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Bank of Montreal (BMO) Stock Up 2% as Q3 Earnings Rise Y/Y
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Shares of Bank of Montreal (BMO - Free Report) gained 2% on the NYSE in response to the release of third-quarter fiscal 2021 (ended Jul 31) results. Adjusted net income of C$2.29 billion ($1.86 billion) increased 82% year over year.
The company recorded higher non-interest income and provision benefits in the reported quarter, which supported results to an extent. Also, loans and deposit balance improved. However, increase in expenses and slight fall in net interest income were undermining factors.
After considering non-recurring items, net income was C$2.28 billion ($1.86 billion), up 85% 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) were C$6.58 billion ($5.35 billion), up 10% year over year.
Net interest income declined marginally year over year to C$3.52 billion ($2.86 billion).
Non-interest income was C$4.04 billion ($3.29 billion), up 11%.
Adjusted non-interest expenses increased 7% to C$3.66 billion ($2.98 billion).
Adjusted efficiency ratio (net of CCPB) was 55.7%, down from 56.8% as of Jul 31, 2020. A fall in the efficiency ratio indicates improvement in profitability.
Recovery for credit losses was C$70 million ($57 million) in the reported quarter against a provision for credit losses in the prior-year quarter.
Loans & Deposit Balances Rise
Total assets as of Jul 31, 2021, were C$971.4 billion ($778.2 billion), up 2% from the prior-quarter end. Total net loans were up 2% to C$455.6 billion ($365 billion), while total deposits grew 4% sequentially to C$680.6 billion ($545.3 billion).
Profitability and Capital Ratios Improve
Return on equity (as adjusted) was 17.6% in the fiscal third quarter compared with 9.6% on Jul 31, 2020. Adjusted return on tangible common equity was 19.8%, up from the prior year’s 11.1%.
As of Jul 31, 2021, common equity Tier-I ratio was 13.4%, up from 11.6% a year ago. Tier-I capital ratio was 15.1% compared with the previous year’s 13.1%.
Our View
Bank of Montreal’s focus and efforts align with its organic and inorganic growth strategies, and are anticipated to support revenues in the upcoming period. However, elevated expenses and lower rates remain concerns.
Bank Of Montreal Price, Consensus and EPS Surprise
Barclays (BCS - Free Report) reported second-quarter 2021 net income attributable to ordinary equity holders of £2.11 billion ($2.95 billion), up significantly from the prior-year quarter.
Deutsche Bank’s (DB - Free Report) second-quarter 2021 net income of €828 million ($997.5million) increased substantially from the year-ago quarter’s €66 million. Also, the German lender reported profit before taxes of €1.17 billion ($1.4 billion) compared with the year-ago quarter’s €158 million.
UBS Group AG (UBS - Free Report) reported second-quarter 2021 net profit attributable to shareholders of $2 billion, up 63% from the prior-year quarter.
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Bank of Montreal (BMO) Stock Up 2% as Q3 Earnings Rise Y/Y
Shares of Bank of Montreal (BMO - Free Report) gained 2% on the NYSE in response to the release of third-quarter fiscal 2021 (ended Jul 31) results. Adjusted net income of C$2.29 billion ($1.86 billion) increased 82% year over year.
The company recorded higher non-interest income and provision benefits in the reported quarter, which supported results to an extent. Also, loans and deposit balance improved. However, increase in expenses and slight fall in net interest income were undermining factors.
After considering non-recurring items, net income was C$2.28 billion ($1.86 billion), up 85% 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) were C$6.58 billion ($5.35 billion), up 10% year over year.
Net interest income declined marginally year over year to C$3.52 billion ($2.86 billion).
Non-interest income was C$4.04 billion ($3.29 billion), up 11%.
Adjusted non-interest expenses increased 7% to C$3.66 billion ($2.98 billion).
Adjusted efficiency ratio (net of CCPB) was 55.7%, down from 56.8% as of Jul 31, 2020. A fall in the efficiency ratio indicates improvement in profitability.
Recovery for credit losses was C$70 million ($57 million) in the reported quarter against a provision for credit losses in the prior-year quarter.
Loans & Deposit Balances Rise
Total assets as of Jul 31, 2021, were C$971.4 billion ($778.2 billion), up 2% from the prior-quarter end. Total net loans were up 2% to C$455.6 billion ($365 billion), while total deposits grew 4% sequentially to C$680.6 billion ($545.3 billion).
Profitability and Capital Ratios Improve
Return on equity (as adjusted) was 17.6% in the fiscal third quarter compared with 9.6% on Jul 31, 2020. Adjusted return on tangible common equity was 19.8%, up from the prior year’s 11.1%.
As of Jul 31, 2021, common equity Tier-I ratio was 13.4%, up from 11.6% a year ago. Tier-I capital ratio was 15.1% compared with the previous year’s 13.1%.
Our View
Bank of Montreal’s focus and efforts align with its organic and inorganic growth strategies, and are anticipated to support revenues in the upcoming period. However, elevated expenses and lower rates remain concerns.
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 #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Landscape
Barclays (BCS - Free Report) reported second-quarter 2021 net income attributable to ordinary equity holders of £2.11 billion ($2.95 billion), up significantly from the prior-year quarter.
Deutsche Bank’s (DB - Free Report) second-quarter 2021 net income of €828 million ($997.5million) increased substantially from the year-ago quarter’s €66 million. Also, the German lender reported profit before taxes of €1.17 billion ($1.4 billion) compared with the year-ago quarter’s €158 million.
UBS Group AG (UBS - Free Report) reported second-quarter 2021 net profit attributable to shareholders of $2 billion, up 63% from the prior-year quarter.