(Reuters) -TD Bank Group reported a fall in its fourth-quarter profit on Thursday, as Canada’s second-largest lender set aside more rainy-day funds to cover for potential sour loans.
Multiple interest rate hikes by the Bank of Canada allowed lenders to charge more on loans. But that, along with persistent inflationary pressures and tough economic conditions, has also raised the risk of defaults on loan repayments, forcing banks to set aside more provisions for credit losses (PCL).
TD’s PCL rose to C$878 million in the quarter, from C$617 million a year earlier.
Peer Scotiabank, which kicked off the Canadian banks’ earnings season on Tuesday, also earmarked higher funds to prepare for potential loan losses, dragging its profit down.
TD’s net interest income – the difference between what banks earn on loans and pay out on deposits – fell nearly 1.8%, to C$7.49 billion.
The lender’s personal and commercial business posted a 1% decrease in net income, while the U.S. retail unit dipped 17%.
The bank’s adjusted net income fell to C$3.51 billion ($2.58 billion), or C$1.83 per share, for the three months ended Oct. 31, from C$4.07 billion, or C$2.18 per share, a year earlier.
($1 = 1.3618 Canadian dollars)
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shilpi Majumdar and Pooja Desai)
