(Bloomberg) — Bank of Montreal’s fiscal second-quarter earnings beat estimates as the waning Covid-19 crisis allowed the lender to set aside less for souring loans and gave a lift to the company’s personal and commercial banking businesses.

Profit more than doubled in Bank of Montreal’s Canadian personal and commercial banking unit and rose 60% in its U.S. division in the three months through April, the Toronto-based lender said Wednesday. Total provisions for credit losses fell 95% from a year earlier.

Given vaccination progress in the U.S. and Canada, the pandemic is likely to conclude without the once-expected deluge of souring loans. That’s giving individuals and businesses confidence to ramp up borrowing, boosting Bank of Montreal’s personal and commercial loan balances in the U.S. from the first quarter and lifting its company and consumer installment loans in Canada. The firm also kept expenses in check, a key focus for investors.

“BMO delivered against a high bar of expectations,” Gabriel Dechaine, an analyst at National Bank of Canada, said in a note to clients.

With the risk of widespread defaults fading, Bank of Montreal set aside just C$60 million ($50 million) in provisions for credit losses last quarter. That compares with C$1.12 billion in provisions a year earlier and is less than analysts’ C$219 million average estimate for set-asides. The lender even recorded a C$13 million recovery of provisions for performing loans in its Canadian banking business and a C$29 million recovery in the U.S. unit.

Net income rose 89% to C$1.3 billion, or C$1.91 a share. Excluding some items, profit was C$3.13 a share. Analysts estimated C$2.75, on average.

Capital Markets

While most banks are benefiting from strong performance in their capital-markets divisions, Bank of Montreal is getting an extra boost because the unit stumbled with trading losses in the year-earlier period. The firm posted capital-markets net income of C$563 million last quarter, compared with a C$74 million net loss in the year-earlier period.

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Canada’s fourth-largest lender by assets has kept a focus on costs throughout the pandemic. The company’s adjusted net efficiency ratio improved to 56.6% from 63.8% a year earlier.

“We are highly focused on continuously improving our performance,” Chief Executive Officer Darryl White said in a statement Wednesday.

Canada’s hot housing market continued to fuel Bank of Montreal’s domestic mortgage business, with residential mortgage balances rising from both the first quarter and a year earlier. Bank of Montreal’s Canadian credit-card portfolio shrank as the country’s continued lockdowns restrained spending.

Bank of Montreal shares have risen 28% this year, compared with a 21% gain for the S&P/TSX Commercial Banks Index.

(Updates with analyst comment in fourth paragraph, provisions recoveries in fifth.)

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