Bank results seen weighing on Toronto stocks

Tue Mar 4, 2008 8:45am EST
 
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TORONTO, March 4 (Reuters) - Toronto's main stock market index was poised to open lower on Tuesday as weak results from two of the Canada's biggest banks and more concern over the health of the international banking sector casts a pall over the market.

But the weakness could be offset somewhat by firm commodity prices which hovered around record levels.

Bank of Montreal's (BMO.TO: Quote) first-quarter earnings fell 27 percent as it took writedowns of C$362 million after tax for trading and valuation-related items in capital markets, and made a higher allowance for credit losses.

Meanwhile, Bank of Nova Scotia (BNS.TO: Quote) said its first-quarter earnings dropped 18 percent, due mainly to substantial volatility in global financial markets.

Also sure to heighten the worries in the banking sector was comments from Gulf investment agency Dubai International Capital which said on Tuesday that it would take "a lot more money" to rescue Citigroup Inc (C.N: Quote) following investments from Abu Dhabi, Kuwait and Saudi Arabia's Prince Alwaleed.

Citigroup suffered a record $9.83 billion fourth-quarter loss tied mainly to mortgage write-downs.

"We're in for an unsettled day until we get over the effects of these lower bank earnings and the problems that still exist on the horizon for a bunch of foreign banks," said Fred Ketchen, director of equity trading at ScotiaMcLeod.

Firm commodity prices could cushion some of the blow, however, as U.S. crude oil sat about $1 below its $103.95 a barrel record, while gold rested just below its record high of $989.30 an ounce.

Investors will also take time to weigh the latest interest rate decision from the Bank of Canada due out before the market's open.

A Reuters poll conducted on Feb. 29 showed most of Canada's primary dealers expect a 50-basis-point cut in the overnight rate to 3.50 percent.

The Toronto Stock Exchange's S&P/TSX composite index .GSPTSE begins the day at 13,544.38 following a drop of 38.31 points in the previous session. ($1=$0.99 Canadian) (Reporting by Scott Anderson; Editing by Renato Andrade)