Canada bank profits soften more than expected

Tue Aug 26, 2008 5:48pm EDT
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By Lynne Olver

TORONTO (Reuters) - Canada's third and fourth biggest banks reported lower than expected profits on Tuesday, with the U.S. housing market proving to be a key factor separating a double-digit drop from a modest one.

Bank of Nova Scotia posted a 2 percent decline in net income but the No. 3 bank still managed to rack up more than C$1 billion ($952 million) in earnings.

Bank of Montreal's profit tumbled 21 percent to C$521 million as it cited weak U.S. real estate markets for sharply higher loan-loss provisions.

While executives said they expected more pressures ahead, they also vowed to work to contain costs.

"These times are challenging and we can reasonably expect them to remain challenging for the near future," Bank of Montreal CEO Bill Downe told a conference call.

Investors had braced for lower earnings from the Canadian bank group, but it appears that results will lag even diminished expectations, said John Kinsey, portfolio manager at Caldwell Securities Ltd.

"BMO was quite a disappointment. It was quite a bit lower than the targets," Kinsey said.

Scotiabank stock closed down 2.5 percent at C$46.45, while Bank of Montreal fell 0.3 percent to C$43.94.   Continued...