Bank of Montreal (BMO) Stock Up 2.7% as Q4 Earnings Rise Y/Y

Shares of Bank of Montreal BMO gained 2.7% on the NYSE following the release of fourth-quarter fiscal 2021 (ended Oct 31) results last week. Adjusted net income of C$2.23 billion ($1.9 billion) increased 38% year over year.

Bank of Montreal recorded higher revenues and provision benefits, which supported results. Also, loans and deposit balance improved. However, the increase in expenses was a headwind.

After considering non-recurring items, net income was C$2.16 billion ($1.84 billion), up 36% from the prior-year quarter.

Revenues Improve, Expenses Rise

Total revenues (on an adjusted basis), net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) were C$6.48 billion ($5.53 billion), up 8% year over year.

Net interest income grew 6.4% to C$3.78 billion ($3.23 billion). Non-interest income was C$2.82 billion ($2.41 billion), up 15%.

Adjusted non-interest expenses increased 6% to C$3.72 billion ($3.18 billion).

Adjusted efficiency ratio (net of CCPB) was 57.4%, down from 58.7% as of Oct 31, 2020. A fall in the efficiency ratio indicates an improvement in profitability.

Recovery for credit losses was C$126 million ($107.6 million) in the reported quarter against a provision for credit losses in the prior-year quarter.

Loans & Deposit Balances Rise

As of Oct 31, 2021, total assets were C$988.2 billion ($854.6 billion), up 2% from the prior-quarter end.

Bank of Montreal’s total net loans were up marginally to C$458.3 billion ($396.4 billion), while total deposits grew almost 1% sequentially to C$685.6 billion ($592.9 billion).

Profitability and Capital Ratios Improve

Bank of Montreal’s return on equity (as adjusted) was 16.5% in the fiscal fourth quarter compared with 12.6% on Oct 31, 2020. Adjusted return on tangible common equity was 18.5%, up from the prior year’s 14.5%.

As of Oct 31, 2021, common equity Tier-I ratio was 13.7%, up from 11.9% a year ago. Tier-I capital ratio was 15.4% compared with the previous year’s 13.6%.

Capital Deployment Updates

Concurrent with the earnings release, Bank of Montreal announced a 25% quarterly dividend hike. Also, the company authorized 22.5 million shares under its share repurchase program.

Our Take

Bank of Montreal’s focus and efforts align with its organic and inorganic growth strategies, and are anticipated to support revenues in the upcoming period. However, high expenses and lower rates 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

Bank of Montreal currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

The Bank of Nova Scotia BNS reported fourth-quarter fiscal 2021 (ended Oct 31) adjusted net income of C$2.72 billion ($2.16 billion), which rose 40.1% year over year. Results excluded certain one-time items.

A drastic decline in provisions and higher non-interest income primarily drove Bank of Nova Scotia’s results. The balance sheet position also remained strong. However, a decline in net interest income and higher expenses were headwinds.

Deutsche Bank’s DB third-quarter 2021 net income of €329 million ($387.9 million) increased 6% from the year-ago quarter’s €309 million. Also, DB reported profit before taxes of €554 million ($653million) compared with the year-ago quarter’s €482 million.

Deutsche Bank’s results benefited from a decline in expenses. Also, the company’s robust capital position was a tailwind. Further, a decrease in provision for credit losses was another positive.

Barclays BCS reported third-quarter 2021 net income attributable to ordinary equity holders of £1.45 billion ($2 billion), up significantly from the prior-year quarter.

Barclays’ results were aided by a rise in revenues, partly offset by higher operating expenses. Also, BCS recorded a decline in credit impairment charges during the quarter.

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