Fitch Ratings has affirmed its ratings on Bank of Montreal, citing the bank’s solid capital position, diverse franchise, and sound financial fundamentals.
The bank’s long-term issuer default rating is affirmed at ‘AA-‘, and the outlook is stable.
The rating agency notes that net income increased in each of BMO’s three principal business lines last year (personal & commercial banking, private client, and BMO Capital Markets). Its liquidity position “remains comfortable”, it says, with a large portion of total assets in cash and liquid securities. BMO also enjoys a solid, diversified funding base.
The ratio of gross impaired loans to loans “continues to compare well internationally although it is at the high end amongst the major Canadian banks”, Fitch notes, adding that impaired loan levels have trended down over the past year. “Overall, credit metrics have benefited from a supportive domestic retail lending environment where housing starts, home sales, and property prices have remained at relatively favorable levels,” it says.
Moreover, Fitch notes that BMO’s exposure to Portugal, Italy, Greece, Ireland and Spain is quite low. Exposure to other Eurozone countries and the rest of Europe is higher, it says, but Fitch believes it is manageable.
On the capital front, it says that BMO’s earnings generation capacity should help it meet the Basel III minimum Tier 1 common equity ratio of 7% before the initial implementation date in early 2013.
“BMO’s ratings also benefit from Canada’s strong economic and regulatory environment, as well as a stable domestic banking market,” it adds.