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Moreover, credit costs eased for both BMO and Scotiabank in the fourth quarter when compared to the third, helping to improve earnings on a quarter-over-quarter basis. Scotiabank’s fourth-quarter profit was up 46 per cent from the third quarter, and BMO’s was up 28 per cent.
“The bank delivered improved earnings in the fourth quarter with strong operating results to end a year marked by high loan loss provisions driven by the global pandemic,” said Brian Porter, president and CEO of Scotiabank, in a press release. “We are encouraged by progress towards a vaccine and we remain cautiously optimistic about the year ahead.”
Tuesday’s results begin another earnings season for Canada’s six largest banks. And as has been the case since the pandemic hit, the driving force behind the financial results at Scotiabank and BMO — the country’s third and fourth-biggest banks, respectively — was COVID-19.
For instance, both lenders reported that full-year profits were down from 2019. Scotiabank’s 2020 net income was approximately $6.85 billion, down from nearly $8.8 billion for the previous fiscal year. BMO said its full-year profit dipped to just shy of $5.1 billion, compared to about $5.76 billion for 2019.
Those lower profits are due in large part to the banks having to increase their loan-loss reserves in the face of the pandemic and its related economic effects, both of which have weighed on borrowers. They have also weighed on lenders, which use economic forecasts in determining how much money to set aside for possible loan losses.