By Robb M. Stewart
Bank of Montreal is boosting its dividend payout 2.4% after logging a lift in fiscal second-quarter earnings on the back of strong fee revenue across its capital markets, wealth management and treasury and payments operations.
The bank's net income rose to 2.63 billion Canadian dollars (US$1.95 billion), or C$3.53 a share, for the fiscal second quarter against C$1.96 billion, or C$2.50 a share, a year earlier.
On an adjusted basis used by the lender to reflect its underlying business performance, Bank of Montreal reported earnings of C$3.67 a share for the three months to April 30, topping the C$3.45 consensus forecast of analysts polled by FactSet.
Overall revenue for the period rose 10% to C$9.57 billion. Net interest income for the period was up 3.4% to C$5.27 billion, while noninterest revenue jumped 20% to C$4.3 billion.
Bank of Montreal, one of a handful of big lenders that together control most of Canada's banking assets, is increasing its dividend by C$0.04 to C$1.71 a share for the new quarter.
The lender recorded a total provision for credit losses of C$739 million. That compares with the C$746 million put aside the quarter before and C$1.05 billion a year earlier. Analysts had expected a provision of C$802 million for the second quarter to cover loans that may sour.
Total gross impaired loans and acceptances were C$6.94 billion, an increase from C$6.86 billion in the prior quarter, due to higher impaired loans in Canadian personal and commercial banking, mainly in residential mortgages.
Bank of Montreal, which has set a target of exiting 2027 with a return on equity of 15%, said the figure--a measure of how effectively shareholder equity generated income--expanded to 13% in the latest quarter from 9.4% the year before.
The bank said the Iran war and its impact on oil supply is currently the most significant risk to the North American economy, with rising energy prices--and the potential for increased food costs due to the disruption of fertilizer shipments in the Strait of Hormuz--set to constrain household spending power. It expects Canada's economy to grow a modest 1% this year, cooling from last year's 1.7% expansion, while the U.S. economy is projected to grow 2.1%, consistent with 2025.
The Bank of Canada has at each of its last four policy meetings left its benchmark interest rate unchanged. Still, officials have recently agreed they may need to respond rapidly should inflationary pressures begin to be felt more broadly if the war in Iran doesn't soon end or if trade is further disrupted by the pending renegotiation of the existing North American trade agreement. The central bank projects modest growth for the economy this year and for inflation to ease back to its 2% target by early 2027, based on an expected decline in global oil prices.
Bank of Montreal's common equity tier 1 ratio narrowed slightly to 13% from 13.1% at the end of the prior quarter. The country's banking regulator requires a CET1 of no less than 11.5% of risk-weighted assets for each of the country's big banks.
The bank said it expects to book a roughly C$900 million charge on the back of a deal this month to sell its transportation and vendor-financing businesses to Stonepeak. The sale is set to close in the final fiscal quarter of the year, and the charge relates mainly to goodwill, it said.
Write to Robb M. Stewart at robb.stewart@wsj.com
(END) Dow Jones Newswires
May 27, 2026 07:11 ET (11:11 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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