(March 6 – 16:40 ET) – Standard and Poor’s says the first quarter 2001 results of Canadian banks were very favorable on the revenue and expense fronts, especially in light of softening economies globally and particularly in the United States.

According to the rating agency, strong capital market activity in January pushed trading income higher, and corporate finance revenues were generally healthy. The only weakness was in the banks’ wealth management revenues, which reflected the slowdown in retail investing activities, particularly at Toronto Dominion Bank.

Asset quality remained stable in the Canadian operations of the banks. However, Standard and Poor’s expresses concern with the bank’s activities in the U.S. syndicated loan markets. Given the mounting pace of defaults by large U.S. corporates, the level of gross impaired loans in the U.S. has been rising.

The company singles out Bank of Nova Scotia, noting Scotiabank experienced a $1 billion jump in U.S. commercial gross impaired loans. Standard & Poor’s says the other banks had lesser increases, although it adds that the increase for Bank of Montreal would have been greater by $170 million if its California utilities exposure had been classified as impaired.

Standard & Poor’s adds that it does not interpret Scotiabank’s performance as indicating a greater risk profile in its U.S. portfolio than that of the other banks. Rather it states that “there is a certain randomness in terms of which of the particular banks’ exposures default at a particular time. Given the large single exposures that characterize Canadian bank loan portfolios, quarter-to-quarter changes may be lumpy depending on the bankruptcy trend. For Scotiabank and the other banks, the underlying improvement in operating performance due to cost discipline offsets the deterioration in U.S. portfolios.”

Therefore, according to the comapny, the ratings on Scotiabank and the other Canadian banks remain unchanged.