Canadian lenders BMO, Scotiabank beat profit estimates

After Canada and the U.S. failed to reach a trade deal, Canada said it would impose tariffs on some U.S. goods in retaliation for 50% levies ordered by President Donald Trump on Canadian products. Trump threatened that U.S. tariffs on all cars, trucks and automotive parts from Canada would be increased to 50% from January 1. "Businesses and banks have figured out a way to manage these (trade tensions) as normal course bumps rather than major hurdles," said Shalabh Garg, analyst at Veritas Investment Research. BMO reported adjusted earnings of C$3.96 per share, beating the estimate of C$3.76, according to LSEG data. Scotiabank’s adjusted profit of C$2.28 per share was also above the estimate of C$2.10. Adjusted profit at BMO rose 19.2% to C$2.86 billion ($2.06 billion). At Scotiabank, it rose 18% to C$2.97 billion. ($1 = 1.3861 Canadian dollars) Canadian lenders **Bank of Montreal** and **Bank of Nova Scotia** on Tuesday beat quarterly profit estimates, driven by strength in their capital markets and domestic businesses, even as trade tensions between Canada and the U.S. persisted. The country’s big six banks account for more than 90% of the country's banking assets and have so far remained resilient, supported by strong earnings across segments, as Canada and the United States negotiate a trade deal. The two neighbors failed to reach an agreement last week, with each side blaming the other for derailing three days of intensive negotiations. BMO said adjusted net income at its capital markets segment rose 45% in the third quarter ended July 31, reflecting higher fee income and lower loan loss provisions. Adjusted net income at its U.S. banking business rose 11%, and Canadian personal and commercial banking grew 15%. At Scotiabank, which operates in the U.S., Mexico and some South American countries, income from the global banking and markets unit grew 37%, driven by record underwriting and advisory fees. Net income rose 8% at its international business and 12% in Canada. The period was "a record quarter" for the bank, Scotiabank’s CEO Scott Thomson said, with two segments hitting record earnings and one record revenue. "In particular, we exceeded our 14% return on equity target this quarter," he said. The banks are benefiting from reserves built up over the past year to guard against potential loan defaults, as credit losses have remained manageable while macroeconomic uncertainty fueled by the conflict in the Middle East has kept financial markets volatile. Choppy markets tend to benefit trading desks at large banks as investors constantly rejig portfolios to hedge against risks. Meanwhile, the Canadian economy has shown signs that it is coping with U.S. tariffs and international tensions, adding far more jobs in July than expected with the unemployment rate dropping to a two-year low.

Canadian lenders BMO, Scotiabank beat profit estimates

Analyst view and reported earnings

BMO and Scotiabank beat quarterly estimates

Capital markets strength and trade tensions

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