BMO hikes dividend but misses expectations as credit provisions climb

financialpost.com:

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