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Bank of Montreal (BMO) Stock Up 1.5% on Solid Q2 Earnings

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Shares of Bank of Montreal (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 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 first-quarter 2021 (ended Mar 31) net income attributable to ordinary equity holders of £1.70 billion ($2.34 billion), up significantly from the prior-year quarter.

UBS Group AG (UBS - Free Report) reported first-quarter 2021 net profit attributable to shareholders of $1.82 billion, up 14% from $1.60 million in the prior-year quarter.

HSBC Holdings (HSBC - Free Report) reported first-quarter 2021 pre-tax profit of $5.8 billion, up 79% from the prior-year quarter.

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