Notably higher provisioning affected the bank’s fundamentals.
Investors weren’t in a forgiving mood after digesting Bank of Montreal‘s (BMO -6.16%) latest news on Tuesday. After the north-of-our-border lender divulged its latest set of quarterly results, investors assertively traded out of the stock. When the smoke cleared, Bank of Montreal shares closed the day more than 6% lower; meanwhile, the S&P 500 index finished in positive territory, with a 0.2% gain.
A miss on the bottom line
Bank of Montreal’s fiscal third quarter of 2024 saw the company earn just over 8.2 billion Canadian dollars ($6.1 billion) in revenue, which was marginally higher than in the same period of 2023. Going in the opposite direction was non-GAAP (adjusted) net income; this came in at CA$1.98 billion ($1.47 billion), or CA$2.64 ($1.96) per share. The profit in the year-ago quarter was $2.15 billion ($1.59 billion).
That bottom-line result fell short of professional expectations. On average, analysts tracking Bank of Montreal stock were estimating CA$2.77 ($2.05) per share in adjusted-net income.
During the quarter, the bank increased its provisioning for credit losses considerably. This nearly doubled year to year, to CA$906 million ($671 million) against CA$492 million ($365 million).
Diversification and U.S. expansion on tap
In the earnings release, Bank of Montreal quoted CEO Darryl White as saying:
While the cyclical increase in credit costs has resulted in loan loss provisions above our historical range, performance has been supported by operating momentum across our diversified businesses, including continued revenue growth in Canadian personal and commercial banking and stronger client activity in our market-sensitive businesses.
White added that the company continues to add new customers to its U.S. banking operations.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
