Latest news with #PiyushAgrawal
Globe and Mail
28-05-2025
- Business
- Globe and Mail
BMO, National Bank profits top expectations as tariff tension looms
Bank of Montreal BMO-T and National Bank of Canada NA-T reported second-quarter earnings that topped analysts' expectations even as the lenders set aside more money for loans that could default as risks mount over tariff tensions. As uncertainty over U.S. trade and fiscal policy raises the risk levels of certain borrowers, two of Canada's largest banks are provisioning for potential loan losses across the country's consumers and businesses. 'The uncertainty related to global trade tensions and ongoing negotiations continues to be an overhang on the economy. Increasing geopolitical and geoeconomic instability, and projected fiscal deficits in major economies are making the path of growth and inflation difficult to forecast,' National Bank chief executive officer Laurent Ferreira said during a conference call with analysts. 'That being said, the latest developments regarding global trade negotiations seem to be progressing in the right direction.' A breakdown of the big banks' second-quarter earnings so far BMO chief risk officer Piyush Agrawal said that while provisions for loans on the verge of defaulting were lower this quarter, the weakening economic outlook prompted the bank to bolster reserves for loans that are still being repaid. 'We remain cautious given the ongoing uncertainty and volatility in the economic environment related to trade policies,' Mr. Agrawal said during a conference call. 'The outlook for the Canadian economy has weakened with rising unemployment and declining GDP growth. The U.S. market has shown resilience, but momentum has softened.' In the quarter, BMO set aside $1.05-billion in provisions for credit losses – the funds banks set aside to cover loans that may default. That was higher than analysts anticipated, and was driven by a higher reserves for debt that is still in being repaid. BMO set aside $289-million for these types of loans, up from $152-million last quarter. Rising risk in Canadian commercial banking and Canadian unsecured consumer lending drove the increase. In the quarter, National Bank set aside $545-million in provisions and included $315-million against loans that are still being repaid. Last quarter, National reserved $254-million in provisions. While the increase was in part due to rising risk in loans, National also set aside $230-million in provisions stemming from its takeover of Edmonton-based Canadian Western Bank. Excluding provisions from CWB, National's reserves were slightly above analysts' estimates. With Canadian banks reporting their first full quarter of financial results since U.S. President Donald Trump launched a trade war, analysts expected Canada's banks to continue grappling with higher loan loss reserves. Over the past week, Toronto-Dominion Bank posted results that beat analyst estimates and Bank of Nova Scotia missed expectations. TD and Scotiabank also increased their provisions, citing concerns over a deteriorating economy stemming from heightened uncertainty in U.S. trade and fiscal policy. Analysts have said that the increase in reserves represents the banks' conservative approach in preparing for potential loan losses, and is not an indication that loans are defaulting. Royal Bank of Canada and Canadian Imperial Bank of Commerce release results on Thursday. BMO earned $1.96-billion in the three months that ended April 30, a 5-per-cent increase from the same quarter last year. Adjusted to exclude certain items, the bank said it earned $2.62 per share, beating the $2.55 per share analysts expected, according to S&P Capital IQ. National Bank's net income decreased by 1 per cent to $896-million, or $2.17 per share. Adjusted to exclude certain items, including acquisition and integration costs related to the acquisition of Canadian Western Bank, the bank said profit climbed 29 per cent, earning $2.85 per share. That edged out the $2.40 per share analysts expected. In the beginning of the quarter, National closed its takeover of Edmonton-based CWB, significantly expanding its footprint in Alberta and British Columbia. National is in the process of integrating Canada's ninth-largest lender, a process that is currently driving up costs. Total revenue rose 33 per cent in the quarter to $3.65-billion, while expenses jumped 32 per cent to $1.94-billion BMO and National both raised their quarterly dividends by 4 cents to $1.63 per share and $1.18 per share respectively.
Yahoo
25-02-2025
- Business
- Yahoo
Scotia, BMO shares diverge on Q1 results as analysts grasp for tariff clarity
Shares of Bank of Montreal ( and Bank of Nova Scotia ( went on divergent paths following first-quarter results Tuesday as analysts sought insights into potential trade-war impacts. During morning conference calls with investors, executives at both banks provided some insights into strategies for potential tariffs but mostly deferred to the overall uncertainty of the situation. Asked how much more BMO might set aside for bad loans in the event of tariffs being imposed in March, the bank's chief risk officer, Piyush Agrawal, outlined the variables at play. 'Let me say there are so many unknowns in this tariff scenario,' Agrawal said. 'We don't know the duration. We don't know what the percentages will be. We don't know which industries might get excluded. We don't know what monetary fiscal policy actions the government here might take to mitigate some of the impact … it's very difficult right now without clarity to give you that perspective.' 'You know, when we have certainty, we'll act on certainty,' Phil Thomas, Scotia's chief risk officer, said in reply to an analyst's question about whether the tariff strategy has evolved since January 31, when the fiscal quarter ended. 'It's difficult to act on headlines and tweets.' Thomas did, however, let on that the impact of tariffs on Scotia's loan portfolio would likely be gradual. 'It's really going to take time for tariffs to grip the Canadian consumer,' he said. 'And there's obviously some positive tailwinds in the economy, as it relates to unemployment, GDP, already. And so you add tariffs on to that, we're really looking at, from an impaired perspective, a lag out to 2026, and beyond.' Both sets of bank results handily beat market expectations Tuesday, but investors responded less favourably to Scotiabank, with shares down around 1.5 per cent at $71.20 on the Toronto Stock Exchange as at midday. BMO shares, meanwhile, were up about 4.5 per cent at $148.62. In notes to investors following the earnings calls, Jefferies Financial Group analyst John Aiken wrote that he was 'somewhat surprised' by the market reaction to Scotia, despite the bank's greater vulnerability to tariffs. BMO, meanwhile, 'managed to exceed the higher bar' that the market had set, Aiken says. Analysts have highlighted BMO's significant U.S. presence, which could provide some insulation against a trade war, a possibility the bank's executives have invoked frequently. 'Over the last couple of quarters, we have conducted extensive work on several tariff scenarios,' Agrawal said. 'Given the diversification of the portfolio between Canada and the U.S. and our strong capital and liquidity levels, we are in a good position to both manage these risks for the bank and help our customers.' Though Scotia's portfolio has less U.S. exposure, CEO Scott Thomson argues that the lender's focus on the North American trade corridor — including a substantial business in Mexico — remains a smart strategy. 'Long term, I think, given the U.S.' geopolitical ambitions, we believe the resources of Canada and the labour in Mexico will be important,' he said. 'I think looking at the renegotiation of [the Canada–United States–Mexico Agreement] will be an important milestone for all of us to consider. And so, you know, way too early to think about pivoting off a strategy which I think long term has a lot of strategic rationale.' The bank executives did acknowledge that the tariff threat has had a measurable impact on their business already, with many customers holding back on activity as they wait for more certainty. Aris Bogdaneris, Scotia's group head for Canadian banking, says commercial banking customers have been 'holding back on borrowing.' Similarly, BMO CEO Darryl White says commercial clients have 'effectively hit the pause button' on some projects, and tension was evident. 'I think the anxiety levels are a little bit higher in Canada than they are in the U.S.,' he said. 'But that's not to say that there aren't anxiety levels in the U.S. as well, with folks who will also look for certainty to the extent that they're trading outside of the U.S. borders — which is applicable to a lot of our clients.' John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf. Download the Yahoo Finance app, available for Apple and Android. Sign in to access your portfolio
