U.S. deal helps push BMO profit past expectations

Wed May 23, 2012 4:47pm EDT
 
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By Cameron French

TORONTO (Reuters) - Bank of Montreal's (BMO.TO: Quote) 2011 acquisition of U.S. lender Marshall & Ilsley helped drive its profit up by a higher-than-expected 27 percent in the second quarter, giving the bank's shares a slight boost despite lingering concerns over slowing retail lending.

BMO, the first Canadian bank to report results for the fiscal second quarter, paid $4.1 billion for Wisconsin-based M&I last July, part of a wave of takeovers by Canadian banks in the wake of the 2008 financial crisis.

The deal doubled BMO's already sizeable U.S. branch count, and contributed C$171 million to its bottom line during the quarter, both by driving up revenue and due to lower than expected loan losses.

Overall BMO earned C$1.03 billion ($1.01 billion), or C$1.51 a share, up from a year-before profit of C$813 million, or C$1.32. Adjusted profit was C$1.44 a share, topping analysts' expectations for a profit of C$1.36.

TOUGH LENDING CONDITIONS

But looking beyond the M&I takeover, narrower loan margins in the quarter showed that BMO's main lending businesses are facing tougher conditions, said National Bank of Canada analyst Peter Routledge.

"Their overall retail operations look like they're suffering through slow growth both in Canada and the United States, and margin pressure, particularly in Canada," he said.

He said the profit beat was due in part to cost controls.   Continued...