BMO posts big miss on earnings expectations as bad loans weigh

TORONTO — BMO Financial Group significantly missed analyst earnings expectations as the money it set aside for potential loan losses jumped.

The bank on Thursday reported a fourth-quarter profit of $2.30 billion, up from last year thanks to a $1.18 billion pre-tax boost from the reversal of a legal judgment related to a Ponzi scheme in the United States.

Adjusted earnings that excluded the one-time gain showed a net income of $1.54 billion, down from $2.24 billion in the same quarter last year.

The earnings drop came as its provisions for credit losses surged to $1.52 billion from $446 million a year earlier.

“Our overall results were impacted by elevated provisions for credit losses,” said BMO chief executive Darryl White in a statement.

“We expect quarterly provisions to moderate through 2025 as the business environment improves.”

BMO shares were trading four per cent lower at $128.74 on the Toronto Stock Exchange early Thursday morning.

The headline provision number includes $1.11 billion set aside for the more serious impaired category where it’s even less confident it will have the loans paid back.

The shaky loans helped lead to adjusted earnings of $1.90 per diluted share in its latest quarter, down from an adjusted profit of $2.93 per diluted share a year ago.

The average analyst estimate had been for an adjusted profit of $2.41 per share, according to data provided by LSEG Data & Analytics.

Revenue totalled $8.96 billion, up from $8.32 billion in the same quarter last year.

The bank said Thursday it will now pay a quarterly dividend of $1.59 per share, up from $1.55 per share.

BMO said its Canadian personal and commercial banking business earned $750 million in its latest quarter, down from a profit of $922 million in the same quarter last year.

In the U.S., the bank said its personal and commercial banking operations earned $256 million, down from a profit of $591 million a year earlier.

BMO’s wealth management business earned $326 million, down from a profit of $351 million a year ago, while its capital markets business earned $251 million, down from a profit of $472 million in the same quarter last year.

The bank’s corporate services segment reported a profit of $721 million, compared with a loss of $626 million a year ago, as it reversed a 2022 provision related to a lawsuit associated with Marshall and Ilsley Bank, which BMO bought in 2011.

This report by The Canadian Press was first published Dec. 5, 2024.

Companies in this story: (TSX:BMO)

Ian Bickis, The Canadian Press