BMO and Scotiabank reap benefits of fast-growing Canadian economy

The Bank of Montreal (BMO) and Bank of Nova Scotia (Scotiabank) are the latest Canadian banks to report profits well above what was expected thanks to a Canadian economy which is benefiting from the best growth since just after the turn of millennium.

Energy and manufacturing has driven a 4.6% growth in the economy as a whole and after the Royal Bank of Canada and the Canadian Imperial Bank Of Commerce reported higher-than-quarterly earnings last week, rivals BMO and Scotiabank have both seen profits grow by 9% and 12% respectively.

Fears that the red-hot housing markets in Toronto and Vancouver could cool right down drove fears about sustaining the growth period, but Scotiabank’s head of Canadian banking James O’Sullivan says the outlook for the economy has improved and reckons that has helped boost the confidence of small business customers.

He told investors: “Certainly when I speak to commercial customers across the country, they’re feeling pretty good about this country’s prospects. We’re seeing that clearly in loan volumes.”

The bank reported net income of $2.10bn (CAN) compared with $1.96bn (CAN) a year ago, and quarterly earnings per share increased to $1.66 (CAN) from $1.54 (CAN) a year earlier, above estimates of $1.64 (CAN).

Chief Executive Brian Porter added: “The bank delivered strong quarterly earnings, generating double digit growth in our Canadian and international personal and commercial banking businesses.”

BMO, which sits just behind Scotiabank as Canada's fourth biggest lender, saw quarterly earnings rise to $2.03 (CAN) from $1.94 (CAN) a year ago, again above estimates.  Net income at the bank’s Canadian retail business $614mn (CAN).

All in all, the results are positive so far, with Toronto-Dominion Bank due to publish on Thursday.