Bank of Montreal earns $1.1B, hikes dividend and slashes 2,300 jobs

Bank of Montreal earns $1.1B, hikes dividend and slashes 2,300 jobs
The Bank of Montreal announced Tuesday it would be laying off roughly 2,300 people as part of a cost-cutting drive after the bank earned $1.19 billion in its most recent quarter and raised its dividend.

A drop in quarterly earnings — from $1.7 billion in the same quarter a year ago — was caused largely by a $357 million restructuring charge, mostly for severance payments. The cuts will affect about five per cent of Bank of Montreal’s workforce, executives said on a fiscal fourth-quarter conference call Tuesday.

“This is a sizable move,” chief executive officer Darryl White said on the call, while announcing earnings that beat analysts’ expectations. “We’re on a new path as far as a continuous improvement of the operating efficiency of the bank and this charge is designed to accelerate that path as we go forward.”

“I would expect the savings that we’ve talked about to flow through each of our businesses in a fairly representative way … both by operating group and by geography,” chief financial officer Tom Flynn told analysts on a conference call.

Based on the geographic breakdown of BMO’s workforce, the restructuring could affect roughly 1,500 jobs in Canada and 775 in the United States.

A spokesperson wasn’t able to say how many of the job losses would be in the Greater Toronto Area, instead pointing to the conference call.

The company’s adjusted efficiency ratio, a measure of what it costs to produce a dollar of revenue, was 60 per cent in the fourth quarter, down from 62.2 per cent a year earlier, as the lender moves toward White’s target of 58 per cent or better by the end of fiscal 2021.

“It is difficult for us to credit good expense control in the face of yet another restructuring charge from this bank, this time approaching $500 million,” CIBC Capital Markets analyst Robert Sedran said in a note to clients. “However, the underlying segment performance was solid with improving volume growth, positive operating leverage and stable credit quality. A decent result.”

The job cuts are across all areas of the bank and are deeper than previous rounds of reductions, including the elimination of 1,850 jobs, or four per cent of the workforce, in May 2016, and the 1,000 positions cut in 2007. The latest move comes about six months after the Toronto-based company pared about 100 jobs across its capital-markets division.

The reductions surpass Bank of Nova Scotia’s 1,500 job cuts, announced in 2014, and the 1,660 positions eliminated by Royal Bank of Canada in 2004. Those were among the Canadian banking industry’s biggest cuts in the past two decades.

Bank of Montreal’s restructuring costs contributed to a 30 per cent decline in net income in the quarter, with the company posting earnings of $1.19 billion, or $1.78 a share. Adjusted per-share earnings were $2.43, beating the $2.41 average estimate of 14 analysts in a Bloomberg survey.

The bank raised its quarterly dividend 2.9 per cent to $1.06 a share.

Wealth management led profit growth in the quarter, with a 22 per cent increase in earnings from the year earlier, while Canadian and U.S. banking also gained. Earnings from the company’s BMO Capital Markets unit fell 9.7 per cent amid a tougher year for dealmaking.
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