(Bloomberg) -- Bank of Montreal’s push to double wealth-management earnings in five years got a boost in the fiscal fourth quarter, even as the company took a C$357 million ($268 million) charge tied mostly to job cuts.

  • The company last year set a target of increasing profit from the business to C$2 billion by 2023 with a strategy that includes accelerating growth in the U.S., building out services for wealthy clients and expanding its global asset manager. The wealth-management unit was the bank’s best-performing business, with income rising 22% in the fiscal fourth quarter to C$267 million as overall earnings beat analysts’ expectations.

Key Insights

  • Executives have been working to boost productivity at Bank of Montreal, the least-efficient among Canada’s biggest banks. Bank of Montreal’s restructuring charge was related to severance and a small amount of real estate-related costs, part of a bid “to continue to improve our efficiency,” the lender said. The company’s adjusted efficiency ratio -- a measure of what it costs to produce a dollar of revenue -- was 60% in the fourth quarter, compared with White’s target of 58% or better by the end of fiscal 2021.
  • Bank of Montreal had 810 fewer full-time positions in the quarter, with most of the reductions in Canada. The bank had 45,513 employees as of Oct. 31, compared with 46,323 at the end of July and 45,454 a year ago.
  • The Toronto-based lender has seen profit growth slow at its U.S. banking division, which includes Chicago-based BMO Harris Bank. Three Federal Reserve interest-rate cuts haven’t helped. Net interest margins in the U.S. division narrowed to 3.35% in the fiscal fourth quarter, its lowest since at least 2010.
  • Bank of Montreal sees scaling up in the U.S. as key to its aspirations of being a top 10 North American investment bank. Earnings from its BMO Capital Markets unit fell 9.7% to C$269 million in the fourth quarter amid a tougher year for dealmaking.

Market Reaction

  • Bank of Montreal shares have risen 13% this year through Monday, compared with a 14% gain for Canada’s eight-company S&P/TSX Commercial Banks Index.

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  • Fourth-quarter net income fell to C$1.19 billion, or C$1.78 a share, from C$1.7 billion, or C$2.58 a share, a year earlier. Adjusted per-share earnings totaled C$2.43 a share, beating the C$2.41 average estimate of 14 analysts in a Bloomberg survey.
  • Bank of Montreal raised its quarterly dividend 2.9% to C$1.06 a share.
  • Read more about Bank of Montreal’s quarterly results here.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, ;David Scanlan at dscanlan@bloomberg.net, Daniel Taub, Steve Dickson

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