Bank of Montreal beats expectations due to capital markets, raises dividend

Bank of Montreal reported earnings Wednesday. Photo by Ben Nelms/Bloomberg

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Bank of Montreal‘s stronger performance in its capital markets and wealth management divisions during the second quarter allowed it to top analysts’ earnings expectations.

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The lender’s net income for the three months ending April 30 was $2.6 billion, up 34 per cent from the same period last year, resulting in net earnings per share of $3.53.

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Its adjusted net income — which removes the impact of non-recurring items — was $2.7 billion, up 34 per cent year over year, resulting in adjusted earnings per share of $3.67, which topped analysts’ expectations of about $3.45 per share.

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“Our second-quarter results continued to demonstrate meaningful progress and momentum,” chief executive Darryl White said in a statement on Wednesday. “We once again strengthened ROE and delivered strong EPS growth, driven by robust fee revenue across capital markets, wealth management and treasury and payments.”

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The Big Six banks‘ earnings tend to provide insights into the Canadian economy, which has been under further strain ever since the Iran conflict pushed up energy prices and added more economic uncertainty.

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All six, however, are expected to post higher profits this quarter. But analysts say the ongoing uncertainty will compel banks to continue to keep aside a high amount of money for loans that may potentially go bad. That marks a shift from earlier forecasts, which had anticipated a gradual improvement in provisions for credit losses (PCLs) in the second half of 2026.

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BMO’s PCLs were $739 million in the second quarter, down from $1.05 billion a year ago. PCLs for impaired loans were $734 million, a year-over-year decrease of $31 million, primarily due to lower provisions in capital markets and United States banking, while PCLs for performing loans were $5 million, compared to $289 million a year ago.

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“The performing provision in the current quarter was primarily driven by the net impact of model changes, largely offset by portfolio credit migration and lower portfolio balances, while the prior year reflected changes in the macroeconomic environment,” the bank said. 

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The bank’s adjusted net income for its Canadian business segment was 887 million, an increase of $119 million, or 15 per cent, compared to last year, primarily due to a five per cent increase in revenue and lower PCLs. Its U.S. banking segment’s adjusted net income was $847 million, an increase of $172 million, or 25 per cent.

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“The impact of the weaker U.S. dollar decreased net income by five per cent, revenue by four per cent and expenses by three per cent,” the bank said.

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Its adjusted net income from its capital markets segment increased 46 per cent from a year ago to $641 million, while its wealth management business reported a 39 per cent increase to $444 million.

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BMO also increased its dividend by four cents to $1.71 per share.

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Earlier in May, BMO announced it was selling a majority interest in its transportation and finance lending businesses to a New York-based alternative investment platform to help improve its capital efficiency and focus on its core markets. The bank said it would record a net after-tax charge of approximately $900 million related to the sale, primarily related to goodwill, in the third quarter.

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BMO, Scotiabank and National Bank of Canada report their results on Wednesday, while Royal Bank of Canada, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce will report them on Thursday.

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