Bank of Montreal Profit Rises 12%, Boosts Dividend

Bank of Montreal raised its quarterly dividend 2.6 percent to 78 cents a share after posting profit that beat analysts’ estimates.

Net income for the second quarter ended April 30 rose 12 percent to C$1.08 billion ($994 million), or C$1.60 a share, from C$962 million, or C$1.40, a year earlier, Canada’s fourth-biggest bank by assets said today in a statement. Profit excluding some items was C$1.63 a share, the Toronto-based firm said, beating the C$1.52 average estimate of 12 analysts surveyed by Bloomberg.

Bank of Montreal reported a 14 percent jump in domestic personal and commercial banking profit from a year earlier, the biggest increase among the five Canadian lenders that have disclosed quarterly results. Earnings from wealth management and its BMO Capital Markets unit also lifted results.

“With continued low interest rates, the heavily leveraged Canadian consumer is continuing to intoxicate themselves with further debt,” Kash Pashootan, a portfolio manager at First Avenue Advisory of Raymond James Ltd., said in a phone interview. “This has been a big driver of all of the Canadian bank earnings over the last five years, and it continues to be an active engine of where their overall earnings are coming from.”

Revenue Increase

Bank of Montreal rose 0.1 percent to C$76.62 at 4 p.m. in Toronto. The shares have gained 8.2 percent this year, outpacing the 6.1 percent advance of the eight-company Standard & Poor’s/TSX Commercial Banks Index.

“The momentum in the bank in the first quarter and second quarter going into the remainder of the year is very, very good,” Chief Executive Officer William Downe, 62, said in a phone interview. “Things that we have been focused on from an operating point of view and a strategic point of view tied to our customers are paying off in every dimension.”

Revenue increased 3.8 percent to C$4.04 billion, according to the statement. Bank of Montreal set aside C$162 million for bad loans in the quarter, up from C$144 million a year earlier.

Canadian retail banking profit advanced to C$480 million from C$421 million a year earlier, lifted by growth in deposits and loans. Earnings at its U.S. subsidiary, Chicago-based BMO Harris Bank, climbed 2.6 percent to C$155 million as commercial loan growth and lower provisions were muted by net interest margins, according to the statement.

Wealth Management

The wealth-management unit, which includes insurance, posted profit of C$194 million, a 39 percent increase from a year earlier, the bank said.

Bank of Montreal bought F&C Asset Management Plc, which runs the oldest U.K. investment fund, for C$1.29 billion this month. The takeover was the second-largest in the bank’s 196-year history, trailing only the C$4.1 billion acquisition of Marshall & Ilsley Corp. in July 2011.

Earnings from the BMO Capital Markets investment-banking unit rose 17 percent to C$305 million from a year earlier, aided by a favorable tax rate, the company said. Underwriting and advisory fees climbed to C$149 million from C$141 million, while revenue from trading decreased 5.3 percent to C$250 million.

Bank of Montreal is the second Canadian lender to raise its dividend in the quarter. Yesterday, Montreal-based National Bank of Canada boosted its payout 4.3 percent to 48 cents a share after reporting profit that beat estimates. Canadian Imperial Bank of Commerce reports results tomorrow.

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