Canada bank profits soften as provisions rise
By Lynne Olver
TORONTO (Reuters) - Two of Canada's Big Six chartered banks kicked off the spring quarterly earnings season on Tuesday by revealing lower profits and higher provisions for credit losses.
Neither development was unexpected -- analysts had flagged weakness in Canadian banks' capital markets-related businesses and rising loan-loss provisions as concerns months ago.
But Bank of Montreal said its provisions for credit losses would climb higher than it had anticipated less than three months ago, while Bank of Nova Scotia said it was unlikely to meet its 2008 earnings growth target of 7 percent to 10 percent.
Net income fell 3 percent at Bank of Montreal to C$642 million in the second quarter ended April 30, or C$1.25 a share. Its U.S. operations include Chicago-based Harris Bank.
Scotiabank, with greater international operations than BMO, said net income fell 6 percent to C$980 million, or 97 Canadian cents a share.
Provisions for loan losses jumped at both banks.
"Yes, the credit environment is deteriorating, I'm not terribly surprised by that," Genuity Capital Markets analyst Mario Mendonca said.
"But BMO could very well be special in this regard," he added. Continued...