The Bank of Montreal building in Ottawa. The bank booked $2.49-billion of profit in its first quarter and is targeting 15% return-on-equity by the end of 2027.Sean Kilpatrick/The Canadian Press
Bank of Montreal BMO-T expects the U.S. economy to rebound while Canada continues to grapple with higher risks as uncertainty over tariffs puts pressure on consumers and businesses.
The Canadian bank reported higher first-quarter profit that beat analysts’ estimates, bolstered by the U.S. division as the lender attempts to improve its profitability. The U.S. is a major market for BMO – making up 40 per cent of its earnings this quarter – and is a key factor in its ambitions to rejig its business and boost its share price.
“Trade issues between Canada and the U.S. remain unresolved, and the USMCA renegotiation presents significant uncertainty. Given these factors, we continue to anticipate a softer economic environment in Canada,” BMO chief risk officer Piyush Agrawal said during a conference call.
“In the U.S., expansionary fiscal policies, supportive monetary policy and AI investments should support growth as we grow through the year. These dynamics are playing out for our customers and are reflected in our portfolios, with gradual improvement in the U.S. geography and elevated risks in Canada.”
BMO has been revamping its U.S. operations and committed to improving the bank’s profitability, targeting 15 per cent return-on-equity by the end of 2027. In the first quarter, the lender posted ROE of 12.4 per cent, up from 9.8 per cent when it set the goal at the end of 2024.
The Canadian and capital markets businesses contributed the most to BMO’s improved profitability, with the U.S. edging slightly lower compared with the previous quarter. When BMO set its target, it said that the U.S. division would be the biggest contributor to boosting its ROE.
BMO chief executive officer Darryl White said the lender is still on track to hit its goal according to its plan. The bank expects to complete its efforts to make its U.S. operations more efficient by the second quarter this year.
“The U.S. was always going to come in a little bit later than the improvement in Canada,” Mr. White said in response to an analyst question.
“We are up 150 basis points year-over-year in the U.S. ROE, so there’s some nice contribution to the total bank already, with a lot more to go.” (There are 100 basis points in a percentage point.)
National Bank profit jumps as CWB takeover drives higher revenue, costs
Bank of Montreal is the second major bank to report earnings for the fiscal first quarter. National Bank of Canada NA-T also released results on Wednesday, topping analysts’ estimates. On Tuesday, Bank of Nova Scotia BNS-T posted profit that beat analyst expectations. Royal Bank of Canada RY-T, Toronto-Dominion Bank TD-T and Canadian Imperial Bank of Commerce CM-T will close out the week on Thursday.
BMO earned $2.49-billion or $3.39 a share in the three months that ended Jan. 31. That compared with $2.14-billion or $2.83 in the same quarter last year.
Adjusted to exclude certain items, the bank said it earned $3.48 a share. That topped the $3.21 analysts expected, according data from S&P Capital IQ.
In the quarter, BMO set aside $746-million in provisions for credit losses – the funds banks set aside to cover loans that may default. In the same quarter last year, BMO reserved $1.01-billion in provisions.
Total revenue rose 6 per cent in the quarter to $9.82-billion while expenses increased 6 per cent to $5.75-billion, which the bank said was in part driven by higher performance-based compensation and severance costs.
Profit from Canadian personal and commercial banking was $948-million, up 8 per cent from a year earlier, on higher revenue and lower provision for credit losses. But loan balances were up a slim 2 per cent year over year.
Profit from the bank’s U.S. arm rose 17 per cent to $742-million, driven by lower provision for credit losses.
The wealth management division generated $352-million of profit, up 7 per cent as revenue increased, spurred by stronger global markets.
Capital markets profit climbed 11 per cent to $657-million, driven by higher equities trading and advisory fee revenue.