Bank of Montreal misses estimates on financial market challenges

By Nichola Saminather and Mehnaz Yasmin

(Reuters) – Bank of Montreal missed analysts’ estimates for third-quarter profit on Tuesday as earnings fell from a year earlier as revenue from its capital markets business fell and a it increased provisions for credit losses (PCL).

Net income excluding special items fell to C$2.13 billion ($1.64 billion), or C$3.09 per share, in the three months ended July 31 from C$2.29 billion. Canadian dollars, or 3.44 Canadian dollars per share, a year earlier. Analysts had estimated C$3.14.

BMO shares fell 1.3% to C$126.04, compared with a 0.3% drop in the Toronto stock index.

The third quarter was mixed for Canadian banks, with some reporting stronger-than-expected loan growth and margins, while others saw larger-than-expected declines in financial markets revenue.

BMO experienced strong loan growth and increased margins in the quarter, which generated record revenues in its retail banking businesses in Canada and the United States.

“We expect recent interest rate changes to impact borrowers as they refinance or renew, which could ultimately lead to increased delinquencies,” but the risk is modest, said Patrick Cronin, BMO’s chief risk officer during his call with analysts.

The bank’s total net interest margin, excluding trading, increased 6 basis points from the prior quarter as the bank benefited from higher central bank rates.

But profits from its capital markets business fell sharply, with profits nearly halving from a year earlier, due to lower issuance, fees and trading activity, as well as cuts. on loan underwriting commitments, BMO said.

Wealth management earnings also declined due to lower assets under management.

BMO took PCL of C$136 million, compared to a takeover of C$70 million a year ago and analysts’ expectations of C$202 million.

Excluding the impact of provisions and taxes, adjusted profit was down 2% from a year ago.

($1 = 1.2983 Canadian dollars)

(Reporting by Nichola Saminather in Toronto and Mehnaz Yasmin in Bengaluru; Editing by Shailesh Kuber, Kirsten Donovan and Jonathan Oatis)