The Canadian Press - ONLINE EDITION

Bank of Montreal Q3 beats estimates with solid retail banking, loan recoveries

  • Print

TORONTO - A strong performance at Bank of Montreal's Canadian operations, combined with improved recoveries from loans previously written off, helped the bank outperform analyst estimates in the third quarter.

The bank (TSX:BMO) earned a third-quarter profit of $1.126 billion, hardly changed from $1.123 billion a year ago, under standard accounting.

But BMO's more closely watched adjusted profit was up four per cent, rising to $1.162 billion from $1.122 billion in the third quarter of fiscal 2013.

The adjusted earnings amounted to $1.73 per share — seven cents higher than a general estimate compiled by Thomson Reuters and up from $1.66 in the year-earlier period. Net income before adjustments was $1.67, up from $1.66 a year before.

Barclays analyst John Aiken said BMO's personal and commercial retail banking operations in both Canada and the United States had "reasonably strong" performances in the three months ended July 31.

Aiken noted that BMO's provisions for credit losses were also lower than expected as it recovered $182 million from previously written off loans, accounting for more than five cents per share in earnings.

But he also said BMO's domestic banking operations were strong, U.S. banking operations were improved and earnings from capital markets were robust.

The weakest segment of BMO's third-quarter was in wealth management, which recorded expenses related to a recent U.K. acquisition as well as a $22-million after-tax charge due to unfavourable movements in long-term interest rates. A year earlier, BMO had a $42-million after-tax benefit related to fluctuations in long-term interest rates.

"It appears that BMO may be gaining relative momentum in its retail operations with some of the upside available in its wealth management operations obscured by a temporarily weaker quarter in insurance," Aiken wrote.

"Although the upside in capital markets is up for debate, it is quite conceivable that BMO's earnings in the third quarter may have set it up for some sustained outperformance coming out of reporting season."

BMO's overall provision for credit losses, including the recoveries, was $130 million — up from an unusually low $76 million a year earlier and down from the $162 million recorded in the second quarter of 2014.

The bank's overall revenue was $4.2 billion, up five per cent from $4 billion a year earlier before adjustments and up 10 per cent from an adjusted $3.842 billion in the third quarter of 2013.

Return on equity was 14.4 per cent, compared with 15.5 per cent year-over-year.

BMO said its Canadian personal and commercial banking operations earned $526 million in the latest quarter, up eight per cent from a year ago, helped by higher revenue.

The bank said year-over-year loan growth was seven per cent, while deposits grew nine per cent.

Canadian P&C revenue was $1.66 billion, up from $1.564 billion year earlier and $1.560 billion in the previous quarter — with increase in both net interest and non interest totals.

Cameron Fowler, who heads the Canadian retail banking operation, told analysts there was "broad-based" growth in retail investment products, card products and commercial business.

Adding to its base of premium card customers has been a priority and the results have been good.

"Those originations have been very, very strong — a multiples of past years," Fowler said.

In the U.S., BMO said personal and commercial banking earned US$147 million, up two per cent from a year ago.

BMO's wealth management business earned $190 million, down $27 million or more than 10 per cent from a year ago, while BMO capital markets earned $306 million, up 14 per cent from a year ago.

The wealth management business was hampered by costs associated with the acquisition of F&C Asset Management PLC, a $1.3-billion deal announced in January.

Gilles Ouellette, head of BMO's wealth management group, said the plan for F&C is to introduce the U.K.-based company's products to North American and North American wealth management products to F&C's base.

"We're pretty happy with what is happening. After a quarter, it's pretty early but certainly it seems to be hitting on every cylinder," Ouellette said.

Bank of Montreal shares closed Tuesday at $82.16, up 35 cents, on the Toronto Stock Exchange.

-Follow @DavidPaddon on Twitter.

Note to readers: This is a corrected story. An earlier version said BMO's profit a year ago was $1.62 billion, which was its adjusted profit in this year's third quarter.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Preview of Small Things at PTE Mainstage

View more like this

Photo Store Gallery

  • A one day old piglet glances up from his morning feeding at Cedar Lane Farm near Altona.    Standup photo Ruth Bonneville Winnipeg Free Press
  • A golfer looks for his ball in a water trap at John Blumberg Golf Course Friday afternoon as geese and goslings run for safety- See Joe Bryksa’s 30 day goose challenge- Day 24– June 15, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

Are you still on the Bombers' and Jets' bandwagons?

View Results

View Related Story

Ads by Google