Bank of Montreal delivered a quarter with two very different stories sitting on the same income statement. A $962-million after-tax charge tied largely to goodwill pushed reported third-quarter profit sharply lower, yet the businesses serving Canadian households and companies moved in the opposite direction. Canadian personal and commercial banking profit rose 16%, while the bank’s adjusted earnings increased 19% from a year earlier. Capital markets, wealth management and U.S. banking also posted growth. The result highlights why headline profit can sometimes obscure what is happening underneath: BMO is absorbing a sizeable accounting cost as it reshapes parts of its business, even as several of its core operations are producing stronger earnings. All amounts are in Canadian dollars unless otherwise indicated.
The $962-Million Charge Changed the Headline More Than the Quarter
BMO reported third-quarter net income of $1.75 billion for the three months ended July 31, down 25% from $2.33 billion a year earlier. Diluted earnings per share fell to $2.38 from $3.14. The biggest reason was not a sudden deterioration in everyday banking. BMO recorded a $1.092-billion pre-tax, or $962-million after-tax, charge associated with the planned sale of its Transportation Finance and Vendor Finance businesses. The charge was primarily related to goodwill and landed in Corporate Services, which consequently posted a reported loss of $1.151 billion. The planned transaction involves businesses with financing operations in both Canada and the United States.
Once specified adjusting items were removed, the picture looked considerably stronger. Adjusted net income reached $2.859 billion, up 19% from $2.399 billion a year earlier, while adjusted diluted earnings per share climbed 22% to $3.96. BMO identifies adjusted results as non-GAAP measures, meaning they are designed to show underlying operating performance after excluding designated items. Revenue on a reported basis rose to $9.896 billion from $8.988 billion. That combination helps explain why investors may look beyond the 25% decline in reported earnings: much of the gap reflects the cost of reshaping the institution rather than weakening across its major operating businesses.
Canadian Banking Became One of BMO’s Strongest Engines
The most important number for the Canadian side of the business was $980 million. That was the reported net income generated by Canadian Personal and Commercial Banking, an increase of $131 million, or 16%, from the same quarter last year. Adjusted profit was nearly identical at $983 million and increased 15%. Revenue rose 6%, with BMO attributing the improvement to stronger net interest income, a higher net interest margin and increased non-interest revenue. Lower provisions for credit losses also helped offset higher operating expenses.
Those numbers matter because Canadian personal and commercial banking is close to the everyday economy. It encompasses relationships with households as well as businesses that borrow, deposit cash and use banking services through different economic conditions. For BMO, stronger margins meant the economics of taking deposits and extending credit became more favourable during the quarter. Management also pointed to continued commercial loan growth in Canada. The performance does not mean every Canadian borrower is suddenly in stronger financial shape, but it does show that BMO’s domestic franchise was producing meaningfully more profit than it did one year earlier, despite an uncertain economic and trade backdrop.
Credit Costs Fell, Giving Earnings Another Lift
Credit quality provided another piece of encouraging evidence. BMO recorded $722 million in total provisions for credit losses during the quarter, down from $797 million one year earlier and also below the $739 million recorded in the preceding quarter. Provisions associated with impaired loans fell to $708 million from $773 million a year earlier. Provisions for performing loans — accounts that have not yet become impaired but for which banks estimate potential future losses — were just $14 million, compared with $24 million in the comparable period.
The year-to-date comparison is even more striking. BMO had recorded $2.207 billion in credit-loss provisions through the first nine months of fiscal 2026, compared with $2.862 billion during the same period of fiscal 2025. That represents a decline of more than $650 million. BMO said the improvement in impaired-loan provisions came largely from Canadian P&C and U.S. Banking. The bank still faces real credit costs, and $722 million is hardly insignificant, but provisions are important because they can consume earnings quickly when borrowers come under stress. Their decline gave BMO more room for growth elsewhere to flow through to adjusted profit.
