February 26, 2019 / 11:15 AM / 9 months ago

UPDATE 3-Scotiabank misses on profit as costs rise, Bank of Montreal beats

* Scotiabank misses estimates, while BMO beats

* Scotiabank shares down 2.19 pct, BMO up 2.4 pct

* Q4 markets rev at both banks fell on higher volatility (Adds analysts’ comments, shares)

By Aparajita Saxena

Feb 26 (Reuters) - Bank of Nova Scotia, Canada’s third-biggest lender, reported a lower-than-expected quarterly profit on Tuesday, as higher expenses and provisions for bad loans ate into gains from international banking and wealth management.

In contrast, smaller peer Bank of Montreal’s quarterly profit trounced analysts’ estimates, benefiting from increased lending in the United States.

Shares of Scotiabank fell 2.19 percent to C$73.76, while that of Bank of Montreal were up 2.4 percent at C$101.57.

Scotiabank’s adjusted non-interest expenses rose 18 percent to C$4.11 billion ($3.11 billion) in the first quarter ended Jan. 31. Its provisions for credit losses, or the money set aside to cover bad loans, rose 26.5 percent, while the same declined at Bank of Montreal.

Net income from Scotiabank’s Canadian business fell 2.6 percent to C$1.07 billion, but it rose 23.2 percent from its relatively smaller international business unit.

“While strong growth in international will be viewed as a positive, the continued deterioration in the domestic retail efficiency ratio will remain a focus...,” said John Aiken, an analyst with Barclays.

The bank’s international operations has been focusing on the Pacific Alliance trading bloc of Peru, Mexico, Chile and Columbia, which now accounts for around a quarter of its revenue.

Markets revenue, which includes trading in bonds and equities, fell at both banks, as uncertainty over the U.S.-China trade war, Brexit, and other geopolitical concerns resulted in a massive sell-off in global stocks, and kept investors on the sidelines.

However, analysts were generally satisfied with Bank of Montreal’s capital markets performance.

“Overall, the bank reported a result that would appear to be inconsistent with the high levels of volatility during the period, with strong U.S. results and stable capital markets results helping power earnings,” said Robert Sedran, an analyst with CIBC Capital Markets.

Bank of Montreal, Canada’s fourth-biggest lender, reported earnings per share, excluding special items, of C$2.32 in the quarter to Jan. 31, beating analysts’ expectations of C$2.25, according to IBES data from Refinitiv.

Scotiabank reported an adjusted net profit of C$1.75 per share, missing estimates of C$1.82. reut.rs/2Nuxg0L

$1 = 1.3216 Canadian dollars Reporting by Aparajita Saxena and Matt Scuffham; Editing by James Emmanuel, Saumyadeb Chakrabarty and Shinjini Ganguli

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