By Nichola Saminather
TORONTO (Reuters) – Bank of Nova Scotia (Scotiabank) and Bank of Montreal (BMO) joined their Canadian rivals in beating analysts’ expectations for first-quarter profits on Tuesday.
Scotiabank benefitted from domestic banking strength, particularly a recovery in business lending, while BMO saw a surge in capital markets profits, with both helping offset declines in wealth management earnings.
Scotiabank, Canada’s No. 3 lender, said net income per share excluding one-off items rose to C$2.15 in the three months ended Jan. 31, compared with C$1.88 a year earlier and analysts’ C$2.05 average estimate.
BMO, Canada’s fourth-biggest bank said adjusted earnings increased to C$3.89 per share from C$3.06 a year earlier, beating analysts’ C$3.28 per share forecast.
Canada’s major banks have reported strong results so far, with Royal Bank of Canada, Canadian Imperial Bank of Commerce and National Bank of Canada also reporting better-than-expected profits.
While lower provisions for loan losses have helped lift earnings, even without those, improving revenues, particularly driven by recovering non-mortgage lending, have helped increase profits. Strong investment banking, trading and growth in wealth management assets also contributed to the improved results, helping offset higher expenses and continued margin pressures, which analysts had flagged.
Toronto-Dominion Bank, the only Big Six bank left, will report results on Thursday.
At Scotiabank, adjusted pre-tax, pre-provision (PTPP) earnings grew 10% from a year ago in its Canadian banking unit and 4% in its Latin America-focused international business. Its expenses remained flat from a year ago.
BMO reported adjusted PTPP rose 19% in its Canadian banking unit and 12% in its U.S. banking business. Its adjusted expenses increased 7% year-on-year.
Their capital markets performances diverged, with Scotiabank’s PTPP earnings up 2%, while BMO’s surged 30%, helped by strong advisory and underwriting revenues.
Wealth management PTPP earnings were subdued at both, down 2% year-on-year on an adjusted basis at Scotiabank and 7% at BMO, with growth in assets offset by higher expenses.
BMO reported a four-basis-point increase in net interest margins from the previous quarter, excluding trading, from a year ago, while Scotiabank posted a 1-basis-point decline.
Margins are expected to improve in coming quarters, benefiting from higher central bank rates. The Bank of Canada is expected to raise interest rates on Wednesday.
($1 = 1.2671 Canadian dollars)
(Reporting By Nichola Saminather in Toronto; Additional reporting by Mehnaz Yasmin and Manya Saini in Bengaluru; Editing by Tomasz Janowski)
