Bank of Montreal BMO-T +2.06%increase reported higher second-quarter profit that beat analysts’ estimates even as the lender set aside more money for loans that could default as tariff tensions weigh on Canadian consumers and businesses.
BMO earned $1.96-billion, or $2.50 per share, in the three months that ended April 30. That compared with $1.87-billion, or $2.36 per share, in the same quarter last year.
Adjusted to exclude certain items, the bank said it earned $2.62 per share. That edged out the $2.55 per share analysts expected, according to S&P Capital IQ.
The bank raised its quarterly dividend by 4 cents to $1.63 per share.
BMO is the third major Canadian bank to report earnings for the fiscal second quarter. Over the past week, Toronto-Dominion Bank posted results that beat analyst estimates and Bank of Nova Scotia missed expectations. National Bank of Canada also reports Wednesday, and Royal Bank of Canada and Canadian Imperial Bank of Commerce release results on Thursday.
Analysts expected Canada’s banks to continue grappling with higher loan loss reserves and lower borrowing activity as U.S. President Donald Trump’s trade war threatens a deeper economic downturn.
In the quarter, BMO set aside $1.05-billion in provisions for credit losses – the funds banks reserve to cover loans that may default. That was higher than analysts anticipated, and included $289-million against loans that are still being repaid, based on models that use economic forecasting to predict future losses.
Rising risk in Canadian commercial banking and Canadian unsecured consumer lending drove the increase in provisions.
In the same quarter last year, BMO reserved $705-million in provisions.
Total revenue rose 9 per cent in the quarter to $8.68-billion while expenses increased 4 per cent to $5.02-billion, driven by employee-related and technology costs.
Profit from Canadian personal and commercial banking was $782-million, down 10 per cent from a year earlier as higher expenses and provisions for credit losses offset an increase in revenue. But loan balances were up 6 per cent year over year.
Profit from the bank’s U.S. arm edged higher to $546-million, partially offset by higher provisions and lower non-interest revenue due to the sale of a U.S. credit card portfolio.
The wealth management division generated $361-million of profit, up 13 per cent as stronger global markets activity boosted revenue.
And capital markets profit fell 6 per cent to $431-million as higher expenses and provisions offset a revenue boost in global markets.
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