Bank of Montreal’s (BMO Quick QuoteBMO - Free Report) first-quarter fiscal 2022 (ended Jan 31) adjusted net income of C$2.58 billion ($2.04 billion) increased 27% year over year.

BMO recorded higher revenues and a rise in loans and deposit balances, which supported results. However, an increase in expenses and provision for credit losses were the undermining factors.

After considering non-recurring items, net income was C$2.93 billion ($2.31 billion), up 45% 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$7.11 billion ($5.61 billion), up 12% year over year.

Net interest income grew 12% to C$4.02 billion ($3.17 billion). Non-interest income was C$3.70 billion ($2.92 billion), up 9%.

Adjusted non-interest expenses increased 7% to C$3.83 billion ($3.02 billion).

Adjusted efficiency ratio (net of CCPB) was 53.8%, down from 56.3% as of Jan 31, 2021. A fall in the efficiency ratio indicates an improvement in profitability.

Provision for credit losses was C$99 million ($78.1 million) in the reported quarter against recovery of credit losses in the prior-year quarter.

Loans & Deposit Balances Rise

As of Jan 31, 2022, total assets were C$1,023.2 billion ($803.8 billion), up 4% from the prior-quarter end.

Bank of Montreal’s total net loans were up 6% to C$484.4 billion ($380.5 billion), while total deposits grew 3% sequentially to C$704.9 billion ($553.8 billion).

Profitability and Capital Ratios Improve

Bank of Montreal’s return on equity (as adjusted) was 18.8% in the fiscal first quarter compared with 15.8% on Jan 31, 2021. Adjusted return on tangible common equity was 20.7%, up from the prior year’s 18.2%.

As of Jan 31, 2022, common equity Tier-I ratio was 14.1%, up from 12.4% a year ago. Tier-I capital ratio was 15.5% compared with the previous year’s 14.2%.

Acquisition & Divestitures During the Quarter

In December 2021, the company announced a deal to acquire Bank of the West from BNP Paribas for $16.3 billion in cash. Bank of the West, which provides a broad range of banking products and services primarily in the Western and Midwestern parts of the U.S., will help Bank of Montreal in its plan to expand its footprint.  

In November 2021, the company concluded the deal to sell its EMEA asset management business, part of BMO Wealth Management segment, to Ameriprise Financial Inc. for £615 million in cash.  Further, this January, Bank of Montreal completed the sale of Taplin, Canida & Habacht, LLC, part of its U.S. asset management business, to Loop Capital.

Our Take

Bank of Montreal’s focus and efforts align with its organic and business restructuring strategies and are anticipated to support revenues in the upcoming period. However, high expenses and relatively lower rates remain concerns.
 

Bank Of Montreal Price, Consensus and EPS Surprise

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

BMO 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 Quick QuoteHSBC - Free Report) reported fourth-quarter 2021 pre-tax profit of $2.7 billion, up 92.3% from $1.4 billion recorded in the prior-year quarter.

The reported quarter’s results benefited from a rise in adjusted revenues and lower expenses. A decline in the adjusted change in expected credit losses and other credit impairment charges was another positive for HSBC.

Barclays (BCS Quick QuoteBCS - Free Report) reported fourth-quarter 2021 net income attributable to ordinary equity holders of £1.12 billion ($1.51 billion), up significantly from the prior-year quarter.

Results were aided by a rise in revenues, partly offset by higher operating expenses. BCS recorded a credit impairment release during the quarter, which was another major positive.