BMO Financial Group reports earnings drop on Bank of the West-related charge
TORONTO –
BMO Financial Group mentioned Tuesday it’s centered on integrating its US$16.3 billion Bank of the West acquisition that dominated fourth-quarter outcomes and can reshape its stability sheet within the quarters forward.
“The completion of our acquisition of the Bank of the West on February 1 is a historic moment for BMO, and the natural next step in our North American growth strategy,” mentioned chief government Darryl White on an earnings name.
“We’re excited to welcome thousands of new employees and 1.8 million customers to the BMO family as we come together with a shared vision to drive progress for our customers and communities.”
The closing of the deal helped pushed its first-quarter revenue right down to $247 million, from $2.93 billion in the identical quarter a 12 months earlier, because it took a one-time cost associated to the acquisition.
With the deal closed, which happened three months later than it anticipated when it first introduced it late 2021, the financial institution is now centered on integrating the banks and attaining the US$670 million in price financial savings anticipated.
Overall the addition of the Bank of the West is anticipated so as to add US$2 billion in pre-tax, preprovision earnings advantages, together with the fee financial savings that White mentioned he is assured they will obtain.
“In the early days of owning the asset, my confidence level has gone up on those revenue synergies,” he mentioned on the decision.
The Bank of the West acquisition add a pre-tax lack of $2.01 billion within the first quarter associated to the administration of the affect of rate of interest modifications between the announcement and shutting of its buy of Bank of the West on its truthful worth and goodwill.
Elsewhere in outcomes, the financial institution reported unfavorable working leverage on the all-bank stage within the final quarter as outcomes in comparison with robust capital markets leads to the primary quarter final 12 months in addition to a 9 per cent enhance in bills.
Revenue totalled $6.47 billion, down from $7.72 billion, whereas provisions for credit score losses amounted to $217 million in contrast with a restoration of $99 million a 12 months earlier.
On an adjusted foundation, BMO says it earned $3.22 per diluted share for its first quarter, down from an adjusted revenue of $3.89 per diluted share in the identical quarter final 12 months.
Analysts on common had anticipated a revenue of $3.16 per share, in line with these polled by monetary markets information agency Refinitiv.
Earnings got here in greater than anticipated on elevated buying and selling income, which different banks have benefited as nicely to this point this quarter, as nicely lower-than-expected provisions for credit score loss, mentioned Scotiabank analyst Meny Grauman.
He mentioned that whereas a part of the earnings beat was much less considerably encouraging, the principle focus is Bank of the West the place BMO has modestly downgraded its earnings per share increase from the deal from eight per cent to seven per cent for its 2024 monetary 12 months.
“Despite a lower quality beat the focus for investors now turns to upside from the BotW deal.”
BMO mentioned its Canadian private and business banking business earned $980 million in its newest quarter, down from $1.00 billion in the identical quarter final 12 months because it confronted greater bills and a better provision for credit score losses.
The financial institution’s U.S. private and business banking operations earned $698 million, up from $681 million a 12 months in the past, helped by a stronger U.S. greenback.
Meanwhile, BMO’s wealth administration division earned $277 million down from $315 million a 12 months in the past.
BMO mentioned its capital markets operations earned $503 million, down from $705 million a 12 months in the past, resulting from market circumstances, leading to decrease funding and company banking income and world markets income, in addition to greater bills and a decrease restoration of the availability for credit score losses.
The financial institution’s company companies phase, which included the Bank of the West cost, reported a lack of $2.21 billion in contrast with a revenue of $228 million a 12 months earlier.
This report by The Canadian Press was first printed Feb. 28, 2023.
