BMO outshines Scotiabank with forecast-busting quarter

By Matt Scuffham

TORONTO (Reuters) - Bank of Montreal outshone rival Canadian lender Bank of Nova Scotia on Tuesday, posting third-quarter earnings that came in ahead of market expectations, helped by growth in the United States.

Shares in Scotiabank, down 5 percent since the start of the year, were 1.8 percent lower at 1 p.m. EDT (1700 GMT). Shares in BMO, up 5 percent so far this year, were down 0.25 percent, with the broader market for Canadian banks 0.5 percent lower..

BMO, Canada's fourth-biggest lender, said earnings per share, excluding one-off items, jumped 16 percent to C$2.36 in the quarter ended July 31, compared with the average analyst forecast of C$2.27, according to Thomson Reuters I/B/E/S.

Net income, excluding one-off items, at the bank's U.S. business grew by 34 percent, benefiting in part from tax changes. Net income, excluding one-off items, at its Canadian business rose 5 percent.

Scotiabank, Canada's third-biggest lender, reported a 5 percent increase in third-quarter earnings, in line with market expectations.

Earnings per share, excluding one-off items, rose to C$1.76 ($1.35) in the quarter ended July 31, up from C$1.68 a year ago. Analysts had on average forecast earnings per share of C$1.75, according to Thomson Reuters I/B/E/S.

Canadian Imperial Bank of Commerce analyst Robert Sedran said BMO had benefited from a strong U.S. performance and also highlighted its investment banking business, which lifted net income by 7 percent helped by stronger trading revenues.

In contrast, he said Scotiabank's performance was unlikely to be greeted positively by the market since other Canadian banks had exceeded expectations this quarter.

Royal Bank of Canada and CIBC both beat forecasts last week.

Scotiabank, which has the biggest overseas presence of Canada's major banks, said its net income, excluding one-off items, rose to C$2.26 billion during the period, from C$2.12 billion in the year-ago quarter.

The bank's international business grew net income by 15 percent, helped by loan growth of over 10 percent in the Pacific Alliance trading bloc, comprising Mexico, Peru, Chile and Colombia, where its international strategy is focused.

Speaking to reporters, Chief Executive Brian Porter said Monday's announcement of a preliminary trade deal between the United States and Mexico was a "solid step in the right direction," and he was hopeful a deal with Canada will be agreed.

"This alleviates ambiguity in the market's mind," he said. "We look forward to the next piece of NAFTA being solved with Canada's inclusion."

($1 = 1.3055 Canadian dollars)

(Reporting by Matt Scuffham; editing by Chizu Nomiyama, Bill Trott and G Crosse)