We’ve got two wildly different storylines in the latest batch of Canadian bank earnings. BMO fell way short of profit estimates as bread-and-butter banking operations on both sides of the border delivered flat quarters and credit loss provisions rose. Meanwhile, Bank of Nova Scotia is standing out from its peers with adjusted profit jumping nine per cent in the latest quarter thanks to double-digit gains in its international unit and a modest uptick at home. It’s also rewarding shareholders with a richer dividend. We’re looking forward to speaking with Scotia CEO Brian Porter in The Real Economy.
FEDS RATCHET UP SCRUTINY OF AIR CANADA-TRANSAT
Transport Minister Marc Garneau’s office announced late yesterday he’s going ahead with an in-depth public interest assessment of Air Canada’s proposed takeover of Transat. That process could stretch until May 2 as input is gathered from various stakeholders and the Competition Bureau, and then the waiting game could drag on even longer for a formal recommendation on the transaction.
WHAT NEXT FOR BANK OF CANADA?
BMO’s economics team today said it has “tipped into the rate-cut camp” for the Bank of Canada’s Oct. 30 meeting as a result of Friday’s escalation in the China-U.S. trade feud. As far as BMO is concerned, the BoC will lay the groundwork for a cut in its Sept. 4 rate decision by striking a dovish tone. Meanwhile, National Bank Financial asked yesterday if Canada needs more monetary stimulus. It concisely answered its own question: “there is no need."
OSC TARGETS RBC, TD ON FX ACTIVITIES
The Ontario Securities Commission has released allegations of inappropriate behaviour by RBC and TD currency traders, including “many hundreds of prohibited disclosures”, between 2011-2013. The details reveal certain choice quotes from chatroom exchanges, like RBC Trader B telling a peer “I agree ur tips have been hot this year.” OSC staff is accusing TD and RBC of not having “a sufficient system of controls and supervision in place.” And in both cases, unidentified managing directors for the banks are involved in the regulator’s allegations. An RBC spokesperson told us the bank is prepared to terminate anyone who doesn’t comply with its standards. A TD spokesperson told us the bank is treating this matter “extremely seriously.” Hearings about proposed settlements with both banks are scheduled for Friday.
OTHER NOTABLE STORIES
-Walmart Canada is getting a new leader, with Haio Barbeito appointed to replace president and CEO Lee Tappenden in October.
-Canfor late yesterday said it has retained Greenhill & Co. to support its special committee’s review of the privatization offer from Jim Pattison’s conglomerate.
-Teck Resources is warning of a production shortfall at its Trail, B.C. zinc refinery as a result of a “electrical equipment failure” that could take 20 weeks to repair.
-Whitecap Resources has cut its capex budget for the second half of this year by 17% “to provide greater optionality and improve near term free funds flow”
NOTABLE RELEASES/EVENTS
-Notable earnings: Bank of Montreal, Bank of Nova Scotia
-Notable data: S&P/Case Shiller U.S. home price index
-12:30 p.m. ET: Alberta Finance Minister Travis Toews delivers first-quarter financial update in Edmonton
Every morning BNN Bloomberg's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN Bloomberg's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnnbloomberg.ca/subscribe.
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