Bank of Montreal Raises Dividend After Quarterly Adjusted Earnings Rise

By Robb M. Stewart

Bank of Montreal nudged up its dividend 2.5% after benefiting in the fourth quarter from a strong capital position and a drop in credit-loss provisions, with underlying earnings and revenue for the period coming in stronger than expected.

The big Canadian lender's net income dipped to just under 2.3 billion Canadian dollars ($1.65 billion), or C$2.97 a share, for the fiscal quarter from C$2.3 billion, or C$2.94, a year earlier.

The C$9 million decrease was primarily due to the reversal of a legal provision in the prior year, the write-down of goodwill related to the planned sale of branches in certain U.S. markets and higher amortization of acquisition-related intangible assets. That offset a lower provision for credit losses

On an adjusted basis used by the lender to reflect its underlying ongoing business performance, Bank of Montreal reported a 73% jump in earnings to C$3.28 a share for the three months to Oct. 31, beating the C$3.04 consensus forecast of analysts polled by FactSet.

Overall revenue for the period was up 4.3% to C$9.34 billion from last year's C$8.96 billion, where analysts expected C$9.03 billion. Net interest income for the period nudged up 1.1% to C$5.5 billion, while noninterest revenue climbed 9.3% to C$3.85 billion.

The bank declared a dividend of C$1.67 a share for the new quarter, an increase of C$0.04 on the latest payout. The dividend will be payable Deb. 26 to shareholders of record on Jan. 30.

Bank of Montreal, one of a handful of big lenders that together control most of Canada's banking assets, recorded a total provision for credit losses of C$755 million. That compares with the C$797 million put aside against potential losses due to credit risk the quarter before and C$1.52 billion a year earlier. Analysts had expected a provision of C$820 million for the latest quarter to cover loans that may default.

The provision for credit losses on performing loans narrowed sharply, reflecting an improvement in macroeconomic projections and lower balances on some portfolios, while the provision on impaired loans was down on the quarter before thanks to a decline U.S. commercial banking and capital markets provisioning that offset by higher provisions in Canadian unsecured consumer lending.

A string of interest-rate cuts by the Bank of Canada through October has lowered borrowing costs and helped drive household spending, offsetting weakness in business investment, though the housing markets remains sluggish and the unemployment rate in the country is elevated despite a recent recovery in hiring.

Canada's economy grew a much stronger-than-expected 2.6% annualized in the third quarter, boosted by a recovery in exports and a jump in government defense spending that masked weakened domestic demand. The final quarter began on shaky ground, with the national statistics agency estimating industry-level gross domestic product contracted 0.3% in October from the month before, which would market the sharpest decline since December 2022.

Bank of Montreal's common equity tier 1 ratio narrowed slightly to 13.3% at the end of October from 13.5% at the end of the prior quarter. The country's banking regulator requires a CET1 of no less than 11.5% of risk-weighted assets for each of the country's big banks.

The bank, one of the top 10 banks in North America by assets, moved in October to sell U.S. bank branches around the U.S. to First-Citizens Bank & Trust while at the same time laying out plans to open 150 new branches over five years, predominately in California. It roughly two years ago expanded its U.S. footprint when it bought California-based Bank of the West, a roughly $16 billion deal that positioned it as one of the largest banks in North America by assets and added nearly 1.8 million customers and more than 500 branches and offices. It

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

12-04-25 0705ET