Scotia, BMO post profits; bad loan provisions up

Tue Mar 3, 2009 5:03pm EST
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By Jeffrey Hodgson

TORONTO (Reuters) - Two of Canada's largest banks pushed through the global financial crisis to report profits on Tuesday, but also disclosed higher provisions for bad loans that point to tougher quarters ahead.

Bank of Nova Scotia and Bank of Montreal closed out a first-quarter reporting season for the country's Big Six banks in which all met or exceeded expectations. But all of them also made room for, or took, hefty writedowns on their credit portfolios.

Scotiabank, Canada's third-largest lender, reported weaker earnings per share as provisions for bad loans more than doubled and its payout of preferred share dividends rose.

Bank of Montreal, the No. 5 lender, reported a 12 percent fall in net income, hurt by charges tied to volatile capital markets and an 86 percent jump in provisions for credit losses.

"Although the core results are doing fine, we have a continued deterioration of credit quality, which is going to be the focus of the market going forward. This is only going to get worse before it gets better," said John Aiken, an analyst at Dundee Capital Markets.

"(Earnings) more than likely are going to stay positive, but they're going to be lower than where we stand today because of credit losses."

Canadian banks, routinely ranked as the world's soundest, have remained profitable despite a crisis that has pushed many U.S. and European institutions to the brink of insolvency.

Experts credit conservative lending practices for helping Canadian banks avoid the massive writedowns and losses seen in other countries.   Continued...

<p>Scotiabank President and Chief Executive Officer Rick Waugh prepares for the annual general meeting at the World Trade and Convention Centre in Halifax, Nova Scotia, March 3, 2009. REUTERS/Paul Darrow</p>