Bank of Montreal's First Quarter Earnings Disappoint

Bank of Montreal’s (BMO) shares have fallen a whopping 14.5% in the last six trading days, dipping further on Tuesday after its first quarter results disappointed. It ended the day down just 3% at C$46.89, after falling as low as C$45.96.

RBC Capital Markets analyst Andre-Philippe Hardy, who shaved C$5 off his price target to C$49 per share, noted that BMO’s first quarter core cash earnings per share [EPS] came in at C$1.21, lower than his estimate of C$1.42. Roughly half of the shortfall was a result of higher-than-expected loan losses. The consensus estimate was C$1.36.

The analyst cut his estimated core cash EPS for both 2008 and 2009 to reflect expectations for higher provisions for credit losses and lower estimates for the bank’s wholesale division.

While BMO’s valuation is now much lower that it has been in the recent past at 1.65 times book value, Mr. Hardy’s target price for the shares implies a valuation of 1.6 times.

“We believe that Bank of Montreal’s stock will underperform its peers as earnings revisions are likely to be more severe,” he said in a research note, adding that structured finance (Sitka and Apex) concerns may lurk over the stock for some time.

But if BMO can quickly restructure these assets, there is upside to the share price, he added.

Comments

[Bingo 2:]

I thought the Canadians were smarter than the idiots running the American banks. I guess this is not the case.I can not imagine how dumb you have to be to issue a loan to a party who have not even the slightest chance, based on their income , to make the payments. and THESE are the folks guarding your money!

2008 Mar 06 03:54 PM