Bank of Montreal’s reported earnings dropped sharply in its fiscal third quarter. Every dollar of the year-over-year decline traces to a single disclosed item, while the bank’s adjusted metrics posted double-digit growth and record pre-provision earnings.
Bank of Montreal reported fiscal third-quarter earnings per share of $2.38, down 24% from $3.14 a year earlier.
Adjusted EPS told a different story: up 22% year over year, to $3.96 from $3.23. Adjusted net income rose 19%. The $1,109 million after-tax gap between the reported and adjusted results traces to a single itemized set of adjustments, the largest a $962 million after-tax loss, primarily a goodwill impairment, on the completed sale of BMO’s Transportation and Vendor Finance business.
Every operating segment, Canadian Personal and Commercial Banking, U.S. Banking, Wealth Management and Capital Markets, posted positive adjusted net income. The divestiture charge landed entirely in Corporate Services, which is why that segment alone swung to a large adjusted loss. Credit quality improved: the provision for credit losses fell to $722 million from $797 million. Adjusted return on equity rose to 14.0% from 12.0%. Common equity Tier 1 capital eased to 13.0% from 13.5%, a modest softening inside an otherwise constructive quarter.
Chief Executive Darryl White called it “another strong quarter, driven by disciplined execution against commitments made at our March Investor Day.”
For BMO, the quarter looks weak only if the divestiture charge is mistaken for the bank’s underlying earnings power.