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Bank of Montreal BMO

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Fee Growth, Low Provisioning Drive Solid Earnings for Bank of Montreal in the Second Quarter

Eric Compton, CFA Senior Equity Analyst

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.

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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.

Contact
129 rue Saint-Jacques
Montreal, QC, H2Y 1L6, Canada
T +1 416 867-7366
Sector Financial Services
Industry Banks - Diversified
Most Recent Earnings Apr 30, 2021
Fiscal Year End Oct 31, 2021
Stock Type —
Employees 43,360

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