Analysts lower targets on BMO (BMO:TSX) on lower than expected Q2 results

TD Securities Reduces Bank of Montreal Target Price Over Credit Risk Concerns (Consensus "Buy")

Bank of Montreal Stock Forecast:

According to 21 analysts, the average target price for Bank of Montreal (BMO) over the next 12 months is CAD 132.92. The analysts’ average rating for BMO is Buy. Stock Target Advisor‘s analysis of BMO indicates a Slightly Bullish outlook, based on 3 positive signals and 2 negative signals. Currently, BMO’s stock price stands at CAD 112.84. Over the past week, the stock price has decreased by -5.68%, over the past month by -8.45%, and over the last year by -15.19%.

Analysts Coverage Change:

  • Scotia Capital maintains the “Outperform” rating for BMO with a target price of $143.
  • TD Securities maintains a “Buy” rating and lowers the target price to $125 from $140.

BMO:CA Ratings by Stock Target Advisor

BMO News:

The Bank of Montreal (BMO:TSX) has reported lower-than-expected results for its second quarter, primarily due to increased provisions for potentially bad loans and costs associated with its acquisition of U.S.-based Bank of the West. The bank’s net income for the three months ending April 30 fell to $1.06 billion, a significant decrease from $4.76 billion during the same period last year. However, on an adjusted basis, BMO’s profit grew to approximately $2.22 billion, or $2.93 per share, up from $2.19 billion the previous year. Despite this adjusted growth, Bloomberg analysts had anticipated earnings of $3.21 per share.

BMO’s CEO, Darryl White, acknowledged the challenging environment but expressed satisfaction with the bank’s overall performance, emphasizing the positive impact of a full quarter of results from Bank of the West. He stated, “While credit trends are beginning to normalize from historically low levels as expected, credit performance remains strong across our portfolios.” White also highlighted that BMO maintained a capital buffer of 12.2% and increased its quarterly dividend by four cents to $1.47 per share.

One of the key factors contributing to BMO’s lower-than-expected results was the bank’s provision for credit losses, which significantly expanded to $1.02 billion in the second quarter compared to $50 million in the same period last year. This increase was largely driven by the recognition of $705 million in provisions on Bank of the West’s performing loan portfolio. However, on an adjusted basis, provisions for credit losses reached $318 million, reflecting a substantial rise from the previous year’s $50 million.

BMO’s Canadian personal and commercial banking segment also experienced a decline in adjusted profit, dropping by eight percent to $864 million. This decline was attributed to higher expenses and increased provisions for credit losses. In contrast, the bank’s U.S. banking segment witnessed a significant profit growth of 47 percent, reaching $866 million. This increase was primarily driven by the stronger U.S. dollar and $163 million in adjusted contributions from Bank of the West.

Wealth management earnings declined by 10 percent year-over-year to $285 million, mainly due to weakened global markets, which resulted in lower online brokerage volumes. BMO Capital Markets reported a 14 percent decline in profit from the previous year, amounting to $388 million on an adjusted basis, despite a slight increase in revenue.

Addressing concerns about commercial real estate, BMO stated that the office segment represents only one percent of the bank’s overall loan portfolio, similar to the Bank of Nova Scotia’s reassurances.

 

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