Bank of Montreal (BMO) and Bank of Nova Scotia (Scotiabank) reported strong fiscal first-quarter earnings, exceeding analyst expectations. Both banks attributed their success to robust performance in their capital-markets divisions, fueled by increased trading activity. However, looming uncertainties surrounding North American trade and potential tariff impacts on client credit outlooks tempered the positive results.
BMO reported adjusted earnings per share (EPS) of C$3.04, surpassing the consensus estimate of C$2.42. Its capital-markets unit generated C$591 million in adjusted net income, a 45% year-over-year increase. The division also achieved record revenue of C$2.07 billion, driven by “strong client activity.” Following the announcement, BMO shares surged over 6% in early trading, marking the most significant intraday gain since August 2020.
BMO’s stock price experienced a sharp increase following the release of positive Q1 earnings.
Scotiabank also delivered positive results, with adjusted EPS of C$1.76, exceeding the C$1.65 estimate. The bank’s global markets and banking division saw a 33% rise in net income, reaching C$517 million. CEO Scott Thomson highlighted the strength in capital-markets businesses as clients adjusted their portfolios in response to the evolving economic landscape.
While acknowledging the positive results, Jefferies Financial Group analyst John Aiken cautioned that capital-markets earnings are inherently volatile and might not be fully appreciated by the market.
Scotiabank’s Global Markets and Banking Division experienced significant growth in net income during Q1.
Both BMO and Scotiabank addressed the potential impact of tariffs on loan performance. BMO allocated C$152 million in provisions for performing loans, a slight decrease compared to the previous year. Scotiabank set aside C$98 million, up from C$20 million a year earlier. Scotiabank’s total provisions for credit losses reached C$1.16 billion, exceeding the analyst forecast of C$1.09 billion. Despite the strong earnings, Scotiabank shares dipped 2% following the announcement.
In conclusion, both BMO and Scotiabank delivered impressive first-quarter results driven by strong capital-markets performance. However, the banks acknowledged potential challenges related to trade uncertainties and the impact of tariffs on client credit. While the immediate market reaction was positive for BMO, Scotiabank’s stock experienced a slight decline, reflecting investor concern over potential future headwinds. The long-term impact of these factors on the Canadian banking sector remains to be seen.
