RBC, TD, Scotiabank, BMO, CIBC: Would They Emerge Unscathed from Commercial Real Estate Issues?

Canadian banks' resilience will be on display this week as the industry's top five report earnings. Would they emerge unscathed from the US commercial real estate issues that helped slash New York Community Bancorp's market value by more than half in less than a month?

BMO, as the company is known, is expected to more than double its provision for credit losses to C$514.2 million from a year earlier, according to the average estimate.

The bank has a C$35.3 billion US commercial real estate exposure, the second highest among Canada's six biggest banks, according to data from company filings and presentations compiled by Bloomberg Intelligence. That's equal to about 5% of BMO's total loan portfolio and represents a C$1.8 billion in potential loss, according to Bloomberg Intelligence. That could have a 15% impact on the company's fiscal 2024 earnings consensus, Kaye said.

"Writing off 5% of the US exposure in isolation represents an 11% profit cut, or a 1.4% book-value hit, with CIBC, BMO, RBC and TD most exposed" Kaye said.

Scotiabank, as the company is known, has a C$8.1 billion exposure in US commercial real estate, or just 1% of its total loans, the smallest of Canada's six biggest banks, according to Bloomberg Intelligence data. That represents a potential loss of C$400 million, or a 4% impact on fiscal 2024 earnings consensus, data showed.

On Wednesday, the Royal Bank of Canada is expected to report a 9.6% plunge in quarterly adjusted earnings to C$2.80. Canada's largest bank is expected to bolster its provision for credit losses by almost 53% to C$812.1 million from a year earlier. RBC, as the bank is known, has a C$29.4 billion exposure in US CRE, with a potential loss of C$1.5 billion that could result to a 7% hit on its fiscal 2024 consensus earnings, according to Bloomberg Intelligence.

On Thursday, TD Bank Group is seen reporting a 13% decline in quarterly adjusted earnings to C$1.93, according to Bloomberg estimates. Canada's second-biggest bank has a C$40 billion exposure to US commercial real estate, the highest among its peers in the country. That could mean a potential loss of C$2 billion, and an 11% hit on its fiscal year consensus earnings, according to Bloomberg Intelligence.

The bank has already been building up its arsenal to mute the impact. It almost tripled its provision for credit losses to C$2.93 billion in the fiscal year ended Oct. 31. TD is seen setting aside C$944.1 million to cover potential losses from delinquent and bad loans, up 37% from a year earlier, according to the estimates.

Canadian Imperial Bank, the fifth among the nation's biggest, is anticipated to see its quarterly adjusted earnings tumble 14% to C$1.67, as it almost doubles its provision for credit losses to C$583.4 million, according to Bloomberg estimates.

CIBC, as the bank is known, has about C$25.7 billion in US CRE, a potential loss of C$1.3 billion and could see a 16% hit on its consensus earnings, according to Bloomberg Intelligence.