Bank of Montreal Profit Tops Estimates on Loan Losses, Trading Revenue

Bank of Montreal, Canada’s fourth- biggest bank by assets, reported profit that beat analysts’ estimates on better-than-expected capital markets fees and declining loan losses.

Net income for the quarter ended Oct. 31 climbed 14 percent to C$739 million ($737 million), or C$1.24 a share, from C$647 million, or C$1.11, a year earlier, the Toronto-based bank said today in a statement. Revenue rose 8 percent to C$3.23 billion.

Bank of Montreal benefited from a 5.5 percent rise in Canadian consumer lending and a decline in loan-loss provisions. The bank set aside C$253 million for bad loans, down 34 percent from a year earlier, following the trend reported by Canada’s other lenders.

“The banks just keep plugging along,” said John Kinsey, who helps manage C$1 billion at Caldwell Securities Ltd. in Toronto. “The first half was good, the second half was sluggish, but on balance they all did pretty well.”

Bank of Montreal said adjusted earnings were C$1.26 a share, beating the average estimate of C$1.22 a share from 13 analysts surveyed by Bloomberg.

“Given what we have seen from its peers, we would be surprised if BMO’s earnings did not receive a very warm reception from the market,” John Aiken, a Barclays Capital analyst, wrote in a note.

Bank of Montreal rose C$1.87, or 3.1 percent, to C$61.87 at 4 p.m. close of trading on the Toronto Stock Exchange, the biggest increase since May 27. The stock has risen 11 percent this year, outperforming the 5.8 percent increase of the 10- company S&P/TSX Banks Index.

Streak Unmatched

Bank of Montreal has reported six consecutive quarters of profit growth, a streak unmatched by Canada’s five other large banks. The bank kept its dividend unchanged at 70 cents a share.

“Capital markets and private client had stand-out quarters,” Aiken said. “Although retail banking on both sides of the border held in, they did both report modest sequential declines in earnings.”

Canadian consumer banking profit rose to C$420 million from C$398 million a year earlier on revenue increases in personal and commercial loans and credit cards. Profit from its Chicago- based Harris consumer bank fell 24 percent to C$38 million on costs for its Amcore Bank purchase.

The BMO Capital Markets investment-banking unit earned C$216 million, down 17 percent from a year earlier on higher provisions and costs from expanding.

Trading Fees

The bank’s fees from trading and underwriting topped expectations from Morgan Stanley analyst Cheryl Pate. Trading revenue was C$276 million, ahead of her estimate of C$254 million.

Profit from the private-client group, which includes brokerage, insurance, investing services and mutual funds, rose 25 percent to C$131 million.

Bank of Montreal increased its medium-term financial performance objective to 12 percent annual growth in earnings per share, up from 10 percent. The bank said it has a Tier 1 capital ratio of 13.45 percent, and its levels already exceed 2019 requirements drawn up by the Basel Committee on Banking Supervision.

Chief Executive Officer William Downe said during a conference call with analysts that he expects consolidation among U.S. banks in 2011, and that Bank of Montreal may consider more small takeovers.

‘Tuck-in Acquisitions’

“Over the last two or three years we’ve made some nice tuck-in acquisitions that have been complementary to the business, and I would foresee them continuing,” Downe, 58, said.

Bank of Montreal is the last of the country’s biggest banks to report fourth-quarter results. Last week, Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce reported lower net income as costs rose and trading revenue fell. Bank of Nova Scotia and National Bank of Canada posted higher profits, and National raised its dividend.

Bank of Montreal, National, Scotiabank and CIBC beat analysts’ profit estimates.

Canadian Western Bank today posted its 90th straight profitable quarter. The Edmonton, Alberta-based lender said net income rose 29 percent to C$39.1 million, or 48 cents a share. The bank raised its quarterly dividend to 13 cents a share from 11 cents.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net or David Scheer at dscheer@bloomberg.net

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