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BofA’s loan growth powers better-than-expected profit

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(Reuters) – Bank of America Corp’s (BAC.N) quarterly profit topped analyst estimates on Wednesday as its growing loan book helped it ride out year-end market volatility.

A Bank of America logo is seen in New York City, U.S. January 10, 2017. REUTERS/Stephanie Keith

Under Chief Executive Officer Brian Moynihan, the Charlotte-based lender has slashed costs while tightening risk controls, which has boosted profitability but also weighed on some of businesses like investment banking.

The second-biggest U.S. bank benefited from 4 percent growth in loans to consumers and 2 percent growth in loans to businesses in the fourth quarter, allowing it to capture more revenue from higher U.S. interest rates.

Revenue rose in three of the lender’s four main businesses. Global markets, which includes trading, recorded a fall in revenue during the turbulent quarter for markets that mirrored declines at rivals.

The bank’s shares jumped 5 percent to $27.94 in premarket trading on Wednesday.

BofA, with its large deposit pool and rate-sensitive mortgage securities, relies heavily on higher interest rates to maximize profits.

Its total net interest income, the difference between what a lender earns on loans and pays on deposits, rose 7.3 percent to $12.3 billion. Average deposits rose nearly 2 percent to $1.34 trillion from the preceding quarter.

Results were buoyed by four Federal Reserve interest rate hikes in 2018 and a U.S. strong job market that kept bad loans in check and borrowing healthy. The bank predicted economic growth would slow in 2019 but still remain strong.

Markets-related revenue fell as market turbulence pushed some customers to the sidelines, but a plunge in bond trading was cushioned by higher equity trading revenue. Fee income in the investment bank fell 5 percent because of lower debt underwriting and advisory fees.

Earlier in the week JPMorgan Chase & Co (JPM.N) missed profit estimates as its fixed-income trading revenue slumped. Citigroup Inc (C.N) likewise reported declines in bond trading, citing the market downturn in December and wider credit spreads.

BofA’s adjusted sales and trading revenue fell 6 percent, with a 15 percent fall in bond trading revenue overshadowing an 11 percent rise in equity trading.

While the Federal Reserve’s forecasts indicate two more rate hikes this year, traders of contracts tied to the central bank’s policy are betting that the Fed will not deliver a single rate hike this year and will begin cutting rates next year.

Non-interest expenses fell 1 percent to $13.13 billion as Moynihan works to streamline the lender’s sprawling operations. Two years ago he pledged to cut expenses to $53 billion by the end of 2018 and stick to that level until 2020.

Net income applicable to common shareholders rose to $7.04 billion, or 70 cents per share, in the fourth quarter ended Dec. 31 from $2.08 billion, or 20 cents per share, a year earlier, when it took a nearly $3 billion charge related to changes in U.S. tax law.

Analysts on average were expecting the bank to earn 63 cents per share, according to IBES data from Refinitiv.

Revenue, net of interest expense, rose 11 percent to $22.7 billion.

Reporting by Siddharth Cavale and additional reporting by Sweta Singh in Bengaluru and Imani Moise in New York.; Editing by Neal Templin and Meredith Mazzilli

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Canadian Tire and NuPort Robotics to commercialize Canada’s first automated heavy duty trucks

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Canadian Tire Corporation and Toronto based start-up NuPort Robotics, Canada’s first autonomous trucking company, are partnering with the Ontario government to invest $3 million to undertake an automated heavy duty trucking project to test a “first-of-its-kind-in-the-world” technology. 

The breakthrough technology provides a transportation solution for the middle mile, the short-haul shuttle runs that semi-tractor trailers make between distribution centres, warehouses and terminals each day.

It is designed to enable next-generation automated trucks that are more fuel efficient, safer to operate, and provide an enhanced driver experience.

Backed by $1 million in support from the Ontario government through Ontario’s Autonomous Vehicle Innovation Network and matched by $1 million investments from Canadian Tire and NuPort Robotics, respectively, the two-year project is applying proprietary, artificial intelligence technology from NuPort Robotics to retrofit two conventional semi-tractor trailers – which will always be attended by a driver – with high-tech sensors and controls, a touchscreen navigation system, and other advanced features such as obstacle and collision avoidance.

Caroline Mulroney, Minister of Transportation, says: “Ontario is proud to be a global leader in automated and connected vehicle technology and this innovative project is an exciting milestone toward automated vehicle tech in the trucking industry.

“Ontarians rely on goods being delivered by trucks across the province every day and projects like this are demonstrating the ways that automated truck technology could help businesses meet delivery demands more efficiently while supporting a strong supply chain in Ontario.”

Vic Fedeli, Ontario Minister of Economic Development, Job Creation and Trade, says: “This project applies unique and made-in-Ontario Artificial Intelligence technology that offers increased safety and efficiency, with a reduced carbon footprint, to the goods supply chains on which we all rely.

“This is the latest example of how Ontario’s Autonomous Vehicle Innovation Network acts as a catalyst, fostering partnerships between ambitious technology start-ups and industry to develop and commercialize next generation transportation technologies that strengthen our economy and benefit society.”

Raghavender Sahdev, CEO of NuPort Robotics, says: “The trucks are currently transporting goods between a Canadian Tire distribution centre in the Greater Toronto Area and nearby rail terminals within a 12.5 mile radius, and early results are promising.

