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Bank of Montreal Earnings - Analysis & Highlights for Q1 2025

Overview

PositivesNegativesOutlook

BMO Wealth Management, PPPT was up 48%, with strong revenue growth in Wealth and Asset Management, reflecting market appreciation and net new assets, as well as a strong quarter for insurance as the company took advantage of investment opportunities in the market.
Net interest income was up 11% YoY and 5% sequentially on an ex-trading basis.
BMO delivered a record PPPT of CAD 4 billion this quarter, an increase of 32% from last year, driven by strong performance across its businesses.
The company has a strong balance sheet, robust capital and liquidity, and a well-diversified business model built to deliver resilient performance through cycles.
The company's strong performance this quarter reflects ongoing investments in talent and technology.

Q1 2025 Earnings Call

The effective tax rate increased to 24.5%, including the implementation of the global minimum tax in Q1.
Net income was down 4% due to higher PCLs.
The macro outlook is increasingly uncertain in light of shifting trade and fiscal policy pronouncements.
The company expects loan demand to slow.
The company's overall operating performance during the remainder of the year will be impacted by the outcome of the ongoing tariff negotiations in North America and the market environment that impacts client activity in its market facing businesses.

Q1 2025 Earnings Call

The company expects loan demand to slow.
The company expects to achieve its medium term ROE target of 15% for BMO.
The company is projecting margin stability at the higher level, assuming it maintains the benefits of higher long rates.
The company expects deterioration in the economic outlook to become part of its economic assumptions if tariffs are implemented and remain in place for a prolonged period.
The company expects those margins to hold up well, depending on the market and the efforts that both businesses are now pursuing on the deposit side.

Q1 2025 Earnings Call

Q&A Highlights from Bank of Montreal Earnings Call Q1 2025

Analyst asked about the difference in the behavior of US Commercial clients versus Canadian Commercial clients, and how the tariff headlines have affected them.
- Darryl White, CEO of Bank of Montreal, stated that there is a sense of anxiety among both US and Canadian clients, but the anxiety level is higher in Canada. Clients are pausing some commercial activities and waiting for clarity, as capital seeks clarity. The company is working with clients on various scenarios and focusing on controlling what it can, such as building capital and liquidity. The company's presence on both sides of the border, with 40% of its earnings plus coming from the US, is beneficial, but there is pressure on both sides. Nadim Hirji, Executive Vice President and Head of Commercial Banking, added that clients are not standing still and are working on business models, contingency plans, and inventory management. The company has a diversified client base in Canada and the US, and not everyone will be impacted equally. The company expects loan demand to slow, but its North American footprint will be advantageous, and it will continue to grow tactically.
Analyst asked about the company's CET1 ratio of 13.6%, and if the pace of buybacks will pick up or if the company expects to build capital ratios beyond 14% in the coming months and quarters.
- Darryl White, CEO of Bank of Montreal, stated that he would be surprised if the company builds capital ratios beyond 14% in the coming quarters. The company intends to continue with the buyback program, as it has the flexibility to watch the environment and play according to it.
Analyst asked about synergies captured in the view.
- Tayfun Tuzun responded that the company is currently progressing on capturing synergies, but they haven't captured a large portion yet, as there is a timeline associated with it. They are guiding towards an exit run rate in fiscal year 2026.
Analyst asked about the expected change in the line item.
- Piyush Agrawal responded that it's hard to predict the change in the line item due to the many unknowns in the tariff scenario.
Analyst asked about the potential impact of tariffs on BMO's US book compared to the broader US economy.
- Darryl White responded that BMO's US book is diversified and does not expect any significant impact on either side of the general outcomes.
Analyst asked about the ultimate goal for BMO's US business, given the 12% medium-term target.
- Tayfun Tuzun explained that the ultimate goal for the US business is to achieve a ROE of 15% or higher, which is 3% above the current 12% target. He noted that the current ROE is impacted by the goodwill, but with continued optimization of the balance sheet and execution of business priorities, the company believes it can reach the 15% target over a five-year plus period.
Analyst asked about the specific portion of the CAD 400-500 million benefit this quarter that can be attributed to seasonality benefits.
- Alan Tannenbaum, Chief Financial Officer, explained that the company experiences a consistent trade over year-end, and some years are better than others. He mentioned that the metals trading business had an outstanding quarter, and the company had a consistent performance across all of its businesses. The objective is to deliver that type of performance on a regular basis.
Analyst asked about the new run rate for trading revenue, suggesting a CAD 1.1 billion or so of trading revenue quarterly.
- Alan Tannenbaum clarified that the company does not expect that level of volatility and opportunity to be consistent throughout the year, and the performance seen in November and December is not expected to be sustained at that high level. The company is well-positioned to take advantage of opportunities in the market, but the performance will not be consistent throughout the year.
Analyst asked about the sustainability of the drivers mentioned in the company's Q1 2025 earnings call, specifically regarding NIM expansion.
- Tayfun Tuzun, the company's Chief Financial Officer, responded that deposit and loan margins are holding up well in the US, and they expect these margins to remain stable going forward. He also mentioned that the company's longstanding guidance has been one of stability, but there is upside potential. Erminia Johannson, Executive Vice President and Chief Operating Officer of US Personal & Commercial Banking, added that the company's focus is on growing core deposits, specifically checking accounts and savings accounts, which will contribute to stable core deposit growth.
Analyst asked about the impact of core deposit growth on NIM.
- Erminia Johannson responded that core deposit growth, specifically checking accounts and savings accounts, will be additive for NIM.

Q1 2025 Earnings Call