Bank of Montreal missed analysts’ earnings estimates as the company reported higher expenses related to the integration of Bank of the West and a drop in wealth-management income.
The Toronto-based lender earned C$2.81 per share on an adjusted basis in the fiscal fourth quarter, it said in a statement Friday, falling short of the C$2.85 average estimate of analysts in a Bloomberg survey. Non-interest expenses totaled C$5.7 billion ($4.2 billion), up from C$4.78 billion a year earlier and missing analysts’ forecasts of C$4.95 billion.
The Canadian bank acquired regional US lender Bank of the West in February and converted its branches to the Bank of Montreal brand over Labor Day weekend. For the fourth quarter, Bank of Montreal had after-tax acquisition and integration costs of C$433 million, up from C$145 million a year earlier.
Bank of Montreal also said Friday it expects pretax cost savings of $800 million annually from the acquisition, up from a previous estimate of $670 million.
The lender’s corporate-services division reported a net loss of C$757 million, compared with C$2.25 billion of net income a year earlier. It said the loss was driven by higher expenses from the impact of Bank of the West and a C$51 million charge related to the consolidation of Bank of Montreal real estate.
The company said adjusted net income from its wealth-management unit slumped 12% to C$263 million as the inclusion of Bank of the West and an increase in revenue from client-asset growth was more than offset by higher expenses.
Provisions for credit losses in the three months through October totaled C$446 million, less than the C$457.7 million analysts had forecast.
It was a “mixed quarter” for Bank of Montreal, Keefe, Bruyette & Woods analysts Mike Rizvanovic and Abhilash Shashidharan said in a note to clients, with elevated expenses remaining a headwind that countered “slightly better provisions for credit losses and surprising strength in the capital-markets business.”
Capital-markets revenue grew 19% to C$1.67 billion, with the bank citing higher underwriting and merger and acquisition activity in the quarter amid “improved market conditions.”
Also reporting Friday was National Bank of Canada, which posted adjusted earnings of C$2.44 per share, beating analysts’ estimates of C$2.26. While revenue at all of the Montreal-based bank’s business lines was up in the quarter, results were impacted by higher expenses and provisions for credit losses, which came in at C$115 million, ahead of analysts’ estimates for C$101.5 million.
It was “a good quarter overall” for National Bank, with “surprising strength in the financial-markets segment” the main reason the company topped forecasts, Rizvanovic and Shashidharan said in a separate note.
Earlier this week, Bank of Nova Scotia reported a large earnings miss after posting significantly higher provisions for credit losses than analysts expected. Toronto-Dominion Bank also missed analysts’ profit estimates and announced C$266 million in after-tax restructuring charges as it said it planned to cut 3% of staff and reduce its real estate footprint.
Read More: TD Misses Estimates on Job-Cuts Charge, Credit Provisions
Meanwhile, Royal Bank of Canada and Canadian Imperial Bank of Commerce beat analysts’ estimates for the quarter. Royal Bank benefited from a tax adjustment while CIBC reported lower-than-expected provisions for potentially bad loans.
(Updates with Bank of the West cost-savings forecast, capital-markets revenue, analyst comment and National Bank results starting in fourth paragraph.)