BMO Financial Group reports $1.59B first-quarter profit, tops expectations

TORONTO — BMO Financial Group beat expectations and reported a first-quarter profit of $1.59 billion as the bank worked to expand its footprint south of the border.

The Toronto-based bank said its profit for the quarter ended Jan. 31 was up from $1.51 billion in the same period a year earlier and amounted to $2.37 per diluted share, an increase from $2.28 per diluted share.

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The results came as the bank has focused on digital innovation by launching BMO Insights, which uses artificial intelligence to help customers manage their day-to-day finances and cash flow.

It's also prioritized expanding its brick-and-mortar presence in the U.S. BMO recently opened new private wealth offices in both Dallas and Atlanta and announced the opening of its first commercial banking office in Los Angeles in the quarter.

On a conference call with financial analysts, BMO chief executive Darryl White characterized the moves as a sign of the bank's commitment to North American customers.

"This is a great example of how we're increasing our wealth penetration with our commercial and business banking customers, a key growth segment for BMO," he said.

The moves helped the bank report a revenue of nearly $6.75 billion, up from nearly $6.52 billion.

The growth was offset in part by higher provisions for credit losses and expenses. It reported a provision for credit losses of $349 million, compared with $137 million a year earlier.

On an adjusted basis, BMO said it earned $2.41 per diluted share, an increase from $2.32 per diluted share in the same quarter a year earlier.

Analysts on average had expected an adjusted profit of $2.37 per diluted share, according to financial markets data firm Refinitiv.

BMO shares were down $1.72 or nearly two per cent at $97.75 in trading on the Toronto Stock Exchange in trading Tuesday morning.

Looking at the quarter, White said he believes the bank performed well, has significant momentum and several businesses increasing their market share.

David Casper, BMO's U.S. chief executive, predicted that will continue because of the bank's January announcement that it will acquire Clearpool Group Inc., a New-York-based provider of holistic electronic trading solutions.

It also purchased New York-based KGS-Alpha Capital Markets, a fixed income broker-dealer specializing in U.S. mortgage and asset-backed securities, last year.

"All of those are investments that are continuing to grow and will bear fruit over time, and so I do have good confidence in our U.S. business and the growth that we see there," Casper said.

The bank will also be watching for any impact from the novel coronavirus outbreak, which has spread to a handful of Canadians and tens of thousands more around the globe.

Patrick Cronin, BMO's chief risk officer, said it is "probably too early to tell" what impact the outbreak could have on BMO's business, but the bank is first concerned with the health and safety of employees in Asia and other affected regions.

"We're obviously very focused on business continuity as well to ensure that we've got continuity in all of our regions in the event it gets worse," he said.

BMO has yet to see any short-term impacts from the outbreak, but said potential affects will take longer to notice in its credit portfolios.

Scotiabank and Royal Bank of Canada also said when they reported their results that they have yet to see an impact from the outbreak.

This report by The Canadian Press was first published Feb. 25, 2020.

Companies in this story: (TSX: BMO, TSX:RY, TSX:BNS)

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