Bank of Montreal (BMO) Down 3.3% Despite Higher Q2 Earnings

Bank of Montreal BMO released second-quarter fiscal 2019 (ended Apr 30) results earlier this week. Adjusted net income was C$1.52 billion ($1.14 billion), up 4% year over year.

Results were primarily driven by rise in net interest income and non-interest income. Moreover, increase in loans and deposits supported the results.

However, higher expenses and weak trading performance were the undermining factors.Also, provisions increased during the quarter. Perhaps these concerns weighed on investors’ sentiments and the stock declined 3.3% on the NYSE since the release of the results.

After considering non-recurring items, net income was C$1.50 billion ($1.13 billion), up 20% 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$5.65 billion ($4.24 billion), up 8% year over year.

Net interest income grew 18% year over year to C$3.13 billion ($2.35 billion). Non-interest income came in at C$3.08 billion ($2.31 billion), increasing 6%.

Adjusted non-interest expenses increased 10% year over year to C$3.56 billion ($2.67 billion).

Efficiency ratio, net of CCPB, was 63.0% at the end of the reported quarter compared with 61.3% as of Apr 30, 2018. Rise in efficiency ratio indicates deterioration in profitability.

Adjusted provision for credit losses increased 10% year over year to C$176 million ($132.1 million).

Loans & Deposits Rise

Total assets increased 3% from the prior quarter to C$830.5 billion ($620.2 billion) as of Apr 30, 2019. Further, total net loans were up 4% sequentially to C$413.2 ($308.6 billion) while total deposits rose 3% to C$548.8 billion ($409.9 billion).

Strong Profitability & Capital Ratios

Return on equity, as adjusted, came in at 13.9% in the reported quarter, down from 14.9% as of Apr 30, 2018 level.

As of Jan 31, 2019, common equity Tier I ratio was 11.3%, on par with Apr 30, 2018 level. Tier I capital ratio was 12.7%compared with 129% in the prior-year quarter.

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 #4 (Sell).

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 strong second-quarter fiscal 2019 (ended Apr 30) results. Adjusted earnings per share were C$2.97, up 1% from the prior-year quarter.

The Toronto-Dominion Bank’s TD adjusted earnings for fiscal second quarter (ended Apr 30) came in at C$1.75 per share, up 8% year over year. Also, adjusted net income rose 7% from the prior-year quarter to C$3.27 billion ($2.45 billion).

The Bank of Nova Scotia’s BNS second-quarter fiscal 2019 (ended Apr 30) adjusted net income for the quarter came in at C$2.3 billion ($1.7 billion), up 4.5% year over year. Results exclude acquisition-related costs.

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