Narrow loan margins mar Canada bank profit gains

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Canada's fourth-largest bank, was boosted by a doubling of wholesale banking income and a gain on U.S. Loans that had previously been written down. (Reuters) Canada's fourth-largest bank, was boosted by a doubling of wholesale banking income and a gain on U.S. Loans that had previously been written down. (Reuters)
SummaryCanada's fourth-largest bank, was boosted by a doubling of wholesale banking income and a gain on U.S. Loans that had previously been written down.

Canadian Western, Canada's seventh-largest bank by market capitalization, which posted a 20 percent profit gain. But the results disappointed investors who had been looking for a better result.

The bank earned C$43.0 million, or 55 Canadian cents a share, up from a year-earlier C$35.9 million, or 47 Canadian cents a share.

The result, the 98th consecutive quarterly profit for the Edmonton, Alberta-based bank, was driven by a 14 percent rise in loans and an C$8.5 million increase in net gains on securities. But it was held back by interest margins that narrowed to 2.67 percent from 2.79 percent. "Net interest income was lower than we anticipated as

greater-than-expected loan growth was offset by greater-than-anticipated margin pressure," RBC Capital Markets analyst Andre-Philippe Hardy said in a note.

Adjusted cash earnings of 56 Canadian cents a share fell just short of analysts' expectations of a profit of 58 Canadian cents a share.

Canadian Western raised its dividend by 6 percent to 17 Canadian cents a share, which analysts had expected. Its shares fell C$1.00 to C$28.00.

BMO U.S. CREDIT BOOST

BMO's adjusted provisions for credit losses were C$113 million, down from C$281 million a year earlier, helped by the unexpected repayment of impaired loans acquired when BMO bought M&I.

BMO paid $4.1 billion for M&I, which it combined with its Chicago-based Harris Bank. Excluding the impact of the impaired loans, profit for the U.S. bank fell 16 percent to C$130 million, due to a reduction in certain loan portfolios and regulatory changes. Also driving BMO profit was a doubling of wholesale banking

income, due largely to a jump in equity and interest rate trading revenues from a relatively weak quarter a year ago.Stronger capital markets income was also key to Royal Bank of Canada's (RBC) better-than-expected 22 percent rise in quarterly income reported last week. oronto-Dominion Bank and Canadian Imperial Bank of Commerce will report on Thursday, while Bank of Nova Scotia will release results on Friday.

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