Bank earnings were one of the biggest stories we tracked at BNN this week.  It’s not over yet, but here’s a quick scorecard of how they have fared so far.

Bank of Montreal (BMO.TO): Widely perceived as the loser so far this earnings season, but consider this: BMO’s adjusted profit rose 12 per cent in the quarter, and it delivered a larger-than-expected hike to its dividend and “missed” earnings per share expectations by only a penny. The results were hardly a disaster. BMO reported $1.92 in second-quarter earnings per share, while the expectation (the mean number in a descending list of analysts’ forecasts) was $1.93.

Still, investors sold the stock, which fell as much as 3.3 per cent on the day the earnings were released. Why? Profit fell in the all-important U.S. segment, and loan losses moved up on both sides of the Canada-U.S. border.

In the U.S., BMO had a quarter it would like to forget. Profit fell by 10 per cent. Provisions for credit losses surged by 74 per cent, to US$68 million from US$39 million. Those numbers aren’t huge, but remember, each dollar in a provision against a loan thought to be in trouble is a dollar less in profit. And that US$68 million figure reduced BMO’s U.S. profit by 25 per cent from what it otherwise would have been. Revenue fell by two per cent, as interest margins were squeezed and loan balances fell.  Investors will likely want to see improvement the next time BMO reports.

Go for Canadian banks with U.S. exposure: Portfolio manager

Following the release of earnings for some of Canada's big banks, BNN speaks with Bryden Teich, portfolio manager at Avenue Investment Management, about where Canadians should invest in the financial sector, and if they should be concerned with Home Capital's troubles.

Royal Bank of Canada (RY.TO):  A winner. So far, this is the bank that has posted the strongest second-quarter results, including a robust performance south of the border. Royal reported $1.89 in quarterly earnings per share, versus an expected $1.80.

Royal’s strategy in the U.S. is very different than the broad retail platform Toronto-Dominion Bank has built and the business-centered regional lending business owned by BMO. Royal has gone after high-net-worth individuals, betting that this segment of the U.S. population will grow significantly in years ahead.  Royal, you probably remember, has tried and failed at the mainline retailing game in the U.S., having years ago acquired – and then sold - a branch network in the southeastern U.S. that never worked out.

Now, Royal’s U.S. platform is City National Bank, which is based in Los Angeles and caters to affluent clients in southern California, San Francisco, Nevada, New York City, Nashville, Atlanta and Minneapolis. Its numbers in the second quarter were stellar: Double digit growth in revenue, profit, loans and deposits.  The contribution to Royal’s massive quarter profit is small (US$57 million from City National, versus a total RBC profit in the quarter that came to a staggering $2.8 billion), but investor loved the growth path and are becoming convinced Royal has got it right this time in the United States. Expect Royal to build out City National in years ahead by acquiring other, similar businesses.

The other standout for Royal was its capital markets arm. It was a good quarter in the markets, and Royal’s clients were eager to trade in that market. Client activity was up, and loan losses were down. Profit surged by 15 per cent to an impressive $668 million.

Otherwise, Royal’s Canadian retail banking franchised posted a respectable six per cent gain in profit, boosting the bottom line by $1.3 billion.

Toronto-Dominion Bank (TD.TO): Winner. TD’s strong performance at its huge U.S. banking unit casts the weak BMO numbers in a harsh light. TD saw profit rise by an impressive 18 per cent in the quarter to US$636 million. Loan losses declined in that business – another point of stark comparison with BMO.  If there was a quibble – and analysts did indeed quibble – it was that loan growth in the U.S. stalled for TD. Shareholders will be hoping that slowdown doesn’t persist.

TD didn’t have the knockout quarter in capital markets that Royal did – revenue actually fell from the first quarter – but its retail banking franchise in Canada posted another impressive quarter, with profit rising seven percent to $1.6 billion. Total profit at TD was $2.6 billion and earnings per share of $1.34 were 10 cents more than expected – the widest earnings beat so far.

A bullish view on Canadian banks and the economy

Adam Johnson, founder and author of the Bullseye Brief investment newsletter joins BNN to provide his view on the Canadian bank earnings and why he's bullish on the market.

Canadian Imperial Bank of Commerce (CM.TO): Winner. Analysts were quick to point out that CIBC’s earnings beat was mainly a result of the bank’s tax bill in the quarter being less than expected – and investors caught up with that notion later in the trading day. But the postives outweighed the negatives for CIBC in the quarter. CIBC reported $2.64 in earnings per share, versus an expected $2.57.

Assets under management in CIBC’s wealth management business surged, taking profit along with it. Wealth management profit rose 35 per cent to $155 million. That’s a vivid example of why all of the Canadian banks have taken steps in recent years to bulk up their wealth management businesses. The fee income generated here can be substantial.

Loan quality improved at CIBC, and capital markets profit jumped by 12 per cent to $292 million.

Retail banking here in Canada posted modest 4 per cent growth, pushing profit to $648 million. Investors, of course, will soon be watching CIBC and how well it is faring in the U.S.  After raising its takeover offer twice, CIBC finally won shareholder support for its $4.9 billion purchase of PrivateBancorp (PVTB.O) in Chicago.

Bank of Nova Scotia (BNS.TO) reports its second-quarter earnings on May 30, followed by National Bank of Canada (NA.TO) the next day.