MONTREAL, Quebec (CU)_Over the past week, the biggest lenders in Canada announced share buybacks and raised dividends following the removal of restrictions on capital distributions by the financial regulator last month. Bank of Nova Scotia became the first Canadian bank to report a hike in dividends in its fourth-quarter results on Tuesday (30 Nov), following a net income of $2.56 billion during the three months ending 31 October. This was followed by Royal Bank of Canada and National Bank of Canada, both of which announced higher profits for the fourth quarter and raised dividend pay-outs, but whose earnings fell short of analysts’ estimates. Similarly, Canadian Imperial Bank of Commerce (CIBC) also posted disappointing earnings for the period on Thursday, while its rival Toronto-Dominion Bank managed to beat expectations.
Accordingly, Bank of Montreal (BMO) brought the earnings season to a close, with better-than-expected fourth-quarter earnings on Friday (3 Dec), as the investment banking company became the last to join its rivals in raising its dividend, together with a share buyback programme. The lender’s adjusted profit for the fourth quarter rose 38 per cent year-on-year, following a growth in income in all its major businesses. The earnings were coupled with a 25 per cent increase in its dividends to $1.33, the biggest hike among Canada’s Big Six lenders. BMO also decided to resume capital distributions with the largest buyback of up to 22.5 million in outstanding shares.
“The key focus will be the relative return of capital, with BMO announcing both the largest increase to its dividend and the largest share repurchase program,” Barclays Analyst John Aiken said in a note, adding that the bank’s loan growth, however, lagged domestic peers, while its earnings in all its units outside Canadian banking dropped from the third quarter. “We would expect to see a positive, but muted, reception by the market for BMO’s quarter,” he said.
