Bank Of Montreal (NYSE:BMO) reported what executives described as a “very strong” start to fiscal 2026, highlighting record pre-provision, pre-tax earnings and broad-based revenue growth across all operating segments during its first-quarter earnings call held February 25, 2026.
Chief Executive Officer Darryl White said adjusted earnings per share (EPS) were CAD 3.48, up 15% from a year earlier, and included a previously announced CAD 202 million severance charge that reduced EPS by CAD 0.21. The bank posted record pre-provision, pre-tax earnings (PPPT) of CAD 4.1 billion, supported by record revenue in each operating segment, along with fee growth in market-driven businesses and margin expansion in Canadian and U.S. banking driven by deposit growth and mix optimization.
Profitability and ROE progress
Chief Financial Officer Rahul (introduced on the call as Tayfun Tuzun, though executives referred to him as Rahul) said adjusted net income was CAD 2.6 billion, up 11% year over year. Excluding the severance charge, the bank delivered positive operating leverage of 1.1% and PPPT growth of 8%. Adjusted ROE was 13.1%, up 180 basis points from a year ago, while return on tangible common equity (ROTCE) was 17.1%, up 220 basis points.
White said underlying ROE reached 13.1%, up 180 basis points year over year and 130 basis points from the prior quarter, and noted U.S. banking underlying ROE improved 150 basis points from the year-ago quarter.
Revenue, margins, and expense actions
On an adjusted basis, revenue rose 6% year over year, or 8% on a constant currency basis, with CFO Rahul citing strong fee growth in capital markets and wealth and net interest margin (NIM) expansion in both personal and commercial banking businesses. Expenses increased 9% year over year, or 5% excluding the severance charge.
BMO also updated how it discloses net interest income and margin. Rahul said the bank has enhanced disclosure of all-bank net interest income (NII) and NIM to exclude Global Markets and insurance to focus on core banking margins, with prior periods reclassified. NII excluding markets increased 5% year over year, or 7% on a constant currency basis, driven by margin expansion in Canadian P&C and U.S. banking and higher NII in corporate services.
NIM excluding markets was 233 basis points, up 20 basis points year over year and up 3 basis points sequentially. Rahul attributed the improvement to higher ladder reinvestment rates, deposit mix actions, and disciplined pricing, partially offset by lower NII in corporate services versus the prior quarter. Canadian P&C NIM increased 6 basis points sequentially, while U.S. banking NIM increased 13 basis points sequentially.
When asked about the outlook, Rahul said management is still thinking about a relatively stable near-term margin outlook at the all-bank level, while acknowledging variability by business and that competitive dynamics in loans and deposits are being monitored.
The severance charge was positioned as part of a broader efficiency program. Rahul said the bank expects to realize approximately CAD 250 million in annualized savings from the charge, with roughly half realized in 2026 and the remainder in 2027, supporting continued efficiency improvement and reinvestment in strategic growth initiatives. The efficiency ratio improved to 55.8%, excluding the charge.
Segment highlights: Canada, U.S., Wealth, and Capital Markets
- Canadian P&C: Adjusted net income rose 8%. Revenue was up 7%, driven by higher NII from balance growth and margin expansion. The bank pointed to deposit momentum, with White citing 8% growth in core operating deposits. CFO Rahul said non-interest revenue benefited from above-trend card fees (tied to revised rewards redemption assumptions), higher commercial treasury and payment solutions (TPS) fees, investment gains, and stronger mutual fund distribution fees.
- Canadian Commercial Banking: White said revenue grew 10%, supported by 9% growth in operating deposits and a 13% increase in TPS fees. He also highlighted increased referrals between commercial and wealth, with referrals rising to 34% and referral revenue up 75%.
- U.S. Banking: On a U.S.-dollar basis, adjusted net income increased 18%, driven mainly by lower impaired and performing provisions for credit losses. Revenue rose 2% as margin expansion offset lower balances tied to optimization efforts. Executives said balance sheet optimization is now about 90% complete and expects to be effectively completed by the end of next quarter. Aron Levine said the bank has reduced roughly $6 billion of loans over the last four quarters as part of optimization, while building momentum in pipelines. He also pointed to 3% growth in non-interest-bearing deposits and strong growth in commercial TPS fees (he cited 23% year-over-year growth and 17% quarter-over-quarter growth).
- Wealth Management: Net income rose 16%, supported by stronger markets and net new asset growth. White said BMO successfully integrated Burgundy Asset Management, with good client and employee retention and engagement. Rahul said wealth and asset management revenue increased 17%.
- Capital Markets: White described a “very strong” quarter with PPPT of CAD 893 million. Rahul said capital markets net income increased 11% year over year, with revenue up 7%. Global Markets revenue rose 6% on higher equities and commodities trading, partially offset by lower interest rate trading. Investment banking revenue increased 9% on higher advisory fees and equity underwriting, partially offset by lower debt underwriting. Capital Markets head Alan Tannenbaum said the bank is optimistic about the pipeline but cautioned against extrapolating first-quarter outperformance across the full year.
White also highlighted business initiatives including the transition from Air Miles to a reimagined Blue Rewards loyalty program this summer, and said BMO is scaling AI-enabled tools, citing the rollout of a generative AI-powered digital assistant in Canadian commercial banking after launching similar capabilities in personal banking last year.
Credit performance and capital
Chief Risk Officer Piyush Agrawal said the credit environment reflects modest growth across North America, with continued U.S. outperformance and a softer Canadian backdrop marked by weaker labor and housing markets and more stress among higher-leverage borrowers. Total provisions for credit losses (PCL) were CAD 746 million, stable quarter over quarter at 44 basis points. Impaired provisions declined CAD 11 million to CAD 739 million. The performing provision was CAD 7 million, and the performing allowance stood at CAD 4.6 billion, providing coverage of 69 basis points over performing loans.
Agrawal said gross impaired loans declined CAD 228 million to CAD 6.9 billion, driven by lower formations in commercial businesses, and noted “positive momentum” in wholesale portfolios with lower formations into watch lists and impaired loans. Looking ahead, he said trade issues and USMCA renegotiation uncertainty remain factors, and he expects impaired provisions to remain in the mid-40 basis points range with quarterly variability.
On capital, Rahul said the common equity Tier 1 (CET1) ratio was 13.1%, down about 20 basis points sequentially, as internal capital generation was more than offset by share repurchases and higher risk-weighted assets tied in part to methodology and model refinement. BMO repurchased 6 million shares during the quarter and said it expects to continue repurchases while navigating toward its 12.5% CET1 target.
Management said it plans to provide additional detail on its strategy and progress at BMO’s Investor Day on March 26.
About Bank Of Montreal (NYSE:BMO)
Bank of Montreal (NYSE:BMO), commonly known as BMO Financial Group, is one of Canada’s largest and longest-established banks. Founded in Montreal and headquartered in Montreal, Quebec, the bank provides a broad range of financial services to retail, commercial, corporate and institutional clients. BMO is publicly listed in both Canada and the United States and operates under a consolidated financial services model that integrates banking, capital markets, wealth management and asset management activities.
BMO’s core businesses include personal and commercial banking—offering checking and savings accounts, lending, mortgages, and small-business services—alongside wealth management and private banking through its asset and investment management divisions.
-etf-logo-1200x675.jpg?v=20230307114716&h=45&w=95&zc=2){kind=logo}
