Bank of Montreal Net Income Misses Estimates on Cost-Cuts

Bank of Montreal, Canada’s fourth-biggest lender, posted second-quarter profit that missed analysts’ expectations after taking charges tied to cost-cutting and its takeover of Wisconsin lender Marshall & Ilsley Corp.

Net income for the period ended April 30 dropped 5.3 percent to C$975 million ($940 million), or C$1.42 a share, from C$1.03 billion, or C$1.51, a year earlier, the Toronto-based company said today in a statement. Revenue declined 0.4 percent to C$3.94 billion.

Earnings fell after Bank of Montreal recorded C$50 million of costs tied to its integration of M&I, which it bought in July 2011 for C$4.1 billion, and an C$82 million restructuring charge tied to cost-cutting. The bank also faced lower earnings from Canadian lending and insurance.

“We view the results as a noisy mess,” Robert Sedran, an analyst with CIBC World Markets, said in a note. “The Canadian personal and commercial-banking segment’s earnings and revenue growth trailed peers so far this quarter.”

Adjusted earnings, which exclude some items, were C$1.46 a share, the company said, missing the C$1.48 average estimate of 15 analysts surveyed by Bloomberg. Bank of Montreal joins Toronto-Dominion Bank and Bank of Nova Scotia (BNS) in posting results that missed estimates.

Shares Decline

Bank of Montreal fell 2 percent to C$62.42 at 9:48 a.m. in Toronto, its biggest intraday drop since June 1, 2012. The shares have risen 2.5 percent this year, the third-best performer on the eight-company Standard & Poor’s/TSX Commercial Banks Index.

“Management’s focus on organizational efficiency is a multiyear commitment,” Chief Executive Officer William Downe, 61, said in the statement. “Our first priority is sustainable revenue growth -- and the disciplined management of expense is an ongoing dimension of profitable growth.”

Canadian consumer-banking profit fell 0.7 percent to C$430 million from a year earlier on lower net interest margins and higher expenses, the lender said. Profit from its Chicago-based BMO Harris Bank consumer-lending unit rose 9.2 percent to C$155 million, the company said.

Slowing Lending

“The slowing in Canadian lending is something we’ve expected,” John Kinsey, who helps manage about C$1 billion at Caldwell Securities Ltd. in Toronto, said in an interview. “For some time all of the banks have said it’s going to be tough to grow in Canada.”

Earnings from BMO Capital Markets, the lender’s investment-banking unit, climbed 18 percent to C$275 million. Profit from the private-client group, which includes insurance and mutual funds, fell 4.1 percent to C$141 million, the bank said.

The lender set aside C$145 million for bad loans, down from C$195 million a year earlier.

Bank of Montreal is the fourth Canadian lender to report second-quarter results. Royal Bank of Canada (RY), the country’s largest lender, and Canadian Imperial Bank of Commerce, the fifth largest, release earnings tomorrow.

(Bank of Montreal (BMO) will hold a conference call to discuss quarterly results at 2 p.m. Toronto time at +1-888-789-0089 or at www.bmo.com/investorrelations)

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

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

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