The Bank of Montreal in Toronto's Financial District on Tuesday, April 4, 2017. THE CANADIAN PRESS/Aaron Vincent Elkaim

TORONTO - Canada's five biggest banks earned more than $10 billion in collective profits in the latest quarter to cap off a better-than-expected year on the surprising strength of the domestic economy.

Despite worries about Canada's overheated housing markets and the impact of measures to cool them down, credit trends and loan growth were solid in the fiscal fourth-quarter, said Meny Grauman, an analyst with Cormark Securities in Toronto.

"It's tied to the strength of the Canadian labour market. The Canadian economy is doing relatively well and it's benefiting the banks... Overall, I think it's a good time to be a Canadian bank," Grauman said in an interview.

The Bank of Montreal wrapped the big banks' earnings season on Tuesday with a drop in profits, which were hit by reinsurance claims related to hurricanes Irma, Maria and Harvey during the quarter ended Oct. 31. The Canadian lender's net income slipped to $1.23 billion, down from $1.35 billion during the same period a year earlier.

The quarter included reinsurance claims of $112 million largely related to the hurricanes, which cost the bank 17 per cents in earnings per share, as well as the impact of a weaker U.S. dollar and a $41-million after-tax restructuring charge.

On an adjusted basis, BMO said it earned $1.31 billion or $1.94 per share, down from nearly $1.4 billion or $2.10 per share a year ago. That fell short of the $1.99 in earnings per share expected on average by analysts, according to Thomson Reuters.

"We had a very strong year in both traditional wealth and insurance with earnings up 18 per cent, even with the impact of elevated claims in our reinsurance business this quarter," chief executive Darryl White told analysts in his first earnings call since taking the top job on Nov. 1 after CEO Bill Downe's retirement.

Meanwhile, the other four banks each posted a rise in quarterly earnings led by the Canadian Imperial Bank of Commerce, which blew past expectations on a 25 per cent bump in quarterly profit to hit $1.16 billion. The Toronto-based lender was helped by better-than-expected performance south of the border reflecting the first full-quarter after CIBC acquired Chicago-based bank PrivateBancorp for roughly US$5 billion in June.

Toronto-Dominion Bank (TSX:TD) reported a $2.71 billion profit, up 17.8 per cent from a year earlier but still fell short of analyst expectations after the high bar it set in the two previous quarters. Royal Bank of Canada (TSX:RY) saw quarterly profits rise 12 per cent, year on year, to $2.84 billion while Scotiabank (TSX:BNS) saw a more modest hike in net income of 2.9 per cent to $2.01 billion.

Scotiabank also announced it was forging ahead in a major way on its strategy fast growing Pacific Alliance markets, with a $2.9-billion offer to acquire a sizable stake in a Chilean bank. On Tuesday, it said its offer to buy Banco Bilbao Vizcaya Argentaria S.A. (BBVA)'s stake in BBVA Chile has been accepted, marking a deal that will double its market share in the country to 14 per cent.

Overall, each of the five biggest Canadian lenders reported record annual profits for a total of $40.3 billion in net income for fiscal 2017, up nearly 13 per cent from a year earlier.

The Big Five are poised to benefit from rosy economic outlook as well for fiscal 2018, if the latest job numbers are any indication. The economy churned out another 79,500 new jobs in November to drive down the jobless rate down to 5.9 per cent, its lowest level in nearly a decade.

However, the lenders also signalled during their conference calls that tougher mortgage underwriting rules set to take effect in the new year will present a headwind to its loan originations, ranging between five to 10 per cent.

RBC told analysts last week that it has already seen an uptick in demand this fall as borrowers looked to lock in loans now. The revised mortgage guidelines will include a stress test which will require would-be homebuyers to prove they can still service their uninsured mortgage if interest rates rise, a caveat which is expected to reduce the maximum amount they will be able to borrow.

Still, the banks were guiding towards roughly four or five per cent mortgage growth in the next fiscal year, lower than in recent years, said Shannon Stemm, analyst with Edward Jones in St. Louis.

"It's our view that mortgage growth is likely to slow, consumer lending is likely to slow as consumers have taken on a lot of debt in recent years," she said. "And you're going to see a moderation in the results in Canada."

News from © The Canadian Press, 2017