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Aug 27, 2019

BMO profit higher in third quarter but loan loss provisions rise

BMO misses Q3 profit estimates while Scotia beats and raises dividend

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TORONTO -- BMO Financial Group's third-quarter profit rose by one per cent, but missed expectations as growth in its capital markets division was offset by lower earnings in wealth management and higher provisions for credit losses.

The Toronto-based bank said Tuesday it earned $1.56 billion during the quarter ended July 31, up slightly from $1.54 billion during the same period last year.

BMO's quarterly profit amounted to $2.34 per diluted share, compared with $2.31 in its third quarter of 2018.

On an adjusted basis, BMO says it earned $1.58 billion or $2.38 per share, compared with $1.57 billion or $2.36 per share a year ago.

Analysts had expected the bank to earn $2.49 per share, according to the financial markets data firm Refinitiv.

BMO's chief executive Darryl White says the bank delivered "strong" operating results during the quarter, demonstrating the resilience of the lender's diversified North American platform.

"Our Canadian and U.S. personal and commercial banking businesses together delivered nine per cent growth in pre-provision pre-tax profit contribution with good balance momentum," he said in a statement.

"Capital markets continues to perform well, with record revenue in investment and corporate banking. While provisions for credit losses increased this quarter from very low levels, overall credit quality remains strong."

BMO's Canadian personal and commercial banking arm earned $648 million, up from $641 million a year ago, while the bank's U.S. personal and commercial banking division earned $368 million, compared with $364 million from the same quarter last year.

The bank's wealth management business earned $249 million, down from $291 million in the same quarter last year as profit from its insurance business fell.

Capital markets earned $313 million, up from $301 million a year ago, while the bank's corporate services group reported a loss of $21 million compared with a loss of $60 million a year ago.

Provisions for credit losses totalled $306 million compared with $186 million in the prior year.

The increase came as provision for credit losses on impaired loans increased to $243 million compared with $177 million a year ago, primarily due to higher provisions in the bank's Canadian personal and commercial banking business. Provisions for credit losses on performing loans grew to $63 million compared with $9 million a year ago.

BMO's common equity tier 1 ratio, a key measure of the bank's financial health, improved to 11.4 per cent at July 31 compared with 11.3 per cent at the end of the second quarter.