By Robb M. Stewart


Bank of Montreal's shares were under pressure after the lender's quarterly earnings were squeezed by higher-than-expected provisions for loan defaults.

In morning trading, the shares were 5.8% lower at C$123.50, narrowing the advance over the past 12 months to 7.5%. In New York, the shares were down 6.2% at $90.20.

Despite growing overall second-quarter revenue to 7.97 billion Canadian dollars ($5.84 billion), up 2.4% on a year earlier, Bank of Montreal's earnings on an adjusted basis fell to C$2.59 a share from C$2.89, missing the C$2.77 consensus forecast of analysts polled by FactSet.

The big Canadian bank set aside C$705 million in overall provisions for credit losses for the three months to April 30, greater than the C$568 million mean estimate of analysts. Total provisions were down sharply from C$1.02 billion in the same quarter last year, though excluding the initial provision last year related to the acquisition of Bank of the West, provisions were up from C$318 million on an adjusted basis.

Bank of Montreal's provision for credit losses on impaired loans was C$658 million, an increase of C$415 million due to increases across the bank's operating segments to reflect the impact of a higher interest-rate environment, while the provision for credit losses on performing loans was C$47 million against C$780 million in the prior year.

Across the bank's operations, net income in its Canadian personal and commercial business was up roughly 6% on last year as balance sheet growth and margin expansion drove a rise in net interest income, but in the U.S. business income dropped 26% as the lender was squeezed by weaker margins in net interest income and a fall in non-interest revenue. BMO Wealth Management income was up 33%, while BMO Capital Markets logged a 24% increase in income as revenue was buoyed by higher interest rate trading and debt and equity issuance activity in global markets.


Write to Robb M. Stewart at robb.stewart@wsj.com


(END) Dow Jones Newswires

05-29-24 1042ET