canadian bank earnings Q3 2021

BMO and Scotiabank Q3 Earnings: Lower Provisions Lead to a Near-Doubling in Profits

Bank of Montreal and Scotiabank kicked off third-quarter earnings for the Big 6 banks this week, with both reporting a sharp rise in profits.

That was largely due to both banks reducing their loan loss provisions, or money set aside to cover loan losses. At the start of the pandemic, the big banks collectively put aside more than $5 billion in provisions, but have since been scaling that figure back as the economic situation improved and large-scale loan losses never materialized.

Scotiabank’s loan loss provisions this quarter dropped to $380 million from $2.2 billion a year ago. Meanwhile, BMO said it booked just $60 million in total provisions this quarter, down from $1.12 billion in Q3 2020. It also managed to reverse provisions that had already been booked to the tune of $70 million.

We’ve picked through the banks’ quarterly earnings reports, presentations and conference calls, and compiled all the mortgage notables below.

We’ll receive earnings from RBC and National Bank of Canada on Wednesday, with TD and CIBC to follow on Thursday.

Bank of MontrealBMO

Q3 net income: $2.28 billion (+85% Y/Y)
Earnings per share: $3.44

  • BMO’s residential mortgage portfolio rose to $126.3 billion, up from $115.6 billion a year earlier.
  • The HELOC portfolio—69% of which is amortizing—rose to $40.3 billion from $35 billion a year ago.
  • 34% of BMO’s residential mortgage portfolio is insured, down from 40% a year ago.
  • The loan-to-value on the uninsured portfolio is 48%, down from 54% a year ago.
  • 79% of the portfolio has an effective remaining amortization of 25 years or less, down from 80% a year ago.
  • Net interest margin (NIM) in the quarter was 2.62%, up from 2.54% in Q3 2020.
  • Provisions for Credit Losses (PCL) was $380 million in Q3, down from $2.2 billion in Q3 2020.
  • The 90-day delinquency rate fell to 14 bps from 22 bps a year ago, with the loss rate for the trailing four-quarter period at 1 bp (unchanged).

Source: BMO Q3 Investor Presentation

Conference Call

  • “The impact of a 25-basis-point increase in short-term rates would add over $100 million to revenue over the next 12 months,” said Tayfun Tuzun, Chief Financial Officer.
  • “Given the relatively strong consensus economic outlook and our specific forecast for impaired losses in the year ahead, we remain comfortable that our $2.7 billion of performing loan allowances provides more than adequate provisioning against loan losses in the coming year,” said Pat Cronin, Chief Risk Officer.
  • “In terms of the outlook, we remain cautiously optimistic given the solid credit performance we’ve seen in the last four quarters,” Cronin added. “While uncertainty remains in terms of the future path of the pandemic and variants of concern, assuming economic strength continues in line with consensus estimates, we would expect further releases from our performing provision in the coming quarters.”

Source: BMO Conference Call



Q3 net income: $2.54 billion (+95% Y/Y)
Earnings per share: $1.99

  • The total portfolio of residential retail mortgages rose to $243 billion in Q3, up 10% from $220 billion in Q3 2021.
  • Net interest margin fell to 2.23%, down from 2.26% in Q3 2021 “from strong growth in mortgages and commercial loans.”
  • Mortgage loans that were 90+ days past due fell to 0.13% from 0.19% a year ago.
  • Scotia’s provisions for credit losses declined 18 basis points from Q2 to 100 bps.

Source: Scotiabank Q3 Investor Presentation

Conference Call

  • “What we saw through the quarter was consumer lending was strong in every single one of our product lines,” said Dan Rees, Group Head, Canadian Banking. “We see the mortgage book continuing to grow from here…And I think it will be an interesting year next year when we look at the role that home improvements will play given that the mortgage market will continue to roll on the secured line portfolio.”

Source: Scotiabank Conference Call