Shares of Bank of Montreal declined 6.2% on the NYSE in response to lackluster third-quarter fiscal 2024 (ended July 31) results. The adjusted earnings per share of C$2.64 saw a 10.2% year-over-year decrease.

The primary culprits behind these disappointing numbers were a significant increase in credit loss provisions and a dip in net interest income (NII). Not all was gloomy, though – there was a surge in non-interest income, along with growth in loans and deposits, and reduced expenses.

After factoring in non-recurring items, net income reached C$1.87 billion ($1.37 billion), exhibiting a solid 19.2% increase from the previous year.

BMO’s Revenues Rise, Expenses Dip

Total revenues (on an adjusted basis), net of insurance claims, commissions, and changes in policy benefit liabilities (CCPB), were C$8.21 billion ($5.99 billion), slightly higher year over year.

NII saw a 2% decline year over year to C$4.81 billion ($3.51 billion). Conversely, non-interest income stood at C$3.4 billion ($2.48 billion), a 3.4% growth.

Adjusted non-interest expenses took a 5% dip to C$4.7 billion ($3.43 billion).

The adjusted efficiency ratio (net of CCPB) dropped to 57.3% from 60.3% as of July 31, 2023.

The provision for credit losses (adjusted) shot up to C$906 million ($515.5 million), marking an 84.1% surge from the previous year.

Loans & Deposits Rise for Bank of Montreal

As of July 31, 2024, total assets hit C$1.4 trillion ($1 trillion), showing a 1.9% increase from the prior quarter.

Bank of Montreal’s total net loans climbed 2.5% sequentially to C$673.2 billion ($486.9 billion), while total deposits surged 3% to C$965.2 billion ($698.1 billion).

BMO’s Profitability Ratios Decline, Capital Ratios Improve

Bank of Montreal’s return on common equity (as adjusted) in the fiscal third quarter was 10.6%, down from 12.5% on July 31, 2023. Adjusted return on tangible common equity dropped to 14.2% from 17.1% in the year-ago quarter.

By July 31, 2024, the Common Equity Tier-I ratio improved to 13%, up from 12.3% the previous year. The Tier-I capital ratio rose to 14.8% compared to 14% a year ago.

Our Take on BMO

Despite the recent hurdles, Bank of Montreal’s strategic direction aligns with its focus on organic growth and business restructuring, promising potential revenue improvements ahead. However, obstacles in the form of heightened expenses and a turbulent macroeconomic environment loom.

Performance & Earnings Date Other Canadian Banks

Toronto-Dominion Bank reported a third-quarter loss in fiscal 2024, chiefly due to provisions related to U.S. regulatory investigations on anti-money laundering practices, resulting in a net loss of C$181 million ($132.2 million). Conversely, Canadian Imperial Bank of Commerce is expected to unveil its quarterly results on Aug. 29.

Recent revisions slightly lowered the Zacks Consensus Estimate for Canadian Imperial Bank of Commerce’s quarterly earnings.