BMO Reports Higher Earnings, Increases Quarterly Dividend 25% After Efficiency Surge – .

BMO Reports Higher Earnings, Increases Quarterly Dividend 25% After Efficiency Surge – .

TORONTO – BMO Financial Group closed the Big Six’s financial results week by announcing the largest dividend hike and share buyback plan of any bank, as it announced earnings that were boosted in part by efficiency gains.
The bank said on Friday it had increased its quarterly dividend 25 percent to $ 1.33 per share and said it would repurchase up to 22.5 million shares representing 3.5 percent of outstanding shares.

The payment commitment came as the bank reported earnings of nearly $ 2.2 billion in the fourth quarter, down from nearly $ 1.6 billion in the same quarter last year, and said that it had achieved efficiency gains which should also lead to largely stable spending next year despite inflation. pressures.

“We have delivered on our spending and efficiency commitments,” CEO Darryl White said on a conference call with analysts.

He said the bank has been striving to cut costs for years, which has helped improve its efficiency ratio, a key measure of banks’ ability to convert assets into profits, by 540 basis points since. 2018 at 56.5%.

The bank has also kept spending stable over the past two years, excluding higher performance-based pay this year as it has cut some lines of business. Going forward, White said there are plans to make more efficient use of real estate and improve back office functions.

“We just keep challenging ourselves. We believe there is more to do, and we don’t think we are rock bottom. “

BMO doesn’t see much inflationary pressure on direct costs so far, CFO Tayfun Tuzun said, while he said the bank has other ways to respond to inflationary pressure if it becomes more. high than expected.

Businesses are also responding quickly to tackle inflationary pressures and the supply chain issues that cause them, noted David Casper, BMO’s U.S. Managing Director, with many stepping up automation and bringing in more factories. and shore equipment.

White said he was optimistic that the various tools used by businesses and governments, including hijacking more ships through the Panama Canal and ramping up activity at ports on the east coast, could resolve much of the backlog next year.

“We’re starting to see a bit of easing. I don’t think we’ll have this conversation in a year. “

BMO says its earnings were $ 3.23 per share for the quarter ended Oct. 31, compared to $ 2.37 per diluted share in the same quarter last year.

On an adjusted basis, BMO says it earned $ 3.33 per diluted share, up from adjusted earnings of $ 2.41 per diluted share in the same quarter last year.

Analysts on average expected adjusted earnings of $ 3.21 per share, according to estimates compiled by financial markets data firm Refinitiv.

Revenue rose 9.8% to $ 6.6 billion, from nearly $ 6 billion a year ago.

Lower than expected spending was one of the main reasons for the drop in profits, along with lower provisions for credit losses, National Bank analyst Gabriel Dechaine said in a note.

In its fourth quarter, BMO recorded a reversal of $ 126 million in its allowance for credit losses, compared to the $ 432 million it set aside for bad debts in the same quarter last year.

Barclays analyst John Aiken said in a note that there might be some concern that cutting costs could affect future growth, but that since BMO is emerging from a streak of high spending, there should be some concern that cost cutting could affect future growth. have more leeway.

He said the increase in BMO payments, with more to come, is a clear benefit for the bank.

“Since we believe the return of capital theme was the most prominent during the quarter, we can say with enough confidence that BMO was the winner. “

The Big Six Canadian banks raised their dividends and announced plans to repurchase a large number of their stocks this week as they released their fourth quarter results.

The increase in payments to shareholders follows a decision by the federal banking regulator last month to lift restrictions on dividend increases, share buybacks and executive compensation that were put in place at the start of the pandemic .

For its full year, BMO said it earned nearly $ 7.8 billion or 11.58 per diluted share on $ 27.2 billion in revenue, compared with profit of $ 5.1 billion or 7.55 per diluted share on $ 25.2 billion in revenue a year earlier.

This report by The Canadian Press was first published on December 3, 2021.

Companies in this story: (TSX: BMO)

Ian Bickis, The Canadian Press


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