Bank of Montreal, Canada’s fourth-largest lender by assets, posted first-quarter profit that beat analysts’ estimates on gains in domestic banking and lower loan-loss provisions.
Net income for the period ended Jan. 31 climbed 2.4 percent to C$1.06 billion ($957 million), or C$1.58 a share, from C$1.04 billion, or C$1.51, a year earlier, the Toronto-based lender said today in a statement. Revenue rose 2.2 percent to C$4.12 billion.
Bank of Montreal reported an 8.3 percent increase in Canadian personal and commercial banking, while earnings from wealth management also increased, helping counter lower profit at its investment-banking unit and U.S. retail bank. The lender set aside C$99 million for bad loans, down from C$178 million a year earlier.
“I’m kind of surprised by Canadian personal and commercial banking,” said John Kinsey, a fund manager at Caldwell Securities Ltd. in Toronto, who helps manage about C$1 billion including bank stocks. “You keep hearing about these headwinds of slowing lending and mortgages, so it’s surprising.”
Profit excluding some items was C$1.61 a share, according to the statement, beating the C$1.52 average estimate of nine analysts surveyed by Bloomberg.
Bank of Montreal gained 6 cents to C$72.63 at 4 p.m. in Toronto. The shares have climbed 15 percent in the past year, outpacing the 13 percent advance of the six-company Standard & Poor’s/TSX Commercial Banks Index.
Results from Canadian personal and commercial banking for the last three quarters demonstrate the lender’s “strong core operating performance,” Peter Routledge, an analyst with National Bank Financial, said in a note.
“That BMO achieved this in a period of slowing loan growth and tight margins suggests that the underlying operating strength of this business has improved relative to peers,” Routledge wrote.
Bank of Montreal is the second Canadian lender to beat analysts’ estimates for the first quarter. National Bank of Canada yesterday reported an 8.6 percent rise in profit led by gains in wealth management and investment banking.
“We feel very good about the year and this quarter was a great start,” Bank of Montreal Chief Executive Officer William Downe, 61, said in a telephone interview.
The bank’s Canadian consumer-lending unit posted profit of C$484 million in the quarter, up from C$447 million a year earlier, on higher loans and deposits, according to the statement.
While earnings from its Chicago-based BMO Harris Bank slipped 7.3 percent to C$166 million from a year earlier, the results reversed three straight quarters of dwindling profit. Downe said the period marked “a return to a more normal level” and the U.S. banking business should benefit this year with an improving economy in Midwest states.
“The thing about the Midwest economy is that it’s shown a nice recovery since the recession,” Downe said. “Productivity is up about 3 percent a year over the last decade in the Midwest, and that really bodes well for the manufacturing economy. And we’re in the right place for that.”
Wealth-management profit rose 8 percent to C$175 million as assets under management increased, the bank said. Earnings from the BMO Capital Markets investment-banking unit fell 7 percent to C$277 million, as trading revenue declined and underwriting and advisory fees slipped 14 percent to C$191 million.
Royal Bank of Canada, the country’s second-biggest bank, reports results tomorrow, followed by Toronto-Dominion, the largest lender, and Canadian Imperial Bank of Commerce, the fifth biggest, on Feb. 27. Bank of Nova Scotia, the No. 3 bank, reports March 4.