The Bank of Nova Scotia and Bank of Montreal have exceeded analysts’ expectations for quarterly profit, driven by strong performance in their capital markets and wealth management businesses. This success comes amidst a backdrop of lower interest rates, which have spurred an increase in mergers and acquisitions activity. Additionally, the less regulatory environment, lower corporate taxes, and pro-business stance in Canada’s neighboring United States are expected to further boost business activity this year.
The wealth management sector, a capital-light and fee-based business model, has experienced significant growth recently. This growth is fueled by a rise in the number of high net worth individuals and increased investments in the market.
Despite their strong performance, the banks are still cautious and have set aside substantial sums to protect against potential bad loans in a challenging environment. Trade tensions between Canada and the United States, a key market for these lenders, have added to the uncertainty. President Donald Trump’s threat to impose a 25% tariff on non-energy Canadian imports starting in March has further increased the banks’ provisions for potential losses.
Scotiabank attributed its provisions of C$1.16 billion to uncertainties surrounding the impact of tariffs on Canada and Mexico. On the other hand, BMO recorded provisions for credit losses of C$1.01 billion, lower than analysts’ expectations. Both banks have been actively seeking expansion opportunities outside of the Canadian market, with BMO making acquisitions on the U.S. West Coast and Scotiabank focusing on stable, lower-risk countries along the North American trade corridor.
Under CEO Scott Thomson, Scotiabank has shifted its focus to growth closer to home, from Quebec to the United States and Mexico. The bank sold its operations in Colombia, Panama, and Costa Rica, while acquiring a 15% stake in U.S. regional lender KeyCorp. On an adjusted basis, Scotiabank earned C$1.76 per share, surpassing analysts’ estimates.
BMO reported adjusted earnings of C$3.04 per share, beating the average estimate. The banks’ successes reflect their strategic moves to capitalize on opportunities in the market while managing risks effectively. As they navigate through the challenging economic landscape, both banks remain optimistic about their future growth prospects.
This article was reported by Arasu Kannagi Basil and Jaiveer Shekhawat in Bengaluru and Nivedita Balu in Toronto, with editing by Tasim Zahid and Sharon Singleton.
