All five of Canada’s big banks have moved up strongly in the past year, as demand for new mortgages and loans remained strong. They have also built up their online and mobile banking operations, which will cut their future operating costs. With these advantages in mind, the Bank of Montreal is trading at a moderate multiple of future earnings.
BANK OF MONTREAL (Toronto symbol BMO; www.bmo.com) recently closed some branches and upgraded its Internet and mobile banking operations. Thanks partly to savings from that plan, Bank of Montreal’s earnings in the quarter ended October 31, 2016, rose 10.4%, to $1.4 billion, or $2.10 a share. A year earlier, it earned $1.3 billion, or $1.90.
Earnings from Canadian retail banking (39% of the total) rose 5.3%, as loan demand from consumers and businesses remained strong. U.S. retail banking (15%) saw its profits jump 34.5%. That was due to Bank of Montreal’s recent acquisition of General Electric’s transportation-financing operation. That business lends money to commercial truck and trailer manufacturers in the U.S. and Canada. It also offers loans to dealers and buyers.
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Earnings at the bank’s capital markets operations (26%) gained 63.6% on higher trading volumes and advisory fee income. Earnings at the wealth management division (20%) improved 11.4% thanks to higher stock market values.
Value Stocks: Another dividend increase in February 2017
Overall, Bank of Montreal’s loan-loss provisions jumped 35.9% in the quarter, to $174 million from $128 million a year earlier. The increase was partly due to the U.S. GE financing acquisition.
The bank will increase its quarterly dividend by 2.3% with the February 2017 payment, to $0.88 a share from $0.86. The new annual rate is $3.52 and yields 3.8%.
Bank of Montreal will likely earn $7.57 a share in fiscal 2017, and the stock trades at just 12.3 times that estimate.
While I remain a tad leary about your commitment to accuracy ( previous comment from a couple of weeks ago regarding inaccurate reporting of dividend growth) I want to applaud you on something. Your nice , tight, well written, highly synthesized recommendations are fantastic. You get to the point…. Fast. Bravo!
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I’m always held and liked BMO over the others.
While I remain a tad leary about your commitment to accuracy ( previous comment from a couple of weeks ago regarding inaccurate reporting of dividend growth) I want to applaud you on something. Your nice , tight, well written, highly synthesized recommendations are fantastic. You get to the point…. Fast. Bravo!
Thanks for your feedback!