Financial Sector Update for 12/15/2015: BMO.TO, NA.TO, BNS.TO, TD.TO, CM.TO, RY.TO
BMO Research Tuesday said fiscal year 2015 was another satisfactory year for Canada's six biggest banks despite challenges, with about $34.9 billion in core earnings, a 7% improvement over fiscal year 2014.
The broker said the diversified business models of the banks once again allowed them to weather the current environment's headwinds. For example, while its going-in expectation of improving NIMs were not met in 2015, the group as a whole was able to offset the pressures of continued low rates with stronger year-over-year loan growth (helped in part by the resiliency of Canada). This dynamic, along with the tailwind of foreign exchange, helped the industry deliver 5% higher net interest income, which, when combined with 8% higher trading and fee income, helped with the group's 6% operating revenue growth overall.
BMO is expecting 6% higher earnings for the industry in fiscal year 2016, driven by 6% higher revenue and 70 basis points improvement in non-interest expense-to-revenue ratio somewhat offset by higher credit costs. The broker added, however, that a precipitously declining oil price environment coupled with slower Canadian economic growth may render its loan growth and loss estimates too optimistic (something it is watching carefully).
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