Scotia Capital, 24 May 2012
• BMO cash operating earnings increased 15% YOY to $1.44 per share, above our expectations of $1.40 per share and IBES at $1.36 per share. The $1.44 includes $72 million after-tax or $0.11 per share related to recovery of provisions for credit losses on M&I purchased credit impaired loans versus $0.13 per share recovery in the previous quarter. Earnings in Q1/12 were $1.42 per share, which included the $0.13 per share recovery.
Implications
• Earnings growth was led by resilient P&C Canada, up 8% YOY, with Private Client Group earnings rebounding and BMO Capital Markets producing a relatively strong quarter driven by strong investment banking revenue and very solid trading revenue.
• Operating ROE: 15.4%, RRWA: 1.81%, CET1: 7.6%.
Recommendation
• Our 2012E EPS is unchanged at $5.75 per share; however, we are trimming our 2013E EPS to $6.20 per share from $6.30 per share. Our one-year target price is unchanged at $66 based on a target P/E multiple of 10.6x our 2013 earnings estimate.
• Maintain 3-Sector Underperform based on high relative P/E multiple given its low relative profitability.
;
• BMO cash operating earnings increased 15% YOY to $1.44 per share, above our expectations of $1.40 per share and IBES at $1.36 per share. The $1.44 includes $72 million after-tax or $0.11 per share related to recovery of provisions for credit losses on M&I purchased credit impaired loans versus $0.13 per share recovery in the previous quarter. Earnings in Q1/12 were $1.42 per share, which included the $0.13 per share recovery.
Implications
• Earnings growth was led by resilient P&C Canada, up 8% YOY, with Private Client Group earnings rebounding and BMO Capital Markets producing a relatively strong quarter driven by strong investment banking revenue and very solid trading revenue.
• Operating ROE: 15.4%, RRWA: 1.81%, CET1: 7.6%.
Recommendation
• Our 2012E EPS is unchanged at $5.75 per share; however, we are trimming our 2013E EPS to $6.20 per share from $6.30 per share. Our one-year target price is unchanged at $66 based on a target P/E multiple of 10.6x our 2013 earnings estimate.
• Maintain 3-Sector Underperform based on high relative P/E multiple given its low relative profitability.
