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WRAPUP 3-TD, CIBC join rivals in better-than-expected quarter, but retail weakness lingers

(Adds CIBC comments, share price)

By Nichola Saminather and Noor Zainab Hussain

Feb 25 (Reuters) - Toronto-Dominion Bank and Canadian Imperial Bank of Commerce closed out quarterly results reporting on Thursday, joining all major rivals in beating expectations, as much lower provisions for loan losses and trading strength offset muted growth or declines in their retail businesses.

All six major banks returned to pre-pandemic profit levels in the first quarter as an increase in soured loans has so far failed to materialize, but executives cautioned that a rise is still on the cards amid continued uncertainty and as government assistance programs come off.

Attributing their better-than-expected credit performance to government support programs and prudent client behaviour, bank executives acknowledged that loan growth outside of mortgages and a significant improvement in margins are contingent on a broad economic recovery that may not materialize until later in the year.

The economic outlook is better than it was at the end of last year, but "there is still uncertainty in the short term," particularly with the rollout of vaccines and the emergence of variants of the coronavirus, Hratch Panossian, chief financial officer of CIBC, said in an interview.

CIBC expects loan impairments to rise, peaking around mid-2021 before falling back down, executives said on an analyst call.

"There are some positive signs with expectations of vaccines, but we need to be vigilant about a possible third wave" of the pandemic, Riaz Ahmed, chief financial officer at TD, Canada's second-largest lender, told Reuters.

But the bank, which has almost C$9 billion ($7.21 billion) of reserves to cover loan losses, is satisfied with its level of coverage for future losses, he added. TD reported a decline of 13% in its U.S retail business, while growth in its Canadian banking unit was driven largely by its wealth business.

In addition to margins under pressure, anemic loan growth, and higher expenses in TD's U.S. business, "strong contributions previously received from Ameritrade have ebbed under the new, previously announced earnings from Schwab," Barclays analyst John Aiken said in a note.

TD shares fell 1.5% to C$78.23 in morning trading in Toronto, while CIBC rose 0.2% to C$118.07, on track for its highest close since September 2018.

CIBC reported higher profit at all its businesses, with strength in capital markets, and the recovery of C$89 million in provisions on performing loans offsetting sluggish growth in its Canadian banking unit.

TD reported adjusted net income of C$1.83 a share, in the three months to Jan. 31, versus analysts' expectations of C$1.49 a shares. CIBC saw adjusted income rise to C$3.58 a share, compared with estimates of C$2.81 a share. ($1 = 1.2483 Canadian dollars)

(Reporting By Nichola Saminather and Noor Zainab Hussain, additional reporting by Sohini Podder; Editing by Aditya Soni, Krishna Chandra Eluri and Nick Zieminski)