Bank of Montreal posted a surprise drop in fiscal second-quarter profit as it set aside a larger provision for loan losses and trading revenue fell.
The bank’s provision for credit losses of C$1.02 billion ($755 million) included an initial C$517 million on the performing loan portfolio of Bank of the West, the bank said in a statement Wednesday. It’s the first time Bank of Montreal has reported results that include the San Francisco-based lender, which it bought from BNP Paribas SA for $16.3 billion.
Excluding some items, profit was C$2.93 a share, missing the C$3.21 average estimate of analysts in a Bloomberg survey.
“Overall, we have a negative view on Q2/23 results as adjusted EPS was below our forecast and consensus on high expenses though capital seems solid,” RBC Capital Markets analyst Darko Mihelic said in a note.
The Bank of the West deal, which closed on Feb. 1, expanded the bank’s US footprint to 32 states and makes its US personal and commercial banking division, with C$2.6 billion in revenue during the quarter, slightly larger than its Canadian one.
Bank of Montreal’s capital-markets division had C$1.59 billion in revenue, in line with analysts’ projections. Global markets revenue was down 15% from the first quarter — trading revenue declined across all categories — but investment and corporate banking rose.
The quarter, which ended April 30, was another volatile one for markets, marked by the failure of several US regional banks, starting with Silicon Valley Bank in early March. Bank shares tumbled and bonds whipsawed, with the yield on Canada 10-year debt falling nearly 70 basis points in less than two weeks that month.
The bank raised its quarterly dividend by 2.8% to C$1.47 per share.
Shares of Bank of Montreal have fallen 4.3% this year in Toronto, compared with a 1.6% decline for the S&P/TSX Commercial Banks Index. Among Canada’s six largest banks, only Toronto-Dominion Bank, which also has high exposure to US regional markets, has performed worse year-to-date.
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