Royal Bank (RY), Bank of Nova Scotia (BNS), and CIBC (CM) are Canada’s finest banks this quarter. Bank of Montreal (BMO) is not.
RY stock traded at fresh highs after reporting strong personal and commercial banking, capital markets, and wealth management. The bank posted lower results in insurance and corporate support.
CIBC gained over 7% last week after it posted a non-GAAP EPS of $1.93. It declared a 90-cent dividend per share and announced a 20 million stock buyback. Though a dividend hike is preferable, the buyback is a shareholder-friendly move.
Once again, BMO disappointed investors. The firm posted revenue climbing by 1.7% Y/Y to $8.19 billion. Provision for credit losses (“PCL”) nearly doubled Y/Y to $906 million. Although the return on equity of 10% is above 9.0%, the adjusted ROE of 10.6% is below the 12.5% comparable.
PCL rose as a result of the ongoing, complex environment that is changing rapidly. Its retail losses continue to be in a tight range. However, Canadian insolvencies are still high. Furthermore, BMO experienced unexpected losses with a lower probability that were significant enough to report.
BMO expects PCL will start falling in the next one to two quarters. By the end of the year, it will revert to its long-term average.
