Monday, March 1

To watch: BMO Bank, MTY and Uni-Select

Auto parts wholesaler Uni-Select had a less bad quarter than expected. (Photo: 123RF)

What to do with BMO, MTY and Uni-Select Bank securities? Here are some recommendations from analysts that may move prices soon. Note: the author may have a totally different opinion from that expressed.

BMO Bank (BMO, $ 101.84): Profit Surpasses Expectations By 42% Thanks To Its US Division

BMO Bank kicks off banking results with a bang.

As some analysts had predicted, its US operations steal the show with a 67% jump in profits to $ 459 million ($ M) in the first quarter.

Better than expected revenues (up 7%), but lower operating expenses (down 7%) and the reversal of $ 25 million in loan loss provisions produced this sharp increase south of the border .

As for the Canadian core banking activities, earnings increased 5% to $ 737 million, thanks to a slight increase of 1% in revenues and a 3% decline in non-interest expenses.

Loans granted increased 3% in Canada while provisions were down $ 44 million compared to the prior quarter.

Overall, the bank has also set aside less reserves for possible loan losses. Provisions decreased from $ 432 million to $ 156 million between the fourth and first quarters. This is significantly less than the provision forecast of $ 547 million by Scott Chan of Canaccord Genuity.

All divisions contributed to the performance, notes Scott Chan of Canaccord Genuity: profits before taxes and provisions increased 16% overall, and the increase is 24% in the United States. Wealth Management increased its profits by 18% while the Capital Markets division increased its profits by 34%.

The bank improved the interest margin, the difference between interest paid on deposits and interest paid on loans, compared to the prior quarter. In the United States, the increase was 17 percentage points, in Canada, 6 percentage points.

The 1% drop in overall operating expenses gave the bank a profitability lever of 7.1% while its efficiency ratio has improved from 60.3 to 56.3% over the past year, specifies the analyst.

Bottom line, net income jumped 27% to $ 3.06 per share, which is 42% above the consensus of $ 2.15 per share.

BMO Bank ends the first quarter well-capitalized: the regulatory capital ratio rose 50 percentage points to 12.4%, compared to the previous quarter.

The bank also posted a return on shareholders’ equity of 15.8%, up 230 percentage points from a year earlier. This exceeds the bank’s medium-term target of 15%, says Scott Chan.

While waiting for the conference call, the analyst maintains his buy recommendation and target price of $ 106.50.

MTY (MTY, $ 49.86): doubts have no place



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