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Bank of Montreal earnings beat estimates, adds mortgage safeguards



Bank of Montreal (BMO) kicked off Canadian lenders’ second-quarter results reporting by strongly beating analysts’ estimates on Wednesday as it set aside fewer provisions than expected and its capital markets unit swung to a profit.

Canada‘s fourth-largest lender is also manually adjudicating more mortgages in areas with rapidly growing house prices and is stress testing its broader loan portfolios against higher interest rates, in addition to individual borrowers, Chief Risk Officer Pat Cronin said on an analyst call.

The measures at BMO, whose loan growth in recent quarters has been driven almost entirely by mortgages, similar to other Canadian banks, come as Canada‘s central bank sounds alarm bells about risks due to rapid house price appreciation and regulators tighten lending requirements.

BMO is taking extra precautions while issuing mortgages in red-hot housing markets.

“But ultimately, our mortgages and loans are (based on) the borrower’s ability to pay, not the house price,” Cronin added.

As signs of an economic recovery emerge with COVID-19 vaccinations picking up, Canadian banks are continuing their better-than-expected run with loan losses remaining low. Strong trading activity and deal-making have also been a boon in recent quarters.

Bank of Montreal shares rose 0.25% to C$123.93 in morning trading in Toronto, versus a 0.4% gain in the Toronto stock benchmark, after touching an all-time intraday high on Tuesday. The Canadian bank benchmark was on track for a record close on Wednesday.

Investors had been expecting lenders to beat estimates.

BMO released C$95 million ($78.5 million) of reserves on performing loans, compared with provisions of C$705 million a year ago. The total provisions of C$60 million were nearly a quarter of what analysts had expected.

BMO’s capital markets unit posted adjusted profit of C$547 million, from a C$68 million loss a year earlier, while wealth management earnings more than doubled to C$346 million.

But commercial loans fell nearly 15% year-on-year, while consumer lending grew 3.3%, driven almost entirely by mortgages.

The higher qualifying rate for mortgages, set to take effect on June 1, is expected to affect about 5% to 10% of borrowers, executives said on the call.

BMO reported net income excluding one-off items of C$3.13 per share, compared with analysts’ expectations of C$2.77.

($1 = 1.2102 Canadian dollars)

(Reporting by Nichola Saminather and Niket Nishant; Editing by Devika Syamnath, Will Dunham and Louise Heavens)


Pre-owned business jet shortage drives sellers’ market, demand for new luxury planes



A shortage of newer-model business jets is driving up prices of second-hand aircraft, a trend that is expected to deliver a windfall for luxury planemakers as new affluent buyers enter the market.

After a turbulent 2020 due to COVID-19, the rush toward private transport is so marked that some buyers are snapping up second-hand planes before fully inspecting the wares as the market shifts toward sellers, lawyers and brokers said.

That is expected to push up demand for new jets from planemakers like General Dynamics Corp‘s Gulfstream, Textron Inc and Bombardier Inc since buyers have fewer pre-owned options, and the price gap between old and new narrows.

“There are virtually no young pre-owned aircraft available – good news for would-be sellers and for (planemakers),” said aviation analyst Rolland Vincent.

He recalled one trucking company’s recent search for a pre-owned Gulfstream jet: “There was one aircraft in the world that fit their requirements.”

Traffic from business jets, which carry roughly a handful to 19 travelers, has rebounded to pre-pandemic levels in the United States, the world’s largest market for private aviation, according to FlightAware data.

“On the pre-owned side, inventory appears to be fairly low, and that’s always a benefit to new aircraft sales,” said Scott Neal, senior vice president worldwide sales, Gulfstream.

“We are seeing strong interest across the board from first-time buyers and high net worth individuals as well as corporate customers with a desire to grow their fleets.”

Textron in April raised its full-year profit forecast, propelled by a rebound in business jet demand.

The trend could encourage some planemakers to increase production rates, although any ramp-up would hinge on supply chain capabilities, Vincent said.

Planemakers do not disclose total number of orders.

Preowned aircraft for sale in May accounted for 6.6% of the worldwide fleet, the lowest level recorded in 25 years by JETNET data, Vincent said. He said 864 pre-owned business jets sold during the first four months of 2021, up 36% from the same period last year.

“There are multiple offers on planes,” said Florida-based aviation attorney Stewart Lapayowker, founder of Lapayowker Jet Counsel PA.

Amanda Applegate, a partner at Aerlex Law Group, said she handled more deals for new jets than usual in May, as buyers fail to secure popular pre-owned planes like the G650, raising prices.

Applegate said it’s a case of pent-up demand as some wealthy travelers previously avoided private jets due to concerns like “flight shaming” over the environment. Corporate planes burn more fuel per passenger than commercial.

But since COVID-19, buyers have been shifting to private aviation to avoid airport crowds and coronavirus variants.

Applegate said some deals are so competitive she’s seen buyers give up pre-purchase inspections to win them.

Don Dwyer, managing partner at Guardian Jet, which does aircraft brokerage, appraisals, and consulting, recalled one case where a client didn’t undertake a pre-purchase inspection, which can take more than a month to complete.

It was a particular case since the plane was highly coveted, in good shape based on a visual inspection, and the seller was reputable, Dwyer said.

“I don’t recommend it, but in certain situations it can work.”


(Reporting by Allison Lampert in Montreal; Editing by Denny Thomas and Steve Orlofsky)

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Ford starts shipping Bronco SUVs from Michigan assembly plant



Ford Motor Co said on Tuesday it had started producing and shipping the new Bronco sport utility vehicles (SUVs) from its Michigan assembly plant, following a delay in the launch of the SUVs due to COVID-19-related issues with the automaker’s suppliers.

Customers have booked more than 125,000 sixth-generation Bronco SUVs since the beginning of the year, the company said. The SUVs are targeted at the Jeep Wrangler market segment.

Ford said it had made more than 190,000 reservations for the Bronco in the United States and Canada.

The company built the first generation of Broncos from 1966 to 1977, and withdrew the line in 1996 amid falling demand.

Ford said it had invested $750 million into and added about 2,700 jobs at the Michigan assembly plant to build the new Broncos.


(Reporting by Ankit Ajmera in Bengaluru; Editing by Vinay Dwivedi)

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Lufthansa sets 2024 goal, eyes capital increase



Germany’s flagship carrier Deutsche Lufthansa said it aims to boost its return on capital employed (ROCE) and laid out plans for a capital increase as it prepares for a business recovery amid an easing coronavirus pandemic.

The largest German airline aims to have an adjusted EBIT margin of at least 8% and an adjusted ROCE of at least 10% in 2024, it said late on Monday.

Adjusted ROCE was –16.7% in 2020 and 6.6% in 2019.

The group added it had mandated banks to prepare a possible capital increase, though size and timing have not yet been determined and the German state, which has bailed out the airline during the pandemic, has not yet given its approval.


(Reporting by Ludwig Burger; editing by Jonathan Oatis)

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