Everything You Need to Know on Wednesday: Bank of Montreal Raises Dividend Despite Earnings Miss
Good morning mooers! Here are things you need to know about today's market:
● S&P/TSX 60 Index Standard Futures are trading at 1,322.30, down 0.57%
● BMO notes "separation anxiety" between Bank of Canada, Federal Reserve
● Bank of Montreal raises dividend despite earnings miss
● National Bank of Canada reports $906m profit in Q2, increases dividend to $1.10 per share
● Fitch downgrades TD bank's outlook to negative amid anti-money laundering concerns
Macro
BMO Notes "Separation Anxiety" Between Bank of Canada, Federal Reserve
There's little left on the inflation front to argue against the Bank of Canada (BoC) cutting rate and Bank of Montreal (BMO) said it continues to believe that June will see a rate cut.
The bigger hangup is what's happening in the United States, where stronger and more stubborn core inflation trends have pushed out expectations of Federal Reserve easing, stated the bank.
A 25 bps cut by the BoC next Wednesday would widen the fed funds-BoC policy rate spread to 62.5 bps (at the fed funds midpoint), back in line with the widest levels seen on a few occasions since 2017, pointed out BMO. If the BoC were to go further in the months ahead, you'd have to go back to 2007 to find a wider spread, which reached 100 bps late in that expansion.
The Canadian dollar (CAD or loonie) was much stronger during that 2005-to-2007 period, in part because rising oil prices were
driving big energy-sector investment in Canada, added the bank. That's not the case today and, as a result, BMO sees rate spreads and simply broad US dollar (USD) strength driving most of the currency moves.
The bank believes there is scope for the BoC to cut rates ahead of, and somewhat more than, the Fed. But anything beyond 50 bps more could start to be an "issue" for the currency.
Stocks to watch
Bank of Montreal Raises Dividend Despite Earnings Miss
$Bank of Montreal(BMO.CA$ reported earnings that fell below analysts' forecasts, attributing the shortfall to higher-than-anticipated provisions for potential credit losses amid a climate of rising interest rates affecting consumers and businesses. In a statement released Wednesday, the Toronto-based bank announced an adjusted profit of $2.59 per share for its fiscal second quarter, missing the $2.77 per share consensus from a Bloomberg survey of analysts. BMO set aside $705 million for credit losses during the quarter ending in April, surpassing the $585 million predicted by analysts.
BMO, which expanded into the U.S. market with the acquisition of Bank of the West in early last year, has encountered difficulties in revenue growth in the U.S. due to a challenging interest-rate environment that has impacted credit quality and curtailed loan expansion. Meny Grauman, an analyst at Scotiabank, noted these challenges in a research note earlier this month.
The U.S. operations of Bank of Montreal experienced a 26 percent decline in net income, reporting $543 million, compared to the same period last year. Despite these setbacks, BMO reported an increase in its Common Equity Tier 1 ratio to 13.1 percent. Additionally, the bank declared a quarterly dividend boost of 4 cents, bringing it to $1.55 per share.
National Bank of Canada Reports $906M Profit in Q2, Increases Dividend to $1.10 Per Share
$National Bank of Canada(NA.CA$ has announced a rise in its second-quarter profits to $906 million, climbing from the prior year's $832 million. Accompanying this increase, the bank has also declared a hike in its quarterly dividend payout.
Based in Montreal, the bank has confirmed an augmented dividend of $1.10 per share, a four-cent rise from its previous distribution.
This boost in shareholder remuneration occurs as the National Bank reveals a profit of $2.54 per diluted share for the quarter ending April 30, a jump from $2.34 per diluted share reported in the corresponding quarter of the previous year.
The bank's revenue saw a significant increase, reaching $2.75 billion compared to $2.45 billion a year before. Concurrently, provisions for credit losses rose to $138 million from last year's $85 million in the same period.
Adjusting for specific items, the National Bank reports earnings of $2.54 per diluted share, marking an improvement from the $2.34 per diluted share adjusted profit of the preceding year.
This performance has surpassed the expectations of analysts who, according to LSEG Data & Analytics, had anticipated a profit of $2.45 per share on average.
Fitch Downgrades TD Bank's Outlook to Negative Amid Anti-Money Laundering Concerns
Fitch Ratings Inc. has revised its outlook for $The Toronto-Dominion Bank(TD.CA$ from stable to negative, citing possible repercussions linked to identified anti-money laundering weaknesses.
While Fitch upheld its AA- long-term credit rating for the bank, it highlighted that the negative outlook is due to the uncertainties arising from several ongoing investigations into TD Bank's anti-money laundering compliance in the United States.
The credit rating firm indicated that the bank could face various consequences, including monetary fines and non-monetary sanctions, such as restrictions on future acquisitions in the U.S. Additionally, Fitch noted that efforts to rectify these compliance issues might shift the bank's attention away from its core operations.
TD Bank's recent financial results revealed a 22 percent decline in profits from the previous year, significantly impacted by a $615 million provision connected to one of the regulatory probes.
Consequently, the bank has decided to scale back its U.S. expansion plans while it negotiates with regulatory bodies.
Despite Fitch's revised outlook, TD Bank has reported that other rating agencies have maintained a stable outlook for the financial institution.
Source: BNN Bloomberg
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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