BMO aims to increase return on equity to more than 15 per cent by 2028

Deepening client relationships is another aspect BMO is focusing on as it tries to achieve its ROE target in the next three years. Photo by Cole Burston/Bloomberg

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The bank reported an adjusted ROE — a ratio that measures how effectively a company uses money invested by its shareholders to generate profit — of 11.3 per cent in fiscal 2025, and that increased to 12.4 per cent in the first quarter of 2026.

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BMO’s biggest opportunity to hit its 15 per cent goal is to improve the return on equity of its U.S. business to 12 per cent from about eight per cent, chief executive Darryl White told investors at the bank’s Investor Day event on Thursday. The U.S. business segment accounts for more than 40 per cent of BMO’s overall earnings.

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The bank will also try to continue to “normalize” its provisions for credit losses (PCLs), the amount of money lenders keep aside to take care of potentially bad loans. BMO reported higher-than-expected PCLs in 2024, but has managed to keep things in check ever since.

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White said it was too early to comment on the U.S.-Israel war on Iran, which is threatening to add to the existing inflation pressures, but said BMO has successfully tackled “many periods of disruption and change” in the past and that these are times when the bank provides its “greatest value” to its clients by “deepening trust and advice and guidance.”

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Deepening client relationships is another aspect BMO is focusing on as it tries to achieve its ROE target in the next three years. It will also use artificial intelligence (AI) to boost its productivity and meet clients’ needs.

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Chief risk officer Piyush Agarwal said AI has already been “fantastically useful” in issues related to anti-money laundering.

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“We get lots of alerts through our algorithm; AI has been able to take down the number of false alerts already by about 10 per cent,” he said. “When these alerts go into case dispositions, you have to do an adverse media search that used to take about 180 minutes per search. That time has come down to 20 minutes.”

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White said the bank’s AI strategy was “ambitious” and “already delivering real value across the bank.”

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Other Canadian banks, such as Royal Bank of Canada and Toronto-Dominion Bank, also said AI is important at their respective investor day events last year.

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TD in September said it plans to use artificial intelligence to “simplify processes” and deliver half-a-billion-dollars’ worth of savings, while RBC last March talked about the importance of winning the “AI arms race” for future growth.

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BMO could also benefit if the U.S. lowers the amount of capital that banks must hold, a decision that could potentially release billions of dollars for lending and other purposes. That decision could be made this week.

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White said BMO’s targets do not include the potential “tailwind” if that happens, so it would be an additional benefit if the U.S. took such a step.

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