Bank of Montreal (BMO) shares advanced in Toronto trading on Monday, approaching a new 52-week high as Canada's benchmark index set a fresh record. The stock gained 0.86% to C$224.37, touching a session high of C$225.69 earlier in the day. Volume reached approximately 460,000 shares.
The S&P/TSX Composite Index rose 0.7% to 34,778.98, buoyed by gains in the materials sector amid signs of progress in U.S.-Iran talks. Financials remained the best-performing sector in May, up 5.5%, with BMO, Royal Bank of Canada, and Toronto-Dominion Bank all set to report quarterly results this week.
BMO's board declared a quarterly common-share dividend of C$1.67, payable on May 26 to shareholders of record as of April 29. The bank is scheduled to release its fiscal second-quarter results on May 27 before markets open, followed by an investor call at 8:15 a.m. ET.
Analysts expect BMO to report net income growth of about 25% year-over-year, driven by cost synergies and scale efficiencies from its 2023 acquisition of Bank of the West. However, pressure on return on equity (ROE) and net interest margins remains a concern. ROE measures how effectively a bank generates profit from shareholder equity, while net interest margin reflects the spread between lending income and deposit costs.
CEO Darryl White reiterated at a March investor day that BMO has a clear path to achieving a 15% ROE by 2028, calling North American capital markets a key growth engine. Capital markets encompass trading, underwriting, and advisory services.
Despite the upbeat outlook, some analysts urge caution. RBC Capital Markets' Darko Mihelic warned of high valuations and soft Canadian economic data ahead of earnings. Canaccord Genuity's Matthew Lee flagged potential credit quality issues from weak consumers and a slower housing market, which could lead to higher-than-expected provisions for credit losses.
Geopolitical risks also loom. Brian Madden, chief investment officer at First Avenue Investment Counsel, expressed skepticism about the durability of optimism from U.S.-Iran talks, noting repeated false hopes of a resolution.
BMO's U.S.-listed shares were inactive Monday due to the Memorial Day holiday on U.S. exchanges. The stock last traded at $160.93 on Friday, up 0.75%. The broader rally in Canadian bank stocks suggests investors are positioning for positive earnings outcomes, but the actual results on Wednesday will determine whether the recent price action is supported by fundamentals or merely momentum.
