The Bank of Montreal announced a two-cent increase to its quarterly dividend on Tuesday despite reporting a weaker-than-expected profit for the fourth quarter.
BMO said its main Canadian banking operations showed strong performance, but that was partially offset by declines at its capital-markets and wealth-management units.
The earnings miss may set a sour tone for the banking industry’s fourth-quarter earnings season, an analyst said.
BMO reported revenue of $4.34 billion for the three months ended Oct. 31. That’s up from $4.14 billion for the year-earlier period.
Net income was $1.07 billion for the three months ended Oct. 31. That’s a slight decline of $4 million from the year-earlier period.
On an adjusted basis, net income was $1.11 billion, or $1.63 per share, up 2 per cent from the fourth quarter of 2013.
Analysts had been expecting net earnings of $1.68 per share.
“While BMO continues to show progress in U.S. retail, an abysmal capital-markets quarter, noise in wealth management and flat domestic retail earnings on top of an arguably low quality miss will not likely provide much excitement and could weigh on the sector as a whole, unless better earnings are produced throughout the remainder of the week,” Barclays Capital analyst John Aiken wrote in a research note.
Bank of Montreal stock fell $1.64 per share to trade at $81.69 just off the opening bell at 9:30 a.m. on the Toronto Stock Exchange.
The bank also announced that its quarterly dividend will increase to 80 cents per common share with the first-quarter payment on Feb. 26, 2015.
For fiscal 2014, BMO Financial Group reported profit of $4.33 billion or $6.41 per share.
Its revenues reached $16.72 billion, up from $16.06 billion for fiscal 2013.
“This performance reflects a well-executed customer-focused strategy and the momentum we have demonstrated over a number of quarters,” president and chief executive officer Bill Downe said in a release.
Provisions for credit losses were $170 million for the fourth quarter, up from $130 million in the third quarter but down from $189 million for the final quarter of 2013.
The bank said that its Canadian personal and commercial banking unit posted a strong fourth quarter result. Net income was $524 million, up 14 per cent from a year ago, driven by higher revenue and lower provisions for bad loans, and partially offset by higher expenses.
In U.S. personal and commercial banking, net income was $152 million, up $54 million from the year-earlier period. The increase was driven by lower provisions for bad loans and higher revenues, partially offset by increased expenses.
The bank’s wealth-management division had $226 million of net income, down from $311 million a year earlier when the bank had a $121 million after-tax security gain.
Profits at BMO Capital Markets fell by 12 per cent to $191 million from a year ago as higher revenue was offset by higher expenses and lower loan recoveries, the bank said.
The bank is expected to provide more earnings details at a 2 p.m. conference call today.
Royal Bank of Canada posts its fourth-quarter and fiscal 2014 results on Wednesday, followed by Canadian Imperial Bank of Commerce and Toronto-Dominion Bank on Thursday. Scotiabank reports on Friday.
- With files from The Canadian Press