Bank of Montreal loan-loss provisions jump

By Lynne Olver

TORONTO (Reuters) - Bank of Montreal (BMO.TO: Quote) reported a bigger-than-expected 21 percent fall in quarterly profit as provisions for credit losses rose more than analysts had forecast and Canada's fourth biggest bank took more charges on the declining value of credit-related securities.

BMO's stock was down 1.3 percent in morning trading on Tuesday, and Dundee Securities downgraded the stock to a "sell," citing disappointing results.

"I'm fairly encouraged by what they managed to do domestically, but they can't get out of the cloud of their capital markets businesses," said Craig Fehr, an analyst at Edward Jones. "Unfortunately BMO couldn't escape the writedown story again this quarter."

The bank earned C$521 million ($494 million), or 98 Canadian cents a share, in the third quarter, down from C$660 million, or C$1.28 a share, a year earlier when it took a big commodities-trading loss.

On a cash basis, closely watched by analysts, BMO earned C$1.00 a share, down from C$1.30. Analysts had expected C$1.20 a share before items, according to Reuters Estimates.

Brad Smith, an analyst at Blackmont Capital, said that core adjusted earnings, after stripping out "myriad" items that could be considered non-recurring, were ahead of his expectations, due in part to "huge" trading results.

Provisions for credit losses totaled C$484 million, with "unusually elevated" specific provisions of C$434 million because of two corporate accounts related to the U.S. housing market, BMO said. Specific provisions were just C$91 million a year earlier.

"We were modeling increased credit provisioning, but it was even higher than we expected," Smith said.