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BMO reports revenue and profits constrained by "challenging economic backdrop"

TORONTO — BMO Financial Group cited numerous headwinds as it reported first-quarter results where revenue and earnings fell short of expectations.

The bank's net income totalled $1.29 billion, up from $133 million a year earlier, but its results in recent quarters have been clouded by everything from its Bank of the West acquisition to accounting shifts.

On an adjusted basis, BMO reported Tuesday a profit of $2.56 per share, down from $3.06 per share a year ago and lower than any quarter last year.

The profit was also well below the $3.02 per share analysts had on average expected, according to estimates compiled by financial markets data firm Refinitiv.

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BMO chief executive Darryl White said the bank faced a challenging economic backdrop that "constrained revenue growth in market-sensitive businesses," with a pickup not expected until the latter half of the year.

"Our first-quarter results were impacted by revenues that fell short of expectations due in part to environmental pressure," White told a conference call with financial analysts.

"We expect North American economic growth to remain subdued in the first half of this year before recovering towards the end of the year on the back of lower interest rates."

Commercial banking in North America has been especially under pressure as concerns mount over office loan portfolios.

The segment is seeing pressure on loan demand as businesses wait to deploy capital at lower costs, said White.

BMO's capital markets division had lower revenue in part because of the weaker environment, while it also took a $50-million hit because of changes to dividend deductions in Canada.

Corporate services revenue was also down as the bank held more liquidity on its balance sheet, while market volatility had a negative effect on a hedge position. The bank expects quarterly revenues in corporate to run at around negative $200 million to $225 million for the rest of the year.

Overall revenue totalled $7.67 billion for the quarter, up from $5.10 billion. On an adjusted basis, revenue came in at $7.85 billion, up 10 per cent from last year.

BMO's provision for credit losses — the money it set aside to cover bad loans — amounted to $627 million, up from $217 million in the same quarter last year.

BMO's Canadian personal and commercial banking business earned $921 million, down from $951 million a year earlier, as higher revenue was more than offset by higher expenses and a higher provision for credit losses.

In the U.S., BMO's personal and commercial banking business earned $560 million, down from $665 million in the same quarter last year.

The bank's wealth management arm earned $240 million, up from $159 million a year earlier, while BMO's capital markets business earned $393 million, down from $488 million in the same quarter last year.

BMO's corporate services group lost $822 million, compared with a loss of $2.13 billion a year earlier.

This report by The Canadian Press was first published Feb. 27, 2024.

Companies in this story: (TSX:BMO)

Ian Bickis, The Canadian Press