(Adds comments by executives at both banks)
* BMO shares up 2.2 percent; Scotiabank down 2.2 percent
* BMO Q1 EPS C$2.28 vs estimate C$1.88
* BMO to buy back 15 million common shares
* BMO core tier 1 ratio up 100 basis points
* Scotiabank Q1 EPS C$1.58 vs forecast C$1.57
By Matt Scuffham
TORONTO, Feb 28 Bank of Montreal,
Canada's fourth biggest lender, reported first-quarter results
on Tuesday that smashed market expectations, but rival Bank of
Nova Scotia disappointed analysts with numbers that
were broadly in line with estimates.
BMO shares rose 2.2 percent, on track for their strongest
daily gain in nearly three months, after the bank reported net
income of C$1.5 billion ($1.1 billion) in the quarter ended Jan.
31. That was up from C$1.1 billion the year before.
Earnings per share, excluding one-time items, came in at
C$2.28 per share, beating the average analyst estimate of
C$1.88, according to Thomson Reuters I/B/E/S data.
At Scotiabank, Canada's third largest, net income was C$2
billion ($1.5 billion) in the first quarter to Jan. 31, compared
with C$1.8 billion the year before. Earnings per share rose to
C$1.58 from C$1.44 the year before.
The average estimate was C$1.57 per share, according to
Thomson Reuters I/B/E/S data. Its stock fell 2.2 percent.
BMO said it plans to buy back 15 million of common shares,
the equivalent of 2.3 percent of its publicly traded stock, due
to its stronger capital position.
"We put the buyback program back into place recognizing that
the (core tier 1) ratio is in a good place, and we think it's a
good part of our capital management strategy," BMO Chief
Financial Officer Tom Flynn said in an interview.
The bank said its core tier 1 capital ratio, a key measure
of its financial strength, increased by 100 basis points to 11.1
percent during the quarter, marking a recovery after the bank
revealed last November it had mistakenly overstated the ratio in
the first three quarters of 2016.
BMO said then its core tier 1 ratio was 10.0 percent at the
end of last August, not the 10.5 percent initially reported, the
weakest of any major Canadian bank.
Analysts said the bank's improved capital position could
help restore the confidence of some investors who were spooked
by last year's error.
"We believe that the repairs done to its capital ratio will
remove a significant overhang," said Barclays analyst John
In the first quarter, BMO benefited from particularly strong
performances from its Canadian retail, wealth management and
capital markets businesses.
FOR SCOTIABANK, 'MILDLY NEGATIVE'
Commenting on Scotiabank's results, Barclays' Aiken said
earnings were boosted by a gain of around C$40 million from the
sale of real estate in Canada and an undisclosed gain on an
investment in Colombia.
"Therefore, the view of earnings is either C$1.55 or a low
quality C$1.58 and will likely be viewed disappointing against
consensus (and our) forecast of C$1.57," he said.
RBC Capital Markets analyst Darko Mihelic viewed the results
as "mildly negative."
"Even assuming that the market interprets Scotiabank's
earnings as C$1.58 per shares, this would be close to in line
with consensus, whereas other banks beat consensus estimates
handily," he said.
Scotiabank, which has the biggest foreign presence of any
Canadian bank, is focusing its international strategy on the
Pacific Alliance, a Latin American trade bloc comprising Mexico,
Peru, Chile and Colombia.
Chief Financial Officer Sean McGuckin played down the
prospect that Mexico's economy could weaken if U.S. President
Donald Trump renegotiates a trade agreement between the United
States, Mexico and Canada.
"If it goes down the road where they have slightly less
trade to the U.S., they're very well positioned to continue to
be an exporter to many other countries," he told reporters.
"They're a really strong force in manufacturing."
($1 = 1.3210 Canadian dollars)
(Editing by Lisa Von Ahn and Jeffrey Benkoe)