BANK OF MONTREAL $76 (Toronto symbol BMO; Conservative Growth and Income Portfolios, Finance sector; Shares outstanding: 647.0 million; Market cap: $49.2 billion; Price-to-sales ratio: 3.0; Dividend yield: 4.2%; TSINetwork Rating: Above Average; www.bmo.com) earned $1.04 billion in its fiscal 2015 first quarter, which ended January 31, 2015. That’s down 3.9% from $1.08 billion a year earlier. Per-share earnings declined 5.0%, to $1.53 from $1.61.
Earnings from Canadian retail banking (47% of the total) rose 3.5% as low interest rates continued to spur loan demand. The U.S. retail banking division (16%) saw its profits rise 3.6% as higher loan volumes offset the additional funds it set aside to cover potential bad loans.
The wealth management division’s earnings (17%) rose 2.2%. Lower earnings from this business’s insurance operations offset the contribution from recently acquired U.K.-based wealth manager F&C Asset Management. However, the trading division’s earnings (20%) fell 19.9%, mainly due to lower trading volumes and underwriting fees.
The bank’s loan-loss provisions rose 64.6% in the quarter, to $163 million from $99 million a year earlier. That’s mainly due to higher provisions at its U.S. banking division and fewer recoveries of loans Bank of Montreal had already written off.
Falling interest rates will cut the income the bank earns on its loans. But its U.S. operations’ growth continues to improve, and it’s doing a good job of controlling costs.
These factors should increase the bank’s earnings to $6.66 a share in fiscal 2015 from $6.59 in 2014. The stock trades at just 11.4 times this year’s estimate. The $3.20 dividend yields 4.2%.
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