Bank of Montreal Reports Q3 Results

The Bank of Montréal’s subprime write-down total has yet to break $1B. Our count stands $611M, with third quarter pretax write-downs of C$134M bringing the total to C$745M written down to subprime so far.

By skillfully renegotiating two of its commercial paper trusts, the Apex and Sitka Trusts, the bank has avoided taking serious write-downs. But the cracks are beginning to show.

Bank of Montreal’s net income sank 21% in its fiscal third quarter as the lender sharply raised its credit provisions and posted yet another charge for valuation adjustments in its capital-markets division.

Bank of Montreal said its provision for credit losses rose to C$484 million from C$91 million a year earlier. Analysts had expected an increase to C$195 million. The bank said C$247 million of the provisions were for two corporate accounts related to the U.S. housing market that were identified as impaired.

Bank of Montreal sharply increased its provisions in the first and second quarters and said in May that provisions for the balance of the year would be above the C$170 million recorded in the first quarter. It had initially set a target for the year for credit-related provisions of C$475 million; so far, provisions have totaled C$755 million.

Citing the economic environment, the bank reiterated it doesn’t expect to achieve its targeted earnings-per-share growth of 10% to 15% in fiscal 2008.

Let’s just blame it all on the environment, right boys? Of course in addition to preparing for future quarters, the bank wasn’t able to escape subprime-related write-downs for the third quarter.

Profit at Bank of Montreal’s BMO Capital Markets investment bank increased 34 percent to C$259 million from a year earlier, as trading revenue surged more than fivefold to C$220 million. Results in the unit were pared by C$19 million in costs for job cuts, and pretax writedowns of C$134 million for the declining value of debt investments, preferred shares and Canadian asset- backed commercial paper.

According to its third quarter report, Bank of Montréal holds $5M in assets categorized as level 3.