BMO reports Q4 profit jump as banks post$11 billion in quarterly profits

TORONTO — Canada’s biggest banks earned more than $11 billion in the latest quarter, up 14 per cent from a year ago, closing out a financial year in which these lenders collectively generated some $43 billion in profits, brushing off worries over tightened lending rules and trade uncertainty.

The Bank of Montreal on Tuesday was the last of the country’s Big Five lenders to post its earnings for its financial fourth quarter and 2018 financial year, with all delivering quarterly profit increases but some falling short of market expectations.

Despite the mixed market reaction, the banks’ performance during the three months ended Oct. 31 was generally “strong” across the board, with good revenue growth led by commercial lending as mortgage growth moderated under after new guidelines were introduced this year, said Robert Colangelo, the senior vice-president of financial institutions at ratings agency DBRS.

The banks also got an earnings boost from their U.S. or international footprints, he added.

“A good, solid quarter for all the banks, with good contributions from all their businesses… There might be some headwinds going into 2019 with some of that uncertainty, but at the end of the day, we think the banks are very well-positioned.”

BMO on Tuesday reported a 38 per cent jump in quarterly net income to $1.7 billion or $2.57 per diluted share, up from $1.23 billion or $1.81 in 2017. Canada’s fourth-largest lender also said Tuesday it will now pay a quarterly dividend of $1 per share, up four cents from its previous payment.

On an adjusted basis, BMO earned $1.53 billion or $2.32 per diluted share, compared with $1.31 billion or $1.94 per share a year ago. Analysts on average had expected a profit of $2.29 per share, according to Thomson Reuters Eikon.

Still, BMO’s shares slipped by as much as 3.2 per cent in Toronto on Tuesday to $95.85.

Canada’s two biggest lenders, Toronto-Dominion Bank and Royal Bank of Canada, beat estimates with quarterly net income of $2.96 billion and $3.25 billion, respectively. Canadian Imperial Bank of Commerce and Bank of Nova Scotia posted net income for the period of $1.27 billion and $2.27 billion, respectively, falling just short of analyst estimates.

The latest quarterly results for Canada’s banks were helped by strong contributions from their international operations, whether in the U.S. or in Latin America and the Caribbean, and BMO was no exception.

BMO’s U.S. personal and commercial banking arm reported a 37 per cent increase in net income to $372 million. At home, the bank’s domestic personal and commercial banking division reported fourth-quarter net income of $675-million, up eight per cent from the same three-month period a year ago. BMO wealth management reported net income of $219 million, up 25 per cent from the prior year.

The bank’s capital markets arm reported net income of $298 million, down six per cent from the same period a year ago, as higher investment and corporate banking revenue and lower taxes were more than offset by higher expenses and lower trading products revenue.

On an annual basis, BMO earned $5.45 billion, up two per cent from its 2017 financial year, including the impact of a $425-million charge related to U.S. tax reform earlier this year. On an adjusted basis, the bank delivered net income of $6 billion, up nine per cent from the previous financial year.

“We have made good progress against the areas we’ve been focused on,” said BMO’s chief executive Darryl White on a conference call with analysts. “Growing the contribution from our U.S. operation, improving efficiency while at the same time, investing in our digital innovation agenda.”

Overall, the five biggest Canadian lenders reported an increase in net income for the 2018 financial year, for a collective total of $43.2 billion, up nearly 7.2 per cent from 2017.

CIBC saw the biggest increase in annual net income at 12 per cent to $5.3 billion, followed by RBC at 8.4 per cent to $12.4 billion. TD delivered annual profits of $11.3 billion, up 7.8 per cent, while Scotiabank and BMO saw net income for the year increase 5.8 per cent and 1.8 per cent, respectively, to $8.7 billion and $5.45 billion.

However, many of the lenders signalled during their conference calls that volatility seen in the equity markets — which has also weighed on Canadian bank valuations — could present some headwinds in the next financial year.

“Looking ahead, while there’s been some volatility in equity markets recently, the economic fundamentals remain strong, and we’re leveraging our competitive strengths to grow our businesses,” said White.

As well, the raft of rate hikes on both sides of the border which have padded the banks’ net interest margins — the difference between the money they earn on the loans they make and what they pay out to savers — may be less beneficial in the quarters ahead.

Pressure has mounted on banks to increase the amount they pay to depositors, particularly south of the border, said James Shanahan, an analyst with Edward Jones.

“It’s pretty competitive right now… The banks were slow to raise deposit costs. and it began to accelerate about three quarters ago,” he said.

While the banks were positive about the coming financial year, other looming risks cited by executives included both macroeconomic and geopolitical uncertainty and strains in the energy and automotive sectors.

The lenders also gave additional guidance on their exposure to the Canadian oil and gas sector in light of the recent decline in market prices, signalling that the size of these portfolios were relatively small and the bulk of the companies were investment grade.

This emerged as major concern looming over Canada’s banks in 2014 and 2015, when crude was hit was a sustained decline, but the overall dollar loss for these lenders was “minuscule,” said Shanahan.

“The banks are probably in a better position today than we were the last time we had a concern when it relates to oil prices… This is a relatively small portfolio compared to, I would say, other pockets of risk.”

Just Posted

Gasoline Alley Harley Davidson hosts 7th annual Toy Run

Bikers jumped on their motorcycles this weekend to help make Christmas better… Continue reading

Innisfail RCMP locate drugs during traffic stop

A Rocky Mountain House man is facing charges after Innisfail RCMP located… Continue reading

Expert says acquittal of Alberta parents in boy’s death unlikely to set precedent

CALGARY — A law professor says the acquittal of an Alberta couple… Continue reading

Take Back the Night rally marches through downtown Red Deer

Dozens marched through the city’s downtown chanting, “Red Deer unite, take back… Continue reading

Houston area sees relief, rescues after Imelda leaves 4 dead

HOUSTON — Emergency workers used boats Friday to rescue about 60 residents… Continue reading

Your community calendar

Tuesday Bower Place Community Association Seniors Card and Coffee party at 1:30… Continue reading

Missing hiker found safe after spending night on North Vancouver mountain

VANCOUVER — Rescue crews have found a missing female hiker safe after… Continue reading

Trudeau was only one in dark makeup at 2001 party but nobody took offence: attendee

VANCOUVER — A man who attended an “Arabian Nights” gala held by… Continue reading

McKenna defends Canada’s climate credibility amid Trudeau controversy

OTTAWA — Liberal cabinet minister Catherine McKenna says Canada still has credibility… Continue reading

Blue Jays rookie Bo Bichette trying to “be smart” with head injury

NEW YORK — Blue Jays rookie shortstop Bo Bichette says he’s feeling… Continue reading

Climate activists step up protests in Britain and France

PARIS — Environmental activists in Britain and France stepped up campaigns Saturday… Continue reading

Man from Winnipeg who was hiking alone found dead in Banff National Park

LAKE LOUISE, Alta. — A hiker has been found dead in Banff… Continue reading

Singh campaigns in Toronto, May in Winnipeg, as Liberal and Tory leaders pause

OTTAWA — Jagmeet Singh and Elizabeth May are continuing on the campaign… Continue reading

Most Read