‘Disappointing’ results from Bank of Montreal’s U.S. operations

Bank of Montreal’s U.S. unit did little for its bottom-line in the latest quarter.

Earnings from its U.S. operations, including Chicago-based lender BMO Harris Bank, were flat from a year earlier at C$278 million ($222 million), the company said Tuesday. Meanwhile, higher profits from Canadian banking and wealth management in the fiscal third quarter were offset by a 7.9% drop in its capital markets business.

“U.S. banking results were disappointing,” said Steve Belisle, a portfolio manager with Manulife Asset Management in Montreal, who oversees about C$4 billion including bank stocks. “They’re facing a slowdown in commercial and industrial lending in the Midwest and a runoff of its indirect auto book.”

Drag on growth

“They’re facing a slowdown in commercial and industrial lending in the Midwest and a runoff of its indirect auto book,” one portfolio manager said in describing BMO’s lackluster U.S. results. Overall, though, the Canadian company reported an 11% profit gain in its fiscal third quarter.

Bloomberg News

The U.S. banking business had a 1% improvement in loan balances from the second quarter, though that total was down 1.3% from a year earlier when measured in U.S. dollars, according to a financial statement. Deposits were little changed from the second quarter and fell 2.6% from a year earlier adjusted for currency.

“Expectations were high coming off of the U.S. election,” Chief Financial Officer Tom Flynn said in a phone interview. “And it looks like, given some uncertainty about the timing of the implementation of some of the policies of the new administration, there’s been what feels like a spreading out of some investment decisions by companies.”

That’s had “a moderating impact” on U.S. bank loan growth, Flynn said, adding that he expects business to pick up on improved customer confidence and expectations of 2% U.S. economic growth through next year.

Firmwide net income climbed 11% to C$1.39 billion, or C$2.05 a share, from C$1.25 billion, or C$1.66, a year earlier. Adjusted earnings were C$2.03 a share, beating the C$2.01 average estimate of 14 analysts surveyed by Bloomberg. Revenue fell 3.1% to C$5.46 billion, while expenses rose 6% to C$3.28 billion.

Bloomberg News

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