Financial Post, Duncan Mavin, 24 August 2006
Canada's big bank analysts are not an easy bunch to impress, as Bank of Montreal found out this week.
BMO delivered record-busting third-quarter net income on Tuesday, up 30% from a year ago to $710-million. The bank beat the street with cash earnings per share of $1.30, more than 9% above consensus estimates of $1.20 per share.
Yet the analysts hardly flinched.
"Although the bank did extremely well," said National Bank Financial analyst Rob Wessel in a note, "we have opted to maintain our underperform rating."
Mr. Wessel's take on the highlights from BMO's results was fairly typical.
"Excellent" earnings were helped by a number of one-off items, including the Mastercard initial public offering worth $25-million to the results, and income tax recoveries worth $26-million, he noted.
Also, BMO's provision for loan losses declined $24-million, or 36% to $42-million, but a forecast turn in the credit cycle is just delayed until later in 2007, said Mr. Wessel.
And stable excess capital of $2.4-billion only increases the risk of a dilutive acquisition, possibly to add to the bank's operations in the United States, he said.
Mr. Wessel raised his target for the bank's stock to $72 from $67. But, he said, the stock is "fully valued" at 12.3 times earnings (about the industry average.) Yesterday, the stock rose 35 cents to $66.70.
Nevertheless, an underperform rating is not a reflection of a negative outlook for BMO's future performance. "Rather," said Mr. Wessel, "We believe the other banks and lifecos will grow EPS faster allowing them to outperform BMO on a relative basis."
;
Canada's big bank analysts are not an easy bunch to impress, as Bank of Montreal found out this week.
BMO delivered record-busting third-quarter net income on Tuesday, up 30% from a year ago to $710-million. The bank beat the street with cash earnings per share of $1.30, more than 9% above consensus estimates of $1.20 per share.
Yet the analysts hardly flinched.
"Although the bank did extremely well," said National Bank Financial analyst Rob Wessel in a note, "we have opted to maintain our underperform rating."
Mr. Wessel's take on the highlights from BMO's results was fairly typical.
"Excellent" earnings were helped by a number of one-off items, including the Mastercard initial public offering worth $25-million to the results, and income tax recoveries worth $26-million, he noted.
Also, BMO's provision for loan losses declined $24-million, or 36% to $42-million, but a forecast turn in the credit cycle is just delayed until later in 2007, said Mr. Wessel.
And stable excess capital of $2.4-billion only increases the risk of a dilutive acquisition, possibly to add to the bank's operations in the United States, he said.
Mr. Wessel raised his target for the bank's stock to $72 from $67. But, he said, the stock is "fully valued" at 12.3 times earnings (about the industry average.) Yesterday, the stock rose 35 cents to $66.70.
Nevertheless, an underperform rating is not a reflection of a negative outlook for BMO's future performance. "Rather," said Mr. Wessel, "We believe the other banks and lifecos will grow EPS faster allowing them to outperform BMO on a relative basis."
