BMO Lifts Payout as Profit Falls on Restructuring, Writedown

  • Impaired energy loans more than doubled from first quarter
  • Bank reduced workforce in quarter by more than 600 employees

Bank of Montreal said second-quarter fiscal profit fell 2.6 percent as soured oil-and-gas loans soared and the firm took a restructuring charge. The lender raised its dividend 2.4 percent to 86 cents a share.

Net income for the period ended April 30 slid to C$973 million ($742 million), or C$1.45 a share, from C$999 million, or C$1.49, a year earlier, the Toronto-based bank said Wednesday in a statement. Profit excluding some items was C$1.73 a share, missing by one cent the average estimate of 14 analysts surveyed by Bloomberg. Revenue rose 13 percent to C$5.1 billion from a year earlier.

“Overall I view it as a positive, even if they missed by a penny," said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. in Toronto. “Expectations for banks’ profits are pretty low and people are focusing on oil and gas."

Profit was hurt by a C$132 million restructuring charge tied to technology costs and operational efficiencies, as well as a writedown on an equity investment in wealth management that cut earnings by 12 cents a share. Still, provisions and impaired energy loans were better than some analysts expected, and the bank saw profit growth in personal and commercial banking in Canada and the U.S.

The lender’s shares gained 1.4 percent to close at C$84.27 in Toronto, the most since March 1. The stock has climbed 7.9 percent this year.

Bank of Montreal, the first Canadian lender to report second-quarter results, set aside C$201 million for loan-loss provisions, up 25 percent from a year earlier as energy borrowers struggled to repay debts. Impaired energy loans more than doubled to C$410 million from C$162 million in the first quarter, the filings show. The company had C$7.26 billion of oil-and-gas loans as of April 30, compared with C$7.38 billion at the end of January and C$6.6 billion a year earlier.

For a preview of second-quarter Canadian bank results, click here

Canadian personal and commercial banking profit increased 8.2 percent to C$525 million with growth in loans and deposits and lower provisions. Earnings from U.S. banking, including its Chicago-based BMO Harris Bank, rose 29 percent to C$267 million, helped partly by contributions from the transportation finance business it bought from General Electric Co. in December. The unit’s profit in U.S. currency climbed 23 percent to $206 million.

‘Key Focus’

“Certainly credit continues to amaze, with the real surprise coming from the resiliency of Canadian credit conditions beyond the oil patch,” Meny Grauman, a Cormark Securities Inc. analyst, said in a note to clients.

BMO Capital Markets profit fell 1.7 percent to C$291 million, as higher provisions for corporate loans eroded gains in trading revenue, according to the bank. Wealth-management earnings, which include insurance, declined 44 percent to C$134 million after taking a C$79 million writedown on an equity investment, the firm said.

Bank of Montreal, the country’s fourth-largest lender by assets, had 46,166 full-time employees as of April 30, 616 fewer workers than three months earlier, according to disclosures. The bank is cutting 4 percent of its workforce -- or about 1,847 jobs -- as it shifts toward digital banking, Chief Financial Officer Thomas Flynn said. Some of cuts last quarter are included in the 4 percent, he said.

Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce report results Thursday, followed by Bank of Nova Scotia on May 31 and National Bank of Canada on June 1.

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