidence in its financial stability and growth prospects. The bank reported strong performance in Canadian Personal and Commercial Banking with record revenue, up 13% year over year, and a 35% increase in newcomers to Canada through its New Start program. However, it faced challenges from higher interest rates, leading to elevated credit risk and a 7% decline in adjusted net income from last year. The provision for credit losses increased to $705 million, up from 38 basis points last quarter. Despite these challenges, BMO’s U.S. business contributed significantly to earnings, and the bank achieved positive operating leverage this quarter at 3%.

Sun Life Financial Inc (TSX: SLF)

Portfolio weight: 9.85%*

EPS Estimate: 1.64

Reported EPS: 1.50

“In the first quarter, we delivered on our Client Impact strategy by advancing our asset management and insurance businesses with strong growth in insurance sales, CSM and AUM. Underlying earnings were affected by tr sale of Sun Life UK, higher morbidity claims, and the end of the Public Health Emergency in the U.S. Our capital remains strong and this quarter, we announced a 4% increase to our shareholder dividend and expect to actively continue share buybacks in the second quarter.” – Kevin Strain, President and CEO.

Sun Life Financial reported significant growth in Asia with a 30% increase in individual protection underlying earnings, driven by strong sales in Hong Kong and India. However, the company faced challenges in the U.S. market, particularly in the health and risk solutions and U.S. dental business, due to rising healthcare utilization rates and Medicaid member disenrollment. Despite these challenges, Sun Life achieved a record $1.47 trillion in AUM, an 8% increase year-over-year, and announced a 4% increase in its common share dividend alongside a share buyback program. The company also highlighted the launch of new health programs in Canada and the expansion of U.S. group benefits. Additionally, Sun Life is leveraging generative AI technologies to improve service efficiency and client experience and advancing its sustainability goals with investments in environmentally positive assets.

Power Corp of Canada (TSX: POW)

Portfolio weight: 9.29%*

EPS Estimate: 1.11

Reported EPS: 1.12

Power Corporation reported a significant increase in adjusted net earnings from continuing operations, rising to $727 million in Q1 2024, driven by strong performance across its main operating companies, particularly Great West and IGM Financial. Great West delivered record earnings, exceeding $1 billion for the first time, while IGM Financial reported strong earnings, driven by growth in both its wealth and asset management segments. The company’s investment in Wealthsimple is now valued at $1.3 billion, up from $1.1 billion, reflecting strong business performance. Additionally, Power Corporation’s alternative asset management platforms, including Sagard and Power Sustainable, continue to grow, with Sagard’s AUM jumping significantly. Despite these positive developments, the company took a noncash impairment charge on one of its standalone businesses, highlighting challenges some units may face.

Great-West Lifeco Inc (TSX: GWO)

Portfolio weight: 9.02%*

EPS Estimate: 1.01

Reported EPS: 1.09

“We’ve had a strong start to the year, exceeding $1 billion in quarterly base earnings for the first time, building on our momentum from 2023. This is the third consecutive quarter of record base earnings supported by the deliberate actions we’ve taken to re-position and strengthen our portfolio of businesses. This disciplined execution against our strategies is unlocking value today and positioning Lifeco for sustainable medium and longer term growth and success.” – Paul Mahon, President and CEO.

Great-West Lifeco Inc. reported a third consecutive quarter of record base earnings, surpassing $1 billion, reflecting strong execution across all operating segments. Empower, a key segment, reported record earnings and surpassed $1.6 trillion in assets under administration, highlighting successful integration of acquisitions and strong growth in the U.S. retirement services market. The company also reported significant growth in the Canadian market and European business expansion, indicating a positive outlook for future performance. However, concerns were raised about the potential impact of the global minimum tax, which could affect future profitability, and an expected increase in the effective tax rate due to this tax. Despite these challenges, the company’s strong financial position and successful integration of acquisitions underscore its resilience and strategic financial management.

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*Portfolio weight as at April 30, 2024

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