Bank of Montreal (BMO) Down 1.8% Despite Higher Q4 Earnings

Bank of Montreal’s BMO fiscal fourth-quarter fiscal 2019 (ended Oct 31) adjusted net income was C$1.61 billion ($1.22 billion), up 5% year over year.

Results were primarily driven by rise in net interest income and higher loan and deposit balances. Further, capital and profitability ratios remained strong.

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 1.8% on the NYSE following the release of the results.

After considering non-recurring items, net income was C$1.19 billion ($0.9 billion), down 30% from the prior-year quarter.

For fiscal 2019, net income on adjusted basis grew 4% to C$6.25 billion ($4.7 billion). After taking into consideration several non-recurring items, net income was C$5.76 billion ($4.33 billion), up 6%.

Revenues & Expenses Up

Total revenues for the reported quarter (on an adjusted basis), net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), amounted to C$5.75 billion ($4.34 billion), up 5% year over year.

For fiscal 2019, adjusted total revenues, net of CCPB, increased 6% to C$22.77 billion ($17.13 billion).

Net interest income grew 12% year over year to C$3.36 billion ($2.54 billion). Non-interest income came in at C$2.72 billion ($2.05 billion), down 5%.

Adjusted non-interest expenses increased 1% year over year to C$3.46 billion ($2.61 billion).

Adjusted efficiency ratio, net of CCPB, was 60.0%, down from 62.2% as of Oct 31, 2018. Fall in efficiency ratio indicates improvement in profitability.

Provision for credit losses jumped 45% year over year to C$253 million ($191.1 million).

Loans & Deposits Rise

Total assets increased 2% from the prior quarter to C$852.2 billion ($647.2 billion) as of Oct 31, 2019. Further, total net loans and acceptances were up 2% sequentially to C$449.7 ($341.5 billion) and total deposits grew 3% to C$568.1 billion ($431.4 billion).

Strong Profitability & Capital Ratios

Return on equity, as adjusted, came in at 13.5% in the fiscal fourth quarter compared with 14.5% on Oct 31, 2018.

As of Oct 31, 2019, common equity Tier I ratio was 11.4%, up from 11.3%. 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 currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Other Canadian Banks

The Bank of Nova Scotia BNS reported fourth-quarter fiscal 2019 (ended Oct 31) adjusted net income of C$2.4 billion ($1.8 billion), up 2% year over year. Results exclude acquisition- and divestiture-related costs.

Both Canadian Imperial Bank of Commerce CM and The Toronto-Dominion Bank TD will announce results on Dec 5.

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