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FINANCIALS: BMO Court Victory; 1.6% Benefit To CET1 Capital, Spread Positive.

FINANCIALS
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Bank of Montreal (BMO: A2/A-/AA-) to see 4Q24 gain from Ponzi scheme court case win in Minnesota. This adds c.1.6% to CET1 capital in the current quarter, a small amount but at least spread positive.

  • Reuters is reporting that BMO won in court last night, meaning a USD564 verdict against the Canadian bank is voided. BMO had been found liable for the fraud by the trustee of the firm of the now-jailed fraudster, Tom Petters. The appeal court in Minnesota ruled, aligned with Madoff precedent, that Petters Co was “equally or more at fault” than BMO so couldn’t pass the buck.
  • The net effect is BMO will take a CAD875m benefit in its 4Q24 (3M to 30-Oct-24) results, from the release of provisioning over this case. This is 1.6% of BMO’s last reported CET1 capital, so not completely immaterial and clearly a spread positive, albeit a small one.
  • The wider issue is around reputational damage, TD Bank has come under fire from regulators repeatedly over perceived wrongdoing and that has had an impact on asset prices, in our view.
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Bank of Montreal (BMO: A2/A-/AA-) to see 4Q24 gain from Ponzi scheme court case win in Minnesota. This adds c.1.6% to CET1 capital in the current quarter, a small amount but at least spread positive.

  • Reuters is reporting that BMO won in court last night, meaning a USD564 verdict against the Canadian bank is voided. BMO had been found liable for the fraud by the trustee of the firm of the now-jailed fraudster, Tom Petters. The appeal court in Minnesota ruled, aligned with Madoff precedent, that Petters Co was “equally or more at fault” than BMO so couldn’t pass the buck.
  • The net effect is BMO will take a CAD875m benefit in its 4Q24 (3M to 30-Oct-24) results, from the release of provisioning over this case. This is 1.6% of BMO’s last reported CET1 capital, so not completely immaterial and clearly a spread positive, albeit a small one.
  • The wider issue is around reputational damage, TD Bank has come under fire from regulators repeatedly over perceived wrongdoing and that has had an impact on asset prices, in our view.