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Bank of Montreal hikes dividend as profit beats expectations on strength in personal banking

Bank of Montreal hikes dividend as profit beats expectations on strength in personal banking
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Bank of Montreal beat analyst estimates for quarterly profit on Tuesday, helped by strength in its retail banking and wealth management businesses despite rising credit loss provisions.

The second of Canada’s big banks to report earnings also raised its quarterly dividend 2.9 per cent to $1.06 a share.

Adjusted income excluding one-off items rose to $1.6 billion, or $2.43 per share, from $1.5 billion, or $2.32 a year earlier. Analysts had expected $2.41 per share, according to IBES data from Refinitiv.

Despite global economic weakness and elevated household debt levels, Canada’s big five banks’ stranglehold on consumer and business lending at home has helped them grow earnings in their retail divisions. Those operating in the United States, including BMO, are also benefitting from healthy household finances in a less concentrated market, albeit with some pressure on margins.

Adjusted net income rose 6.1 per cent in Bank of Montreal’s personal and commercial business in Canada, driven by growth in commercial loans. Profit from the U.S. business rose 5.5 per cent, despite a 11-basis-point drop in net interest margins.

The wealth management division’s 31 per cent increase in adjusted earnings also helped offset a 9.4 per cent drop in profit from its capital markets business.

Despite the better-than-expected result, Credit Suisse analysts expressed concern about an unsustainable 16 per cent growth in commercial loans in Canada, margin compression in the U.S. and the likelihood that a 4-basis-point margin expansion in Canada will begin to reverse as commercial loan growth slows.

The bank set aside $253 million for credit losses in the quarter ended Oct. 31, up 45 per cent from a year earlier.
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