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By Andrew Willis

Sticking with this theme of what’s good for Bank of Montreal (BMO) shareholders is bad for its financiers, Credit Suisse bumped up its forecasts for the company on Tuesday in part due to expectations that bonus checks are shrinking.

Bank of Montreal led off the earnings parade on Tuesday with better-than-expected financial results, including sharply lower costs.

After crunching the number and talking to management, Credit Suisse analyst Jim Bantis raised his 2010 earnings forecast by 9%. He sees “the prospect of lower operating costs (Retail), lower incentive compensation (Capital Markets) and lower credit provisioning (US Commercial).”

Bank of Montreal raised the overall amount of money it set aside for performance pay by 3%, to $1.34 billion. Capital markets profits at the bank were up 49%, to $1.06 billion.

As my colleague Boyd Erman wrote in Tuesday’s Globe and Mail, there’s an expectation all the bank-owned dealers will attempt to rein in bonus payments this year.

Mr. Bantis is bearish on Bank of Montreal, but raised his one-year target price on the stock to $49, from $42. The Credit Suisse analyst’s negative outlook reflects the fact that Bank of Montreal enjoys a premium valuation these days, by historic standards, and that “ignores the following factors: 1) increasing impairments from the bank’s US commercial mortgages and C&I loan portfolio, 2) a notably low reserve coverage ratio (58%) relative its domestic peers, and 3) lagging 2010 ROE in 13-14% range.”

Source: Bank of Montreal: Putting Shareholders Ahead of Bonuses