Bank of Montreal $62 – Toronto symbol BMO

BANK OF MONTREAL $62 (Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; SI Rating: Above average) is Canada’s fourth-largest bank, with assets of $305.8 million.

The bank continues to expand its Chicago operations, where its Harris Bank subsidiary is the area’s second-largest bank in terms of deposits.

In 2005, acquisitions added 21 branches to the Harris network, and expanded its geographic reach to Indiana. Harris now operates close to 200 branches, and supplies 10% of Bank of Montreal’s revenue, and 5% of its profit.

The Chicago banking market is highly fragmented with over 250 different firms. It’s likely that Harris will strengthen its market share with more acquisitions this year.

In its first fiscal quarter ended January 31, 2006, earnings rose 5.2%, to $1.22 a share from $1.16. Higher income from retail banking and wealth management helped offset a 21% jump in loan loss provisions. However, the bank feels that provisions for the entire year will likely fall 19% below its earlier forecasts.

The stock now trades at 12.7 times the $4.90 a share Bank of Montreal should earn in fiscal 2006. The $2.12 dividend yields 3.4%.

Bank of Montreal is a buy.

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