Bank Of Montreal: Best Bank For The Canadian Housing 'Bubble'

Jonathan Wheeler profile picture
Jonathan Wheeler


  • BMO is holding its own in Canadian banking, but posted weak deposit growth in America.
  • The bank will likely continue growing strongly in retail investing.
  • Lower exposure to the Canadian housing market than peers may be attractive to some investors.

This article is the third in a series on the Canadian banks. If you missed the first 2 on the Canadian Imperial Bank of Commerce (NYSE:CM) or Toronto-Dominion Bank (NYSE:TD), you can find them here and here. The Bank of Montreal (NYSE:NYSE:BMO) has an impressive record with the longest streak of consecutive dividend payments among any Canadian company, at 188 years. BMO has seen slowing growth in some segments, but the bank maintains the strongest position in ETF's and investment vehicles among the Canadian banks, and the lowest exposure to the housing market. Although other banks offer either better value or stronger growth, BMO is a strong choice for those investors nervous of housing prices in Canada.

The most recent quarter saw strong net income growth of 12%, adjusted down from 28% reported, and adjusted EPS growth of 11% (27% reported). The bank's net income is well diversified, with 60% coming from P&C banking and 40% from wealth management and capital markets. Additionally, BMO has strong operations in America, notably in the midwest, and a small presence internationally.

BMO's Canadian banking segment saw a 1% gain in net income, with a 3% revenue boost yoy. Loans grew 5% and deposits grew 8%, which is short of Toronto-Dominion Bank (NYSE:TD)'s 11% deposit growth, but strong nonetheless. The big story in Canadian banking has been the introduction of new technological offerings which has created a very competitive landscape. Expenses have been rising as the big 5 banks have pushed to be the first to market on new offerings that improve the customer experience. Some of these are basic, like mobile app functionality and fee reductions. This last quarter, BMO launched free unlimited e-transfers, and the bank was recognized by research and advisory firm Celent with the 2017 Model Bank Award for their improvements in technology. Over 50% of the Canadian banking

This article was written by

Jonathan Wheeler profile picture
I have been writing since 2016, and I enjoy the process of interacting with the broader investing community on Seeking Alpha. I employ basically a barbell approach to portfolio management, with a stable base of dividend growth companies and exposure to high growth companies looking for the next blue chips.

Disclosure: I am/we are long CM, TD, BNS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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