Bank Earnings Benefit on Trading Units
Canadian banks, including Bank of Montreal (BMO), Canadian Imperial Bank of Commerce (CIBC), and Bank of Nova Scotia (Scotiabank), have posted strong earnings in the first quarter of fiscal year 2019. BMO’s capital-markets division contributed to its earnings beating estimates last quarter, with revenue from BMO Capital Markets coming in at C$1.72 billion ($1.27 billion), which exceeded analysts’ average estimate of C$1.48 billion. Despite being down from a year earlier, BMO’s trading revenue from fixed income, foreign exchange, and equities increased compared to the previous quarter. Similarly, CIBC benefited from the same trends in the quarter, while trading was a bright spot in Scotiabank’s results, which otherwise missed estimates.
However, Scotiabank’s results were marred by the bank’s failure to capture the benefit of rising interest rates, and its net interest margin contracted to 2.11% in the three months through January, down from 2.18% in the previous quarter. Scotiabank’s international division has weighed on the lender’s shares in recent years, and its net interest margin contracted to 4% from 4.08% in the fiscal fourth quarter.
BMO’s shares fell after its non-interest expenses rose from a year earlier and its net interest margin remained below year-earlier levels. Despite this, BMO’s earnings exceeded expectations for the fiscal first quarter. The bank set aside C$217 million in provisions for credit losses, which was less than analysts had projected.
Bank of Montreal completed its $16.3 billion purchase of Bank of the West from BNP Paribas SA on Feb. 1, which has expanded its US footprint to 32 states and added 1.8 million new customers. The bank’s net income dropped 92% to C$247 million, or 30 cents a share, because of accounting adjustments related to the Bank of the West acquisition. Excluding some items, profit was C$3.22 a share, which exceeded analysts’ average estimate of C$3.16.