Decent Fourth-Quarter Results for Bank of Montreal; Net Interest Income Still Growing

Narrow-moat Bank of Montreal reported OK fiscal fourth-quarter results. Adjusted earnings per share of CAD 3.04 represented a year-over-year decline of 9% and a sequential decline of 2%, essentially in line with our estimate of CAD 3.05. BMO had a relatively decent quarter as it was able to increase adjusted revenue sequentially—something not all peers have managed to accomplish—with the primary driver of the sequential decrease in EPS being higher provisioning. Overall, management’s outlook for positive operating leverage, some net interest margin expansion, and slowing expense growth in 2023 all fit within our previous expectations. The adjusted preprovision pretax earnings growth forecast of 7% for the full year also met expectations. As a result, we do not expect to make a material change to our CAD 146/$105 fair value estimate.