Capital Markets and Wealth Management Added More Firepower
BMO was not relying only on traditional lending. Capital Markets generated reported net income of $645 million, up $203 million, or 46%, from a year earlier. Adjusted earnings of $649 million increased 45%. The bank attributed the improvement to higher revenue across Global Markets and Investment and Corporate Banking, together with lower credit-loss provisions, partly offset by increased expenses. Stronger capital-markets performance can be particularly valuable for a diversified bank because activities such as trading, underwriting and corporate finance respond to different forces than consumer lending.
Wealth Management also strengthened beneath the reported headline. Total reported wealth-management profit rose 4% to $408 million, while adjusted earnings climbed 22% to $480 million. Within Wealth and Asset Management specifically, adjusted net income increased 31% to $392 million, helped by stronger global markets, net sales and higher net interest income. Insurance profit, by contrast, fell 8% to $88 million, partly because the previous year included a gain from the sale of a non-strategic portfolio. Taken together, these businesses broaden BMO’s earnings base and reduce its dependence on any single source of banking revenue.
U.S. Banking Grew Even as BMO Continued to Reshape Its Footprint
BMO’s American operations also moved higher. U.S. Banking reported net income of $868 million, a 13% increase from the prior year, while adjusted profit rose 11% to $925 million. Currency movements provided some assistance: BMO said the stronger U.S. dollar increased revenue, expenses and net income by roughly 2%. Measured directly in U.S. dollars, reported profit was US$620 million, up 11%, while adjusted profit increased 9% to US$661 million. Revenue on that basis grew 5%, supported by higher net interest margin and non-interest revenue.
At the same time, BMO has been pruning parts of its U.S. and specialized-finance footprint. The Transportation Finance and Vendor Finance operations are being sold to infrastructure investment firm Stonepeak, with BMO expected to retain an approximately 19.9% interest in the new entity. Separately, the bank previously agreed to sell 138 U.S. branches in selected markets to First Citizens Bank, involving approximately US$5.7 billion of deposits and US$1.1 billion of loans when announced. The combination is important: BMO is not retreating from the United States altogether, but it is becoming more selective about where capital is deployed and which businesses meet its desired returns.
BMO Still Has Capital Available for Dividends and Buybacks
Despite the large accounting charge, BMO ended July with a Common Equity Tier 1 ratio of 13.0%, unchanged from the end of the previous quarter. CET1 is a closely watched measure of a bank’s highest-quality capital relative to its risk-weighted assets. OSFI’s current supervisory expectation for Canada’s domestic systemically important banks is 11%, incorporating minimum capital requirements and required buffers. BMO therefore remained above that supervisory benchmark while continuing to return capital to shareholders.
During the third quarter, the bank repurchased 3.8 million common shares for cancellation at an average price of $239.37. It also announced plans for a new normal-course issuer bid covering as many as 25 million shares, subject to approvals from OSFI and the Toronto Stock Exchange. That potential authorization represents about 3.6% of BMO’s public float as of July 31. Meanwhile, the bank declared a fourth-quarter dividend of $1.71 per common share, unchanged from the previous quarter but 5% above the year-earlier level. At that quarterly rate, the dividend equates to $6.84 annually.
The Bigger Test Is Whether BMO Can Turn Momentum Into Higher Returns
For shareholders, the quarter ultimately comes back to returns rather than a single earnings adjustment. BMO’s reported return on equity fell to 8.4% from 11.6%, reflecting the goodwill-related charge. Its adjusted ROE moved in the opposite direction, rising to 14.0% from 12.0%. Management has laid out a longer-term goal of achieving a sustainable 15% ROE as it exits fiscal 2027, with better operating performance, normalization of credit costs and capital management among the levers identified for getting there.
The latest results suggest BMO is moving closer to that objective, although the path is not risk-free. Canadian and U.S. borrowers remain exposed to economic uncertainty, and the bank is operating while Canada-U.S. trade tensions create another layer of unpredictability for companies on both sides of the border. Reuters reported that BMO and Scotiabank both beat analysts’ quarterly profit expectations, with executives emphasizing the resilience of their businesses despite tariff concerns. For BMO, the central question after this quarter is therefore fairly straightforward: whether the strength visible in domestic banking, capital markets, wealth and U.S. operations can persist after the unusually large divestiture charge fades from the comparison.
