Bank of Montreal (CSE:BMO) reported higher second-quarter profit on Wednesday, helped by rising revenue and a smaller-than-expected increase in provisions for potential loan losses, as credit quality continued to improve.
The Canadian lender posted net income of C$1.96 billion, or C$2.50 per diluted share, for the quarter ended April 30, up from C$1.87 billion, or C$2.36 per share, a year earlier.
On an adjusted basis, BMO earned C$2.62 per share, beating analysts' expectations of C$2.53, according to LSEG data.
Revenue rose to C$8.68 billion from C$7.97 billion, while total provisions for credit losses climbed to C$1.05 billion from C$705 million.
But provisions on impaired loans fell for the second straight quarter to C$765 million, down from C$1.11 billion two quarters ago.
“The story in the quarter for BMO was credit: Provisions were well below expectations allowing it to generate a strong beat, but this was underscored by another improvement in its impaired loans, with formations dropping significantly,” Jefferies analysts wrote in a note.
“While the market may not necessarily want to give the bank full marks for this, the underlying improvement in core earnings should be supportive to its outlook.”
BMO’s US banking unit posted a modest gain in profit, while Canadian banking earnings fell 10% to C$782 million. Wealth Management earnings rose 13% and Capital Markets profit declined 6%.
Jefferies raised its target price on BMO shares to C$150 from C$129, citing stronger-than-expected credit performance and US operations.