BMO profit rises to $1.1 billion in Q1

On an adjusted basis, earnings were $1.42 per share, beating average analyst expectations of $1.36, according to a poll by Thomson Reuters.

Net income was also up from $825 million, or $1.34 per share, in the same period a year ago.

Revenue increased to $4.12 billion from $3.47 billion.

The stronger results were weighted heavily on the integration of Marshall & Ilsley Corp., a U.S. bank focused in the recovering Midwest, into the results.

The improvement came from fewer loan defaults, which offset lower earnings at most of its divisions.

“Our focus on customers and investing wisely in the business are serving us well, and this is reflected in our results and the momentum of the bank,” said president and CEO Bill Downe in a release.

“Each of our businesses is well-positioned and our balance sheet is strong — a source of confidence for our customers.”

Provisions for credit losses, or the money put aside for bad loans, declined to $141 million from $323 million.

But profit in Canadian retail banking was down 6.7% to $446 million from $477 million a year ago when it benefited from a securities gain.

Consumer borrowing is beginning to slow as demand becomes exhausted after nearly two years of ultra low interest and mortgage rates.

During the first quarter, many banks engaged in pricing wars, offering close to record low fixed-rate mortgages to draw consumers through their doors.

The low interest rates have also been eating into net interest income, shrinking margins between the amount of money banks make on loans versus what they put out on deposits.

In the United States, personal and commercial banking profits were US$135 million, an increase of $81 million from a year ago. On an adjusted basis that factors in the intangible assets related to acquisitions, profits were up $93 million to $152 million, with Marshall & Ilsley contributing almost all of the gains.

Consumers in the U.S. are having an opposite reaction to post-recession low interest rates to those in Canada.

Canadian consumers took advantage of ultra low interest and mortgage rates early in the recovery, spurring a flurry of activity in the housing market and driving the economic rebound. But Americans remained reluctant to spend until they saw definite signs of a rebound, and just seem to be gaining confidence to spend again.

The capital markets division saw profits fall 24% to $198 million as it pulled back from the “very strong results of a year ago,” the bank said. Trading revenue in the division was up 11% to $79 million.

Capital markets divisions, which focus on investment banking and helping clients raise capital on stock markets, have been struggling as confidence in global markets has been battered by economic turmoil.

The bank also booked a $46 million after-tax restructuring charge related to the 60 jobs the bank cut last week in its capital markets division. It said the cuts were part of its strategy to keep staffing levels in line with demand in the capital markets environment.

Credit costs were much lower than analysts expected, which helped boost earnings per share by 14 cents, said Andre-Philippe Hardy, an analyst at RBC Dominion Securities.

Meanwhile, actuarial reserve increases in the insurance business related to low interest rates hurt earnings per share by seven cents.

“Canadian (personal and commercial) and capital markets earnings were lower than we expected (but closer to street estimates), which offset better-than-expected Corporate Support results.”

Bank of Montreal has more than 38,000 employees across its North American operations, which include retail banking, wealth management and investment banking, as well as its Chicago-based Harris Bank subsidiary.

Shares in BMO were up one per cent or 54 cents to $58.55 in Tuesday afternoon trading on the Toronto Stock Exchange.