BMO Reports Rising Profits as Loan Growth Continues, Spending Also Rises

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TORONTO – BMO Financial Group said on Wednesday that loan growth remained strong in the second quarter as businesses continued to invest and residential mortgages rose, but it is also stepping up its risk assessments as pressures mount. economies, including inflation, increase.

Central banks have responded to rising prices by raising interest rates, raising fears they could overshoot and plunge the economy into a recession, but BMO says it has yet to see a decline in the numbers.

“There’s definitely more uncertainty given some of the lingering issues that we’re all experiencing, supply chain, inflation,” said David Casper, who leads North American commercial banking at BMO.

“But demand for our customers’ products always exceeds supply. So they continue to grow, they try to keep up, and the other part of the problem is that there continues to be, both in Canada and in the United States, more movement towards offshoring, less dependence on foreign supply, more capital expenditure to improve productivity.”

The bank saw average net loans up 9% year-over-year, as well as up 3% from the prior quarter, as commercial loans were a bit ahead of consumer balances.

Although the bank says it hasn’t seen signs of an economic slowdown, it has tightened its risk management, Chief Risk Officer Patrick Cronin said.

“We have recognized the potential for economic headwinds by increasing the weighting of our downside scenario, as well as reducing parts of our economic outlook in our base scenario.”

The bank has also worked over the past two years to improve its automated and data-driven risk mitigation processes, which will serve it well in the face of macroeconomic and geopolitical risks, he said.

Overall, the bank reported second-quarter profit of $4.76 billion as it announced it would now pay a quarterly dividend of $1.39 per share, up 6 cents from $1.33 per share.

The increased payout to shareholders came as BMO’s second-quarter profit was $7.13 per diluted share, compared to profit of $1.30 billion or $1.91 per diluted share a year ago. one year old.

Revenue for the quarter totaled $9.32 billion, down from $6.08 billion in the same quarter last year, while the bank’s provision for credit losses was $50 million, down from $60 million. million dollars a year ago.

On an adjusted basis, BMO says it earned $3.23 per diluted share, up from adjusted earnings of $3.13 per diluted share a year ago.

Analysts on average had expected adjusted earnings of $3.21 per share, according to financial markets data firm Refinitiv.

BMO said its adjusted spending rose 2% in the quarter from a year earlier, including an 11% increase in its Canadian personal and business division, as investments in technology and its sales force that started last year are piling up.

The bank now expects a year-on-year increase in spending of around 2.5% this year, compared to a previously forecast 1.5%, as it sees a bigger move in wages, the bank said. CFO Tayfun Tuzun.

Scotiabank analyst Meny Grauman said in a note that the bank’s earnings growth was good, but results were “not as searing as we’re used to seeing from this bank”.

“The good news from these results is that there are no signs of a recession in the numbers,” Grauman wrote.

The bank said its personal and commercial banking business in Canada generated net income of $940 million, compared to $777 million in the same quarter last year, while its personal and commercial banking business in the United States grew. generated $588 million, compared to $538 million a year ago.

BMO’s wealth management business brought in $314 million, down from $322 million a year earlier, while BMO Capital Markets earned $448 million, down from $558 million a year ago.

The bank’s business services arm gained $2.47 billion last quarter, compared with a loss of $892 million a year ago, as the bank saw higher revenue from equity management of the fair value related to the announced acquisition of Bank of the West and lower expenses due to the lower goodwill entry related to the disposal a year ago of its EMEA asset management business.

This report from The Canadian Press was first published on May 25, 2022.

Companies in this story: (TSX: BMO)

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