Bank of Montreal Shares Drop After Loan-Loss Provision Squeezes Earnings

By Robb M. Stewart

Bank of Montreal's shares were under pressure Tuesday after the big Canadian lender's fiscal three-quarter earnings fell short of expectations thanks to weakness in U.S. retail banking and heftier-than-anticipated provisions for potential soured loans.

In morning trading, the shares were 6.2% lower at C$112.38, widening the drop so far this year to 14%. In New York, Bank of Montreal was 5.8% weaker at $83.60.

The bank reported third-quarter adjusted earnings of 2.64 Canadian dollars (US$1.96) a share, missing the C$2.76 mean forecast of analysts polled by FactSet. That was despite overall revenue for the three months to July 31 increasing to C$8.19 billion from C$8.05 billion a year earlier.

Chief Executive Darryl White said a cyclical increase in credit costs pushed loan-loss provisions above the historical average. Bank of Montreal set a total provision for credit losses of C$906 million, up from the C$705 million put aside against potential losses due to credit risk the quarter before and C$492 million a year earlier.

The provision for credit losses on impaired loans was C$828 million, an increase of C$495 million from a year earlier, and the provision for credit losses on performing loans was C$78 million compared with a provision of C$159 million in the prior year.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

August 27, 2024 10:46 ET (14:46 GMT)

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