By Robb M. Stewart

Shares of two of Canada's biggest banks diverged after Bank of Nova Scotia's quarterly earnings topped analyst expectations while Bank of Montreal fell short of forecasts with higher loan-loss reserves and weakness in its capital markets business.

In morning trading Tuesday, Scotiabank was 3.6% higher at C$66.21, and is now up 2.7% in the new year. Bank of Montreal was down 3.9% at C$121.92, widening the year-to-date drop to just under 10%.

The pair kicked off earnings season for the country's banks.

Scotiabank reported first-quarter income of 2.17 billion Canadian dollars ($1.61 billion), or C$1.68 a share, against C$1.72 billion, or C$1.35, a year earlier. On an adjusted basis that strips out certain items, earnings were C$1.69 a share, topping the C$1.61 mean forecast of analysts polled by FactSet.

The beat came from stronger-than-expected growth in both net interest income and noninterest revenue for the three months to Jan. 31, and despite a provision for credit losses that was C$324 million higher than a year earlier at C$962 million.

Bank of Montreal's income jumped to C$1.29 billion, C$1.73 a share, for the fiscal quarter against C$133 million, or C$0.14 a share, a year earlier, when its one-off items included a loss of C$1.46 billion related to the acquisition of Bank of the West and management of the impact of interest rate changes between announcing and closing the deal. On an adjusted basis, earnings were C$2.56 a share, below the C$3.02 consensus forecast.

Overall revenue on an adjusted basis for the period was 10% higher at C$7.85 billion, missing the C$8.36 billion that was expected.

The bank's provision for credit losses increased to C$627 million from the C$217 million put aside a year earlier against potential losses due to credit risk, with the provision for credit losses on impaired loans up C$277 million on-year to C$473 million.

Write to Robb M. Stewart at

(END) Dow Jones Newswires

02-27-24 1037ET