BANK OF MONTREAL $58 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 643.4 million; Market cap: $37.3 billion; Price-to-sales ratio: 2.4; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with assets of $525.5 billion.
The bank’s exposure to troubled European countries was a moderate $1.3 billion on April 30, 2012. That’s up from $1.0 billion three months earlier (it didn’t report comparable results for the end of fiscal 2011). The rise is mainly due to an increase in short-term loans to clients in Italy.
In the quarter ended April 30, 2012, Bank of Montreal’s earnings rose 27.5%, to $982 million from $770 million a year earlier. That mainly reflects the contribution from U.S. banking firm Marshall & Ilsley, which Bank of Montreal bought for $4.0 billion in stock in July 2011. Because of extra shares outstanding, earnings per share rose at a slower pace of 15.2%, to $1.44 from $1.25.
Revenue rose 18.8%, to $4.0 billion from $3.3 billion. The bank’s Canadian banking business, (40% of its total revenue), saw its revenue rise just 2.4% due to strong competition for new borrowers.
Bank of Montreal’s clients continue to repay their loans on time. As well, it took back some of the money it had set aside to cover any bad loans it may have acquired from Marshall & Ilsley. As a result, its loan-loss provisions fell 34.3%, to $195 million from $297 million a year earlier.
The stock trades at just 10.2 times the bank’s likely 2012 earnings of $5.71 a share. The $2.80 dividend yields 4.8%.
Bank of Montreal is a buy.
