Scotiabank, BMO 'cautiously optimistic' about COVID rebound after reporting profits

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TORONTO — Canadian bank executives say an economic rebound is on its way after months of governments and financial institutions working to offset turmoil with loans, deferrals, interest rate cuts and subsidies.

The chief executives of Bank of Nova Scotia and BMO Financial Group said Tuesday that they are starting to see signs of improvement and are feeling reassured by countries like Canada, the U.S., Chile and Peru, which have spent on average 17 per cent of their gross domestic product on relief measures.

"We are seeing clear evidence that the stimulus is having the desired impact," Scotiabank's Brian Porter said on a conference call to discuss the bank's latest financial results.

"In Canada, retail spending has reached pre-pandemic levels, the housing market is experiencing robust growth and auto sales have largely recovered."

Porter, who called himself "cautiously optimistic" about 2021, hadn't factored in the potential rollout of a COVID-19 vaccine, but if Pfizer, Moderna or AstraZeneca get the go-ahead to inject people with their early vaccine candidates, he said his optimism would grow even more.

Meanwhile, BMO chief executive Darryl White was also feeling positive about 2021, but warned that troubles are still lingering as many countries, including Canada, plunge into a second wave of COVID-19.

"While the path of the pandemic and the economic recovery remains uncertain, we now know that vaccines will be available relatively soon, and there's good reason to be optimistic about the associated economic recovery accelerating as 2021 progresses," he said.

The remarks came as their companies started to see the expiration of consumer relief programs they launched to help Canadians hit hard by the pandemic.

Scotiabank offered $120 billion worth of relief for customers throughout the pandemic, while BMO said it granted payment deferrals to more than 256,000 retail accounts in Canada and the U.S. since March.

Both spent much of the pandemic stowing away cash to protect themselves from bad loans, but were able to ease up in recent months.

Scotiabank's provisions for credit losses in its latest quarter totalled $1.1 billion, up from $753 million a year ago, but down from nearly $2.2 billion in the third quarter.

BMO's amounted to $432 million, up from $253 million a year ago, but down from nearly $1.1 billion in its third quarter.

BMO also looked to protect itself further by winding down its non-Canadian investment and corporate banking business in the energy sector — a move White said would help better allocate resources in places where they can deliver strong returns now and in the future.

"Going forward, BMO Capital Markets' energy business will be focused on the Canadian energy market, where we believe our competitive positioning is strongest and where we will continue our deep and long-standing commitment to supporting clients," he said.

BMO reported a fourth-quarter profit of nearly $1.6 billion or $2.37 per share, up from nearly $1.2 billion or $1.78 per share a year ago.

On an adjusted basis, BMO says it earned $2.41 per share, down from an adjusted profit of $2.43 per share in the same quarter last year.

Analysts on average had expected an adjusted profit of $1.90 per share, according to financial data firm Refinitiv.

Revenue totalled nearly $6 billion, down from almost $6.1 billion in the same quarter last year.

The results pushed BMO's stock up by 3.6 per cent or $3.33 to reach $96.66 in late morning trading.

Meanwhile, Scotiabank reported a fourth-quarter profit of $1.9 billion or $1.42 per diluted share, down from $2.3 billion or $1.73 per diluted share in the same period a year earlier.

On an adjusted basis, the bank earned $1.45 per diluted share for the quarter ended Oct. 31, down from an adjusted profit of $1.82 per diluted share last year.

Analysts on average had expected Scotiabank to earn an adjusted profit of $1.22 per share, according to financial data firm Refinitiv.

Revenue totalled $7.5 billion, down from nearly $8 billion in its fourth quarter last year.

Scotiabank's stock climbed by 2.9 per cent or $1.83 to reach $65.03 in late morning trading.

This report by The Canadian Press was first published Dec. 1, 2020.

Companies in this story: (TSX:BNS, TSX:BMO)

Tara Deschamps, The Canadian Press