• Adjusted Net Income: $2.3 billion.
• Adjusted Earnings Per Share (EPS): $3.04.
• Pre-Provision Pretax Earnings (PPPT): $4 billion, up 32% from last year.
• Revenue Growth: 18% increase.
• Operating Leverage: 8.9% positive.
• Common Equity Tier 1 (CET1) Ratio: 13.6%.
• Return on Equity (ROE): 11.3%.
• Share Buyback: 1.2 million shares repurchased this quarter, 3.2 million shares in total.
• Canadian P&C Revenue: Record $3 billion, PPPT up 13%.
• US P&C PPPT Growth: 6%.
• BMO Wealth Management PPPT Growth: 48%.
• BMO Capital Markets PPPT Growth: 67%.
• Provisions for Credit Losses (PCLs): $1 billion, 58 basis points.
• Effective Tax Rate: 24.5%.
• Average Loan Growth: 4% year over year on a constant currency basis.
• Average Deposit Growth: 8% year over year, excluding the impact of the stronger US dollar.
• Net Interest Income (NII) Growth: 11% year over year.
• Noninterest Revenue Growth: 24% year over year.
• Expense Growth: 9% year over year.

• Warning! GuruFocus has detected 7 Warning Sign with BMO.

Release Date: February 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Bank of Montreal (NYSE:BMO) reported a strong start to the year with first-quarter adjusted net income of $2.3 billion and earnings per share of $3.04.
• Revenue growth was broad-based, up 18%, driving strong all-bank operating leverage of 8.9%.
• The CET1 ratio remained robust at 13.6%, providing ample opportunity for organic growth and investment while returning capital to shareholders.
• BMO Wealth Management saw a 48% increase in pre-provision pretax earnings, with strong revenue growth in wealth and asset management.
• BMO Capital Markets experienced a 67% growth in pre-provision pretax earnings, driven by strong Global Markets trading performance and client flows in the US business.

Negative Points

• Provisions for credit losses were $1 billion, reflecting higher delinquencies in credit cards and other unsecured personal loans.
• The economic outlook is uncertain due to potential tariffs, which could impact client activity and lead to variability in future quarters.
• US Commercial Banking loan growth remains subdued, consistent with industry trends.
• Higher performance-based compensation and technology costs contributed to a 9% increase in expenses.
• The effective tax rate increased to 24.5% due to the implementation of the global minimum tax.

Q & A Highlights

Q: Can you discuss the impact of tariffs on your US and Canadian commercial client base? A: Darryl White, CEO, noted that while it's challenging to predict outcomes, there is a higher level of anxiety in Canada compared to the US. Clients are pausing some commercial activities due to uncertainty. Nadim Hirji, Head of BMO Commercial Banking, added that clients are actively working on contingency plans and that BMO's North American footprint provides a strategic advantage.

Q: With a CET1 ratio of 13.6%, do you plan to increase share buybacks? A: Darryl White, CEO, stated that the bank intends to continue with share buybacks, leveraging the flexibility provided by the strong CET1 ratio, rather than allowing the ratio to build significantly higher.

Q: What are the expected revenue synergies from the Bank of the West acquisition? A: Tayfun Tuzun, CFO, mentioned that the bank expects $450 million to $500 million in revenue synergies, primarily from commercial, personal, and wealth management businesses. The timeline for achieving these synergies has been extended due to a muted market environment, with full realization expected by 2027.

Q: How are you managing the performing allowance for credit losses amid tariff uncertainties? A: Piyush Agrawal, Chief Risk Officer, explained that while the macroeconomic forecast did not initially include tariffs, the bank applied expert judgment to account for potential impacts. If tariffs are implemented and prolonged, adjustments will be made in future economic assumptions.

Q: Can the 15% ROE target withstand a tariff scenario? A: Darryl White, CEO, emphasized that the 15% ROE target is a medium-term goal. While tariffs could impact Canadian GDP in the short term, the bank remains optimistic about the North American opportunity and believes in its ability to achieve the target over time.

Q: What is the outlook for net interest margins (NIM) in the US P&C business? A: Tayfun Tuzun, CFO, indicated that while current margins are holding up well, the bank expects stability in NIM going forward. Efforts to grow core deposits and improve deposit mix are expected to be accretive to NIM.

Q: How does BMO's loan portfolio compare in terms of susceptibility to tariffs? A: Piyush Agrawal, Chief Risk Officer, stated that BMO's loan portfolio is well-diversified, and the bank has conducted extensive analysis to manage industry and borrower risks. The North-South diversification provides additional resilience.

Q: What is the expected performance for BMO Capital Markets in Q2? A: Alan Tannenbaum, Head of BMO Capital Markets, noted that while Q1 saw exceptional results due to market volatility, Q2 is expected to be above trend but not as strong as Q1. The bank aims for consistent performance across its businesses.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.