First-quarter earnings season for Canada’s largest banks continued on Wednesday, with the Royal Bank of Canada and National Bank each beating analyst expectations, as an expert says the results bode well for the financial sector.

Nate Thooft, chief investment officer and senior portfolio manager at Manulife Investment Management, told BNN Bloomberg that despite concerns Canadian banks may struggle to meet the mark amid a weakened economy, results have been mostly positive so far.

“We’re quite a ways through earnings for the big banks in Canada and overall… we’re expecting around eight to 10 per cent (year-over-year) increases for earnings,” he said in a Wednesday interview.

“Given all the headline risk you hear about banks; the economy being weak, loan-provision losses going up, the health of the consumer may be deteriorating… you still are seeing pretty healthy earnings in general.”

RBC reported a profit of $3.58 billion in the quarter that ended on Jan. 31, up from $3.13 billion in the same quarter a year earlier.

Canada’s biggest bank earned $2.85 per share on an adjusted basis in the quarter, it said in a statement Wednesday, topping the $2.80 average estimate of analysts surveyed by Bloomberg.

National Bank of Canada, the smallest of the “Big 6,” also beat, reporting a first-quarter profit of $922 million, up from $876 million a year earlier. Adjusted earnings per share came in at $2.59, topping Bloomberg analyst estimates of $2.35.

Thooft said that these and other recent bank results from both Canada and the U.S. have made him bullish on financials due to their consistent performance and reasonable valuations.

He said that U.S. bank stocks may present more value to investors as Canadian banks often trade at higher prices, but that may be for good reason, he added.

“Canadian banks have traded at a premium and the reason for that is they generally are pretty high quality and they do have a pretty global business overall, including operations in the U.S.,” Thooft said.

“They generally have a consistent earnings profile and generally a really good dividend profile.”

Provisions for credit losses

Despite positive results from both banks, RBC and National each put aside more money to cover bad loans in the first quarter compared to the previous year – a sign they’re still wary of the economic health of their clients. 

RBC said its provisions for credit losses totalled $813 million for the quarter, up from $532 million a year earlier, while National Bank’s totalled $120 million, up from $86 million the previous year.

RBC said in a Wednesday slide presentation that it also raised provisions for impaired loans in its commercial-lending business, mainly in the automotive and real estate sectors.

The bank also provided new details on commercial real estate, noting that its total lending in the space represents 9.7 per cent of its overall loan book, while U.S. office loans represent less than one per cent of its portfolio.

Bank of Nova Scotia and Bank of Montreal, each of which reported earnings on Tuesday, both also increased loan-loss provisions in the first quarter.

BMO said that it put aside $627 million, more than the $514.2 million forecast by Bloomberg analysts, while Scotiabank’s loan-loss provisions in the quarter totaled $962 million, up from $638 million a year ago.

The Canadian Imperial Bank of Commerce and TD Bank are set to finish off this round of Canadian bank earnings, as they each are scheduled to report quarterly results on Thursday.

With files from Bloomberg News and The Canadian Press