BMO’s Q2 net in­come up 28 per cent


The Bank of Mon­treal grew its sec­ond-quar­ter net in­come by 28 per cent and boosted its quar­terly div­i­dend, even as prof­its in its U.S. per­sonal and com­mer­cial bank­ing busi­ness de­clined.

The Toronto-based bank, the first of the big Cana­dian lenders to re­port its sec­ond-quar­ter re­sults, had $1.25 bil­lion of net in­come, helped by higher earn­ings from its wealth man­age­ment and cap­i­tal markets di­vi­sions.

But earn­ings from its U.S. per­sonal and com­mer­cial bank­ing seg­ment de­creased by seven per cent from a year ago to $248 mil­lion, mainly due to higher pro­vi­sions for credit losses.

BMO also hiked its quar­terly div­i­dend on Wed­nes­day by two cents to 90 cents per share, payable on Aug. 28.

Ed­ward Jones an­a­lyst Jim Shana­han said he had been look­ing for stronger re­sults out of BMO’s U.S. fran­chise to com­pen­sate for the chal­leng­ing op­er­at­ing en­vi­ron­ment at home.

Cana­dian banks face a num­ber of head­winds, in­clud­ing over­stretched bor­row­ers and wor­ries about high house prices and the health of the mort­gage mar­ket.

“When we’re re­ally con­cerned about some of the other chal­lenges in Canada with consumer lever­age and home prices, we would look to the U.S. to be a source of strength in earn­ings sta­bil­ity — and for there to be soft­ness here is a lit­tle bit dis­con­cert­ing,” Shana­han said.

An­a­lysts noted that BMO re­ported no de­te­ri­o­ra­tion in Cana­dian res­i­den­tial mort­gages. In spite of that, ques­tions about the mort­gage mar­ket and the re­cent liq­uid­ity cri­sis at mort­gage lender Home Cap­i­tal are likely to dom­i­nate up­com­ing con­fer­ence calls for all of the ma­jor Cana­dian banks, Shana­han said.

Royal Bank, TD Bank and CIBC will re­port their sec­ond-quar­ter re­sults on Thurs­day. Sco­tia­bank will re­lease its earn­ings next Tues­day.

“I imag­ine there will be a lot of ques­tions about Home Cap­i­tal and the mort­gage bro­ker part of the mar­ket,” Shana­han said.

BMO CEO Bill Downe said the bank — which re­ported $5.74 bil­lion in quar­terly rev­enue, up from $5.10 bil­lion a year ago — ben­e­fited from hav­ing a di­ver­si­fied model.

The bank’s net in­come was equal to $1.84 per share, up from $1.45 per share dur­ing the sec­ond quar­ter of 2016 when its net in­come was $973 mil­lion.

“While there has been a mod­er­a­tion in loan and de­posit growth in the United States re­flec­tive of slower than an­tic­i­pated busi­ness ac­tiv­ity in the first cal­en­dar quar­ter, we are well-po­si­tioned to con­tinue to build on the strength of our U.S. fran­chise,” Downe said.

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