Canada’s five biggest banks keep fourth quarter profit steady at $4.45 billion

Canada’s five biggest banks earned a combined $4.45 billion profit in the fourth quarter – marginally higher than in the same period last year – as weakness in corporate financing and trading revenues outshone strength in consumer banking.

While profits were above the $4.44 billion in the fourth quarter last year, the overall results were further evidence that it will be some time before the banks return to the blockbuster profit growth they enjoyed before the recession.

Bank of Montreal was the final major bank to issue fourth-quarter earnings in a period that has been mildly positive across the industry, posting a 14 per cent increase in profits to $739 million and beating expectations.

The bank said its net income was equal to $1.26 on a cash per share basis, about five cents above analyst expectations according to a survey by Thomson Reuters.

The earnings compared with $647 million during the same period last year, or $1.13 per share. On a cash per share basis, earnings were equivalent to $1.24, compared to $1.11 a year earlier. Revenue increased eight per cent to $3.23 billion, above expectations of $3.08 billion.

Bank of Montreal kept its dividend unchanged at 70 cents per share, which was widely expected by analysts.

One of the more stellar performers was National Bank, which raised its dividend, though it is considered the sixth biggest bank in the country and is considerably smaller than its major brethren.

Royal Bank was widely considered the most significant underperformer as it disappointed investors with its quarterly report and missed analyst expectations by a wide margin. TD Bank also fell short of average estimates.

For the full year, Canada’s five biggest banks brought in $19.41 billion in profit, soaring above the $13.52 billion reported in 2009 when the economic downturn ravaged results.

In the quarter, BMO’s provisions for credit losses were $253 million, down from $386 million a year ago, but up from $214 million in the third quarter.

“Overall, BMO’s results reflect a very good quarter and a strong year with sound capital and liquidity positions,” said chief executive Bill Downe in a release.

“Good results this quarter and for our 2010 fiscal year, as well as our strong balance sheet, reflect the consistent execution of our strategy _ and the benefits of our diversified business mix,” he added.

Personal and commercial banking in Canada reported a profit of $420 million, up $22 million from a year ago, while BMO’s U.S. banking operation earned $37 million, down $11 million from the fourth quarter last year.

BMO Capital Markets, the bank’s investment banking division, earned $216 million, down $44 million, hurt by higher provisions for credit losses and spending on expanding its business.

The bank’s private client group earned $131 million, up $25 million from a year ago.

Return on equity for the quarter was 15.1 per cent, up from 14 per cent a year ago.

Barclays Capital analyst John Aiken said the bank’s provisions were bad loans were a disappointment for the quarter, but not a major concern.

“While BMO did suffer similar expense growth as its peers, it was lower than the group and the bank was able to offset it with strong revenue growth,” Aiken wrote in a note to clients.

“Capital markets and private client had stand out quarters and although retail banking on both sides of the border held in they did both report modest sequential declines in earnings.”

For the financial year, net income rose 57 per cent to $2.81 billion while revenues were ahead 10 per cent to $12.2 billion.

BMO’s tier one capital ratio was 13.45 per cent.

Bank of Montreal has more than 38,000 employees across its North American operations, which include retail banking, wealth management and investment banking, as well as its Chicago-based Harris Bank subsidiary.

Harris Bank has more than 300 branches in Illinois, Indiana, and Wisconsin as well as locations in Arizona, California, Florida, Georgia, New York, New Jersey, Texas Virginia and Washington.

Earlier this year, Downe said the company was exploring options to grow its business in China including the possibility of starting a Chinese wealth management division.

The division allows BMO to offer its services to Chinese citizens who plan to emigrate to Canada, as well as multinational businesses looking to expand in the region.

Print