By Nivedita Balu and Arasu Kannagi Basil
(Reuters) – Canada’s Bank of Nova Scotia and Bank of Montreal said on Tuesday they would wait for clarity on U.S. government tariffs to build more rainy-day reserves and take actions to manage risks.
The banks, Canada’s third and fourth largest, put aside over C$1 billion in loan loss reserves in the first quarter ended January 31 to shield against bad loans amid tariff uncertainty that could slow loan demand.
U.S. President Donald Trump on Monday said his plan to impose a 25% tariff on imports from Canada and Mexico was “on time” and expected to take effect on March 4.
“I think the anxiety levels are a little bit higher in Canada, than they are in the US,” BMO’s CEO Darryl White told analysts, noting the bank’s North American footprint, with more than a third of its income coming from the U.S., would be an advantage.
“It’s frustrating for our clients to try to predict where this all lands,” he said, adding that clients on both sides of the border were being more cautious.
Scotiabank’s Chief Risk Officer Phil Thomas said the lender would build provisions in the second quarter if tariffs are put in place and had incorporated more severe tariffs into its “already stressed, pessimistic and very pessimistic scenarios.”
“If tariffs are imposed by the U.S. government, then we have clarity in terms of our actions. Until then, we have no clarity,” he said.
Analysts have said Scotiabank faces more risks as it bets on the growth of the North American trade corridor. CEO Scott Thomson said it was “way too early” to think about pivoting off the strategy.
Scotiabank reported loan loss provisions of C$1.16 billion ($813.81 million) in the first quarter, slightly more than analysts estimate of C$1.12 billion, according to LSEG data.
BMO, which had said its credit issues would normalize in 2025, recorded provisions for credit losses of C$1.01 billion, compared with the estimate of C$1.14 billion.
The banks beat analysts’ expectations for first quarter profit driven by strong income from capital markets and wealth management businesses.
Jefferies analyst John Aiken noted that enthusiasm would be muted for Scotiabank as its Canadian banking segment missed expectations and because capital markets was the driving force. On BMO, he noted improving credit provided a material lift.
Scotiabank’s shares fell 2% and BMO’s shares rose 5% in Toronto.
On an adjusted basis, Scotiabank earned C$1.76 per share, compared with analysts’ estimates of C$1.65.
It recorded an impairment charge of C$1.36 billion due to the sale of its Colombia, Panama and Costa Rica operations.
BMO reported adjusted earnings of C$3.04 per share, beating the average estimate of C$2.41.
($1 = 1.4254 Canadian dollars)
(Reporting by Arasu Kannagi Basil and Jaiveer Shekhawat in Bengaluru and Nivedita Balu in Toronto; Editing by Tasim Zahid, Sharon Singleton and Christina Fincher)
