Bank results push TSX higher; Oil declines again
The Bank of Canada’s decision to keep interest rates at 0.75 per cent was the most anticipated news Wednesday but this week the banking sector began publishing its quarterly results. BMO and National Bank’s results helped push gains on the Toronto Stock Exchange despite new decline in oil prices. Asian markets closed mixed earlier in the day with Tokyo and Shanghai outperforming the rest of the region once again. Fear over a default on debt repayments by Greece is dominating European markets this week but hints of a potential deal have helped markets in the region close with gains.
The S&P/TSX Composite Index closed up 59.66 (0.40 per cent)
The NYSE closed higher (Dow was up 121.5)
Oil is trending lower (Brent $62.29, WTI $57.63 at 4.10pm)
Gold is trending flat
The loonie is valued at U$0.8021 (at 4.10pm)
Interest rates hold steady at 0.75 per cent
The Bank of Canada announced its latest decision on interest rates Wednesday and as widely expected didn’t move from the current 0.75 per cent. Analysts are split as to whether the central bank’s forecast that stronger US growth will deliver better export potential for Canada but for now governor Stephen Poloz is still expecting the second quarter to see increased growth for the non-energy sectors. In a statement the bank notes that there are challenges but that they are not cause for immediate concern: “Risks to financial stability remain elevated, but appear to be evolving as expected. Weighing all of these risks, the Bank judges that the current degree of monetary policy stimulus remains appropriate and therefore the target for the overnight rate remains at 3/4 per cent.”
BMO, National Bank announce results
Bank of Montreal and National Bank of Canada have reported second quarter results. BMO’s net income was $1 billion, down 7 per cent from a year earlier, but adjusted net income was up 5 per cent at $1.146 billion. The bank’s revenue from personal and commercial banking was up 1 per cent in Canada but south of the border that part of its business gained 31 per cent. BMO announced an increased dividend of 82 cents per share (up from 80 cents a year ago). The results exceeded analysts’ expectations.
Meanwhile National Bank of Canada reported a 12 per cent rise in profits and a 52 cents per share dividend, up from 50 cents. Net income at Canada’s sixth largest lender grew to $404 million with personal and commercial banking up 6 per cent and personal lending up 7 per cent compared with the same period in 2014.
Economists battle over household debt
There’s some dispute as to whether the level of household debt in Canada is cause for major concern or overstated. The Huffington Post reports that on one side is the Fraser Institute’s report last week that suggested that the debt was manageable due to low interest rates and is also lower than many other developed countries. However on the other side of the argument, David Madani of Capital Economics says that report is “misleading” for only considering the cost of servicing the debt rather than the actual level. While the Bank of Canada has raised concern at the level of household debt, in its statement on interest rates it notes that “ financial conditions for Canadian households and firms remain highly stimulative.”