Bank of Montreal US results a bright spot in noisy Q1

Bloomberg

Bank of Montreal has made efforts over the years to expand in US banking. It’s a good thing it did. The Canadian lender’s US business was one of the few bright spots in its fiscal first quarter, deliv-
ering higher earnings growth as divisions including capital markets and wealth management saw profits fall.
Earnings from US personal and commercial banking, which includes Chicago-based BMO Harris Bank, rose 24 percent to C$310 million ($244 million) from a year earlier, helping the firm post profit that beat analysts’ estimates.
“The constructive economic environment, particularly in the US, plays to the strengths of our business mix, with another quarter of increased contribution from our US segment,” Chief Executive Officer Darryl White, 46, who took over the top job in November, said in a statement.
White came into the CEO role with a goal of getting a greater share of earnings from the US The Toronto-based bank has expanded in the US Midwest since its 1984 acquisition of Harris Bank, with more recent growth via takeovers including the 2011 purchase of Milwaukee-based Marshall & Ilsley Corp. that doubled US deposits and branches. US retail banking accounted for 32 percent of the bank’s overall profit for the quarter ended January 31.

‘LOW-QUALITY BEAT’
“Compared to peers, we would characterize the result as a low-quality beat,” Canaccord Genuity Group Inc. analyst Scott Chan said in a note. “BMO’s results are arguably the weakest among peers thus far.” Bank of Montreal shares fell 0.8 percent to C$98.74 at 11:32 a.m. in Toronto, the most since February 9. The stock has slid 1.8
percent this year.
Profit from Canadian banking, the lender’s biggest division, fell 13 percent to C$647 million from a year earlier, when the firm had a C$168 million gain from selling a US payments business. Excluding that gain and other one-time items, profit rose 9 percent, Chief Financial Officer Tom Flynn said in a phone interview.
“Canadian banking is doing well,” Flynn said, citing growth in commercial lending and deposits. “Revenue growth was 6 percent — that’s the best number that we’ve had in the last five quarters.”
Flynn sees “a little bit of moderation” in Canadian mortgage lending given tougher eligibility rules imposed in January. The changes may reduce mortgage originations by 5 percent to 10 percent, he said, though it’s “early days” in determining the impact.