Loan-loss provisions and severance costs weigh on BMO results

financialpost.com:

Bank of Montreal reported record revenue in its Canadian banking businesses during its fiscal third quarter, but the gains were offset by rising expenses and greater provisions for credit losses that pushed adjusted earnings lower.

The bank reported net income of $1.45 billion or $1.97 per share for the three-month period ended July 31, up seven  per cent from $1.37 billion or $1.95 per share in the same quarter a year ago. But on an adjusted basis, net income was $2.04 billion or $2.78 per share, down four per cent from $2.13 billion or $3.09 per share in the same quarter the year prior.

“As we discussed last quarter, we’re taking action to adjust to market forces that are creating near-term headwinds for the industry and negative operating leverage for us this year,” chief executive Darryl White said during the bank’s earnings call on Aug. 29.

White said while he believes the macro headwinds could persist for some time to come, synergies from the Bank of the West transaction and workforce reductions that he described as “complementary and incremental” to the integration of the large U.S. regional bank would lead to positive operating leverage in 2024.

“Against that backdrop what sets BMO apart is the strength of our team and the emphasis that we’ve placed on dynamically managing our business to control the forces that we can control,” White said.

Total provision for credit losses was $492 million for the quarter, compared with a provision of $136 million in the prior year. The total provision for credit losses as a percentage of average net loans and acceptances ratio was 30 basis points, compared with 10 basis points in the prior year.

BMO said the results for the quarter reflected a revenue increase from higher