Don’t Short the Canadian Banks – Bank of Montreal

Summary

  • BMO released its Q4 and FY2017 results on December 5, 2017 to mixed reaction from Bay Street analysts.
  • Results were negatively impacted by a $0.112B charge related the hurricanes in the Gulf of Mexico area.
  • BMO has a US presence which needs to be beefed up. “Bolt-on” acquisitions are more likely given that reasonably valued decent major acquisitions are hard to come by in current market conditions.
  • BMO is exposed to the over-indebted Canadian consumer and to a correction in the Canadian housing market. Risk, however, is very well managed and the probability of a correction to the magnitude of that postulated by PAA Research is remote.
  • Some investors might be able to make money shorting BMO. It just happens to be a tough way to make money. Most investors should just buy, hold, and reinvest the dividends.

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Schedule I Canadian Banks – (part 1 of 6): Bank of Montreal Stock Analysis

Summary

  • This Bank of Montreal Stock Analysis is based on Q2 2017 results and is the first of a 6 part series covering the Big 6 Canadian Banks.
  • BMO US results have raised concerns about a slowing in its US growth.
  • BMO’s Capital Measure Ratios continue to improve thus providing investors with assurances that BMO remains a safe bank.
  • Pockets of the Canadian real estate market are wildly overheated but BMO’s results indicate its real estate related loan portfolio is of sound quality.
  • The Home Capital Group implosion is unlikely to have a significant effect on BMO’s residential mortgage portfolio.
  • BMO has paid a dividend for 188 years and it announced a $0.02 increase to CDN $0.90 effective with its August 2017 dividend payment.

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