UPDATE 2-Bank of Montreal reports smaller first-quarter profit

Tue Feb 24, 2015 8:49am EST
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(Adds analyst comment, details on results)

TORONTO Feb 24 (Reuters) - Bank of Montreal posted a smaller-than-expected first-quarter profit on Tuesday, due to the impact of declining long-term interest rates on its insurance unit and lower investment and corporate banking revenues.

"BMO's first quarter results reflect the impact of an unsettled environment in which we saw significant movements in oil prices, long-term interest rates and the Canadian dollar," said Chief Executive Bill Downe, in a statement.

Despite the challenging environment however, Toronto-based BMO saw earnings and revenues expand in its core personal and commercial banking segment, along with improved profits from its wealth management arm.

Net income at Canada's fourth-largest bank was C$1 billion, or C$1.46 a share, for the first quarter ended Jan. 31, compared with C$1.06 billion, or C$1.58 a share, a year earlier.

Excluding certain one-time acquisition-related costs and an amortization charge, the bank said adjusted earnings were C$1.53 a share. Analysts, on average, were expecting earnings of C$1.63 a share, according to Thomson Reuters I/B/E/S.

The bank noted however, that its adjusted earnings do not factor in the impact of the decline in long-term rates on its insurance business, charges for credit and funding valuation adjustments, and other items.

"While there were quite a few moving parts in the quarter, which, in the right light, could get BMO back above consensus, the disappointing headline will likely be the focus of the market," said Barclays analyst John Aiken in a note to clients.

Aiken said BMO's results could weigh on the shares of the Canadian banking sector, until its rival begin to report later this week.   Continued...