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BMO, Scotiabank kick off earnings with optimism as vaccines seen boosting economic recovery

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Credit costs eased for both banks when compared to the third quarter, aided by a better economic outlook. The change helped boost earnings on a quarter-over-quarter basis, with Scotiabank’s fourth-quarter profit rising 46 per cent and BMO’s up 28 per cent relative to the third quarter.

Scotiabank’s provisions for credit losses were $1.13 billion for the fourth quarter, compared to $2.18 billion in the third quarter and $753 million a year ago. Total provisions for credit losses at BMO were $432 million in the fourth quarter, up from $253 million a year earlier, but down from $1.05 billion it set aside in the third quarter.

Both banks also saw decreases in the amount of debt on which customers are deferring payments, which shot up in the early days of the pandemic.

BMO chief risk officer Patrick Cronin said approximately 88 per cent of payment deferrals to Canadian consumers and 80 per cent to U.S. consumers have expired, with just over two per cent of those now in default or delinquent on their payments.

“We’ve been pleased with our overall risk performance given the acute stress and uncertainty caused by the pandemic, and expect credit losses through fiscal 2021 to remain manageable,” Cronin said.

Yet even with a better-then-expected end to their year, the lenders reported that profits for their fiscal 2020, which ended Oct. 31, were down from those of pre-pandemic 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.

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