EPS of $2.59 missed estimates of $2.77; revenue of $7.988B missed estimates of $8.06B. The dividend was raised 5%. Bank of Montreal is progressing toward positive operating leverage aided by extra cost synergies, and confirmed it's on pace to achieve the goal in 2024, after a 3% adjusted level in 2Q. BMO sees a stable net interest margin in 2H, yet it may tighten in Canada and keep shrinking, at a slower pace, in the US, leaving the corporate segment to offset the pressure. Loan growth is consistent with its low- to mid-single-digit 2024 expectations. Markets and Wealth businesses continue to support profit. Guidance for impaired provisions to stay at 2Q's level in 2H may drive the 2024 provisions ratio to about 40 bps vs. prior expectations in the low-30s. BMO could book more provisions earlier than some peers, with the possibility of reversing later. The bank noted a likelihood of higher performing provisions. The 9% drop in the stock was the worst since Covid, but the miss and higher credit provisions are concerning. The drop was likely a 'small' overreaction and we would not panic here, but it was not a great quarter, certainly.
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