Bank of Montreal (BMO) outlined a detailed strategy roadmap at its March 26 investor day, reaffirming its target of achieving a core return on equity above 15% by fiscal 2028, with about 15% expected by the end of fiscal 2027, RBC Capital Markets said in a Friday research note.
Management maintained its medium-term targets. These include more than 8% growth in core pre-provision pre-tax earnings, an efficiency ratio below 54% and an impaired provision for credit losses ratio in the mid-30 basis-point range. RBC said these targets support low double-digit core earnings per share growth in the near term.
Bank of Montreal set divisional core ROE targets of over 25% for Canadian personal and commercial banking. Wealth management is expected to deliver more than 40%, US banking about 12% and capital markets above 15%.
RBC said most of the bank's medium-term ROE improvement is expected to come from stronger operating performance. Drivers include higher PPPT growth, normalized credit losses and capital optimization. These gains are expected to be partly offset by growth in risk-weighted assets, according to the note.
In US banking, Bank of Montreal is targeting mid-single-digit revenue growth and roughly 10% PPPT growth. RBC said achieving these goals will depend on strong execution and efficiency improvements.
The firm maintained its sector perform rating on the stock with a price target of CA$205.
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