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Bank of Montreal (BMO) Up 1.8% Despite Y/Y Lower Q2 Earnings
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Bank of Montreal’s (BMO - Free Report) second-quarter fiscal 2020 (ended Apr 30) adjusted net income was C$715 million ($519.9 billion), down 53% year over year.
The results were hurt by lower revenues and a significant rise in credit costs. However, lower expenses, and improvement in loan and deposit balance offered some support. These factors might have led to bullish investor sentiments. The stock rallied 1.8% on the NYSE, following the release of the company’s results.
After considering non-recurring items, net income was C$689 million ($501 billion), down 54% from the prior-year quarter.
Revenues & Expenses Down
Total revenues (on an adjusted basis) — net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) — amounted to C$5.46 billion ($3.97 billion), down 3% year over year.
Net interest income grew 12% year over year to C$3.52 billion ($2.56 billion). Non-interest income came in at C$1.75 billion ($1.27 billion), down 43% from the prior-year quarter.
Adjusted non-interest expenses declined 2% year over year to C$3.48 billion ($2.53 billion).
Adjusted efficiency ratio — net of CCPB — was 63.8%, up from 63.0% as of Apr 30, 2019. A rise in the efficiency ratio indicates deterioration in profitability.
Provision for credit losses surged substantially year over year to C$1.12 billion ($0.8 billion).
Loans & Deposits Rise
Total assets increased 12% from the prior quarter to C$987.1 billion ($707.4 billion) as of Apr 30, 2020. Further, total net loans were up 9% sequentially to C$468.9 ($336 billion) and total deposits grew 15% to C$563.7 billion ($404 billion).
Profitability & Capital Ratios Deteriorate
Return on equity — as adjusted — came in at 5.5% in the fiscal first quarter compared with 13.9% on Apr 30, 2020.
As of Apr 30, 2020, common equity Tier I ratio was 11.0%, down from 11.3% in the comparable year-ago period. Tier I capital ratio was 12.5% compared with 13.0% a year ago.
Our Viewpoint
Bank of Montreal’s focus and efforts are aligned with organic and inorganic growth strategies, and are expected to boost revenues going forward. However, mounting expenses and economic slowdown are expected to strain the company’s profitability.
Bank Of Montreal Price, Consensus and EPS Surprise
The Bank of Nova Scotia (BNS - Free Report) , carrying a Zacks Rank #4 (Sell), reported second-quarter fiscal 2020 (ended Apr 30) adjusted net income of C$1.4 billion ($1 billion), down 39% year over year. The results excluded certain one-time items.
Zacks #3 Ranked ICICI Bank’s (IBN - Free Report) fourth-quarter fiscal 2020 (ended Mar 31) net income was INR12.21 billion ($161 million), up 26% from INR9.69 billion ($128 million) recorded in the prior-year period. Excluding coronavirus-related provisions, net income would have been INR32.60 billion ($431 million).
Deutsche Bank (DB - Free Report) , also a #3 Ranked stock, reported first-quarter 2020 net income of €66 million ($72.8 million), significantly down from the year-ago quarter’s €201 million. Also, the German lender reported adjusted profit before taxes of €303 million ($334.3 million), up 13% year over year.
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Bank of Montreal (BMO) Up 1.8% Despite Y/Y Lower Q2 Earnings
Bank of Montreal’s (BMO - Free Report) second-quarter fiscal 2020 (ended Apr 30) adjusted net income was C$715 million ($519.9 billion), down 53% year over year.
The results were hurt by lower revenues and a significant rise in credit costs. However, lower expenses, and improvement in loan and deposit balance offered some support. These factors might have led to bullish investor sentiments. The stock rallied 1.8% on the NYSE, following the release of the company’s results.
After considering non-recurring items, net income was C$689 million ($501 billion), down 54% from the prior-year quarter.
Revenues & Expenses Down
Total revenues (on an adjusted basis) — net of insurance claims, commissions and changes in policy benefit liabilities (CCPB) — amounted to C$5.46 billion ($3.97 billion), down 3% year over year.
Net interest income grew 12% year over year to C$3.52 billion ($2.56 billion). Non-interest income came in at C$1.75 billion ($1.27 billion), down 43% from the prior-year quarter.
Adjusted non-interest expenses declined 2% year over year to C$3.48 billion ($2.53 billion).
Adjusted efficiency ratio — net of CCPB — was 63.8%, up from 63.0% as of Apr 30, 2019. A rise in the efficiency ratio indicates deterioration in profitability.
Provision for credit losses surged substantially year over year to C$1.12 billion ($0.8 billion).
Loans & Deposits Rise
Total assets increased 12% from the prior quarter to C$987.1 billion ($707.4 billion) as of Apr 30, 2020. Further, total net loans were up 9% sequentially to C$468.9 ($336 billion) and total deposits grew 15% to C$563.7 billion ($404 billion).
Profitability & Capital Ratios Deteriorate
Return on equity — as adjusted — came in at 5.5% in the fiscal first quarter compared with 13.9% on Apr 30, 2020.
As of Apr 30, 2020, common equity Tier I ratio was 11.0%, down from 11.3% in the comparable year-ago period. Tier I capital ratio was 12.5% compared with 13.0% a year ago.
Our Viewpoint
Bank of Montreal’s focus and efforts are aligned with organic and inorganic growth strategies, and are expected to boost revenues going forward. However, mounting expenses and economic slowdown are expected to strain the company’s profitability.
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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Foreign Banks
The Bank of Nova Scotia (BNS - Free Report) , carrying a Zacks Rank #4 (Sell), reported second-quarter fiscal 2020 (ended Apr 30) adjusted net income of C$1.4 billion ($1 billion), down 39% year over year. The results excluded certain one-time items.
Zacks #3 Ranked ICICI Bank’s (IBN - Free Report) fourth-quarter fiscal 2020 (ended Mar 31) net income was INR12.21 billion ($161 million), up 26% from INR9.69 billion ($128 million) recorded in the prior-year period. Excluding coronavirus-related provisions, net income would have been INR32.60 billion ($431 million).
Deutsche Bank (DB - Free Report) , also a #3 Ranked stock, reported first-quarter 2020 net income of €66 million ($72.8 million), significantly down from the year-ago quarter’s €201 million. Also, the German lender reported adjusted profit before taxes of €303 million ($334.3 million), up 13% year over year.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
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