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BMO is the fifth major Canadian bank to report earnings that topped profit estimates for the fiscal fourth quarter.Mark Blinch/Reuters
Bank of Montreal’s fiscal fourth-quarter profit beat analysts’ estimates and the bank raised its quarterly dividend as strong earnings from capital markets, rebounding U.S. profit and lower loan-loss reserves helped its results.
Toronto-based BMO BMO-T reported profit of $2.3-billion, which was roughly unchanged from the prior year, when the bank benefitted from the reversal of a legal provision.
BMO earned $2.97 per share, up 1 per cent from $2.94 per share a year ago.
After adjusting to exclude one-time items, including the impact of the legal provision and the sale of some BMO branches in the U.S., the bank said profit increased 63 per cent year-over-year to $2.51-billion.
Adjusted earnings per share of $3.28 beat the consensus estimate among analysts, who expected earnings of $3.03 per share, according to S&P Capital IQ.
The bank raised its quarterly dividend by 4 cents, or 2 per cent, to $1.67 per share.
BMO is the fifth major Canadian bank to report earnings that surpassed profit estimates for the fiscal fourth quarter, which ended Oct. 31. The banks have churned out earnings in spite of the uncertainty weighing on the economy from trade tensions with the United States.
Bank of Nova Scotia BNS-T, Royal Bank of Canada RY-T and National Bank of Canada NA-T reported fourth-quarter earnings earlier this week. Canadian Imperial Bank of Commerce CM-T and Toronto-Dominion Bank TD-T released quarterly results on Thursday.
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BMO earmarked $755-million in the quarter in provisions for credit losses – the money banks set aside to cover loans that could default – down from $1.52-billion a year ago.
Analysts have been expecting BMO’s loan-loss provisions to come down to levels more in line with its historical average. The bank took $750-million in provisions on loans that are past due, and only $5-million against those that are still being repaid, as its forecast for the economy improved.
Investors are also watching for signs of a rebound in BMO’s portfolio of U.S. loans, where the bank has been reworking its balance sheet. Loan balances fell 2 per cent in the quarter, compared with a year earlier, and deposits were down 5 per cent.
Profit from U.S. banking rose sharply year-over-year to $807-million, as loan-loss provisions fell. The division’s revenue increased by 3 per cent.
Capital markets profit nearly doubled to $521-million, from $270-million a year ago, as revenue from investment banking and trading both increased.
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BMO’s core Canadian personal and commercial banking division reported profit of $752-million that was roughly unchanged year-over-year, or up 5 per cent on an adjusted basis to $800-million. Loan balances rose 3 per cent from a year ago.
Profit from BMO’s wealth management arm was $383-million, up 27 per cent year over year, as rising markets and product sales helped boost revenue.
During the quarter, BMO bought back 8 million shares under a previously announced repurchase plan. That brought the bank’s common equity Tier 1 (CET1) capital ratio to 13.3 per cent, down from 13.5 per cent in the fiscal third quarter.
BMO also announced Thursday that is has appointed Tammy Brown to its board of directors. Ms. Brown is a former partner and industry leader at KPMG Canada, and was deputy chair of KPMG Canada’s board.
