Bank of Montreal Earnings - Q3 2025 Analysis & Highlights
Key Takeaways
Bank of Montreal's Q4 2025 earnings call highlighted strong financial performance, strategic progress, and a positive outlook, with discussions around ROE improvement, US banking optimization, capital allocation, and navigating the macroeconomic environment.
Key Financial Results
Adjusted EPS for Q4 was CAD 3.28, and CAD 12.16 for the year.
Full-year ROE increased by 150 basis points from 9.8% to 11.3%, with Q4 exiting at 11.8%.
EPS growth of 26% and record net income of CAD 9.2 billion were delivered.
PPPT was up 18% for the year to CAD 15.8 billion.
Positive operating leverage of 4% was achieved for the year.
The efficiency ratio improved by 230 basis points to 56.3%.
Impaired provisions moderated from the peak in Q4 2024 to 44 basis points this quarter.
Business Segment Results
Wealth Management had a very strong year with record revenues and net income.
Capital Markets' PPPT growth for the full year was strong, with each quarter above expectations.
Canadian P&C business delivered record revenue this year and strong PPPT growth of 8%.
Canadian Commercial Banking saw good loan growth of 7% and deposit growth of 5%.
US Banking reported under a unified structure, with momentum building.
US Banking ROE improved by 170 basis points to 8.1% for the full year.
Capital Allocation
Over CAD 8 billion in capital was returned to shareholders through buybacks and dividends in 2025.
The dividend increased by CAD 0.04 to CAD 1.67 per share, up 5% over last year.
The CET1 ratio of 13.3% remains above the target.
Continued execution of the share buyback program is maintained.
Completed 8 million share repurchases during the quarter and 22.2 million shares in total during fiscal 2025.
Expect to continue buying back shares in 2026, while supporting business growth opportunities and maintaining a strong capital position.
CET1 management target remains 12.5%.
Industry Trends and Dynamics
Initiatives to invest in Canada and diversified trade relationships are beginning to move forward.
A renewed CapEx cycle is expected, benefiting the Commercial Banking and Capital Markets segments.
Continued growth in net sales, strong balance sheet growth, and higher brokerage transactions drove Wealth Management performance.
Competitive Landscape
BMO is positioned to further expand private wealth solutions with Burgundy Asset Management joining on November 1.
BMO Capital Markets ranked number one in M&A deals and number two in ECM league tables in Canadian Investment Banking.
BMO's North American Treasury & Payment Solutions platform offers a comprehensive product suite.
Sale of 138 branches in certain US markets and strategic reinvestment to strengthen the network in key markets.
Plan to add 150 new branches over the next five years, focusing on densifying in California.
Macroeconomic Environment
GDP growth is expected to be modest, with 1.8% in the US and 1.4% in Canada.
The Canadian unemployment rate is likely to remain above 7% through the middle of next year, presenting challenges to consumer credit.
Trade uncertainty persists pending the review of the USMCA agreement.
Softer economic environment in Canada is anticipated during the first half of 2026.
Growth Opportunities and Strategies
A digital-first AI-powered strategy is reshaping operations to serve clients.
A leading GenAI productivity tool was introduced to all BMO employees.
Strategic partnerships and investments in data, risk governance, and talent are accelerating AI capabilities.
Execution and captured benefits from GenAI tools like Lumi and Rovr.
Recurring fee revenues are up 10% this year in US Banking.
Commercial TPS fees grew 23% year-over-year, and strong growth in net new assets and AUM drove a 12% increase in Private Wealth fees.
Momentum continues to build in retail banking, with 60% higher growth in net new checking accounts year-over-year.
Positioning the US Banking business for growth, leveraging the strength and scale of all three businesses to drive greater synergies and continued ROE improvement.
Focus on allocating resources to areas of competitive strength and higher returns in the US.
Expect to largely complete balance sheet optimization in the early part of the year and expect year-over-year loan growth to strengthen and reach mid single digits by the end of the year.
Financial Guidance and Outlook
Expect PCL to continue to normalize over time.
Core expense growth is expected to be in the mid single-digit range in 2026, including investments in talent, technology, and automation.
Positive operating leverage is still expected for the year, including the impact of the first quarter charge.
Canadian P&C net income was up 5% year-over-year as good PPPT growth of 7% was partly offset by an increase in impaired and performing PCLs.
Expect low single-digit loan growth in Canada due to the macroeconomic environment impacting personal and commercial demand.
Expect an effective tax rate in the range of 25% to 26%.
Impaired provision is expected to remain in the mid-40 basis points range, assuming the consensus macroeconomic outlook plays out.
Expect impaired provision to remain in the mid 40 basis points range with quarterly variability.
