BMO profit up; US unit off­sets bad loans

The Pak Banker - - FRONT PAGE -

TORONTO: Bank of Mon­treal, (BMO) Canada's fourth­largest len­der, posted a higher quar­terly profit that topped mar­ket ex­pec­ta­tions on Wed­nes­day, lifted by growth in its US retail bank­ing busi­ness. How­ever, bad loans in the en­ergy sec­tor shot up in the first quar­ter, re­flect­ing the im­pact of a col­lapse in the oil price and sig­nal­ing that the Cana­dian banks were not im­mune to the oil-re­lated slow­down in Western Canada. Gross im­paired loans in the oil and gas sec­tor jumped C$162 mil­lion ($118.15 mil­lion), from none recorded in the year-ear­lier pe­riod and C$102 mil­lion in the fourth quar­ter.

Pro­vi­sions for that sec­tor's credit losses climbed to C$22 mil­lion, from vir­tu­ally zero a year ear­lier. En­ergy sec­tor loans ac­count for 2 per­cent of BMO's to­tal loan port­fo­lio, and the oil­pro­duc­ing prov­ince of Al­berta makes up about 6 per­cent of its loan book."There's no cause for panic at this point over the bank's en­ergy ex­po­sure and the in­crease in bad loans, said David Cock­field, man­ag­ing di­rec­tor and port­fo­lio man­ager at North­land Wealth Man­age­ment, which owns shares of BMO. "It's worth watch­ing, but get­ting too ex­cited about it? Not yet," he said. Cock­field said one area of con­cern in the num­bers was the in­crease in non-in­ter­est ex­pense, which was up 8.8 per­cent at C$3.27 bil­lion.BMO shares climbed 2.2 per­cent to C$75.48 in early trad­ing in Toronto. The len­der's earn­ings qual­ity was some­what weak and the com­pany ben­e­fited from a fa­vor­able tax rate, Ed­ward Jones an­a­lyst James Shana­han said. "This is not a great quar­ter, but it's not a disas­ter ei­ther," he said. Net in­come for the first quar­ter ended Jan. 31 was C$1.07 bil­lion, or C$1.58 per share, com­pared with C$1 bil­lion, or C$1.46 per share, a year ear­lier. Ex­clud­ing spe­cial items, earn­ings were C$1.75 per share. An­a­lysts on av­er­age had ex­pected C$1.72 a share, ac­cord­ing to me­dia. The com­pany recorded a 31 per­cent in­crease in earn­ings at its U.S. per­sonal and com­mer­cial bank­ing divi­sion and an 18 per­cent rise at its cap­i­tal mar­kets unit. Cana­dian retail bank­ing earn­ings were 5 per­cent higher, while net in­come fell at its wealth man­age­ment unit.

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