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Bank of Montreal (BMO) Stock Up 2.4% as Q1 Earnings Improve

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Shares of Bank of Montreal (BMO - Free Report) rose 2.4% on the NYSE following the release of first-quarter fiscal 2019 (ended Jan 31) results. Adjusted net income was C$1.54 billion ($1.16 billion), up 8% year over year.

Results were primarily driven by rise in revenues and lower provisions. Moreover, increase in loans and deposits supported the results. However, higher expenses were an undermining factor.

After considering non-recurring items, net income was C$1.51 billion ($1.13 billion), up 55% from the prior-year quarter.

Revenues & Expenses Up, Provisions Decline

Total revenues (on an adjusted basis), net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), amounted to C$5.59 billion ($4.2 billion), up 6% year over year.

Net interest income grew 10% year over year to C$3.17 billion ($2.38 billion). Non-interest income came in at C$3.35 billion ($2.52 billion), jumping 21%.

Adjusted non-interest expenses increased 5% year over year to C$3.52 billion ($2.64 billion).

Efficiency ratio, net of CCPB, was 63% at the end of the reported quarter compared with 63.8% as of Jan 31, 2018. Fall in efficiency ratio indicates improved profitability.

Adjusted provision for credit losses decreased 3% year over year to C$137 million ($102.9 million).

Loans & Deposits Rise

Total assets increased 4% from the prior quarter to C$806.6 billion ($614.5 billion) as of Jan 31, 2019. Further, total net loans were up 4% sequentially to C$397.6 ($302.9 billion), while total deposits rose 2% to C$532.2 billion ($405.4 billion).

Strong Profitability & Capital Ratios

Return on equity, as adjusted, came in at 13.9% in the reported quarter, onpar with Jan 31, 2018 level.

As of Jan 31, 2019, common equity Tier I ratio was 11.4%, up from 11.1%. Tier I capital ratio was 12.7%compared with 12.8% in the prior-year quarter.

Our Viewpoint

Bank of Montreal’s focus and efforts remain aligned with its organic and inorganic growth strategies, and are expected to boost revenues, going forward. Also, the stock’s steady capital-deployment activities, supported by strong capital position will help it gain investors’ confidence. Nevertheless, mounting expenses continue to strain the company’s profitability.

Bank of Montreal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

HSBC Holdings (HSBC - Free Report) recorded fourth-quarter 2018 pre-tax profit of $3.3 billion, up 41.3% year over year. The increase was due to rise in revenues.

Barclays (BCS - Free Report) reported fourth-quarter 2018 net loss attributable to ordinary equity holders of £76 million ($97.8 million). This reflects improvement from net loss attributable to ordinary equity holders of £1.29 billion ($1.66 billion) recorded in the prior-year quarter.

Deutsche Bank (DB - Free Report) incurrednet loss of €409 million ($467.1 million) in fourth-quarter 2018 compared with a loss of €2.4 billion in the year-ago quarter. The bank incurred loss before taxes of €319 million ($364.3 million).

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