BMO misses expectations on weak capital markets, higher loan-loss provisions

financialpost.com:

Bank of Montreal missed analysts’ estimates as it grappled with weak capital-markets revenue and reported an increase in loan-loss provisions.

The Toronto-based bank earned $2.56 per share on an adjusted basis in the fiscal first quarter, it said in a statement Tuesday, falling short of the $3.02 average estimate of analysts in a Bloomberg survey. Adjusted results were affected by a number of one-time items, including a special assessment by the US Federal Deposit Insurance Corp. of $417 million before taxes.

Some analysts had predicted that BMO’s trading revenue could come in light for the quarter. The bank’s capital-markets division reported net income of $393 million, down 19 per cent from a year earlier, with lower trading revenue countered by higher underwriting and advisory fee revenue.

Provisions for credit losses in the three months through January totalled $627 million, more than the $514.2 million analysts had forecast.

BMO acquired San Francisco-based Bank of the West last February, and investors have been closely watching for signals that it will deliver on plans to wring cost savings as well as revenue synergies out of the deal. Last quarter, it increased its outlook for pretax cost savings from the takeover to US$800 million annually from a previous estimate of US$670 million.

“With the integration of Bank of the West complete, we have achieved 100 per cent of the US$800 million run-rate cost synergies to start the second quarter, and we’re delivering incremental operational efficiencies across the enterprise, resulting in a sequential decline in our expense base,” chief executive Darryl White said in the statement.

The bank also announced a restructuring program last August and incurred a total of about