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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).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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