Canadian lender BMO Financial Group (BMO, BMO.TO) on Tuesday reported a 5 percent decline in profit for the second quarter, reflecting the impact of lower net interest margins at the company's Canadian personal & commercial banking segment in addition to restructuring costs. Adjusted earnings per share missed analysts' expectations, while revenues beat their estimates.
Canadian personal & commercial banking group's net income for the second quarter declined 1 percent to C$430 million, while revenue was flat with last year as the effects of strong volume growth across most products was offset by the impact of lower net interest margins.
U.S. personal & commercial banking net income increased 9 percent from last year to C$155 million. However, revenue declined 1 percent as the effects of increased commercial lending fees and strong commercial loan growth were more than offset by reductions in certain loan portfolios, net interest margin and deposit fees.
Private Client Group net income declined 4 percent from the prior-year period to C$141 million. Adjusted net income in insurance was C$34 million, down 34 percent from a year ago. The decrease was due to the $34 million after-tax impact of a decline in long-term interest rates in the latest quarter relative to a modest gain a year ago.
BMO Capital Markets net income grew 18 percent from the year-ago quarter to C$275 million, reflecting strong revenue growth from the company's Trading Products business, most notably from interest rate activities. The company also saw higher corporate banking revenue from its Investment and Corporate Banking business.
The company's total provision for credit losses for the quarter declined 26 percent from last year to C$145 million.
BMO Financial's second-quarter net income attributable to shareholders declined to C$957 million or C$1.42 per share from C$1.01 billion or C$1.51 per share in the year-ago quarter.
Excluding items such as restructuring charges and costs related to the integration of acquired U.S. lender Marshall & Ilsley, adjusted net income for the quarter was C$979 million or C$1.46 per share, compared to C$964 million or C$1.44 per share a year ago.
On average, sixteen analysts polled by Thomson Reuters expected the company to report earnings of C$1.49 per share for the quarter. Analysts' estimates typically exclude special items.
Revenue for the quarter edged down to C$3.94 billion from C$3.96 billion in the year ago quarter, but topped analysts' consensus estimate of C$3.84 billion.
Net interest income declined 1 percent to C$2.10 billion and includes amounts for the recognition of a portion of the credit mark on the purchased performing loan portfolio of acquired U.S. lender Marshall & Ilsley.
Meanwhile, non-interest revenue edged up slightly to C$1.85 billion. Adjusted non-interest revenue increased 4 percent to C$1.84 billion, reflecting an increase in adjusted trading revenues, growth in mutual fund revenues and lending fees. These were offset by declines in insurance revenues as well as underwriting and advisory fees.
Assets under management and administration for the quarter grew by about 12 percent from last year to C$522 billion, reflecting growth in new client assets and market appreciation.
BMO announced a third-quarter dividend of C$0.74 per common share, unchanged from the preceding quarter and up C$0.04 per share from the prior-year period. This is equivalent to an annual dividend of C$2.96 per common share. The dividend on the common shares is payable on August 27 to shareholders of record on August 1.
BMO closed Tuesday's trading at $61.21. In Wednesday's pre-market, the stock is down $0.34 or 0.56 percent to $60.88.
On the Toronto stock exchange, BMO.TO closed Tuesday's trading at C$63.70, up C$0.39 or 0.62 percent on a volume of 1.16 million shares.
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