BMO was the fifth of Canada's big banks to beat expectations on adjusted earnings per share in a quarter that is proving to have more positive surprises than analysts expected.
Profits were equal to $1.60 per share for the quarter, an increase from $962 million or $1.40 per share in the same quarter of 2013.
Adjusted earnings per share were $1.63, which beat analysts' expectations of $1.53.
Meanwhile, BMO (TSX:BMO) increased its quarterly dividend by two cents to 78 cents.
Traders reacted to the results by sending BMO stock's to an all-time high of $77.46 in morning trading before pulling back and ending the day down slightly. The bank's stock closed at $76.62 on the Toronto Stock Exchange, down 18 cents on the day but still up about three per cent in the past week since the big banks starting reporting earnings.
Like its Canadian peers, BMO's Canadian banking operations continued to be strong, while wealth management — although a smaller part of the overall business — showed even more year-over-year growth.
BMO's wealth management operations delivered net income of $194 million, an increase of 38 per cent from the same quarter a year ago. Its capital markets division posted $305 million in profits, up 16 per cent due to higher investment and corporate banking revenue.
The bank's Canadian personal and commercial banking produced net income of $480 million, up 14 per cent or $59 million year over year, but was relatively steady with the previous quarter ended Jan. 31.
Cam Fowler, who has been head of BMO's Canadian personal and commercial banking operations since January, said a generally slow start to the 2014 spring home-buying and mortgage-lending season had an slowing effect in the second quarter but that the volumes have risen in the fiscal third quarter that began May 1.
"I think we'll close the season quite well," Fowler said in a conference call with analysts. "I expect we can continue to be a little bit better than the market."
Fowler said BMO is holding its own against competitors, which include Canada's other big banks such as Royal (TSX:RY), Toronto-Dominion (TSX:TD) and Scotiabank (TSX:BNS), which have also reported strong profit growth in the quarter.
"It's possible there's a little more competition in the home finance market this year than last, but I don't think to a large degree," Fowler said.
As for commercial lending, Fowler described competition as "healthy" and "I wouldn't say there's disproportionate pressure from any one player in any particular region."
In the area of credit cards, Fowler said Bank of Montreal is beginning to see positive results from its investments over the past few quarters — particularly with products in the premium segment of the market.
"We've acquired more premium cards in the first half of this year than we did in all of last year," Fowler said. "One fifth of those are new to (BMO)."
In the United States, BMO's personal and commercial banking operations posted weaker results, hurt by smaller gains on new mortgages. The division posted lower net income of US$140 million, down six per cent from a year ago.
Provisions for credit losses were $261 million in the quarter, down from $322 million in the same quarter last year.
BMO said its return on equity was 14.3 per cent compared with 14.2 per cent in the year-earlier period.
National Bank (TSX:NA) reported its results after the markets closed on Tuesday and had a second-quarter net income of $362 million, down 13 per cent from a year ago. On an adjusted basis, earnings were $1.05 a share, a penny higher than analyst estimates and it also raised its quarterly dividend.
However, revenue of $1.28 billion missed expectations of $1.34 billion and its shares tumbled $1.17 or 2.49 per cent to $45.86.