Sep 19 2026 12:46 AM EST

Bank of Montreal Beats Expectations as Fee Growth and Capital Returns Drive Strong Q2 Results

Bank of Montreal (TSX: BMO) delivered adjusted earnings per share of $3.67, up 40% year‑over‑year, and revenue grew roughly 10% YoY in the quarter ended April 30, 2026. The results lifted the stock, helping it outperform its benchmark by more than ten percentage points for the year.

Adjusted net income rose $2.7 billion, while pre‑provision pretax earnings (PPPT) climbed to $4.4 billion (+16% YoY). Return on equity (ROE) improved to 13.5% (+370 bps), and the CET1 capital ratio held at 13%. The bank also raised its dividend by 5% to $1.71 per share and repurchased 6 million shares.

Quarterly performance highlights

Revenue rose 10% YoY, driven by fee‑based growth across wealth management (+21‑24%), capital markets (+19%) and treasury‑payment solutions (+12%). Operating expenses increased 6%, delivering an operating leverage of 4.1%. Net interest margin (NIM) ex‑markets was 229 bps, up 12 bps YoY.

Fee‑based revenue as the main catalyst

Wealth Management net income surged 39% YoY, with mutual‑fund sales up 49% and asset‑under‑management growing 30%. Capital Markets posted a record PPPT of $900 million, a 31% increase YoY, powered by equity trading and underwriting fees. Treasury and Payment Solutions fee revenue rose 12%, reflecting higher transaction volumes and pricing adjustments.

Capital allocation and balance‑sheet optimisation

Management announced a 5% dividend increase and a normal‑course issuer bid for up to 25 million shares. The pending sale of Transportation and Vendor Finance businesses is expected to add roughly 28 bps to the CET1 ratio and about 30 bps to ROE once closed. Additionally, BMO is opening new financial centres in Southern California at a rate of one per month, expanding its U.S. retail footprint.

Macro and geopolitical context

The Bank of Canada kept its policy rate at 2.25%, while the U.S. Federal Reserve signalled a steady‑rate stance. Elevated oil prices linked to Middle‑East conflict have kept headline inflation near 3% in Canada, but core inflation remains around 2%. Management cited USMCA clarity and cross‑border infrastructure spending as tailwinds for loan growth, while noting trade‑policy uncertainty and higher consumer‑credit delinquencies as headwinds.

Outlook and targets

Management reaffirmed a goal of a 15% ROE by fiscal 2027, citing continued operating leverage, mid‑single‑digit expense growth and disciplined capital deployment. The bank expects NIM to remain stable, loan growth to stay in the mid‑single‑digit range, and CET1 to benefit from the pending divestitures.

Risks and unanswered questions

Key risks include a potential slowdown in fee‑based revenue if market volatility eases, higher liquidity levels that could compress NIM, and lingering credit‑quality concerns in the unsecured Canadian portfolio, where delinquencies have been rising. The timing and valuation of the Transportation and Vendor Finance divestiture also remain uncertain, and any adverse regulatory changes to cross‑border banking could affect the expanding U.S. footprint.