Office buildings in Toronto’s financial district

Two of Canada’s biggest financial services firms saw an uptick in earnings in the latest quarter, but signs of caution loom.

Toronto-based Sun Life Financial Inc. reports its investor clients are “cautious” amid a shaky trade backdrop while Manulife Financial Corp., also based in Toronto, is cutting back the firm’s physical footprint and workforce.

Sun Life CEO Dean Connor says clients of the firm’s MFS investment-management arm were “derisking,” and net outflows for the latest quarter were “outsized” at US$11.5 billion.

“The trade backdrop has clearly got people cautious, sitting on their hands a little bit,” he told analysts on a conference call on Thursday.

Meanwhile, Manulife gave more details on Thursday about an aggressive cost-cutting initiative it announced at its investor day in June aimed at saving $300 million per year.

The firm’s chief financial officer, Philip Witherington, told analysts that Manulife intends to combine its head office footprints in the U.S. and Canada to a single building in each market, consolidate its legacy IT systems in the U.S., in addition to a previously announced cut of 700 jobs.

“Execution of those actions will be completed over the next 12 to 18 months,” Witherington told analysts.

Both companies recorded an increase in profit during their fiscal second quarter (Q2), with adjusted earnings beating analyst expectations, as the industry players invest in technology to stay competitive and the broader macroeconomic outlook is clouded by concerns over trade tensions between Canada and the U.S.

Manulife recorded a Q2 profit of $1.26 billion, slightly higher than during the same period ended June 30 a year ago.

Sun Life’s net income during the quarter was $729 million, up by 6% from the same period a year earlier.

Both Manulife and Sun Life benefited from their international presence.

Despite softness in its MFS results, Sun Life’s U.S. and Asia businesses saw a 24% increase and 18% increase to underlying net income, respectively, compared with a year ago.

Manulife’s core earnings from its U.S. and Asia businesses rose by 16% and 27%, respectively, during the quarter compared with a year earlier.