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BMO was the second major Canadian bank to report earnings on Wednesday.Isabella Falsetti/The Globe and Mail
Bank of Montreal BMO-T reported higher second-quarter profit that topped analysts’ estimates on a boost from its capital markets business and its division in the United States.
BMO earned $2.6-billion, or $3.53 per share, in the three months that ended April 30, up 34 per cent from the same quarter last year.
Adjusted to exclude certain items, the bank said it earned $3.67 per share. That beat the $3.41 per share analysts expected, according to data from Bloomberg.
In March, BMO unveiled its new strategy to revive its U.S. business and boost its return on equity – a closely watched measure of profitability. In 2024, BMO set a goal of improving its ROE to 15 per cent by the end of 2027.
The U.S. division – which makes up 40 per cent of BMO’s earnings – is weighing on the bank’s profitability. BMO set a target to improve the unit’s ROE from 8 per cent to 12 per cent by 2028.
In the second quarter, BMO’s return on equity edged higher to 13 per cent and 8.6 per cent in its U.S. business.
“Our second quarter results continued to demonstrate meaningful progress and momentum against these commitments,” BMO chief executive officer Darryl White said in a statement.
The bank raised its quarterly dividend by 4 cents to $1.71 per share.
BMO is the second major Canadian bank to report earnings for the fiscal second quarter. Earlier, Bank of Nova Scotia BNS-T posted earnings that beat analyst expectations. National Bank of Canada NA-T also reports earnings on Wednesday. Royal Bank of Canada RY-T, Toronto-Dominion Bank TD-T and Canadian Imperial Bank of Commerce CM-T will post earnings on Thursday.
In the quarter, BMO set aside $739-million in provisions for credit losses – the funds banks set aside to cover loans that may default. That was lower than analysts expected and included $734-million against loans that the bank believes may not be repaid, based on models that use economic forecasting to predict future losses.
Revenue rose 10 per cent in the quarter to $9.6-billion, while expenses increased 6 per cent to $5.3-billion.
Profit from Canadian personal and commercial banking was $884-million, rising 15 per cent from a year earlier on higher revenue and lower provisions, partially offset by higher expenses.
Profit from the bank’s U.S. unit rose 32 per cent to $790-million, bolstered by higher revenue and a lower provisions.
Capital markets profit surged 47 per cent to $638-million, driven by higher revenue in global markets and investment and corporate banking, as well as lower provisions.
The wealth management division generated $428-million of profit, up 34 per cent as the bank integrates its takeover of Toronto-based Burgundy Asset Management.
