Scotia Capital, 24 August 2011
• BMO cash operating EPS increased 19% to $1.36 per share, beating our expectation of $1.30 per share and IBES consensus of $1.31 per share, aided by tax recovery, partially offset by weaker insurance revenue.
Implications
• BMO Capital Markets earnings were stronger than expected due to tax recovery, as well as trading revenue held up better than U.S. Bank results, improving to $269 million from $250 million the previous quarter. Equities trading revenue was particularly strong at $103 million (including a couple of small items of note) versus $66 million in Q2/11.
• P&C Canada earnings growth slowed to 2%, with Private Client earnings (ex Insurance) strong increasing 43% and P&C U.S. earnings increasing 39%, excluding M&I.
• Operating ROE: 15.6%, RRWA: 1.79%, CET1: 6.6%.
Recommendation
• Increasing slightly our 2011E EPS to $5.36 from $5.30 due to the beat this quarter. Our 2012E EPS is unchanged at $5.85 per share.
• Maintain 2-Sector Perform as relative valuation remains high versus low RRWA and low CET1.
;
• BMO cash operating EPS increased 19% to $1.36 per share, beating our expectation of $1.30 per share and IBES consensus of $1.31 per share, aided by tax recovery, partially offset by weaker insurance revenue.
Implications
• BMO Capital Markets earnings were stronger than expected due to tax recovery, as well as trading revenue held up better than U.S. Bank results, improving to $269 million from $250 million the previous quarter. Equities trading revenue was particularly strong at $103 million (including a couple of small items of note) versus $66 million in Q2/11.
• P&C Canada earnings growth slowed to 2%, with Private Client earnings (ex Insurance) strong increasing 43% and P&C U.S. earnings increasing 39%, excluding M&I.
• Operating ROE: 15.6%, RRWA: 1.79%, CET1: 6.6%.
Recommendation
• Increasing slightly our 2011E EPS to $5.36 from $5.30 due to the beat this quarter. Our 2012E EPS is unchanged at $5.85 per share.
• Maintain 2-Sector Perform as relative valuation remains high versus low RRWA and low CET1.
