Rising provisions and weak segment performance weigh on BMO’s fourth-quarter adjusted earnings
BMO Financial Group reported a significant miss in fourth-quarter earnings expectations, driven by a sharp rise in provisions for potential loan losses, according to BNN Bloomberg.
Despite a boost from a legal judgment reversal, the bank’s adjusted earnings reflected challenges across key segments.
The bank posted a fourth-quarter profit of $2.30bn, up from last year due to a $1.18bn pre-tax benefit from the reversal of a US legal judgment related to a Ponzi scheme.
However, adjusted net income, which excludes this one-time gain, declined to $1.54bn from $2.24bn in the same quarter last year.
Elevated provisions for credit losses weighed heavily on results. The provisions surged to $1.52bn from $446m a year earlier, including $1.11bn allocated to impaired loans, where repayment appears uncertain.
BMO chief executive Darryl White acknowledged the impact, stating, “Our overall results were impacted by elevated provisions for credit losses. We expect quarterly provisions to moderate through 2025 as the business environment improves.”
BMO’s adjusted earnings dropped to $1.90 per diluted share, down from $2.93 per share a year ago, and below analysts’ expectations of $2.41 per share, according to LSEG Data & Analytics.
Revenue for the quarter rose to $8.96bn, compared to $8.32bn a year earlier.
BMO’s Canadian personal and commercial banking business reported earnings of $750m, down from $922m last year. In the US, the personal and commercial banking segment earned $256m, a decline from $591m in the same quarter last year.
Wealth management earnings fell to $326m from $351m, while the capital markets business earned $251m, down from $472m a year ago.
The corporate services segment, however, reported a profit of $721m, a stark contrast to the $626m loss recorded last year, reflecting the reversal of a 2022 provision tied to a lawsuit involving Marshall and Ilsley Bank, acquired by BMO in 2011.
Early Thursday, BMO shares traded four percent lower at $128.74 on the Toronto Stock Exchange. The bank also announced an increase in its quarterly dividend to $1.59 per share, up from $1.55 per share.
