BMO is the last of the big six Canadian banks to report this morning

Posted: Tuesday, December 5, 2017 - 08:26 EST

BMO is the last of the big six Canadian banks to report this morning with 2017 adjusted net income of $5.508bil that was up 10% y/y.  Canadian personal and commercial banking continued to see good performance with loans up 4% and deposits up 6% year over year.  Canadian Net Interest Margin Securities (NIMS) in P&C were up 5bps q/q with positive operating leverage of 1.7%.  U.S. personal and commercial banking also saw strong loan and deposit growth with NIMs up 3bps q/q.  However, adjusted net income was down 3% y/y as a result of a weaker U.S. dollar.  The capital markets division, similar to other banks, saw earnings down 17% y/y as a result of investment and corporate banking activity being down from stronger activity last year.  CET1 continues to remain strong at 11.4%, up 0.2% from last quarter.

Scotiabank announced that it has formalized the agreement to purchase BBVA Chile, as the Said family has declined the right of first refusal to acquire the 68.19% stake.  The deal, which will cost Scotiabank approximately $2.9bil CAD is expected to decrease BNS’ CET1 ratio by 90bps and 135bps if the Said family decides to tender its share to Scotiabank.

It was a busy day in the Canadian new issue corporate credit market yesterday.  Penske Truck Leasing issued $375mil five year bonds at +110bps over the curve, followed by the Hospital for Sick Kids issuing $300mil 40-year bonds at +118bps over the curve.  Along with the new issuance, the December Canada coupons led to stronger secondary flows.  Overall, spreads ended the day mostly unchanged.

Equity Markets:

  Index Level % Change QTD YTD Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017
S&P 500 2,639.44 -0.11% 5.15% 20.13% 2.44% 3.85% 3.82% 6.07% 3.09% 4.48%
TSX

15,969.03

-0.44% 2.59%

7.15%

5.06% 5.45% 4.53% 2.41% -1.64% 3.68%

Rates:

 

Today

% Change

QTD change

YTD change

June 30  2016

Sept 30 2016

Dec 31 2016

Mar 31 2016

June 30 2017

Sept 30  2017

Canada 5 Year

1.741%

0.05% -0.01% 0.63% 0.569% 0.615% 1.150% 1.119% 1.393% 1.753%
Canada 10 Year 1.946% 0.04% -0.15% 0.23% 1.059% 0.990% 1.750% 1.625% 1.762% 2.099%
Canada 30 Year 2.237% 0.03% -0.24% -0.08% 1.714% 1.658% 2.350% 2.302% 2.148% 2.472%
30yr Generic Corporate A rated Spread 1.240% 0.00% 0.00% -0.09% 1.610% 1.530% 1.390% 1.330% 1.210% 1.240%
30yr All-in Corporate A rated Yield

3.477%

0.03% -0.24% -0.17% 3.324% 3.188% 3.740% 3.632% 3.358% 3.712%
US 10 Year 2.378% 0.01% 0.04% -0.07% 1.47% 1.60% 2.50% 2.39% 2.31% 2.33%
CDX IG 51.120 -1.252                

The information contained herein is intended for advisors for general information only and is compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made as to its accuracy. All opinions contained in the commentary and expressed by the portfolio manager are subject to change without notice and are provided in good faith without legal responsibility. All market data is sourced from Bloomberg.