Bank of Montreal (BMO) Up as Q2 Earnings & Revenues Rise Y/Y

Shares of Bank of Montreal BMO have gained 1.5% since the announcement of second-quarter fiscal 2022 (ended Apr 30) results. Adjusted net income of C$2.19 billion ($1.73 billion) increased 4% year over year.

BMO recorded higher revenues, provision benefits and a rise in loans and deposit balances, which supported results. However, an increase in expenses was the undermining factor.

After considering non-recurring items, net income was C$4.76 billion ($3.76 billion), up significantly from the prior-year quarter.

Revenues Improve, Expenses Surge

Total revenues (on an adjusted basis), net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) were C$6.56 billion ($4.39 billion), up 4% year over year.

Net interest income grew 13% to C$3.9 billion ($3.08 billion). Non-interest income was C$5.42 billion ($4.28 billion), up substantially.

Adjusted non-interest expenses jumped 36% to C$3.65 billion ($2.88 billion).

Adjusted efficiency ratio (net of CCPB) was 55.6%, down from 56.6% as of Apr 30, 2021. A fall in the efficiency ratio indicates an improvement in profitability.

Recovery for credit losses was C$50 million ($39.5 million) in the reported quarter compared with recovery of credit losses in the prior-year quarter.

Loans & Deposit Balances Rise

As of Apr 30, 2022, total assets were C$1,041.6 billion ($809.9 billion), up 2% from the prior-quarter end.

Bank of Montreal’s total net loans were up 4% to C$502.3 billion ($390.6 billion), while total deposits grew 1% sequentially to C$713.7 billion ($555 billion).

Profitability and Capital Ratios Solid

Bank of Montreal’s return on equity (as adjusted) was 15.7% in the fiscal second quarter compared with 16.7% on Apr 30, 2021. Adjusted return on tangible common equity was 17.2%, up from the prior year’s 19.1%.

As of Apr 30, 2022, common equity Tier-I ratio was 16%, up from 13% a year ago. Tier-I capital ratio was 17.5% compared with the previous year’s 14.8%.

Our Take

Bank of Montreal’s focus and efforts align with its organic and business restructuring strategies and are anticipated to support revenues in the upcoming period. However, high expenses and macroeconomic uncertainty remain concerns.

Bank Of Montreal Price, Consensus and EPS Surprise

Bank Of Montreal Price, Consensus and EPS Surprise

Bank Of Montreal price-consensus-eps-surprise-chart | Bank Of Montreal Quote

BMO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

HSBC Holdings HSBC reported first-quarter 2022 pre-tax profit of $4.2 billion, down 27.9% from $5.8 billion recorded in the prior-year quarter.

HSBC’s results were primarily hurt by a decline in adjusted revenues, partly offset by lower expenses. The expected credit losses and other credit impairment charges (ECL) were a charge in the quarter under review against a release in the prior-year quarter, which was another headwind.

ICICI Bank’s IBN fourth-quarter fiscal 2022 (ended Mar 31) net income was INR70.19 billion ($926 million), jumping 59% from the prior-year quarter.

Results were driven by a rise in net interest income, non-interest income and growth in loans and deposits. Provisions also declined during the quarter. However, higher operating expenses posed a headwind for IBN.

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