Topic: How To Invest

The Successful Investor Hotline – Friday, August 28, 2020

Article Excerpt

BANK OF MONTREAL, $82.83, Toronto symbol BMO, is a buy. The bank continues to set aside large sums to cover potential loan defaults resulting from COVID-19. In its fiscal 2020 third quarter, ended July 31, 2020, the bank’s loan-loss provisions soared 244.4% to $1.05 billion from $306 million a year earlier. However, that’s an improvement from provisions of $1.12 billion in the second quarter. The higher provisions are largely why Bank of Montreal’s earnings in the quarter dropped 20.4%, to $1.26 billion from $1.58 billion; earnings per share fell 22.3%, to $1.85 from $2.38, on more shares outstanding. Those figures exclude costs related to recent acquisitions. On that basis, the latest earnings easily beat the consensus estimate of $1.66 a share. Due to the higher loan-loss provisions and lower interest income on outstanding loans, earnings for Canadian retail banking (23% of the total) dropped 50.8%, while profits at the U.S. retail banking operations (20%) fell 28.0%. However, earnings at the wealth management division (25%) jumped 35.3%,…