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Bank of Montreal (BMO) Q1 Earnings Impress, Shares Up 3.3%

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Shares of Bank of Montreal (BMO - Free Report) gained 3.3% on the NYSE, following the release of its first-quarter fiscal 2021 (ended Jan 31) results. Adjusted net income came in at C$2.04 billion ($1.58 billion), up 26% year over year.

The company recorded an improvement in revenues, lower provisions and a decline in expenses in the quarter, which supported results to an extent. Also, the balance sheet position remained strong.

After considering non-recurring items, net income was C$2.02 billion ($1.57 billion), up 26.7% from the prior-year quarter.

Revenues Improve, Expenses Decline

Total revenues (on an adjusted basis) — net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) — amounted to C$6.37 billion ($4.95 billion), up 5.7% year over year.

Net interest income grew 5.6% year over year to C$3.58 billion ($2.78 billion). Non-interest income came in at C$3.40 billion ($2.64 billion), up 1.1% from the prior-year quarter.

Adjusted non-interest expenses declined 1.4% year over year to C$3.59 billion ($2.79 billion).

Adjusted efficiency ratio — net of CCPB — was 56.3%, down from 60.3% as of Jan 31, 2020. A fall in the efficiency ratio indicates improvement in profitability.

Provision for credit losses plummeted 55.3% year over year to C$156 million ($121.2 million).

Loans & Deposits Rise

Total assets as of Jan 31, 2021 were C$973.21 billion ($761.53 billion), up 2.5% from the prior-quarter end. Total net loans were up marginally from the prior quarter to C$451.86 billion ($353.58 billion), while total deposits increased 2% sequentially to C$672.50 billion ($526.23 billion).

Profitability and Capital Ratios Steady

Return on equity — as adjusted — came in at 15.8% in the fiscal first quarter compared with 13.5% on Jan 31, 2020. Adjusted return on tangible common equity was 18.2%, up from the prior year’s 15.8%.

As of Jan 31, 2021, common equity Tier I ratio was 12.4%, up from the year-ago period’s 11.4%. Tier I capital ratio was 14.2% compared with the previous year’s 13%.

Our Take

Bank of Montreal’s focus and efforts align with its organic and inorganic growth strategies, and are anticipated to boost revenues in the upcoming period. However, elevated expenses and economic slowdown might erode the company’s profitability.

Bank Of Montreal Price, Consensus and EPS Surprise

Bank Of Montreal Price, Consensus and EPS Surprise

Bank Of Montreal price-consensus-eps-surprise-chart | Bank Of Montreal Quote

Bank of Montreal currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Competitive Landscape

Barclays (BCS - Free Report) reported fourth-quarter 2020 net income attributable to ordinary equity holders of £220 million ($290.5 million), down 67.7% from the prior-year quarter.

UBS Group AG (UBS - Free Report) recorded fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from the prior-year quarter’s $722 million.

HSBC Holdings (HSBC - Free Report) delivered fourth-quarter 2020 pre-tax profit of $1.4 billion against a pre-tax loss of $3.9 billion posted in the prior-year quarter.

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