TORONTO —Bank of Montreal (BMO) kicked off the second-quarter reporting season for Canada’s big banks by posting a better-than-expected 7% increase in earnings on the back of lower loan-loss provisions and ongoing strength in its Canadian retail bank.
The country’s fourth-largest bank in assets earned C$800 million, or C$1.34 a share, in the three months ended April 30, up from C$745 million, or C$1.26, a year earlier. Excluding certain items, adjusted earnings improved to C$1.35 a share from C$1.28, ahead of the Thomson Reuters mean estimate of C$1.31 a share.
Loan-loss provisions fell to C$145 million, lower than expected, from C$249 million a year earlier, and revenue rose 5.5% to C$3.22 billion, reflecting the Canadian economy’s strength and jobs growth, as business and consumer confidence pick up.
“It’s business as usual for the banks,” said Tommy Nguyen, senior portfolio manager at Montreal-based Palos Management Inc. “They have decent numbers, with lower-than-expected provisions for credit losses, which means the economy is getting better and customers aren’t defaulting. It’s a positive start to earnings season.”
Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce (CM) and National Bank of Canada (NA.T) are due out Thursday followed by Royal Bank of Canada (RY) Friday and Bank of Nova Scotia (BNS) next week.
Bank of Montreal continues to toil in the U.S. Midwest, where it’s increasing its presence through the C$4.1 billion purchase of Wisconsin-based regional lender Marshall & Illsley Corp. (MI).
In the U.S., personal and commercial banking net income fell 2.8% to US$43 million, reflecting an increase in the impact of impaired loans and a higher credit-loss provision under the lender’s expected loss-provisioning methodology. Revenue rose 11%, largely from wider loan and deposit spreads, coupled with deposit balance growth.
Excluding the insurance business, the division earned C$100 million, up 41% from a year ago.
Net income at BMO Capital Markets, the lender’s securities firm, fell 9.4% to C$235 million, primarily from lower trading revenue. The investment dealer participated in 156 new debt and equity issues, raising C$50 billion.
The bank said its net interest income, the spread between interest earned and paid out, increased 12%, while non-interest income rose 4.5%. Trading revenue declined 36%, while underwriting and advisory fees surged 47%, reflecting financing and takeover activity in Canada’s oil and mining industries.
Adjusted earnings exclude after-tax charges of C$8 million to revenue for the hedge of foreign exchange currency risk on its offer to purchase M&I, C$17 million for M&I integration planning, C$9 million for amortization of acquisition-related intangible assets and a C$30 million decrease in the general allowance for credit losses.
Its return on equity, a key measure of profitability, rose to 16.7% from 16.4%.