Bank of Montreal Jumps as Earnings Beat Analysts’ Estimates

(Bloomberg) -- Bank of Montreal’s stock jumped the most in six months after posting fiscal third-quarter profit that beat analysts’ estimates with better-than-expected trading revenue and lower expenses.

Shares of Canada’s fourth-largest lender rose 2.6 percent to C$86.61 at 9:46 a.m. in Toronto, the most intraday since Feb. 12, leading the nation’s bank stocks higher.

“Earnings growth came in stronger than we had anticipated and we believe that BMO should enjoy relative outperformance today based on the beat," John Aiken, an analyst with Barclays Plc, said in a note to clients.

Bank of Montreal reported a 4.4 percent increase in profit for the period ended July 31, helped by higher earnings in U.S. banking and a surge in trading revenue. Net income climbed to C$1.25 billion ($964 million), or C$1.86 a share, from C$1.19 billion, or C$1.80, a year earlier, the Toronto-based bank said in a statement Tuesday. Profit excluding some items was C$1.94 a share, beating the C$1.81 average estimate of 15 analysts surveyed by Bloomberg.

“Earnings were good considering expectations were quite low for the Canadian banks,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc., which oversees about C$5 billion including banks. “This also highlights the diversity of BMO’s lines of business.”

GE Business

Bank of Montreal gained from higher profit at its U.S. personal and commercial banking units, with added contributions from its takeover of General Electric Co.’s North American transportation-finance business in December. That helped offset lower earnings from the wealth-management division and sluggish growth in Canadian consumer banking.

Revenue rose 17 percent to C$5.63 billion from a year earlier, beating analysts’ estimates of C$5 billion. The lender set aside C$257 million for credit losses, up from C$160 million, after setting aside more to cover soured commercial and oil-and-gas loans.

Earnings from the U.S. personal and commercial division, which includes Chicago-based BMO Harris Bank, jumped 25 percent to C$277 million while Canadian personal and commercial banking profit rose 0.9 percent to C$561 million.

BMO Capital Markets earnings climbed 18 percent to C$321 million, boosted by a 31 percent surge in trading revenue to C$346 million, and higher corporate-banking revenue. Wealth-management earnings, which include insurance, fell 4.3 percent to C$201 million on lower equity markets.

Bank of Montreal is the first Canadian lender to report third-quarter results. Earnings for the country’s eight largest lenders are expected to be unchanged from a year earlier, marking the weakest period since the fourth quarter of 2010, according to an Aug. 9 note by Credit Suisse Group AG analyst Kevin Choquette.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net. To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, David Scanlan at dscanlan@bloomberg.net, Steve Dickson