Lumos Ajans/iStock Editorial by way of Getty Pictures
Jefferies downgraded Financial institution of Montreal (BMO) to Maintain from Purchase after the Canadian financial institution’s earnings missed consensus for a 3rd straight quarter as credit score continued to deteriorate.
BMO (BMO) inventory slid 5.9% in late Tuesday morning buying and selling after the financial institution ratcheted up its provision for credit score losses to C$906M in its fiscal Q3 ended July 31, 2024, from C$492M within the year-ago quarter.
“The tempo of degradation in credit score and BMO’s relative over-exposure to business infer ongoing stress to the financial institution’s earnings,” analyst John Aiken wrote in a word to purchasers.
Administration sees elevated credit score losses for the following a number of quarters as it’ll take time for central financial institution easing to filter by means of, CEO Darryl White mentioned in the course of the firm’s convention name.
Aiken identified that underlying outcomes stay stable, as seen in its preprovision, pretax earnings, supported by a return to optimistic working leverage. “Nevertheless, these enhancements had been inadequate to negate the elevated provisions’ influence on profitability,” he mentioned.
“Consequently, whereas we do anticipate that underlying progress will speed up in BMO’s (BMO) U.S. platforms, we not imagine that it will likely be ample to offset the credit score headwinds and supply earnings outperformance in opposition to its friends,” Aiken wrote.
Aiken’s Maintain score aligns with the SA Quant score and broke with the typical Wall Road score of Purchase.
