BMO Results Missed Expectations, Weaker Credit Quality.

BMO (BMO CN) 1Q24 results (3M to 31-Jan-24) which missed consensus quite meaningfully, even at the adjusted level and show weaker credit quality. BMO’s EUR cash curve has tightened YTD but these results do ask questions of that move, we feel.

• Key credit metrics: credit losses rose to 38bp (from 27bp in 4Q23), non-performers rose to 65bp (from 59bp at Oct-23) and the CET1 ratio is 30bp higher (at 12.8%, ahead of 12.3% consensus). There is surprisingly little commentary on this move in credit quality other than it being across most business lines.
• Adjusted revenues missed consensus by 6% (though were +10% y/y), costs also overran expectations and credit losses rose by around half from 3 months earlier and were a fifth above expectations. Adjusted net income and EPS both missed by c.15%. These figures all exclude an FDIC special assessment charge and a range of charges relating to the BankWest acquisition (from 1-Feb-23).
• In common with Scotiabank, there is very little outlook commentary, other than around solid expectations for BankWest synergies. NPL growth was driven, in part, by CRE and that is likely to be a focus on the call.