Top banks had cumulative profits edge higher in Q4 Warn the year ahead could be a challenge with waning consumer lending, volatile markets

TORONTO Canada’s top banks had their fourth-quarter profits edge higher this year, but they warned that a slew of headwinds — including the sluggish global economy, a slowdown i n consumer lending and volatility on the stock markets — will make the year ahead challenging.

Combined, Canada’s five biggest banks — Royal Bank, TD Bank, Scotiabank, Bank of Montreal and CIBC — earned $7.4 billion of net income during the quarter, up slightly from $7.3 billion a year ago. Their profits for the year climbed to a total of $31.7 billion, from $29.2 billion last year.

However, three of the banks — Scotiabank, the Bank of Montreal and CIBC — reported fourth quarter net income that was down from a year ago.

National Bank financial analyst Peter Routledge said the quarterly results showed, as expected, growth i n consumer lending i n Canada is starting to wane as household debt climbs.

Profits derived from investment banking and corporate banking services were “f airly good,” but were down from last quarter, which Routledge noted was exceptionally strong thanks to big gains on the stock markets.

Scotiabank, on Friday, was the last of the group to release its fourth-quarter results this week. The bank reported its net income slipped 14 per cent from a year ago to $1.438 billion as it recognized severance expenses relating to its downsizing and difficulties in its international operations.

Net income amounted to $1.10 per diluted share, down from $1.29 last year.

Excluding the restructuring and certain other items, Scotiabank’s net income was $1.703 billion — up 2 per cent from last year.

Scotiabank president and CEO Brian Porter described it as a “year of transition” to analysts on Friday, and said the bank expects stronger earnings in the second half of 2015 as economic conditions in Latin America improve.

“You’re always going to have a hurricane in the Caribbean or something somewhere that’s going to impact you for a quarter or two. But we’ve had a bit of a perfect storm,” Porter said during a conference call Friday.

Higher regulatory costs and lower interest rates in Latin America, higher provisions for credit losses related to write-offs the bank took in Puerto Rico and the Caribbean and challenges at two of the bank’s associated companies in Venezuela and Thailand were among the items that cost the bank $250 million over the course of the year.

The quarter included a restructuring charge totalling $110 million after tax, mostly relating to employee severance as Scotiabank moves to increase efficiency in its domestic operations and reduce the number of branches it has outside Canada.

Despite the decline in fourthquarter profit, Scotiabank’s fullyear profit for 2014 was up 10 per cent from last year, rising to $7.298 billion. Adjusting for notable items, its profit was $7.008 billion, up from $6.52 billion in 2013.

The Bank of Montreal reported a fourth-quarter profit of $1.070 billion, down from $1.074 billion a year earlier. Analysts blamed weaker than expected revenue in the bank’s capital markets division.

CIBC reported fourth quarter net income of $811 million, down from $825 million.

Royal Bank reported net income of $2.3 3 billion, up from $2.101 billion, a year ago.

TD Bank grew its fourth-quarter profit to $1.746 billion, up from $1.616 billion a year earlier.

National Bank, the country’s sixth largest lender, reported fourth-quarter net income of $330 million, up from $320 million a year ago.