By Robb M. Stewart
Bank of Montreal first-quarter earnings jumped on a year earlier despite a sharp rise in its credit-loss provision, though revenue growth fell short of market expectations.
The Canadian bank recorded net income of 1.29 billion Canadian dollars ($956.6 million), or C$1.73 a share, for the fiscal quarter against C$133 million, or C$0.14 a share, a year earlier.
The results were affected by a number of one-off items, including a loss of C$1.46 billion the year before related to Bank of Montreal’s acquisition of Bank of the West and the management of the impact of interest rate changes between announcing and closing the deal.
On an adjusted basis that seeks to reflect the underlying performance of ongoing businesses, Bank of Montreal reported earnings of C$2.56 a share for the three months to Jan. 31, below the C$3.02 consensus forecast of analysts polled by FactSet.
Overall revenue for the period jumped 50% to C$7.67 billion.
Net interest income for the period rose to C$4.72 billion from C$4.02 billion a year ago, missing the C$4.94 billion expected by the market. Noninterest revenue climbed to C$2.95 billion, compared with C$1.08 billion in the same period the year before and the C$3.3 billion expected.
The bank, one of Canada’s largest lenders, recorded a total provision for credit losses of C$627 million. That marks a big increase on C$217 million put aside a year earlier against potential losses due to credit risk.
The provision for credit losses on impaired loans was C$473 million, an increase of C$277 million on-year due to higher provisions in all of Bank of Montreal’s business lines.
Analysts are watching the banks’ credit performance closely given risks in commercial real estate as North American economies slow and expectations of heightened stresses in consumer lending as Canadians look to renew mortgages at higher interest rates following a string of central bank interest rate increases.
Bank of Montreal’s common equity tier 1 ratio stood at 12.8% for the quarter, and the bank said its credit quality remained well managed and underpinned by strong underwriting. The country’s banking regulator late last year opted against requiring lenders to set aside more capital against potential losses, holding the CET1 target for the big banks at no less than 11.5% of risk-weighted assets.
Write to Robb M. Stewart at [email protected]
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