Bank of Montreal (BMO) Down 3.8% Despite Q3 Earnings Rise

Bank of Montreal BMO released third-quarter fiscal 2019 (ended Jul 31) results earlier this week. Adjusted net income was C$1.58 billion ($1.19 billion), up 1% year over year.

Results were primarily driven by rise in net interest income and non-interest income. Moreover, higher loans and deposits were tailwinds.

However, rise in expenses and weak trading performance were the undermining factors. Also, provisions increased substantially during the quarter. Perhaps these concerns weighed on investors’ sentiments and the stock declined 3.8% on the NYSE since the release of the results.

After considering non-recurring items, net income was C$1.56 billion ($1.17 billion), up 1% from the prior-year quarter.

Revenues & Expenses Up

Total revenues (on an adjusted basis), net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), amounted to C$5.78 billion ($4.35 billion), up 5% year over year.

Net interest income grew 12% year over year to C$3.22 billion ($2.42 billion). Non-interest income came in at C$3.45 billion ($2.60 billion), increasing 18%.

Adjusted non-interest expenses increased 4% year over year to C$3.46 billion ($2.60 billion).

Efficiency ratio, net of CCPB, was 59.9%, down from 60.1% as of Jul 31, 2018. Fall in efficiency ratio indicates improvement in profitability.

Provision for credit losses jumped 65% year over year to C$306 million ($230.4 million).

Loans & Deposits Rise

Total assets increased 1% from the prior quarter to C$839.2 billion ($636 billion) as of Jul 31, 2019. Further, total net loans were up 1% sequentially to C$417.8 ($316.6 billion) and total deposits rose nearly 1% to C$553.4 billion ($419.4 billion).

Strong Profitability & Capital Ratios

Return on equity, as adjusted, came in at 13.5% in the reported quarter, down from 15.0% from Jul 31, 2018 level.

As of Jul 31, 2019, common equity Tier I ratio was 11.4%, on par with Jul 31, 2018 level. Tier I capital ratio was 13.0% compared with 12.9% a year ago.

Our Viewpoint

Bank of Montreal’s focus and efforts remain aligned with its organic and inorganic growth strategies, and are expected to boost revenues, going forward. Nevertheless, mounting expenses continue to strain the company’s profitability.

Bank Of Montreal Price, Consensus and EPS Surprise

 

Bank Of Montreal Price, Consensus and EPS Surprise

Bank Of Montreal price-consensus-eps-surprise-chart | Bank Of Montreal Quote

Bank of Montreal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Canadian Banks

Canadian Imperial Bank of Commerce CM reported decent third-quarter fiscal 2019 (ended Jul 31) results. Adjusted earnings per share were C$3.10, up 1% from the prior-year quarter.

Royal Bank of Canada’s RY third-quarter fiscal 2019 (ended Jul 31, 2019) net income was C$3.3 billion ($2.5 billion), up 5% from the prior-year quarter.

The Bank of Nova Scotia BNS reported third-quarter fiscal 2019 (ended Jul 31) adjusted net income of C$2.5 billion ($1.9 billion), up 9% year over year. Results exclude acquisition- and divestiture-related costs.

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