Bank of Montreal is a diversified financial services provider and the eighth largest bank in North America by assets.
It has a large portfolio of products and service offerings in personal and commercial banking, wealth management, and investment banking and caters to a diversified range of customers including more than 12 million individuals, businesses, governments, and corporate customers across Canada and the U.S.
The bank also has a presence in a few countries in Europe, Asia, the Middle East, and South America. By geography, Canada is its largest market accounting for nearly 60% of net income, followed by the US (30%) and other countries (10%).
The bank conducts its business through the operating groups: Canadian Personal and Commercial Banking (36% of 2020 net income), U.S. P&C (24%), BMO Wealth Management (20%), and BMO Capital Markets (20%). Bank of Montreal has diversified its business across multiple U.S. and Canadian banking service lines.Investment Data
- Opportunity Score: 57
- Ticker: TSE:BMO
- Sector: Financial Services
- Industry: Banks - Diversified
- Market Cap: 50.51B
- P/E: 13.22
- Dividend Yield: 4.25%
- Payout Ratio (Earnings): 56.16%
- Canadian Dividend Aristocrat: YES
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 5/10
- Dividend Income Fit: 7/10
Revenue Growth & Market Exposure
BMO’s personal banking segment serves customers with its wide range of products and service offerings, including savings accounts, credit cards, mortgages, etc., while its commercial banking provides small business and commercial banking customers with a broad suite of commercial products and services like business loans, commercial mortgages, etc.
The bank is highly diversified by businesses and geographies. Canadian Personal and Commercial banking is BMO’s flagship business and continues to expand its share in key markets. Its wealth management business also maintains a #2 share in the Canadian ETF market.
Bank of Montreal has an extensive network of more than 900 branches and a large number of ATMs across the US and Canada. The bank is strategically located across strong regional economies and markets around the world and is in a good position to address the growing cross border needs of corporate customers.
With more than two centuries of existence, the Bank of Montreal has developed an extensive understanding of its client needs and behaviors. The bank is strongly focusing on technology deployment and maintained a double-digit growth rate in technology investment last year. It is also looking at building new capabilities that will drive customer growth in the future.
The bank’s operational performance remained resilient, despite impacts from the COVID-19 pandemic. It maintained high provision for credit losses due to the pandemic. As a result, BMO’s one-year adjusted EPS of $7.71 in 2020 declined by more than 18% YoY.
The bank also witnessed lower loan growth and strong deposit growth. Bank Of Montreal has a huge opportunity to expand in the digital market and registered a growth of 9% in digital sales this year. Bank of Montreal’s large North American platform and growing presence in international markets gives it an edge over the competition.
The bank is well-positioned to capture growth opportunities in the US segment driven by strength in commercial and personal banking, and Capital Markets.
Bank of Montreal is a Canadian Dividend Aristocrat with a 191-year long dividend-paying history. The bank sports a handsome dividend yield of more than 4% and a reasonable payout ratio of 56%. The bank’s last dividend hike was 6%.
Dividends paid over the last five-year period have increased at an average annual compound rate of 5.6%. It has a strong liquidity position with a CET1 ratio of 11.9%.
Strong investment in digital initiatives to drive client growth, solid customer focus, and a large footprint have helped Bank Of Montreal to consistently deliver solid results. BMO targets to achieve 7%-10% earnings growth over the medium term which should easily translate into a low single-digit dividend growth rate in the future.
The bank has proven resilient earnings power. It expects the Canadian economy to return to pre-virus levels of activity by the second half of 2021. Lower provisions and improving efficiency ratio should translate to better results.
A well-established and profitable flagship banking business in Canada, and diversified U.S. operations positions Bank Of Montreal well to capture growth opportunities. The bank expects future growth on the back of improving customer loyalty, a large suite of products, solutions and capabilities, and simplified and streamlined operations.
The Canadian personal and commercial banking segments are highly competitive. Bank of Montreal competes with other leading Canadian banks like TD Bank, Royal Bank, Scotiabank, Canadian Imperial Bank of Commerce, and National Bank.
National Bank ranks amongst the six largest commercial banks in Canada, while CIBC caters to 11 million individual, small business, commercial, corporate and institutional clients in Canada, the U.S., and around the world.
Scotiabank is a leading international financial services provider with a rich history of 185 years and Bank of Montreal is the eighth largest bank in North America by assets.
|TSE:RY||RY||Royal Bank||Financial Services||Banks - Diversified||0.58||107.98||120.84||13.80||13.80||7.82||0.04||4.00||0.5524||4||4.32||0.1136||6||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:TD||TD||TD Bank||Financial Services||Banks - Diversified||0.63||74.11||105.89||11.53||11.53||6.43||0.04||4.26||0.4914||4||3.16||0.1327||6||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:BNS||BNS||Scotia Bank||Financial Services||Banks - Diversified||0.66||68.06||64.77||12.84||12.84||5.30||0.05||5.29||0.6792||4||3.60||0.1123||6||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:BMO||BMO||Bank of Montreal||Financial Services||Banks - Diversified||0.57||99.86||50.51||13.22||13.22||7.55||0.04||4.25||0.5616||4||4.24||0.0803||5||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:CM||CM||CIBC||Financial Services||Banks - Diversified||0.61||112.51||39.38||13.68||13.68||8.22||0.05||5.19||0.7105||4||5.84||0.1006||6||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:NA||NA||National Bank||Financial Services||Banks - Diversified||0.60||73.10||24.56||12.83||12.83||5.70||0.04||3.89||0.4982||4||2.84||0.1074||6||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:CWB||CWB||Canadian Western Bank||Financial Services||Banks - Regional||0.60||30.35||2.64||10.63||10.63||2.86||0.04||3.82||0.4056||4||1.16||0.0931||6||7||Tollbooth - Unregulated||NO||YES||YES||NO||Canada||1|
|TSE:LB||LB||Laurentian Bank||Financial Services||Banks - Regional||0.43||32.37||1.40||13.67||13.67||2.37||0.05||4.94||0.6751||4||1.60||0.0849||2||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
The U.S. and Canadian economies are expected to rebound in 2021 on vaccine hope with stable unemployment rates and housing market activity.
BMO continues to strengthen customer loyalty and gain market share in key focus areas. A diversified business mix, leading market share, a reputed brand name, and a strong balance sheet form a huge moat around its business.
Increased investment in expanding its footprint both digitally as well as across the US should start bearing fruits in the near future.