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Bank Of Montreal (BMO) PT Cut To $61 By CIBC After Q2, 'Sector Underperformer' Maintained

 May 24, 2012 12:47 PM

(By Balaseshan) CIBC World Markets Inc. analyst Robert Sedran lowered his price target on shares of Bank of Montreal (NYSE:BMO) to $61 from $62, while maintaining his "Sector Underperformer" rating.

After the company's second quarter results, the brokerage raised its 2012 EPS estimate to $5.61 from $5.56 while lowering its 2013 estimate to $5.96 from $6.02.

After removing the credit recovery related to purchased impaired loans (which Sedran sees as temporary), he views the result as a notional miss versus our estimate, which he has reduced again (for fiscal 2013).

BMO reported Q2 adjusted earnings of $1.44 per share (or $1.31 per share if the analyst removes the aforementioned credit gain), which compares with his estimate of $1.33 per share and consensus of $1.35 per share.

[Related -6 Safe Canadian Bank Stocks With High Yields]

The biggest variance to Sedran's estimate came from credit ($0.10/share), followed by lower expenses ($0.07/share) and taxes ($0.06/share). That was somewhat offset by weaker-than-expected lending net interest income (negative $0.12/share) as the firm-wide margin contracted by 13 basis points sequential.

Earnings in Canadian P&C were unchanged sequential as lower expenses offset lower revenue (lower margin). Meanwhile, lower revenues hurt U.S. P&C results, with earnings declining 12% sequential. Capital Markets were up 14% sequential on a bounce back in investment banking fees that offset lower trading.

Bank of Montreal provides retail banking, wealth management and investment banking products and services. It conducts business through three operating groups: Personal and Commercial Banking (P&C); Private Client Group (PCG), and BMO Capital Markets.

[Related -Dividend Roundup: BMO, MOV, EGP, TCAP, QCOR, UVSP]

BMO is trading down 1.13% at $54.19 on Thursday.



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