Global Banks See Mixed Q3 Season Results in US Markets

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The earnings season has come to an end, and the results showed that CEOs of international banks were not immune to the same challenges faced by their U.S. peers.

Similar to Citigroup’s agreement with the Office of the Comptroller of the Currency to comply two preliminary consent ordersTD Bank Group has been grappling with a wave of anti-money laundering failures, sparking anger U.S. Department of Justice and the U.S. Department of the Treasury Financial Crimes Enforcement Network.

The provisions, including regulatory penalties of about $3 billion, combined with depressed deposit margins and loan demand, wiped out revenue from the bank’s U.S. operations in Toronto, leading to its first quarterly net loss since the fourth quarter of 2002.

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Credit losses also weighed on bank profits across all asset classes.

Montreal-based BMO Financial Group doubled its loan loss reserves in the latest quarter from the same period last year, to C$906 million. Net income rose to C$1.87 billion in the quarter ended July 31, from C$1.56 billion a year earlier.

“While we may well be closing the barn door on the animals’ escape, the pace of credit deterioration and BMO’s relative overexposure to commercial business suggest continued pressure on the bank’s earnings,” Jefferies analyst John Aiken said in a statement. “While we remain positive about the long-term outlook for the U.S. operations, near-term outperformance over the forecast period has become increasingly difficult.”

Changing consumer preferences also affected Bank of Nova Scotia, which also increased cash reserves to cover potentially troubled loans in the third quarter, causing its net income to fall to C$1.88 billion.

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Below are examples of American Banker’s analyses of the earnings and performance of international banks operating in the U.S.