Bank of Montreal profits at odds with turbulent Canadian economy

The slowing Canadian economy, coinciding with tumbling oil prices, appears to have done little to damage Bank of Montreal’s (TSE:BMO, Mkt cap 45.65B, P/E 11.24, Div/yield 0.82/4.62, EPS 6.32, Shares 642.32M) bottom line – which reported a third-quarter profit which exceeded analysts’ expectations, writes the Wall Street Journal.

The Toronto-based bank’s results show how its net earnings for the three-month period were driven up by higher contributions from personal and commercial banking along with wealth management.

It was largely believed that Canadian banks would bear the effects of five consecutive months of economic contraction due to the collapse in oil prices, but BMO’s net profit of 1.19 billion Canadian dollars ($897 million), or C$1.80 a share, for the three months ended July 31, 2015, suggests otherwise.

Thomson Reuters’ mean estimate was expecting earnings – excluding items – of C$1.73 a share, but BMO posted a significantly higher C$1.86 a share

BMO’s chief executive Bill Downe said Canada’s fourth-largest bank by assets was anticipating an upturn in performance in the second half of the year and the Q3 results are evidence that the optimism is well-founded.

However, analysts have detected a potential weakness in the bank’s US Oil & Gas portfolio, highlighting how BMO’s provision for credit losses –the money the set aside to cover bad loans – grew to C$160 million in the third quarter versus C$130 million a year earlier.

But Downe spoke of the positives instead: “These results were driven by good operating group performance, particularly in our combined Personal and Commercial Banking business which posted adjusted earnings of $792 million, up 13% from last year, and in Wealth Management where adjusted net income was up 10%. Credit provisions continued to be stable.”
The Bank of Montreal or Banque de Montréal in French is commonly called BMO in either of Canada’s official languages. It is also known as BMO Financial Group. BMO is one of the Big Five banks in Canada. It is the fourth-largest bank in Canada by market capitalization and based on assets, and among the ten largest banks in North America.

Bank of Montreal provides a range of retail banking, wealth management, and investment banking products and services. It conducts its business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets. The Bank operates primarily in Canada and the United States. It also has operations in the UK, Europe, the Caribbean and Asia. BMO serves customers through its wealth management businesses: BMO Nesbitt Burns, BMO InvestorLine, BMO Private Banking, BMO Global Asset Management and BMO Insurance. BMO Capital Markets, its investment and corporate banking and trading products division, provides financial products and services to North American and international clients. In the United States, BMO serves customers through BMO Harris Bank.

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