Bank of Montreal $49 - Toronto symbol BMO

Bank of Montreal $49 (Toronto symbol BMO Conservative Growth Portfolio, Finance sector; Shares outstanding: 503.5 million; Market cap: $24.7 billion; SI Rating: Above average) is Canada’s fourth-largest bank, with assets of $375.2 billion. The bank recently restructured two of its investment vehicles that hold asset-backed securities. The restructuring averted potential writedowns and costs of as much as $1.5 billion. To put that in context, Bank of Montreal earned $642 million or $1.25 a share in its second fiscal quarter ended April 30, 2008. The latest earnings included a $57 million after-tax gain from the restructuring of these two investment vehicles. The restructuring also reduces the likelihood that Bank of Montreal will have to issue new shares. Bank of Montreal now aims to further cut its long-term risk by building up its retail operations, and shrinking its corporate and stock market businesses. It may also take advantage of the slowdown in the United States to expand its American operations. Bank of Montreal’s main U.S. asset is 100%-owned Harris Bank, which provides banking services in Chicago, Florida and Arizona. The bank also continues to expand its operations in China. It recently became the first Canadian bank to offer fixed-term deposit products in that country. These products should increase Bank of Montreal’s appeal among clients who plan to immigrate to Canada, as well as Chinese citizens who wish to study at Canadian universities. The bank should earn $4.95 a share in fiscal 2008, and the stock trades at 9.9 times that estimate. The $2.80 dividend yields 5.7%. Bank of Montreal is a buy.