BMO Joins the Party as ‘Big Five’ Banks Record Another Successful Quarter

May 30, 2018 Updated: May 31, 2018

TORONTO—The Bank of Montreal joined its peers in delivering second-quarter profits that beat expectations as Canada’s Big Five banks earned a collective $10.6 billion—up nearly 11 percent from a year ago.

Canada’s biggest banks also handily beat analyst estimates for adjusted profits, brushing off concern about the impact of a cooling real estate market amid tighter mortgage lending guidelines.

“The market is in various stages of worry about the outlook for the mortgage market in particular, but the results themselves seem to indicate that a lot of that worry is misplaced,” said Meny Grauman, an analyst with Cormark Securities in Toronto.

BMO on May 30 was the last of the biggest banks to report its earnings for the three-month period that ended April 30.

Its second-quarter net profit of $1.25 billion was relatively flat compared with a year ago, but included a $192 million after-tax restructuring charge primarily related to severance costs. Canada’s fourth-largest lender also raised its quarterly dividend to 96 cents per share, up 3 cents from its previous quarter.

Like its rivals, BMO benefited from strong earnings on both sides of the border. Its Canadian banking arm saw net income rise 11 percent to $590 million. And although home sales activity across the country in April hit a monthly low not seen in years, due to factors including a new stress test for uninsured mortgages as of Jan. 1 and higher interest rates, BMO’s total Canadian residential mortgage portfolio grew by 2.2 percent to $106.4 billion in the latest quarter.

“BMO’s results this quarter demonstrate strong performance and momentum in our U.S. and Canadian [personal and commercial] banking and wealth businesses,” said Darryl White, BMO’s chief executive officer, in a statement.

The other Big Five banks generated strong earnings at home as well. TD’s Canadian retail division net income was up 17 percent compared with last year. RBC’s Canadian personal and small business banking division reported a 7 percent increase in net income, while Scotiabank’s domestic banking division saw a 5 percent increase, and CIBC’s Canadian personal and small business banking division reported a 16 percent increase in net income.

International growth was a bright spot for the Canadian lenders as well, and a big contributor to the $10.6 billion in net income attributable to shareholders amongst them during the quarter.

BMO said its U.S. personal and commercial banking division saw net income increase 46 percent to $348 million for the quarter. The Canadian Imperial Bank of Commerce saw an even bigger increase of 431 percent, helped by its acquisition of Chicago-based PrivateBancorp in June last year.

Profits at TD Bank’s U.S. retail arm rose 16 percent, while Royal Bank’s U.S. Wealth Management unit, which includes Los Angeles-based City National, saw a 25 percent jump. Scotiabank, which has focused its international expansion in Mexico, Peru, Chile, and Colombia, saw net income at its international banking arm increase 14 percent to $675 million.

Canada’s sixth-largest bank, National Bank of Canada, also reported better-than-expected results and raised its dividend on May 30. It earned $547 million, or $1.44 per diluted share, for the quarter ended April 30, up from $484 million, or $1.28 per diluted share, in the same quarter last year.

“We’re seeing a lot of good contribution from their U.S. and international businesses,” said Robert Colangelo, senior vice president of Canadian banking and financial institutions at ratings agency DBRS.

“Those seem to be the platforms that are taking off.”