Bank of Montreal (TSX: BMO) delivered first-quarter earnings that handily surpassed analyst estimates, driven by a standout performance from its capital markets division, even as the bank took restructuring charges and navigated a diverging economic landscape between the U.S. and Canada.
The Montreal-based lender, which prides itself on having paid dividends continuously since 1829, reported net income of $2.49 billion for the quarter ended Jan. 31, up 16% from $2.14 billion in the same period last year. Diluted earnings per share (EPS) rose to $3.39, compared with $2.83 a year earlier.
On an adjusted basis, BMO earned $3.48 per diluted share, significantly topping the average analyst estimate of $3.20, according to LSEG Data & Analytics. Total revenue for the quarter climbed to $9.82 billion, up from $9.27 billion last year.
According to Scotiabank analyst Mike Rizvanovic, the earnings beat was largely fueled by the bank’s capital markets division.
“Canadian personal and commercial banking and U.S. banking both came in below our estimate, wealth management was in line, while capital markets was a big beat, and the adjusted loss in corporate came in lower than we had expected,” Rizvanovic noted in a research report.
BMO’s capital markets business posted earnings of $657 million, a 12% jump from $589 million in the prior year, underscoring strong trading and underwriting activity.
While the overall results were robust, performance across business units highlighted the contrasting economic conditions in Canada and the United States.
Chief Risk Officer Piyush Agrawal said loan portfolios are performing as expected, but noted that Canada faces stiffer economic headwinds compared to its southern neighbor.
“The U.S. economy is maintaining its outperformance relative to Canada, supported by expansionary fiscal policies, accommodative monetary policy, and investments in AI,” Agrawal said on the earnings call. “In Canada, the overhang of trade issues and the renegotiation of the North American trade deal are creating significant uncertainty. Given these factors, we continue to anticipate a softer economic environment in Canada.”
Following the acquisition and customer migration of Bank of the West, BMO is accelerating its branch optimization strategy in the U.S. The bank plans to sell 138 branches in lower-growth markets to First-Citizens Bank & Trust Company by mid-2026, a move expected to result in a goodwill charge of approximately US$117 million.
Concurrently, BMO announced it will open 150 new branches in California over the next five years. Management identified California as the market with the highest growth potential, where it aims to strengthen its presence in Personal and Business Banking, Commercial Banking, and Wealth Management across the West Coast.
The bank also demonstrated its commitment to operational efficiency, recording a $202 million pre-tax severance charge during the quarter. The charge contributed to a reduction in total employee headcount, which fell by 678 to 53,035 compared to the third quarter.
“Our commitment to expense management and operational efficiency continues to enable strategic investments in technology and talent,” CEO Darryl White said on the call. “We’re executing on our commitment to deliver higher returns and profitable earnings growth.”
For income-focused investors, BMO’s latest results reinforce its status as a cornerstone holding. The bank has paid dividends without interruption for 197 years, a streak that began in 1829—decades before Canada’s confederation. This remarkable track record has weathered the Great Depression, two World Wars, the 2008 financial crisis, and the COVID-19 pandemic.
During the pandemic, when the Office of the Superintendent of Financial Institutions (OSFI) mandated a pause on dividend hikes, BMO maintained its payout. Immediately after the restrictions were lifted in 2021, the bank raised its dividend by 25%, underscoring its commitment to shareholder returns.
While near-term uncertainties persist in the Canadian market, BMO’s diversified business mix, disciplined cost management, and strategic expansion in the high-growth U.S. market position it to navigate the cycle. For investors seeking both dividend reliability and growth potential, the bank’s capital markets strength and U.S. footprint expansion offer a compelling narrative.
