Adjusted Fees Slowing a Bit as Expenses Rise for BMO in Third Quarter

Narrow-moat Bank of Montreal reported OK fiscal third-quarter results. Adjusted earnings per share came in at CAD 3.09, representing a year-over-year decline of 10% and a sequential decline of 4%. BMO reports mark-to-market adjustments on its swaps in trading income, which can cause wide swings in reported fee income, making the adjusted numbers much easier to interpret. The biggest point of weakness for the Canadian banking sector in this quarter has been fees, particularly in the more market- and activity-sensitive investment banking, trading, and wealth businesses. BMO was no exception, as it saw declines in adjusted trading fees, investment banking fees, and wealth-related fees, leading to a sequential decline in adjusted fees of roughly 12%. As a result, we are lowering our fee outlook.