Photographer: Ben Nelms/Bloomberg

Bank of Montreal Falls as Profit From U.S. Unit Disappoints

  • Canadian lender’s revenue slides 3.1% in fiscal third quarter
  • Net income climbs 11%, exceeding analysts’ expectations

Bank of Montreal fell the most in three months after posting profit from its U.S. banking operations that was little changed from a year earlier.

The bank’s shares slid 2.4 percent to C$90.18 at 11:33 a.m. in Toronto, the most intraday since May 24 and the worst performance in the eight-company S&P/TSX Commercial Banks Index.

Higher profits from Canadian banking and wealth management in the fiscal third quarter were offset by a 7.9 percent drop in its capital markets business. Earnings from its U.S. operations, including Chicago-based lender BMO Harris Bank, were flat from a year earlier at C$278 million ($222 million), the company said Tuesday in a statement.

“U.S. banking results were disappointing," said Steve Belisle, a portfolio manager with Manulife Asset Management in Montreal, who oversees about C$4 billion including bank stocks. "They’re facing a slowdown in commercial and industrial lending in the Midwest and a runoff of its indirect auto book."

The U.S. banking business had a 1 percent improvement in loan balances from the second quarter, though that total was down 1.3 percent from a year earlier when measured in U.S. dollars, according to a financial statement. Deposits were little changed from the second quarter and fell 2.6 percent from a year earlier adjusted for currency.

High Expectations

“Expectations were high coming off of the U.S. election,” Chief Financial Officer Tom Flynn said in a phone interview. “And it looks like, given some uncertainty about the timing of the implementation of some of the policies of the new administration, there’s been what feels like a spreading out of some investment decisions by companies."

That’s had “a moderating impact" on U.S. bank loan growth, Flynn said, adding that he expects business to pick up on improved customer confidence and expectations of 2 percent U.S. economic growth through next year.

Firmwide net income climbed 11 percent to C$1.39 billion, or C$2.05 a share, from C$1.25 billion, or C$1.66, a year earlier. Adjusted earnings were C$2.03 a share, beating the C$2.01 average estimate of 14 analysts surveyed by Bloomberg. Revenue fell 3.1 percent to C$5.46 billion, while expenses rose 6 percent to C$3.28 billion.

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