BMO hikes dividend after profit rises 38% in 4th quarter

Bank of Montreal hiked its dividend as it reported a fourth-quarter profit that jumped 38 per cent compared with a year ago and beat analyst estimates.

Canada's fourth-largest bank said Tuesday it will now pay a quarterly dividend of $1 per share, up four cents from its previous payment.

The increase in payment to shareholders came as BMO reported its net income for the three months ended Oct. 31 rose to $1.7 billion or $2.57 per diluted share, up from to $1.23 billion or $1.81 in 2017.

The bank's latest quarterly results were driven by strong performances from its Canadian and U.S. personal and commercial banking divisions as well as its wealth management business.

BMO was the last of the country's Big Five banks to post its earnings for its financial fourth quarter and 2018 financial year, with all delivering quarterly profit increases but some falling short of market expectations.

The bank's latest quarterly results were driven by strong performances from its Canadian and U.S. personal and commercial banking divisions as well as its wealth management business.

Its results from the three months ended Oct. 31 capped off a "successful year" for the bank, said BMO's chief executive Darryl White on Tuesday.

Growing U.S. operations

"We have made good progress against the areas we've been focused on," he said on a conference call with analysts. "Growing the contribution from our U.S. operation, improving efficiency while at the same time, investing in our digital innovation agenda... Looking ahead, while there's been some volatility in equity markets recently, the economic fundamentals remain strong, and we're leveraging our competitive strengths to grow our businesses."

On an adjusted basis, BMO earned $1.53 billion or $2.32 per diluted share, compared with $1.31 billion or $1.94 per share a year ago.

Analysts on average had expected a profit of $2.29 per share, according to Thomson Reuters Eikon.

BMO's domestic personal and commercial banking division reported fourth-quarter net income of $675-million, up eight per cent from the same three-month period a year ago. South of the border, its U.S. personal and commercial banking arm reported a 37 per cent increase in net income to $372 million.

BMO wealth management reported net income of $219 million, up 25 per cent from the prior year.

2018 earnings improve by 2%

On an annual basis, BMO earned $5.45 billion, up two per cent from its 2017 financial year, including the impact of a $425-million charge related to U.S. tax reform earlier this year. On an adjusted basis, the bank delivered net income of $6 billion, up nine per cent from the previous financial year.

Its key measure of financial health, called the common equity tier 1 ratio (CET1), was 11.3 per cent, down from 11.4 a year ago and 11.4 in the previous quarter.

The lender also reported provisions for credit losses, or money set aside for bad loans, of $175 million during the latest quarter, compared with $202 million a year earlier.

The latest quarterly results for Canada's banks were helped by strong contributions from their international operations, whether in the U.S. or in Latin America and the Caribbean, and BMO was no exception.

BMO's U.S. personal and commercial banking arm reported a 37 per cent increase in net income to $372 million.

At home, the bank's domestic personal and commercial banking division reported fourth-quarter net income of $675-million, up eight per cent from the same three-month period a year ago.

BMO wealth management reported net income of $219 million, up 25 per cent from the prior year.

The bank's capital markets arm reported net income of $298 million, down six per cent from the same period a year ago, as higher investment and corporate banking revenue and lower taxes were more than offset by higher expenses and lower trading products revenue.

However, under a new accounting standard implemented earlier this year, more variation in provisions amounts is expected. The new guidelines increase the emphasis on banks' expected losses over the life of the loan, and in turn, introduce more volatility to the measure.