Canadian bank earnings season got off to a strong start this morning as RBC reported a record $3.5-billion first-quarter profit as earnings from Capital Markets surged 35 per cent and amid an uptick in its mortgage book that boosted core Canadian banking. Overall credit quality also improved as loan loss provisions fell sharply, and shareholders are being rewarded with a richer dividend. We'll have plenty of analysis of Royal Bank of Canada's performance today.
TECK TAKES NEARLY $1B IMPAIRMENT ON FORT HILLS
$910 million after-tax, to be precise, with Teck Resources pinning the blame on “lower market expectations for future oil prices.” This feels especially newsworthy as the clock ticks down to the federal cabinet’s decision on whether to approve the $20B+ Frontier project (on that front, Teck warned it will face a $1.13-billion impairment if the feds block Frontier). The miner also reported a big drop in adjusted fourth-quarter profit ($122 million from $500 million a year earlier) and fell way short of estimates. CEO Don Lindsay rattled off a list of factors that weighed on his company’s performance, including the coronavirus.
TSX HITS ANOTHER ALL-TIME HIGH
Four straight winning sessions. Record closing highs in each of them. And only two days so far this month when Canadian stocks have closed in the red. What a run it’s been for the S&P/TSX composite index. We’ll continue gathering insight on how long momentum will stay on Bay Street’s side. Also worth pointing out: of the top 10 percentage gainers so far this month, three names are in the clean/renewable power space (Ballard, Brookfield Renewable, Innergex).
BLOCKADE WATCH
Wet’suwet’en hereditary chiefs have met with Mohawk protesters whose blockade near Belleville, Ont. is choking off rail traffic in Canada and triggered approximately 1,450 layoffs at CN and Via. And as Heather Wright from CTV News told us this morning, more meetings are expected today between the chiefs as Mohawk community. As for Public Safety Minister Bill Blair’s call to take down barricades after the RCMP offered to back off Wet’suwet’en territory in British Columbia, Heather said one of the Mohawk protesters delivered a “straight up, no” when asked if the blockade will come down as a result.
OTHER NOTABLE STORIES
-Statistics Canada reported retail sales flatlined in December at $51.6 billion. But there are questions to be asked about quality of the data. StatsCan says e-commerce accounted for 4.7 per cent of total sales in the month. While that's a record, it's worth keeping in mind that even Bank of Canada Governor Stephen Poloz has pointed out the flaws in our retail sales data-gathering since Amazon isn't accounted for.
-Magna International saw its sales and profit slump in the fourth quarter, but managed to exceed estimates nonetheless and also announced a 10% boost to the quarterly dividend. The auto parts maker is sticking with its full-year outlook for now, while noting there haven’t been any tweaks as a result of the coronavirus due to challenges of forecasting its impact.
-Teck’s not alone with its impairment news today: Enerplus disclosed a $451-million writedown on its Canadian assets this morning, sending the oil and gas producer to a loss in its fourth quarter.
-Home Capital Group reported flat fourth-quarter adjusted profit of $0.72 per share this morning while mortgage originations inched up to $1.62 billion.
NOTABLE RELEASES/EVENTS
-Notable earnings: Royal Bank of Canada, Teck Resources (11am call), Home Capital Group, Canfor, Deere & Co.
-Notable data: Canadian retail sales
-1:00 p.m. ET: Foreign Affairs Minister Francois-Philippe Champagne addresses Montreal Council on Foreign Relations (plus avail)
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
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