* Q1 cash EPS C$1.13 vs Street view C$1.03
* Provisions for credit losses down 22 pct to C$333 mln
* BMO extends pattern set last week by rivals
* Shares rise 3.6 percent to 52-week high
(Adds CEO comment from conference call, analyst)
By Andrea Hopkins
TORONTO, March 2 Bank of Montreal (BMO.TO) said
on Tuesday quarterly profit surged, topping expectations, as
domestic banking income climbed 28 percent and provisions for
loan losses fell, more than offsetting weak U.S. results.
The strong performance for Canada's fourth-largest bank
sent shares up 3.6 percent and extended a trend set last week
by Canadian Imperial Bank of Commerce (CM.TO) and National Bank
of Canada (NA.TO).
Indeed, the entire Canadian banking sector rose on Tuesday
as three stronger-than-expected results in a row raised
expectations that Canada's big lenders would all show that a
trough in profits and peak of bad credit had already passed.
"BMO's positive earnings surprise makes the tally three for
three so far this quarter," Barclays Capital analyst John Aiken
said in a note to clients. "Intraday, the bank is being
rewarded for its results, we think rightfully so."
Bank of Montreal's net income rose to C$657 million ($632
million) for the fiscal first quarter ended Jan. 31 from C$225
million a year earlier, when the Toronto-based bank took
capital markets environment charges of C$359 million.
Cash earnings per share, which include amortization of
intangibles like acquisitions, were C$1.13 in the latest
quarter, well above market expectations for C$1.03, according
to Thomson Reuters I/B/E/S.
BMO said funds set aside to cover bad loans, known as
provisions for credit losses, fell to C$333 million, down 22
percent from a year earlier and down 14 percent from the fourth
CAUTION ON CREDIT OUTLOOK
Credit losses have eaten into bank profits in recent
quarters as consumers and businesses have struggled to repay
debts during the recession. Analysts have been waiting for
signs that the losses have peaked, and BMO's numbers suggest
the worst may be over.
Aiken nevertheless said he was cautious about the bank's
credit outlook, noting consumer impairment levels were still a
worry. Trading revenues also look unsustainable, he said.
"Despite our view that BMO's outlook continues to improve,
we do question its ability to sustain the current level of
trading revenues and remain conservatively cautious on our
outlook for credit," Aiken said.
Capital markets revenue, which has powered Canadian bank
profits in recent quarters, was up 40 percent from a year
earlier at C$248 million but down from previous quarters,
suggesting the volatile profits from that sector are ebbing to
more normal levels.
Canadian domestic banking, the traditional profit engine of
all of the nation's big banks, was strong for BMO. Net income
surged 28 percent to C$403 million as loan and deposit books
grew and the bank set aside less money to cover bad loans.
But BMO's U.S. banking operations struggles as impaired
loans increased and the U.S. economy lagged the Canadian
recovery. Net income there fell 43 percent to $16 million.
BMO has a big presence in the U.S. Midwest through its
Chicago-based Harris Bank subsidiary.
Chief Executive Bill Downe has said BMO will take advantage
of weaker rivals by acquiring small U.S. banks and branches
that fit its strategy and geographic footprint, but on Tuesday
he dampened speculation that the bank would strike a lot of
deals in the near term.
The strong results sent shares of BMO 3.6 percent higher to
a fresh 52-week high of C$58.75 in late afternoon trade on the
Toronto Stock Exchange. The stock hit a 52-week high on Monday
of C$56.88 as early signs of a strong quarter bolstered the
sector. Shares were just C$26.14 a year ago.
Canada's biggest banks are scheduled to report quarterly
results later this week and next week, with Royal Bank of
Canada (RY.TO) due on Wednesday, Toronto-Dominion Bank (TD.TO)
due Thursday, and Bank of Nova Scotia (BNS.TO) scheduled for
(Reporting by Andrea Hopkins; editing by Frank McGurty)