Solid Fourth Quarter for Bank of Montreal, Superior Cost Control Likely to Continue in 2022

Narrow-moat rated Bank of Montreal reported solid fiscal fourth-quarter earnings. Adjusted earnings per share were CAD 3.33, coming in slightly above Factset consensus estimates of CAD 3.24. Results were mostly in line with our expectations, as fees and expenses were relatively in line, while net interest income came in slightly ahead of our projections. The net interest margin was relatively stable sequentially while average loans were up 3%, showing some decent momentum heading into 2022. Fees came under a bit of pressure sequentially, as expected, as underwriting and advisory fees normalized slightly after an exceptionally strong third quarter. Momentum remained strong for wealth- and card-related fees, and we anticipate both of these items will be driving forces of revenue growth in 2022. Adjusted expenses were up 2% sequentially, and year-over-year operating leverage was a robust 2.4%. Momentum was strong across all business segments, with adjusted pre-provision pretax earnings up high-single-digit or double-digit percentages across all segments.