BMO Stock (TSE:BMO) Falls on Disappointing Q2 Earnings, Rising Provisions
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BMO Stock (TSE:BMO) Falls on Disappointing Q2 Earnings, Rising Provisions

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BMO stock is in the red today after reporting earnings that missed analysts’ expectations. Rising provisions for credit losses played a role in the earnings slump.

Bank of Montreal (TSE:BMO) (NYSE:BMO) revealed its Q2-2023 earnings results earlier today, missing earnings expectations. As a result, the stock is currently in the red, despite raising its quarterly dividend by four cents to C$1.47 per share.

Q2-2023 Results

BMO’s adjusted net earnings grew modestly to C$2.22 billion compared to C$2.19 billion in the prior year. However, on a per-share basis, adjusted EPS fell from C$3.23 to C$2.93, missing the consensus estimate of C$3.19 per share. The company’s recent acquisition of Bank of the West is included in the results.

BMO set aside much more provisions than last year for potentially sour loans — its provisions for credit losses expanded to C$1.02 billion in the second quarter from C$50 million a year earlier. Nonetheless, the bank’s CEO mentioned that while credit trends are returning to normal from historically low levels, credit performance across their portfolios remains strong. Notably, BMO’s CET1 ratio (a liquidity ratio — the higher, the more liquidity) fell from 16% to 12.2%.

Looking at its individual segments, adjusted profits in BMO’s Canadian Personal and Commercial Banking segment fell by 8% to C$864 million due to increased expenses and provisions for credit losses. However, the U.S. Banking segment saw a 47% rise in profit to C$866 million, largely due to a stronger U.S. dollar and contributions from Bank of the West. Lastly, global market weakness caused a 10% dip in Wealth Management earnings and a 14% decline in BMO Capital Markets profits.

Is BMO Stock a Buy, According to Analysts?

According to analysts, BMO stock comes in a Strong Buy based on six Buys and two Holds assigned in the past three months. The average BMO stock price target of C$139.42 implies 23.1% upside potential.

If you’re wondering which analyst you should follow if you want to buy and sell BMO stock, the most accurate analyst covering the stock (on a one-year timeframe) is Scott Chan, CFA of Canaccord Genuity (TSE:CF), with an average return of 18.77% per rating and a 57% success rate. See below.



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