BMO's Credit Woes: Loan-Loss Provisions Far Exceed Forecasts

Bank of Montreal (BMO) reported a significant miss in its third-quarter earnings, driven by a substantial increase in loan-loss provisions that far exceeded analysts' forecasts. The bank's provision for credit losses surged to $906 million, more than double the $492 million recorded in the same period last year. This sharp increase was primarily driven by provisions for impaired loans, which nearly doubled from the previous year. Despite the decline in earnings, BMO's CEO, Darryl White, expressed confidence that the bank's credit costs would return to normalized levels in 2025, as the Bank of Canada eases monetary policy.



BMO's provision for credit losses reached $906 million, more than double the $492 million reported in the same quarter last year.



BMO's earnings disappointed as loan-loss provisions soared 89% YoY to C$906 million, far exceeding forecasts. This surge was driven by a 125% increase in impaired loans provisions, with 15 accounts comprising nearly half. Despite CEO Darryl White's confidence in containing the issue, analysts question BMO's predictive capabilities, leading to a 6% stock decline. The bank's commercial lending book, heavily exposed to rising interest rates, may face further headwinds. As BMO strives to maintain its competitive edge, investors should monitor its credit management and strategic responses to evolving market conditions.