TORONTO – The Bank of Montreal (TSX:BMO) reported a fourth-quarter profit of $1.08 billion on Tuesday as its capital markets business more than doubled its earnings compared with a year ago.
The increase came as the bank said the Canadian housing market appeared to be slowing in most markets.
“We continue to see growth in residential mortgage market share, and believe the changes to Canada’s mortgage market announced earlier this year, which are aligned with BMO’s risk practices and ongoing efforts to encourage Canadians to borrow smartly, are having the desired moderating effect on housing prices in most markets,” BMO chief executive Bill Downe said.
For the fourth quarter ended Oct. 31, BMO reported a net profit of $1.59 per share, up from $768 million or $1.11 per share.
BMO’s revenue in the fourth quarter from all business segments totalled $4.18 billion, up from $3.82 billion in the fourth quarter of 2011.
The bank’s adjusted earnings amounted to $1.65 per share compared with expectations of $1.43 per share on an adjusted basis for the fourth quarter, according to estimates compiled by Thomson Reuters. The quarterly revenue estimate had been $3.8 billion.
Downe noted that a “concerted focus on efficiency was reflected in a reduction of 700 full-time employees.”
BMO Capital Markets helped drive the quarter as the division earned $293 million, up from $143 million a year ago.
Personal and commercial banking in Canada earned $439 million, about the same as a year ago, while the U.S. division earned $130 million, down from $155 million.
Downe said the bank completed the conversion of its core banking platform in the U.S. during the quarter.
“Over the past two years, with the acquisition of Marshall & Ilsley Corp., we have fundamentally transformed the bank, changed its growth trajectory, and enhanced long-term value for shareholders.
“BMO Harris Bank has strong deposit market share positions in our core Midwest markets, and our U.S. footprint has doubled in size.”
The bank’s private client group earned $166 million for the quarter, up from $137 million.
Despite the better than expected results, RBC Capital Markets analyst Andre-Philippe Hardy maintained a “sector perform” rating on the bank.
“We continue to believe that the shares of banks with better revenue growth will perform better in the next 12 months,” Hardy wrote in a note to clients.
He noted that BMO did not grow year-over-year revenues for its Canadian personal and commercial banking, while revenue slipped five per cent at its U.S. personal and commercial banking operations.
“We believe that better revenue growth in retail banking divisions is needed for BMO’s stock to perform well on a sustained basis relative to peers,” Hardy wrote.
The quarter brought Bank of Montreal’s total earnings for the 2012 financial year to $4.19 billion or $6.15 per diluted share, up from $3.11 billion or $4.84 per diluted share the previous year.
Revenue for the full 2012 financial year increased to $16.1 billion from $13.9 billion.
In the third quarter, the bank announced plans to close 24 of its U.S. BMO Harris bank branches in the U.S. Midwest, as an effort to scale back on overlapping branches after the acquisition of Marshall & Ilsley, also known as M&I.
Bank of Montreal is involved in retail banking, wealth management and investment banking across Canada, as well as the Chicago-based Harris Bank.
BMO was also one of the Canadian banks that was put under review by Moody’s Investors Services, which rates the credit of governments, public sector institutions and corporations.
Moody’s said the review was prompted by concerns about consumer debt levels and home prices in Canada, where the banking sector is the major source of mortgage lending.
Shares in the company were up 26 cents at $59.55 on the Toronto Stock Exchange on Tuesday afternoon.