December 7, 2011 / 5:43 PM / 6 years ago

Analysts cut BMO shares after results disappoint

TORONTO (Reuters) - At least four analysts downgraded shares of Bank of Montreal (BMO.TO) on Wednesday, after it reported a weaker than expected fourth-quarter profit and warned of sluggish conditions ahead.

<p>A Bank of Montreal sign is pictured in downtown Ottawa March 3, 2009. REUTERS/Chris Wattie</p>

Desjardins Securities analysts Michael Goldberg cut his rating on Canada’s No. 4 bank to “hold” from “buy” and lowered his 12-month price target to C$68.50 from C$70, citing a lower earnings forecast and disappointment that BMO chose not to raise its dividend.

Bank of Montreal said on Tuesday that its profit rose 21 percent due to the acquisition of U.S. bank Marshall & Ilsley in July, but the results fell short of estimates, prompting investors to pull the shares down by 3.5 percent.

“The good news for BMO was that the M&I acquisition looks like a winner,” wrote Goldberg. “The bad news was capital markets were weak.”

Shares of BMO, the only big Canadian bank to miss estimates in the fourth quarter, were down another 1.8 percent at C$56.69 just before midday on Wednesday.

Mario Mendonca of Canaccord Genuity also cut BMO shares to “hold”, while RBC Capital Markets’ Andre-Philippe Hardy cut the stock to “sector perform” from “outperform”.

Robert Sedran of CIBC World Markets cut the shares to “sector underperformer” from “sector performer”, noting BMO’s stock may have run a bit ahead due to expectations it would repeat its performance from the third quarter, when its results topped expectations.

“This bank stands as the negative outlier this time after being a positive outlier last time,” Sedran said in a note.

While he cut his rating on the shares, Sedran raised his 12-month price target to C$63 from C$62.

Net profit at the bank was C$897 million ($888 million), or C$1.34 a share, in its fourth quarter, ended October 31. That compared with a year-before profit of C$739 million, or C$1.24.

Analysts forecast a difficult year ahead as interest margins are expected to stay narrow, while the uncertainty surrounding the European debt crisis could threaten market-related income.

BMO cut its medium term annual EPS growth objective to a range of 8-10 percent from 12 percent and has instituted a top-to-bottom cost review in order to preserve profit growth in a weak revenue environment.

($1=$1.01 Canadian)

Reporting By Cameron French; editing by Rob Wilson

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