BANK OF MONTREAL $58(Toronto symbol BMO; Conservative Growth Portfolio, Finance sector; Shares outstanding: 568.1 million; Market cap: $32.9 billion; Price-to-sales ratio: 2.1; Dividend yield: 4.8%; TSINetwork Rating: Above Average; www.bmo.com) is Canada’s fourth-largest bank, with assets of $411.6 billion.
The bank earned $2.8 billion in its 2010 fiscal year. That’s up 57.2% from $1.8 billion in fiscal 2009. Earnings per share rose 54.2%, to $4.75 from $3.08, on more shares outstanding. Unusual items, such as severance costs and writedowns of securities the bank holds, depressed its fiscal 2009 earnings. If you exclude these items, earnings per share would have risen 19.9%.
In fiscal 2010, loan-loss provisions fell 34.6%, to $1.05 billion from $1.6 billion. Revenue rose 10.4%, to $12.2 billion from $11.1 billion.
In December 2010, the bank agreed to buy Marshall & Ilsley Corp. (New York symbol MI). This firm provides banking and financial services through 374 branches in Wisconsin, Indiana, Missouri, Minnesota, Kansas, Arizona and Florida. The purchase doubles the size of Bank of Montreal’s U.S. retail-banking division.
The bank will pay $4.1 billion U.S. in stock. It will also sell $800 million of new common shares. In all, the extra shares will increase the total outstanding by 14%. Bank of Montreal aims to close the purchase in July 2011.
Marshall & Ilsley is losing money, and owes $1.7 billion U.S. to the U.S. Treasury. However, Bank of Montreal feels it can save $250 million a year by merging its U.S. operations with Marshall & Ilsley’s. The bank feels that the new operations will begin adding to its earnings by 2013.
The stock trades at 10.8 times the bank’s likely 2011 earnings of $5.35 a share.
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