*

Strong income from capital markets and wealth management

boosts

profits

*

Banks set aside funds for bad loans amid trade tensions

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Scotiabank expands in North America, divest Latin American

assets

Feb 25 (Reuters) - Canada's Bank of Nova Scotia ( BNS )

and Bank of Montreal ( BNKD ) on Tuesday beat analysts'

expectations for quarterly profit driven by strong income from

capital markets and wealth management businesses.

Lower interest rates have increased appetite for mergers and

acquisitions while less regulation, lower corporate taxes and a

broadly pro-business stance in Canada's southern neighbour are

expected to boost activity this year.

The wealth management business, a capital-light and

fee-based business, has also boomed recently, powered by a rise

in the number of high net worth individuals and increasing

investments.

The banks, Canada's third and fourth largest, still set

aside large sums to shield against bad loans in a challenging

environment amidst trade tensions between Canada and the United

States, a key market for the lenders.

U.S. President Donald Trump has threatened to impose a 25%

tariff on all non-energy Canadian imports starting in March.

Scotiabank said its provisions of C$1.16 billion ($813.81

million) were partly due to uncertainties related to the impact

of tariffs on Canada and Mexico. Analysts were expecting

provisions of C$1.12 billion, according to LSEG data.

"We are well positioned to compete and grow in this dynamic

operating environment," BMO's CEO Darryl White said in a

statement.

The lender, which had said its credit issues would normalize

in 2025, recorded provisions for credit losses of C$1.01

billion, lower than analysts' expectations of C$1.14 billion.

Both BMO and Scotiabank have looked for expansion

opportunities outside of the Canadian market, largely dominated

by the Big Six banks, entering markets in other parts of North

America.

BMO has expanded on the U.S. West Coast through its

acquisition of Bank of the West.

Under CEO Scott Thomson, Scotiabank changed focus to push

funding to stable, lower-risk countries, making a bet on the

North American trade corridor.

The plan focuses on growth closer to home, from the province of

Quebec to the United States and Mexico. As a part of the

strategy, Scotiabank sold its Colombia, Panama and Costa Rica

operations to Banco Davivienda and bought a roughly 15% stake in

U.S. regional lender KeyCorp ( KEY ).

On an adjusted basis, Scotiabank earned C$1.76 per share,

compared with analysts' estimates of C$1.65, according to LSEG

data.

It recorded an impairment charge of C$1.36 billion due to

the sale of Latin American assets.

BMO reported adjusted earnings of C$3.04 per share, beating

the average estimate of C$2.41.

($1 = 1.4254 Canadian dollars)