Rising loan delinquencies start to pinch at BMO, Scotiabank

financialpost.com:

Earnings at Bank of Montreal and Bank of Nova Scotia were marred by increasingly cash-strapped consumers and businesses amid a challenging economic landscape.

The two Toronto-based banks — the first of the big Canadian lenders to report fiscal first-quarter results — diverged in their results, with BMO missing estimates on lower capital-markets, insurance and corporate-services revenue and Scotiabank topping expectations. Still, both lenders set aside more money for potentially bad loans as higher interest rates continue to hurt credit quality, with missed payments beginning to mount.

Scotiabank’s provisions for credit losses rose to $962 million, more than the $922 million expected by analysts, while BMO’s provisions totalled $627 million, far more than the $514.2 million forecast.

Scotiabank pointed to higher impaired provisions in its international business as well as for Canadian auto loans and unsecured lines of credit, while BMO detailed an increase in impaired provisions for consumer loans, credit cards and business and government loans.

“Higher delinquencies across most of our retail portfolios this quarter reflect the challenging macroeconomic environment,” Phil Thomas, Scotiabank’s chief risk officer, said on a conference call with analysts.

His counterpart at BMO, Piyush Agrawal, said the ongoing impact of tighter monetary policy is to blame for an increase in impaired loan provisions.

“Consumer loan losses, in both Canada and the U.S., reflect higher delinquencies in credit cards and other personal loans, reflecting increases in customer insolvencies, which in Canada are now above pre-pandemic levels,” Agrawal said.

Still, executives at both lenders said they continue to see the credit situation as manageable