Bank of Montreal Quarterly Profit Rises Even as Loan-Loss Provisions Increase

By Robb M. Stewart

Bank of Montreal earnings rose in the latest quarter despite a rise in loan-loss provisions thanks in part to a rise in Canadian revenue and strength in capital markets operations.

The big Canadian bank reported a rise in net income to 1.87 billion Canadian dollars ($1.38 billion), or C$2.48 a share, for the fiscal third quarter against C$1.57 billion, or $2.12 a share, a year earlier. On an adjusted basis used by the lender to reflect its underlying ongoing business performance, Bank of Montreal reported earnings of C$2.64 a share for the three months to July 31, missing the C$2.76 consensus forecast of analysts polled by FactSet.

Overall revenue for the period increased to C$8.19 billion from C$8.05 billion last year, the bank said.

Net interest income for the period was 2.3% lower at C$4.79 billion, just ahead of the C$4.74 billion expected by analysts, while noninterest revenue rose 8% to C$3.4 billion against the C$3.46 billion anticipated.

Chief Executive Darryl White said a cyclical increase in credit costs pushed loan-loss provisions above the historical average, but the banks saw operating momentum across its businesses.

Revenue from Canadian personal and commercial banking was lifted by higher net interest income with higher margins and balance growth, while in the U.S. revenue was lower thanks to a decrease in non-interest revenue and a higher provision for credit losses. Wealth management income was down on last year, but the bank's capital markets operations saw a sharp increase in income as both global markets and investment and corporate banking was buoyed by higher trading, underwriting and advisory, and corporate banking-related revenue.

The bank, one of Canada's largest lenders, recorded a total provision for credit losses of C$906 million. That compares with the C$705 million put aside against potential losses due to credit risk the quarter before and C$492 million a year earlier. The provision for credit losses on impaired loans was C$828 million, an increase of C$495 million from a year earlier, and the provision for credit losses on performing loans was C$78 million compared with a provision of C$159 million in the prior year.

Bank of Montreal's common equity tier 1 ratio slipped slightly to 13% from 13.1% at the end of the prior quarter. The country's banking regulator late last year opted against requiring lenders to set aside more capital against potential losses, effectively holding the CET1 target for the big banks at no less than 11.5% of risk-weighted assets.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 27, 2024 06:27 ET (10:27 GMT)

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