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BMO profit beats estimates — but analysts see shortcomings in core Canadian division

CANADA NEWSWIRE PHOTO/BMO Financial Group

Bank of Montreal\’s latest earnings results were high enough to beat estimates, support a dividend increase, and give investors a break from fretting about the impact weaker oil prices may be having on Canada\’s biggest banks, however they weren\’t perfect.

BMO\’s bottom line got a big increase in the second quarter from its U.S. personal and commercial operations and also benefited from strong profits both in its capital markets and wealth management divisions.

Bank of Montreal hikes dividend as adjusted profit tops $1.1 billion and beats Street

Bank of Montreal reported higher-than-expected second-quarter earnings on Wednesday and increased it quarterly dividend to 82 cents per share from 80 cents.

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Its core Canadian P&C segment, however, is constantly on the struggle and stays a disappointment to analysts after a quarter of slower loan growth and slightly higher provisions for credit losses.

\”The results arrived ahead of estimates and also the dividend moved higher,\” said Robert Sedran, an analyst at CIBC World Markets, inside a note to clients. \”All good? Well, not if one is inclined to become picky.\”

The country\’s fourth-largest bank by market capitalization said Wednesday that net gain in the quarter ended April 30 was $999-million, or $1.49 per share, representing a 7% decline from a year ago.

The decline was largely related to a $106-million restructuring charge that is expected to save the financial institution $100-million on a run rate basis and includes job cuts across the bank, many of which already happened.

The bank\’s adjusted earnings, as a result, were 5% higher on the year-over-year basis at $1.15 billion, or $1.71 per share, which topped the average analyst estimate of $1.66 per share.

The bank also boosted its dividend 2 cents to 82 cents per share, and reported 3 million shares were repurchased in the quarter bringing the year-to-date buyback total to 6 million.

Total provisions for credit losses, meanwhile, were $161 million when compared with $162 million within the second quarter this past year despite the rise in Canada.

\”BMO delivered good results in the second quarter,\” said Bill Downe, the bank\’s chief executive on a conference call.? \”Our operating groups performed well.\”

BMO said adjusted net gain for its Canadian personal & commercial division increased 1 per cent to $487 million.

The increase was driven with a 4 per cent increase in revenue but weighed down by weaker quarter-on-quarter loan growth that was driven partly by seasonality, said Cam Fowler, BMO\’s group head of Canadian personal and commercial banking, but additionally by management\’s decision to sign up less in certain types of auto lending.

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