BMO, National Bank Raise Dividends as Profit Beats Estimates

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Bank of Montreal and National Bank of Canada boosted their dividends after posting fiscal second-quarter profit that beat analysts’ estimates.

Bank of Montreal, Canada’s fourth-largest lender, raised its quarterly payout 2.5 percent to 82 cents a share after reporting profit of C$999 million ($801 million), down 7.2 percent from a year earlier, the Toronto-based company said Wednesday in a statement. The firm attributed most of the decline to a restructuring charge.

National Bank, Canada’s sixth-largest lender, reported a 12 percent increase in net income to C$404 million and raised its dividend 4 percent to 52 cents a share.

The banks are the first to report earnings for the three-month period ended April 30, with results from Bank of Montreal signaling continued weakness in domestic consumer lending. Earnings from Canadian personal and commercial banking rose 1.3 percent from a year earlier, the firm said, the slowest pace of growth in two years.

“BMO incurred a disappointing quarter in its retail operations,” John Aiken, a Barclays Plc analyst, said in a note to to clients. “It had a poor quarter in domestic retail as sequential loan growth was essentially flat, while provisions increased.”

Domestic Lending

Adjusted profit for Canada’s six biggest banks is expected to climb 3.1 percent in the quarter from a year earlier, the slowest since the start of 2012, according to estimates by Robert Sedran, a CIBC World Markets analyst. Weakened domestic lending and low interest rates, combined with the effect of lower oil prices on Canada’s resource-dominated economy, have pressured lenders’ earnings.

Bank of Montreal rose 0.3 percent to C$77.90 at 4 p.m. in Toronto, while National Bank was little changed at C$49.36.

Profit excluding some items was C$1.71 a share, Bank of Montreal said, beating the C$1.66 average estimate of 15 analysts surveyed by Bloomberg. National Bank reported adjusted profit of C$1.15 a share, topping the C$1.12 average estimate of 12 analysts surveyed.

Severance Costs

Bank of Montreal took a C$106 million charge in the quarter with about 85 percent percent tied to severance costs from restructuring across the bank, with the rest due to settling a legacy legal matter. The costs, aimed to “drive operational efficiencies,” will result in annual savings of C$100 million, the bank said.

“I’d characterize it as a flattening of the managerial organization, some streamlining that we’ve undertaken in terms of headcount,” Chief Executive Officer William Downe said in an telephone interview. “It comes on the back on some investments in process and management technology that we think are quite constructive.”

Canadian personal- and commercial-banking profit rose to C$486 million from C$480 a year earlier, its slowest growth since posting a profit decline in the second quarter of 2013. Bank of Montreal executives said in a investor call that earnings and revenue will improve in the second half of 2015.

Earnings at its Chicago-based BMO Harris Bank rose 31 percent to C$206 million from a year earlier, helped in part by the stronger greenback relative to the Canadian currency and lower provisions for bad loans.

Wealth Management

Earnings from wealth management, which includes insurance, rose 24 percent to C$238 million from a year earlier. Profit from capital markets fell 3 percent to C$296 million, as higher revenue was countered by the effects of a less favorable tax rate, the firm said. The capital-markets unit reorganized its sales and trading operations in March, leading to some job cuts.

National Bank’s profit was helped by selling some shares in Montreal-based investment firm Fiera Capital Corp. The lender also benefited from higher capital-markets earnings, including a 31 percent increase in fees from investment banking.

National Bank’s capital-markets unit reported net income of C$160 million, up from C$128 million, while wealth-management earnings rose 49 percent to C$103 million. Personal- and commercial-banking profit increased 5.7 percent to C$166 million.

Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank report results Thursday, followed by Bank of Nova Scotia on Friday.

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