Earnings bonanza continues at big banks as RBC, TD and CIBC profits up by more than 100%

Three of Canada's biggest banks saw their profits either more than double or more than quadruple last quarter, a sign that the worst of the economic toll of the pandemic may be in the rear-view mirror as the country's biggest lenders are back to raking in the cash.

Canada's biggest bank, The Royal Bank of Canada, posted a profit of $4 billion for the three-month period up until the end of April. That's up from $1.5 billion in profits for the same time last year, when the COVID-19 pandemic was just beginning.

The second-biggest bank, TD Bank, was only slightly behind with a profit of $3.7 billion for the quarter, up 144 per cent from last year.

CIBC followed suit with an even bigger jump in percentage terms, posting a quarterly profit of $1.6 billion — more than four times what it made in the same time last year.

WATCH | Big banks under fire for raising fees in a pandemic:

Ottawa questioned as anger over bank fee increase grows | Go Public

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A CBC Go Public story about rising banking fees has prompted anger with customers and politicians calling out the banks for increasing costs during a pandemic while recording big profits and criticizing the federal government for not doing anything to stop it.

Bank of Montreal was the first major bank to report quarterly earnings on Wednesday, announcing that its profits almost doubled to just over $1.3 billion. The last of the big banks, Scotiabank, will report on Monday, and analysts are expecting a similarly large jump.

The banks are somewhat of a canary in Canada's economic coal mine in that if the consumers and businesses they lend money to are having problems paying their bills, those woes will show up on the banks' books. But this week's profit bonanza suggests that in the aggregate at least, consumers and businesses are not exactly struggling.

Part of the massive spike in profits can be attributed to the banks being able to draw down some of the money they set aside to cover loans they worried might go bad. Known as loan-loss provisions, the banks squirreled away billions of dollars worth of cash on their balance sheets in case they had to write off loans that they feared would default because of the pandemic.

But for the most part, that hasn't happened. Official data shows that in the year up to March 31, 2021, just over 2,500 Canadian companies went insolvent. That's down 30 per cent from just over 3,500 that did so the year prior, when there wasn't a pandemic.

Consumer insolvencies follow a similar trajectory, down by 37 per cent compared to before the pandemic.

That suggests that by and large Canadians are managing to stay on top of their debt, which is allowing the banks to move some of that cash they had set aside from being a liability over to the asset side of the ledger.

Royal Bank had loan-loss provisions of $2.1 billion this time last year. They're now down to just $260 million. TD, meanwhile, had $3.2 billion worth of provisions a year ago. This quarter, that figure actually became a net positive, with a recovery of $377 million worth of such loans.

At CIBC, loan-loss provisions plunged by 98 per cent, from $1.4 billion last year to just $32 million now.