Bank of Montreal misses estimates, charges squeeze profit

Wed May 29, 2013 12:13pm EDT
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By Cameron French

(Reuters) - Bank of Montreal's (BMO.TO: Quote) second-quarter profit fell a steeper-than-expected 5 percent, the bank said on Wednesday, due to narrowing interest margins on its Canadian loans and one-time charges.

After the results, the latest in a generally disappointing quarter for the Canadian banking sector, shares dropped by 2.5 percent at C$62.09. It was the weakest Canadian financial stock in early trading.

Canada's banks have been named the soundest in the world five years running by the World Economic Forum, but have begun to feel the effects of a slowing domestic housing market and rock-bottom interest rates that squeeze profits on their existing loan book.

"There's been a lot of talk ... about a slowing Canadian consumer, and we're seeing that evident in the results reported to date. That is an area of concern for the bank," said Jeff Bradacs, portfolio manager at Manulife Asset Management, which owns BMO shares.

Margins on the its Canadian loans narrowed to 2.59 percent from 2.83 percent, squeezing BMO's Canadian banking profit by C$3 million to C$430 million.

Narrower margins also pressured income at its U.S. Harris Bank unit, which BMO bulked up in 2011 with the acquisition of Wisconsin lender Marshall & Ilsley. Profit in the division rose a slim 6 percent to C$152 million.

All told, Canada's fourth largest bank earned C$975 million, or C$1.42 a share, in the quarter ended April 30, down from C$1.03 billion, or C$1.51 a share, a year earlier.


The logo for the Bank of Montreal is seen at its branch Toronto, March 5, 2013. REUTERS/Mark Blinch