Analyst Note| Eric Compton, CFA |
Narrow-moat-rated Bank of Montreal reported solid fiscal second-quarter earnings, with EPS of CAD 3.13 representing solid year-over-year growth compared with adjusted EPS of CAD 1.04 last year. Provisioning was the major swing factor, coming in at just CAD 60 million compared with more than CAD 1 billion for the second quarter of last year. This aligns with our view that the Canadian banks would be fine and that better results would be returning in 2021, led by the return of fee growth and much lower provisioning, which would drive solid earnings growth. Even so, we still expect that type of growth to subside in 2022. With Bank of Montreal's credit costs coming in better than our expectations, and with noninterest income also trending better than we had forecast, we have increased our fair value estimate to CAD 115/$94 per share from CAD 109/$86.