Earnings come in close to expectations
The Bank of Montreal is hiking its dividend by more than four per cent after posting higher second-quarter earnings fuelled in part by North American loan growth.
The bank reported adjusted earnings of $3.23 a share in the three months ending April 30, up from $3.13 a share last year. Bloomberg analysts had been expecting a profit of $3.22 a share. The dividend hike of six cents brought the quarterly payout to $1.39.
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The bank’s Canadian personal and commercial loan unit led the results with adjusted net income of $941 million, up 21 per cent from the year earlier. The unit saw an 11 per cent boost in revenue from higher net interest income and non-interest revenue.
BMO also saw growth in its U.S. loan business, which reported adjusted net income of $589 million, an eight per cent year-over-year jump.
“We continued to deliver good financial performance this quarter driven by broad-based customer loan growth in our North American (personal and commercial loans) and wealth businesses, and solid results in our market-sensitive businesses,” BMO Financial Group chief executive officer Darryl White said during a Wednesday morning conference call.
White also provided an update on the bank’s US$16.3 billion Bank of the West transaction, which was announced late last year. That included confirming that Bank of the West’s systems will largely migrate over to BMO, completing a common equity financing of $3.1 billion and confirming expense synergy opportunities and expectations.
Even though bank mergers are facing more scrutiny under the Biden administration, White said that so far the process has unfolded as expected and that he does not anticipate the transaction, which is slated to close by the end of the 2022 calendar year, will be delayed.
“We continued to strengthen our capital including executing the planned equity issuance, and are well-positioned to support both client-driven balance sheet growth and the Bank of the West acquisition. (Return on equity) remains our key area of focus guiding our strategic investment decisions as we manage the bank and our businesses for sustained profitable growth,” White said.
John Aiken, head of research and senior analyst at Barclays, told clients BMO’s earnings were in line with expectations and continue to show growth — particularly in the commercial segment. However, Aiken noted that the bank’s margin expansion was not as robust after an “impressive run” and its credit performance relative to other banks could raise some questions about its valuation.
“While relative performance will be dependent on what its peers report through the remainder of the week, we believe there may be some pressure on its valuation, although this will likely be offset by the higher-than-expected dividend increase,” Aiken wrote.
BMO chief risk officer Patrick Cronin said the team was pleased with the bank’s risk performance so far this year, but is making adjustments to address any economic uncertainty.
“We did recognize the potential for economic headwinds by increasing the weighting of our adverse scenario as well as reducing parts of our economic outlook in our base case scenario,” said Cronin during the conference call.
BMO’s shares were up half a per cent to $133.78 at noon in Toronto.
• Email: shughes@postmedia.com | Twitter: StephHughes95
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