“The aim of the project is to develop a system that incorporates an autopilot feature for conventional trucks with a driver, leading to the most efficient way to drive and increase safety.

“The sensors work as a ‘safety cocoon’ to cover blind spots and prevent accidents and the end result is peak fuel efficiency, meaning lower carbon emissions, and peak driving performance for an overall more optimal transportation experience.”

NuPort Robotic’s approach to autonomous trucking is unique in the industry because it focuses only on solving the middle mile challenge, using a known set of predetermined trucking routes that are repetitive and high frequency as opposed to general highway driving.

Ultimately, when implemented on fixed routes in the future, Canadian Tire will benefit from faster commercial deployments and improvements in supply chain sustainability.

Gary Fast, vice-president of transportation, Canadian Tire, says: “Canadian Tire embraces innovation and is always testing new technologies to improve our operational efficiency and safety.

“As proud Canadian companies, the safety of all stakeholders, including drivers, employees, customers, and public will be the top priority as we work together towards deployment of this technology.”

Cari Covent, vice president of intelligent automation, Canadian Tire, says: “Over the last three years, Canadian Tire has made a significant effort to solve complex business problems by using the Canadian start-up Artificial Intelligence ecosystem, and NuPort Robotics exemplifies what we look for in a start-up with a focus on innovation, automation and artificial intelligence.”

Sahdev says: “As NuPort Robotics continues to develop new technologies to overcome middle mile supply chain problems and advance autonomous trucking, I am extremely grateful for the support of the Ontario Government through AVIN and the Ontario Centre of Innovation.

“With their continued support, we are striving to position Canada as the leader in autonomous transportation.”

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Constellation Software is money in the bank, this fund manager says

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If you’re looking for a long-term hold in Canadian tech then Constellation Software (Constellation Software Stock Quote, Chart, News, Analysts, Financials TSX:CSU) should definitely be on your radar. So says Jason Del Vicario of Hillside Wealth Management who likes not only Constellation but its recent spin-off Topicus (Topicus Stock Quote, Chart, News, Analysts, Financials TSXV:TOI) which Del Vicario says could do even better than CSU over the next ten years.

Software consolidator Constellation has been running on the same game plan for years, buying small vertical market software companies providing so-called mission critical software solutions globally. Over the years CSU has completed over 500 such acquisitions, buying the top names in their respective niche verticals and then using its clout and breadth to grow the business and expand into new markets. The resulting cash flow is then plowed back into more acquisitions and the cycle repeats.

The strategy has worked wonders for Constellation, which has grown its revenue from $631 million in 2010 to almost $4 billion for 2020 while taking earnings from $4.12 per share in 2010 to $20.59 per share this past year.

Shareholders were given a special treat last month when Constellation spun out recently acquired Topicus, giving CSU owners about 1.9 Topicus shares for every Constellation share as a dividend-in-kind. Constellation bought Netherlands-based software company Total Specific Solutions BV (or TSS) in 2013 and that subsidiary recently acquired Topicus BV, a Dutch information service company focusing on sectors such as healthcare, education and finance.

Topicus was singled out by Constellation founder Mark Leonard for its ability to grow without using outside shareholder funding. Leonard said the spin-out was part of the intention since a purchase agreement was struck last year.

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Nuvei wins price target raise from National Bank

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Strong quarterly results and an even brighter outlook for 2021 are reasons to celebrate for Canadian payments company Nuvei (Nuvei Stock Quote, Chart, News, Analysts, Financials TSX:NVEI), according to National Bank Financial analyst Richard Tse. In an update to clients on Wednesday, Tse left his rating unchanged at “Outperform” while raising his price target from C$85.00 to C$100.00.

Montreal-headquartered Nuvei is a provider of payment technology solutions to merchants and partners around the world, with a platform geared for high-growth mobile commerce and e-commerce markets. Nuvei’s solutions include a fully integrated payments engine with global processing capabilities, a turnkey checkout solution and a suite of data-driven business intelligence and risk management tools and services.

The company released its fourth quarter and full year 2020 financials on Wednesday, showing Q4 revenue of $115.9 million, up 46 per cent year-over-year, and adjusted EBITDA of $51.3 million, up 61 per cent year-over-year. Total dollar value of transactions processed by merchants (‘total volume’) with Nuvei rose by 53 per cent to $13.9 billion. (All figures in US dollars except where noted otherwise.)

The 2020 year featured revenue up 53 per cent to $375.0 million and adjusted EBITDA up 87 per cent to $163.0 million, with total volume rising a full 76 per cent year-over-year to $43.2 billion.

“Our performance continues to be driven by strong momentum in the high-growth verticals we serve, as well as by our customizable, scalable and feature-rich technology platform which provides one of the industry’s most complete payment technology solutions going well beyond merchant acquiring,” said Philip Fayer, chairman and CEO, in a press release.

The company said the fourth quarter represented the strongest growth yet experienced by Nuvei, driven by wallet share expansion from current merchants along with accelerated uptake of new merchants. New e-commerce business almost tripled compared to a year earlier, Nuvei said, while the company expanded its connectivity coverage over the quarter, introduced new product innovations on its platform and continued to execute on M&A.

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