Scotiabank, BMO kick off Canadian bank results with profit beats

[August 24, 2021]  By Nichola Saminather

TORONTO (Reuters) -Bank of Nova Scotia (Scotiabank) and Bank of Montreal kicked off Canadian lenders' third-quarter reporting on Tuesday by exceeding profit expectations, driven by lower provisions for credit losses than estimated and as their Canadian banking units improved from a tough quarter a year ago.

A woman leaves a Bank of Nova Scotia (Scotiabank) branch in Ottawa, Ontario, Canada, May 31, 2016. REUTERS/Chris Wattie/File Photo

BMO released C$70 million ($55.53 million) of reserves it had set aside to cover potential bad loans in the three months ended July 31, while Scotiabank took provisions for credit losses (PCL) of C$380 million, less than the expected C$564 million.

Although Canada's third- and fourth-largest lenders both beat estimates, Scotiabank had a tougher quarter in its core business, with adjusted pre-tax pre-provision (PTPP) earnings down 1% both from a year ago and from the previous quarter. BMO's PTPP rose 12% from a year ago and 6% from the second quarter.

Both banks were helped by recoveries in Canadian lending, with Scotiabank's 7% year-on-year growth helping offset a 12% decline in loans in its international unit. And while BMO's Canadian loans increased 5.4% from a year ago, they fell 11% in its U.S. unit.

Wealth management continued to grow, with both banks seeing double-digit expansion in adjusted earnings. But their capital markets performances diverged, with BMO's up strongly as investment banking fees helped offset lower trading revenues, while Scotiabank's saw earnings declines due to lower fixed income revenue.

Scotiabank reported net income excluding one-off items of C$2.01 a share, compared with C$1.04 a year earlier and analysts' estimates of C$1.90 a share, according to IBES data from Refinitiv.

BMO's adjusted profit was C$3.44 a share, versus C$1.85 a year ago, beating expectations of C$2.94.

($1 = 1.2605 Canadian dollars)

(Reporting by Nichola Saminather in Toronto, and Noor Zainab Hussain and Niket Nishant in Bengaluru; Editing by Shinjini Ganguli and Bernadette Baum)

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