WRAPUP 1-Canada's big banks BMO, Scotiabank, National beat profit estimates

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Three banks kick off Q2 earnings

All three banks beat adjusted earnings estimates

Earnings driven by strength at domestic, capital markets business

- Three of Canada’s big six banks- BMO Financial <BMO.TO>, Bank of Nova Scotia <BNS.TO> and National Bank of Canada <NA.TO> - on Wednesday reported second-quarter profits that beat analysts’ estimates, strengthened by their domestic business and capital markets income.

The three banks are the first to report for the quarter in which the big lenders faced continued uncertainty from U.S.-Canada trade tensions, as well as broader economic challenges from the Middle East conflict and higher commodity prices.

Scotiabank’s domestic retail business grew 53% benefitting from growth in personal day-to-day and savings deposits and a 3% rise in loans. At BMO, earnings were supported by strong fee-driven income at its capital markets business, where adjusted net income grew 46%. At National Bank, quarterly profit was helped by an 18% rise in earnings in both personal banking and wealth management.

Canadian banks, renowned for their resilience, have built strong reserves underpinned by robust regulatory oversight, diversified their businesses and maintained conservative lending practices, allowing them to withstand challenges that have gripped the global banking industry.

The banks are still preparing for uncertainty by putting aside large chunks of money for potentially souring loans to shield their profits. Scotiabank's loan loss provisions stood at C$1.22 billion ($881.95 million), while analysts had projected C$1.11 billion, according to LSEG data. BMO recorded provisions of C$739 million, compared with estimates of C$787 million. National Bank's provisions of C$233 million were lower than the estimate of C$255 million.

"We note that much of BMO's upside came from strong results in Capital Markets while domestic retail underperformed," Jefferies analyst John Aiken said in a note, highlighting a drop in quarter-over-quarter earnings at the bank's domestic retail business.

"While we do not believe that this will fully take away from BMO's perceived results, it does remove some of the luster."

BMO, the country's third-largest bank by market capitalization, recorded adjusted earnings of C$3.67 per share, compared with average analysts' estimate of C$3.45. Scotiabank reported earnings of C$2.02 per share, comfortably beating the estimate of C$1.94, while National Bank's earnings of C$3.23 beat the estimate by 10 Canadian cents.

($1 = 1.3833 Canadian dollars)