A Bank of Montreal branch in Toronto's financial district. BMO and National Bank of Canada both reported higher first-quarter profit Wednesday that beat analysts’ estimates.Aaron Vincent Elkaim/The Canadian Press
Bank of Montreal BMO-T and National Bank of Canada NA-T expect the Canadian economy to face further challenges, with uncertainty over tariffs putting pressure on consumers and businesses, even as the U.S. continues to rebound.
The Canadian banks both reported higher first-quarter profit Wednesday that beat analysts’ estimates. BMO’s profit was bolstered by the U.S. division, a major market for the bank – making up 40 per cent of its earnings this quarter – and a key factor in ambitions to rejig its business and bolster 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, referring to the United States-Mexico-Canada Agreement on trade.
“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.”
National Bank chief executive officer Laurent Ferreira said the geopolitical environment continues to weigh on the economy, and trade tensions have hindered business investment.
“Our economy must take a different strategic direction,” Mr. Ferreira said during a conference call. “We are encouraged by our government’s actions and by momentum across the country to re-establish our economic sovereignty.”
National Bank of Canada's chief executive officer Laurent Ferreira says the geopolitical environment continues to weigh on the economy.Ryan Remiorz/The Canadian Press
BMO and National are the latest lenders to report first-quarter earnings this week. Royal Bank of Canada RY-T, Toronto-Dominion Bank TD-T and Canadian Imperial Bank of Commerce CM-T will close out the earnings for the major banks on Thursday. On Tuesday, Bank of Nova Scotia posted profit that beat analyst expectations.
BMO’s profit climbed 16 per cent to $2.49-billion, or $3.39 a share, in the three months that ended Jan. 31. Adjusted to exclude certain items, the bank said it earned $3.48 a share, topping the $3.21 a share analysts expected, according to data from S&P Capital IQ.
Profit from the bank’s U.S. arm rose 17 per cent to $742-million, driven by lower provision for credit losses.
BMO has been rejigging 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.
As part of this, the lender has been cutting costs and booked a charge of $202-million pretax related to severance costs.
Scotiabank CEO says unrest in Mexico not expected to affect financials
The Canadian and capital markets businesses contributed the most to BMO’s improved profitability, with the U.S. unit edging slightly lower compared with the previous quarter. When BMO set its target, it said that this 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 this goal according to its plan. The lender expects to complete its efforts to make its U.S. operations more efficient – which includes divesting from less profitable loan books – 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. There’s some nice contribution to the total bank already, with a lot more to go.” (One hundred basis points equal one percentage point.)
National’s profit jumped 26 per cent to $1.25-billion, or $3.08 per share, in the quarter, bolstered by the lender’s takeover of Canadian Western Bank. Adjusted to exclude certain items, the bank said it earned $3.25 a share, beating analysts’ estimates of $2.99.
Last February, the bank closed its deal to take over Canadian Western Bank, significantly expanding its personal and commercial banking footprint in Alberta and British Columbia.
Profit from Canadian personal and commercial banking was $427-million, up 47 per cent from a year earlier, as the lender integrated CWB.
National also said it is increasing the number of shares it is buying back, boosting the repurchase plan to 14.5 million shares, up from its previous announcement of eight million shares. To date, it has bought back 6.4 million shares.
National is also aiming to improve its profitability, targeting 17 per cent ROE by 2027. The lender raised its 2026 target to 16 per cent from 15 per after booking 16.6 per cent ROE in the quarter.
The bank said it raised the goal after considering the strong start to the year across its businesses, upcoming revenue and cost benefits from the CWB acquisition and the accelerated share buyback program.
National believes it can also boost profitability in its personal and commercial banking unit, where its 12.7 per cent ROE is significantly lower than its other businesses and many of its peers. The bank is conducting a review of the business’ strategy.
“Part of the reason why we disclosed ROE per segment is because we believe that we could improve it significantly over time,” Mr. Ferreira said in response to an analyst question. “It is something that we are going to focus on over the next several years, and we do believe that we are going to be able to deliver more.”