Bank of Nova Scotia and Bank of Montreal got an earnings boost with commercial clients ramping up their borrowing as economies emerged further from the pandemic.
Scotiabank increased fiscal first-quarter government and commercial loans 8.2% from a year earlier in its international division and 16% in its Canadian unit. At Bank of Montreal, business loans rose 9.9% in its Canadian banking unit and 9.1% in its U.S. division. Both banks’ overall profit topped analysts’ estimates.
Canada’s banks had weathered the COVID-19 crisis with strong mortgage growth, helped by the country’s hot housing market. That lending strength is now broadening to other categories as economies recover from the earlier phases of the pandemic and omicron-variant infections dissipate, prompting businesses and consumers to borrow more.
“It’s a promising sign of reopening,” Bloomberg Intelligence analyst Paul Gulberg said of the broader-based loan growth. “It’s a promising sign that omicron didn’t hurt things too much and was more of a short-term phenomenon.”
That helped Bank of Montreal’s net income rise 45% to C$2.93 billion ($2.31 billion), or C$4.43 a share, in the three months through January. Excluding some items, profit was C$3.89 a share. Analysts estimated C$3.29, on average.
Bank of Montreal has been the top-performing major Canadian bank stock over the past year as it managed to control expenses and boost lending. Its success on those fronts are part of what has made its $16.3 billion agreement to buy BNP Paribas's Bank of the West unit palatable to investors and analysts.
The bank’s common equity Tier 1 ratio rose to 14.1% from 13.7% in the fourth quarter.
Bank of Montreal shares rose 1% to C$146.16 at 9:40 a.m. in Toronto, while Scotiabank advanced 0.7% to C$92.45. Scotiabank shares have risen 3.1% this year and Bank of Montreal is up 7.3%, compared with a 4.8% gain for the S&P/TSX Commercial Banks Index.
International revamp
For Scotiabank, net income rose 14% to C$2.74 billion, or C$2.14 a share. Excluding some items, profit was C$2.15 a share. Analysts estimated C$2.04, on average.
Chief Executive Officer Brian Porter has spent much of his eight-year tenure revamping the international unit by selling off small or underperforming operations and doubling down in larger, more promising markets. He has said investors would see the full earnings power of the bank this year.
That pledge got a boost last quarter as the international division benefited from growth in business-loan balances. Profit in the division rose 43% from a year earlier to C$630 million, helped by falling noninterest expenses.
“This quarter had strong loan growth, along with good fee-income growth,” Porter said in a statement.
Scotiabank on Monday
