- Key insight: BMO Financial Group showed improvement on a key profitability measure for its U.S. banking business last quarter, moving closer to its near-term goal.
- What's at stake: The Canadian bank recently restructured its U.S. banking balance sheet in order to generate more profitability and drive higher returns. That work is now paying off, executives said Tuesday.
- Forward look: BMO expects to complete the sale of 138 U.S. branches in non-core markets during the fourth quarter, it said.
On Tuesday the bank, which has
Executives were confident that BMO will be able to hit their 12% target by Oct. 31, 2027. The pathway there requires higher client balances, fee-income growth and a mix of cost savings and a "normalization" of provisions for credit losses, said Aron Levine, BMO's U.S. president.
"Across all of those, it's good progress," Levine said Tuesday on BMO's earnings call. "There's work to be done. We have to continue to execute the strategy as we've laid out … we're clearly making progress, and we'll continue to work each quarter toward our ultimate goals."
BMO was the first of Canada's five biggest banks to hold its third-quarter 2026 earnings call. The company has spent the past 18 months retooling its U.S. banking segment, which generates a significant portion of its overall revenue, and reconfiguring its U.S. balance sheet.
The changes were designed to increase BMO's stateside profitability. They include selling a U.S. credit card portfolio; exiting a franchise loan book;
BMO CEO Darryl White repeated his May 2026 claim that the bank has
In U.S. retail banking, core customer deposits were up 2% franchise-wide, with 3% growth in California, according to White. BMO, which acquired San Francisco-based Bank of the West in 2023, is planning to open more than 130 California branches over a five-year period.
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In March, BMO executives laid out their rationale for
For the third quarter, BMO reported company-wide net income of $1.75 billion Canadian dollars, down nearly 25% year over year. The decline was due to a charge related to the reduction in goodwill tied to the sale of the transportation and vendor finance businesses, the bank said in a press release.
Excluding the charge, adjusted net income was CAD $2.86 billion, up 19% year over year.
In addition to its U.S. return on equity target, BMO is also aiming to ramp up its company-wide return on equity. That goal is 15% by the end of October 2027. For the third quarter of this year, the metric came in at 8.4%, down from 11.6% in the year-ago quarter. On an adjusted basis, which excludes the reduction in goodwill, return on equity was 14%, the bank said in the release.
White on Tuesday reiterated the bank's focus on achieving that goal. When asked by an analyst if BMO is interested in doing mergers or acquisitions in the U.S., given the favorable valuation spread between U.S. banks and Canadian ones, he said M&A is not currently a priority.
"At the risk of boring with repetition, I'll say it again. Might we engage in M&A in the U.S.? Only if it meets very strict conditions," he said. "We wouldn't look at anything that would delay our [return on equity] promises from a timing perspective by a day."
