BMO Bank Earnings Reports

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Net-write-offs is a backward-looking metric for credit quality, while provision for credit loss (PCL) and allowance for credit loss (ACL) are forward-looking metrics for credit quality. The net write-off is write-offs minus recovery of assets written off in the past. Write-offs are taken from allowance for credit losses (ACL) and do not affect quarterly income. ACL (Allowance for Credit Losses) is the estimated amount of potential future credit losses in a loan portfolio that a financial institution sets aside as a reserve. PCL Provision for Credit Losses is the amount charged to expenses in a period to bring the ACL to its appropriate level based on the assessment of potential future credit losses. These two concepts are closely related - the PCL is the periodic expense that adjusts the ACL balance.

All three parameters were relatively stable between 2016 and Q1 2020. They rose sharply in Q2 2020 and Q3 2020 as the pandemic hit, but they started declining as the government initially made significant transfers to affected and even unaffected consumers, and then the population started coping with the coronavirus.

More recently, the most notable features of BMO’s credit quality data include a continuous rise in net write-offs from a trough of $131 M in Q2 2022 to $643 M in Q3 2024 and $1,244 M in Q4 2024. Provision for credit loss (PCL) also has risen from a trough of -$126 M in Q4 2021 to $906 M in Q3 2024 and $1,523 M in Q4 2024. Note that a negative PCL value indicates a reversal of the earlier provisions for credit losses. In the middle of this trend there was a sharp peak in Q2 2023, as BMO had to provision for possible credit losses on the assets of the Bank of the West while it was consolidating those assets for the first time. Finally, the allowance for credit loss has risen from a post-pandemic trough of $2,792 M in Q1 2022 to $4,750 M in Q3 2024 and to $4,936 M in Q4 2024. BMO’s commercial loans in the US have significantly hurt its bottom line by rising PCL, but the bank’s CEO suggests that these credit problems are finally under control.

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We can see an increase in the number of BMO shares, which occurred mostly in Q1 2023 and Q2 2022.

Second Quarter 2022: In March 2022, BMO issued approximately 20.8 million common shares, raising $3.1 billion. This action bolstered the bank's Common Equity Tier 1 (CET1) Ratio to 16.0% as of April 30, 2022, up from 14.1% at the end of the previous quarter.

First Quarter 2023: In December 2022, BMO announced a public offering and concurrent private placements, issuing a total of about 26.6 million common shares at $118.60 per share, resulting in gross proceeds of approximately $3.15 billion. This initiative increased the CET1 Ratio to 18.2% as of January 31, 2023, up from 16.7% at the end of the fourth quarter of 2022.

These capital-raising efforts were part of BMO's strategy to maintain a strong capital base and support its growth initiatives, mainly the acquisition of Bank of the West.

The amount of quarterly dividends has increased by 98% over the past 8 years. The number of Canadian BMO branches is declining as the share of banking operations performed online increases and as BMO’s growth has been mostly focused on the US market.

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BMO’s total assets have grown by over 102% over 8 years, from $691,682 M in Q3 2016 to $1,400,470 M in Q3 2024. This shows the growth of BMO as a lending institution. Assets under management mostly show the size of asset management and wealth management operations of an institution. BMO’s assets under management dropped by 36% in Q1 2022 when BMO sold its EMEA asset management business to Ameriprise Financial.

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BMO is a lender, and like most other banks, its assets are largely concentrated in its loan portfolio. Total loans include secured loans to dealer-brokers, loans to other financial institutions, loans to Canadian government entities, loans to foreign governments, leases receivable, personal loans to individuals, reverse repurchase agreements, business loans and mortgages.

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Securities include securities issued by Canadian government entities as well as securities of non-governmental entities and non-government securities include both debt securities and stocks. Cash and cash equivalents include deposits with the Bank of Canada (BoC), Bank notes, Gold, Cheques in Transit and deposits with other financial institutions.

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Deposits are the most significant component of BMO’s liabilities. BMO deposits include both foreign and domestic deposits. Each of foreign and domestic deposit includes demand and notice deposits as well as term deposits. Both demand and notice deposits and fixed-term deposits include deposits made by government entities, financial institutions, individuals, and non-financial firms.

Bank of the West was an American financial institution headquartered in San Francisco, California. Established in 1874 as Farmers National Gold Bank of San Jose, it evolved over time, adopting the Bank of the West name and expanding its presence across the Midwest and Western United States. In 1979, it became a French banking group BNP Paribas subsidiary. In February 2023, the Canadian banking group Bank of Montreal (BMO) completed its acquisition of Bank of the West for $13.8 B. This acquisition added 1.8 million customers and 500 branches to BMO. Subsequently, over the Labor Day weekend of 2023, the Bank of the West brand was retired, with all accounts and branches integrated into BMO's U.S. subsidiary, BMO Bank, N.A.