Bank of Montreal Tops Earnings Estimates on Strong U.S. Performance and Lower Provisions for Credit Losses
TORONTO — Bank of Montreal (BMO), one of Canada’s largest banks, reported stronger-than-expected fiscal third-quarter results on August 26, 2025, driven by robust performance in its U.S. operations and provisions for credit losses that fell short of analyst forecasts. The earnings beat highlights the bank’s ongoing efforts to revitalize its U.S. segment following the 2023 acquisition of Bank of the West, amid a stabilizing credit environment and cautious optimism for North American economic recovery.
BMO posted adjusted earnings of C$3.23 per share for the three months ended July 31, surpassing the average analyst estimate of C$2.96 compiled by Bloomberg. This marks a positive turn for the lender, which has faced challenges in its commercial lending portfolio but is showing signs of improvement in profitability and risk management. The bank’s adjusted return on equity (ROE) reached 12%, exceeding the forecasted 10.9%, reflecting effective execution of its return-on-equity rebuild strategies.
Net income at BMO’s U.S. personal and commercial banking division surged 51% year-over-year to C$709 million, outperforming the C$648 million consensus estimate from three analysts. This growth underscores the bank’s focus on enhancing its U.S. prospects, where it has significant exposure—about a third of its overall income derives from the American market. CEO Darryl White attributed the results to “disciplined execution,” noting consistent positive operating leverage, improving credit performance, and strengthening profitability, particularly in the U.S. businesses.
Provisions for credit losses, a key metric for assessing potential bad loans, totaled C$797 million—below the C$931 million anticipated by analysts. This lower-than-expected figure signals stabilizing credit trends after a period of elevated provisions earlier in 2024, when BMO’s performance lagged due to commercial lending pressures. Chief Risk Officer Piyush Agrawal highlighted “tremendous progress” across portfolios over the past three quarters, with conversations with commercial clients picking up in Canada and strong U.S. engagement despite borrower caution.
Key Financial Highlights
BMO’s results position it as the first of Canada’s Big Six banks to report for the quarter, setting a potentially positive tone amid broader economic uncertainties, including U.S.-Canada trade tensions under President Donald Trump and softening GDP growth projections (1% for Canada and 1.3% for the U.S.). The bank is also optimizing its balance sheet by divesting non-core assets; it sold a U.S. credit-card portfolio in the second quarter and is reportedly exploring a $1 billion sale of its transportation-finance business.
| Metric | Q3 2025 Actual | Analyst Estimate | Year-Ago Figure | Change YoY |
|---|---|---|---|---|
| Adjusted EPS | C$3.23 | C$2.96 | N/A | N/A |
| U.S. P&C Net Income | C$709 million | C$648 million | C$470 million (est.) | +51% |
| Provisions for Credit Losses | C$797 million | C$931 million | N/A | N/A |
| Adjusted ROE | 12% | 10.9% | N/A | N/A |
Strategic Moves and Market Reaction
In a shareholder-friendly move, BMO announced a new share buyback program authorizing the repurchase of up to 30 million shares, or about 4.2% of its outstanding shares, replacing a prior 20 million share program. This signals confidence in its financial health and commitment to enhancing shareholder value. The bank maintained its quarterly dividend at C$1.59 per share.
Shares of BMO climbed 3.9% to C$163.96 in Toronto trading following the release, reflecting investor approval despite some caution around the reliance on lower provisions for the beat. Jefferies analyst John Aiken noted that while the results warrant a “warm reception,” the outperformance was largely driven by the U.S. division’s credit benefits, which may temper long-term enthusiasm.
BMO’s U.S.-heavy strategy differentiates it from peers like Royal Bank of Canada or Toronto-Dominion Bank, providing diversification but also exposing it to cross-border risks. The acquisition of Bank of the West has been pivotal, though it initially strained returns due to integration costs and stagnant commercial loan growth. Recent improvements, including lower loan-loss reserves in the U.S., suggest the turnaround is gaining traction.
Broader Implications for U.S. Investors
For American investors, BMO’s performance is particularly relevant given its substantial U.S. footprint, including branches in key markets like California and the Midwest. The bank’s success in the U.S. segment—bolstered by resilient client engagement—could signal stability in North American banking amid high interest rates and trade uncertainties. However, ongoing portfolio sales indicate a focus on shedding lower-return assets to boost efficiency.
As other Canadian banks report in the coming days, BMO’s results may influence sector sentiment. Analysts anticipate continued moderation in credit provisions across the industry, though macroeconomic headwinds like potential trade disruptions remain a watchpoint. White emphasized the bank’s readiness to navigate volatility, stating that economic resilience in the U.S. has helped offset Canadian slowdowns.
Overall, BMO’s Q3 earnings demonstrate a lender adapting effectively to challenges, with U.S. growth and prudent risk management paving the way for sustained profitability. Investors will monitor upcoming reports from peers like Scotiabank, which also beat estimates on similar lower-provision dynamics, for further insights into the sector’s health.