Bank of Montreal Q2 profit down as credit provision increases

Source: Exec Digital Canada

Date :5/28/2008 2:06:46 AM

BMO Financial Group’s second quarter profit slips three percent due to weaker capital markets as Canada’s fifth largest bank warned that provisions for credit losses would rise.

For the second quarter ended April 30, 2008, BMO reported net income of $642 million or $1.25 per share, from $671 million or $1.31 per share a year ago.

Market conditions

Bill Downe, president and chief executive officer, said that the results in BMO Capital Markets reflect the current market conditions with activity in the investment banking business slow in the quarter.

In the Capital Markets division net income decreased to 7.5 percent to $182 million from a year ago.

The results reflect a net $28 million after-tax recovery related to the capital markets environment, compared with $324 million of after-tax charges in the first quarter, BMO said in a statement.

Risk provisions

BMO said it now expects provisions for credit losses in the coming quarter to increase “given continued deterioration in the credit environment including the U.S. real estate and particularly the residential real estate related sectors.”

The bank recorded specific provision for credit losses of $170 million in the first quarter.

May 28, 2008