Bank of Montreal ( BMO Quick Quote BMO - Free Report) gained 1.5% on the NYSE, following the release of its second-quarter fiscal 2021 (ended Apr 30) results. Adjusted net income of C$2.10 billion ($1.67 billion) increased significantly year over year.
The company recorded an improvement in revenues and lower provisions in the reported quarter, which supported results to an extent. However, an increase in expenses was a negative.
After considering non-recurring items, net income was C$1.30 billion ($1.03 billion), up 89.1% from the prior-year quarter. Revenues Improve, Expenses Rise
Total revenues (on an adjusted basis) — net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) — amounted to C$6.33 billion ($5.03 billion), up 15.9% year over year.
Net interest income declined 1.8% year over year to C$3.46 billion ($2.75 billion). Non-interest income was C$2.62 billion ($2.08 billion), up 50.1% from the prior-year quarter. Adjusted non-interest expenses increased 2.9% year over year to C$3.58 billion ($2.84 billion). Adjusted efficiency ratio — net of CCPB — was 56.6%, down from 63.8% as of Apr 30, 2020. A fall in the efficiency ratio indicates an improvement in profitability. Provision for credit losses plummeted 94.6% year over year to C$60 million ($47.7 million). Loans & Deposit Balances Fall
Total assets as of Apr 30, 2021, were C$949.84 billion ($773.25 billion), down 2.4% from the prior-quarter end. Total net loans were down 1.6% from the prior quarter to C$444.61 billion ($361.95 billion), while total deposits declined 2.3% sequentially to C$657.20 billion ($535.02 billion).
Profitability and Capital Ratios Improve
Return on equity — as adjusted — was 16.7% in the fiscal second quarter compared with 5.5% on Apr 30, 2020. Adjusted return on tangible common equity was 19.1%, up from the prior year’s 6.4%.
As of Apr 30, 2021, common equity Tier-I ratio was 13.0%, up from the year-ago period’s 11.0%. Tier-I capital ratio was 14.8% compared with the previous year’s 12.5%. 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 might erode the company’s profitability.
Bank of Montreal currently carries a Zacks Rank #2 (Buy). You can see
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