Bank of MontrealDeborah Baic/The Globe and Mail
Bank of Montreal reported a first-quarter profit of $657-million Tuesday, up $432-million from a year ago.
Like the other Canadian banks that have reported so far, BMO topped analysts' expectations. Its cash earnings per share came in at $1.13, while the Street had been forecasting profits of about $1.03 per share.
The bulk of BMO's earnings came from Canadian business and consumer lending operations, while profit from its U.S. lending business came in 43 per cent lower than a year ago.
The bank's insurance and wealth management businesses both posted significant increases in profits, partially due to healthier stock markets and customer asset levels.
Earnings from BMO Capital Markets came in at $248-million. While that was up 40 per cent from a year ago, BMO chief executive Bill Downe noted that this quarter's profits from the capital markets arm came in shy of those in recent quarters, which had benefited from hefty trading revenues.
BMO suggested those revenues are tapering off due to lower market volatility and narrower spreads, although the size of the bank's trading revenues this quarter continued to be stronger than some analysts had expected. The capital markets business benefited from a rebound in demand for mergers and acquisitions and debt underwriting services.
In a statement accompanying the bank's results, Mr. Downe gave kudos to the federal government for changing the regulations to make it slightly more difficult for consumers to take on mortgages that are too big for them.
"We fully support the prudent measures announced by the Canadian finance minister two weeks ago to support the long-term stability of Canada's housing market and curtail any speculative excesses in mortgage borrowing," Mr. Downe said.
RBC Capital Markets analyst Andre-Philippe Hardy said in a note to clients that the amount the bank set aside this quarter for soured loans was lower than he expected, helping it to beat expectations.
Barclays Capital analyst John Aiken questioned the stability of BMO's trading revenues, but added "we believe the market should focus on the positives in the quarter."
Declining provisions for troubled loans are a positive, he said, as is the strong performance of the bank's Canadian lending business.