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Bank of Montreal BMO

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Morningstar’s Analysis

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Excellent Third-Quarter Results for Bank of Montreal; Raising Our FVE to CAD 130/USD 103

Eric Compton, CFA Senior Equity Analyst

Analyst Note

| Eric Compton, CFA |

Narrow-moat rated Bank of Montreal reported excellent fiscal third-quarter earnings, with EPS of CAD 3.44 representing solid year-over-year growth compared with adjusted EPS of CAD 1.85 last year and higher than last quarter’s EPS of CAD 3.13. Provisioning continues to be a major driver of improved earnings, coming in at a net benefit of CAD 70 million, a multi-year low and materially lower than the CAD 1.1 billion charge the bank took in the third quarter of 2020. This aligns with our view that the Canadian banks will be fine from a credit perspective and that better results should be the norm going forward. We still expect the return of fee growth and much lower provisions to drive solid earnings growth for the rest of the year, while the lack of a boost from lower provisioning will make for tougher comps for the Canadian banks in 2022. Bank of Montreal's fees continue to come in better than we were expecting. After decreasing our credit cost projections for 2021, decreasing certain expense line items, increasing some noninterest income items, and making some additional improvements to our balance sheet growth and net interest margin outlook, we have increased our fair value estimate to CAD 130/$103 per share from CAD 115/$94.

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Company Profile

Business Description

Bank of Montreal is a diversified financial-services provider based in North America, operating four business segments: Canadian personal and commercial banking, U.S. P&C banking, wealth management, and capital markets. The bank's operations are primarily in Canada, with a material portion also in the U.S.

129 rue Saint-Jacques
Montreal, QC, H2Y 1L6, Canada
T +1 416 867-7366
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Jul 31, 2021
Fiscal Year End Oct 31, 2021
Stock Type
Employees 43,360