Profit Decreasing Risk Increasing
May 29, 2008 – 10:54 amThe Bank of Montreal has so far avoided the crushing massive write downs of the likes of Citigroup and UBS and for the first time on this blogs record actually made a net after-tax recovery from previously written down assets, namely its Apex and Sitka asset-backed trusts.
The bank booked a $42-million pre-tax ($28-million after tax) recovery related to the capital environments this quarter. That effectively reverses a small portion of the hundreds of millions of dollars in writedowns the bank has taken in recent quarters, including the roughly $490-million pre-tax ($324-million after tax) writedowns it took in the prior quarter.
The bank reported second quarter earnings of $642 million or $1.25 per share, down from $671 million or $1.31 per share a year ago. The banks private client group showed up strong.
BMO’s private client group saw earnings increase 10 per cent to $109-million, even thought commission revenue fell in the brokerage businesses as a result of lower transactional revenue, including fierce price competition from the direct brokerage business.
BMOs lower earnings come on higher loan loss provisions.
The lender set aside C$151 million for bad loans in the second quarter, up from C$59 million a year ago. Revenue rose 3.6 percent to C$2.62 billion. The bank expects loan loss provisions to rise from the rate of C$170 million reported in the first quarter as loan defaults tied to U.S. real estate rise and the Canadian economy expands at its slowest pace in 16 years in 2008.
So instead of the expected $200 million in additional write downs in BMOs second quarter the bank can now actually remove some of the write it took in the first quarter. The bank also seems to take this as license to claim the good times are here again.
Chief Executive Bill Downe said the bank’s outlook is improving “as there are indications that concerns are easing in credit markets as credit spreads are trending toward more normal levels.”
We don’t think so Bill. How can you say things are getting back to normal at the same time your increasing loan loss provisions? That means you see risks increasing. No one knows what the future holds, but we can all hear what you say and see what you do and calculate difference. Good luck in Q3 and Q4.
One Response to “Profit Decreasing Risk Increasing”
I am from Montreal. This banker is a liar. Nothing is improving at Bank of Montreal. CIBC announced today also a 1,1 billion loss relaterd to US real estate. These guys in banking are real sociopaths like George W. Bush. Politicians and bankers are made from the same clothe. Nothing is getting back to normal. Liar liar pant on fire. Bank of Montreal isn’t even based in Montreal. Today they operate in hogtown Toronto.
By Marc Authier on May 29, 2008