Q: What do you think of Darko Mihelic’s rating cut of BMO today? Agree? Disagree?
5i Research Answer:
The BMO analyst has influence, and the bank has in the past two quarters already set aside more money for bad loans. His view has changed on 'credit concerns'. We would agree there are some concerns, and the stock is already down 11% YTD. The question is whether the valuation at 10X earnings reflects this. Considering that the US economy is still quite strong and rates are headed lower (officially now based on the FED statements) we would think the risk is mostly priced in.