Canadian stocks slightly down despite banks' strong earnings

Canada's main stock market in Toronto inched down fractionally after touching a fresh nine-month high on Thursday, although latest releases of quarterly results from the country's biggest banks are all topping profit estimates even as the energy industry downturn takes a toll on their loan books.

The Toronto Stock Exchange's benchmark Standard & Poor's/TSX Composite Index shed 4.54 point, or 0.03 percent, to close at 14,049.20 points. Five of the TSX index's eight main sub-sectors were higher.

Canada's biggest banks are seeing an increase in energy clients struggling to pay back loans following a sharp decline in the price of oil. Bank of Montreal (BMO) said on Wednesday it had set aside more funds to cover losses.

Royal Bank of Canada (RBC), the biggest bank by market value in the country, said on Thursday bad loans increased by 583 million Canadian dollars (449 million U.S. dollars), or 19 percent, in the second quarter from the quarter before, largely due to a rise in credit to oil firms that had turned sour.

Despite the warning, RBC reported a 7 percent increase in second-quarter profit from the same quarter a year earlier, which it said reflected strength across its businesses. RBC shares went up 0.95 percent to 80.0 Canadian dollars.

RBC said net income excluding one-off items for the second quarter to April 30 was 2.6 billion Canadian dollars, or 1.66 Canadian dollars per share, compared with 2.4 billion Canadian dollars, or 1.61 Canadian dollars per share, a year earlier.

Canadian Imperial Bank of Commerce (CIBC) reported a 3.5 percent rise in quarterly profit, helped by growth in its retail and business banking division. CIBC shares went down 1.03 percent to 102.30 Canadian dollars.

CIBC's net income rose to 926 million Canadian dollars, or 2.35 Canadian dollars per share, in the second quarter ended April 30 from 895 million Canadian dollars, or 2.25 Canadian dollars per share, a year earlier.

Toronto-Dominion Bank (TD), Canada's second biggest lender, reported a 10.4 percent rise in quarterly profit on Thursday, helped by growth in its retail banking business. TD shares went up 0.14 percent to 57.46 Canadian dollars.

The Toronto-based bank's net income rose to 2.05 billion Canadian dollars, or 1.07 Canadian dollars per share, in the second quarter ended April 30 from 1.86 billion Canadian dollars, or 97 cents per share, a year earlier.

As a group, the financials edged down 0.01 percent, while the metals & mining group, which includes precious and base metals miners and fertilizer firms, rose 0.24 percent.

Barrick Gold Corporation lost 1.209 percent at 22.21 Canadian dollars, while Kinross Gold Corporation gained 2.09 percent to 5.86 Canadian dollars.

Copper prices retreated from two-week highs, while spot gold edged 0.28 percent lower on stronger U.S. dollar.

The energy group seesawed as oil turned slightly lower after rising above 50 U.S. dollars a barrel for the first time in nearly seven months.

The West Texas Intermediate for July delivery fell 8 cents to settle at 49.48 U.S. dollars a barrel on the New York Mercantile Exchange, while Brent crude for July delivery decreased 15 cents to close at 49.59 dollars a barrel on the London ICE Futures Exchange.

On the economic agenda, Statistics Canada reported on Thursday that average weekly earnings of non-farm payroll employees were 960 Canadian dollars in March, up 0.5 percent from the previous month. Compared with the same month the year before, average weekly earnings increased 0.7 percent.

Meanwhile, iconic Canadian brand Canada Goose, known for its popular luxury outerwear, said Thursday it plans to open its first retail stores this autumn, one flagship outlet in Toronto's Yorkdale Shopping Centre in October, and another in Manhattan's SoHo neighborhood in November.

The Canadian dollar traded higher at 0.7710 U.S. dollar, compared with Wednesday's closing rate of 0.7679 U.S. dollar.

"The Canadian dollar has had a great 24 hours, it has been in rally mode since the Bank of Canada statement yesterday and last night the loonie received some strength from the oil price that hit over 50 U.S. dollars a barrel," said Michael J Smith, a Toronto currency expert at AFEX, a global non-bank provider of foreign currency services.

"Whether or not the loonie can continue this run remains to be seen but I would still advise U.S. dollar buyers to look at these levels as a great opportunity to pick up some of your short-term requirements," said Smith. Endit