BMO, National Bank Climb as First-Quarter Profit Beats Estimates

  • Bank of Montreal's GE unit acquisition bolsters U.S. earnings
  • Both Canadian lenders had increased impaired energy loans

BMO, National Bank Climb as 1Q Profit Beats Estimates

Bank of Montreal and National Bank of Canada rose in Toronto trading after posting fiscal first-quarter profit that beat analysts’ estimates, even as soured energy loans continued to mount.

Bank of Montreal, Canada’s fourth-largest lender by assets, rose 1.8 percent to C$75.22 at 9:48 a.m. in Toronto trading, the best performance in the Standard & Poor’s/TSX Composite Banks Index, and National Bank advanced 1.1 percent to C$38.73.

Bank of Montreal said profit for the period ended Jan. 31 rose 6.8 percent to C$1.07 million ($778 million), or C$1.58 a share, from C$1 billion, or C$1.46 a year earlier after contributions from its purchase of General Electric Co.’s transportation-finance business bolstered U.S. earnings. Profit excluding some items was C$1.75 a share, topping the C$1.72 average estimate of 15 analysts surveyed by Bloomberg.

‘Favorable Reaction’

“BMO appears to be immediately benefiting from the acquisition of GE’s transportation-leasing business," John Aiken, a Barclays Plc analyst, said Tuesday in a note to clients. “We would expect a favorable reaction to earnings today, despite some misgivings about energy reserving."

National Bank, the sixth-largest lender, said profit fell 37 percent to C$261 million, or 67 cents a share, after writing off C$164 million on its investment in Maple Financial Group Inc., a firm seized by regulators in Germany and Canada this month amid a tax probe. The Montreal-based bank said adjusted per-share earnings were C$1.17 a share, compared with the C$1.15 average estimate of 13 analysts.

National is “in the crosshairs” for the quality of its corporate oil-and-gas loan book, Meny Grauman, a Cormark Securities analyst, said in a note.

‘Smoking Gun’

“Although results in that portfolio certainly deteriorated, it was still not the smoking gun that many people continue to look for," Grauman said. “The problem is that with oil prices still in the doldrums and a fresh round of borrowing base reviews looming, the outlook remains very challenging."

Bank of Montreal and National Bank are the first two Canadian lenders to report quarterly results. The nation’s six largest lenders are expected to increase per-share adjusted earnings by an average of 1 percent from a year earlier, Mario Mendonca, a TD Securities analyst, said in a Feb. 9 note.

Royal Bank of Canada reports quarterly results Wednesday, followed by Toronto-Dominion Bank and Canadian Imperial Bank of Commerce on Thursday. Bank of Nova Scotia reports March 1.

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