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Bond Market News

Scotiabank and BMO Beat on Quarterly Earnings

Toronto-based banking majors Bank of Nova Scotia (Scotiabank) and Bank of Montreal (BMO) reported earnings for their third quarter ended July 31 on Tuesday.

Scotiabank reported a 95% YoY surge in net income to CAD 2.5bn ($2.01bn). However, pre-tax pre-provision (PTPP) earnings were down 2% YoY to CAD 3.66bn ($2.9bn). A 15% and 20% rise in PTPP from its Canadian Business and Global Wealth Management to CAD 1.53bn ($1.21bn) and CAD 523mn ($415mn) helped offset the 32% decline in PTPP from Global Banking and Markets to CAD 633mn ($502mn). Credit Suisse analyst Mike Rizvanovic wrote in a note, “Scotiabank’s PTPP miss was of particular concern, mostly for international banking, which we continue to view as key to a potential rerating of (its) valuation.” Provisions from its Canadian Banking and International Banking business were 91% and 71% lower YoY to CAD 69mn ($55mn) and CAD 339mn ($269mn) on the back of a more favourable credit and macroeconomic outlook and improving credit quality. The bank’s CET1 ratio stood at 12.2% vs. 12.3% in the prior quarter. Scotiabank´s bonds were trading stable with its 4.9% Perps trading at 109.312, yielding 2.32%.

BMO reported a net income of CAD 2.275bn ($1.8bn), up 85% YoY. BMO’s strong performance was led by an overall 10% growth in revenues to CAD 6.578bn ($5.22bn) and 13% growth in PTPP at CAD 2.894bn ($2.29bn). Its PTPP from Canadian Personal & Commercial Banking was up 19% to CAD 1.195bn ($948mn), US Personal and Commercial Banking was up 12% to CAD 539mn ($427mn), BMO Wealth Management up 15.5% to CAD 529mn ($419mn) and BMO Capital Markets down 5% to CAD 666mn ($528mn). BMO’s CET1 ratio stood at 13.4%, up from 13% at the end of the previous quarter. BMO’s 4.8% Perps traded steady at 106.81 yielding 2.43%.

 

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