Bank of Montreal Profit Tops Estimates as U.S. Banking Gains

(Bloomberg) -- Bank of Montreal, Canada’s fourth-largest lender, posted earnings that beat analysts’ estimates as U.S. banking and capital markets trading revenue rose.

Net income for the period ended July 31 climbed 4.4 percent 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 Tuesday in a statement. Profit excluding some items was C$1.94 a share, beating the C$1.81 average estimate of 15 analysts surveyed by Bloomberg.

“We had good performance across our operating groups, particularly in personal and commercial banking and BMO Capital Markets,” Chief Executive Officer William Downe, 64, said in the statement.

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 transportation finance business in December. That helped offset lower earnings from its wealth-management division and sluggish growth in Canadian consumer banking.

“Earnings were good considering expectations were quite low for the Canadian banks," 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.”

Revenue Gains 

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.

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

The capital markets unit earnings rose 18 percent to C$321 million, lifted 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.

Royal Bank of Canada is scheduled to report Wednesday, followed by Canadian Imperial Bank of Commerce and Toronto-Dominion Bank on Thursday. Bank of Nova Scotia is scheduled for Aug. 30, followed by National Bank of Canada on Aug. 31.

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