BMO hikes dividend but misses expectations as credit provisions climb

Bank of Montreal missed analysts’ estimates after setting aside more money than expected for potential credit losses as consumers and businesses struggle with higher interest rates.

The Toronto-based lender earned $2.59 a share on an adjusted basis in the fiscal second quarter, it said in a statement Wednesday, falling short of the $2.77 average estimate of analysts in a Bloomberg survey. The bank’s provisions for credit losses totalled $705 million in the three months through April, more than the $585 million analysts had forecast.

Credit conditions for consumers and businesses have continued to weaken, and Toronto-Dominion Bank and Bank of Nova Scotia each put aside more than $1 billion for potential bad loans in the quarter.

Bank of Montreal, which acquired San Francisco-based Bank of the West early last year, has faced a challenging outlook for revenue expansion in the United States, where the interest-rate environment has pressured credit performance and hampered loan growth, Scotiabank analyst Meny Grauman wrote in a research note earlier this month.

Bank of Montreal’s U.S. business reported net income of $543 million, down 26 per cent from a year earlier.

The lender’s overall net income rose 81 per cent to $1.89 billion, helped by lower acquisition and integration costs and a favourable comparison to the initial credit-loss provisions recorded when the Bank of the West deal was completed.

The bank said its Common Equity Tier 1 ratio rose to 13.1 per cent and announced a 4-cent increase in its quarterly dividend to $1.55 a share.

Bloomberg.com