WRAPUP 3-Canada's BMO, Scotiabank miss profit estimates on higher provisions, weakness at home

(Adds details from conference call, analyst comments)

May 24 (Reuters) - Bank of Montreal and Bank of Nova Scotia on Wednesday missed quarterly profit estimates as the Canadian banks were forced to set aside more rainy day funds due to weakness in the housing market at home and global banking uncertainty.

The results come as investor confidence deteriorates in markets amid high volatility triggered by a relentless rate-hiking cycle and a banking crisis in the United States, which began in March following the collapse of Silicon Valley Bank and led to the fall of a handful of U.S. regional banks.

Shares of BMO and Scotiabank were down about 3.4% and 1.5% respectively in early trading in Toronto, weighing on the country's main stock index.

Both banks reported lower earnings at home, which accounts for roughly about 40% to 50% of their earnings. Adjusted income from Scotiabank's Canadian banking segment fell 10% while that of BMO's fell 8%, reflecting higher provisions for credit losses.

Provisions for credit losses jumped to C$709 million from C$219 million, due to economic uncertainty and challenging market conditions in Chile and Colombia amid rising inflation, Scotiabank said.

BMO, which completed its acquisition of Bank of the West in February, said adjusted provision for credit losses was C$318 million at the end of the second quarter, compared with C$50 million a year ago.

"In Canada, mortgages are a big portion of the book and housing has slowed immensely and that's impacting the overall growth of the Canadian banks," Canaccord Genuity analyst Scott Chan said.

Executives for both banks said they were cautious about broader macroeconomic uncertainty, with BMO assuring investors it was confident that its $16.3 billion Bank of the West acquisition earlier this year would boost earnings in the coming years.

"I'm more confident today (in the deal) despite the environment," Chief Executive Officer Darryl White said.

The bank however said it expects impaired loss rates to trend towards low- to mid-20 basis points with the Bank of the West portfolio.

Scotia on the other hand said it was prudent as some key markets in Latin America face inflationary pressures.

"Given the current economic outlook, we expect PCLs to remain elevated for the remainder of the year," Scotiabank's Chief Risk Officer Philip Thomas told analysts.

At home, the Bank of Canada said it was more concerned than it was last year about households being able to pay off their debts and was seeing signs of financial stress among some home buyers.

About a third of mortgage holders saw an increase in payments compared with February 2022, just before borrowing costs started to rise. By the end of 2026, almost all mortgage holders will face higher payments, the bank said, as homeowners renew deals.

BMO's net income, excluding one-off items, rose to C$2.22 billion ($1.65 billion), or C$2.93 per share, for the three months ended April 30, compared with C$2.19 billion, or C$3.23 a share. Analysts were expecting C$3.19 per share, according to Refinitiv data.

"A disappointing quarter at first look, which was also a bit messy with the inclusion of Bank of the West," KBW analyst Mike Rizvanovic said.

For Scotiabank, it fell to C$2.17 billion ($1.62 billion), or C$1.7 a share, from C$2.77 billion, or C$2.18 a share, a year earlier. Analysts had forecast C$1.78 per share.

($1 = 1.3372 Canadian dollars) (Reporting by Nivedita Balu in Toronto, and Mehnaz Yasmin and Jaiveer Singh Shekhawat in Bengaluru; editing by Jason Neely, Bernadette Baum and Chizu Nomiyama)