BMO Stock Forecast & Price Target

Bank of Montreal has demonstrated a solid financial performance with performing allowance for credit losses (ACLs) increasing to 0.56% of gross loans, marking a notable improvement compared to pre-pandemic levels and indicating robust credit quality. The bank experienced a significant surge in trading revenues, with a 67% increase quarter-over-quarter and a remarkable 77% increase year-over-year, showcasing strong demand in both equities and fixed income trading. Additionally, capital markets earnings escalated by 119% quarter-over-quarter and 45% year-over-year, reaching $591 million, which surpassed prior estimates and further reinforces the positive outlook on the bank's financial health.

The Bank of Montreal reported a total provision for credit losses (PCLs) of $1,011 million in Q1/25, which was down 34% quarter-over-quarter and significantly lower than the estimate of $1,396 million, indicating deteriorating credit quality. Additionally, impaired PCLs reached $859 million, a decrease of approximately 22% from the previous quarter, which fell short of the projected $1,057 million, raising concerns about asset performance. While the Common Equity Tier 1 (CET 1) ratio remained steady at 13.6%, above expectations, the decline in both performing and impaired PCLs points to deeper issues within the bank's credit risk management framework.