Consequently, BMO’s shares fell by 6.9 percent to $111.52 by midday, marking the largest intraday decline since a similar earnings miss occurred in late May, which was also due to higher loan-loss provisions.
Following this, Jefferies Financial Group Inc. analyst John Aiken downgraded BMO’s stock from a buy to a hold.
Aiken commented, “We freely admit that we may be closing the barn door after the animals have escaped,” referring to the bank’s overexposure to commercial loans.
He added that the ongoing pressure on BMO’s earnings is likely to persist, given the bank’s significant exposure to commercial loans on both sides of the border and the lagging impact of credit. Aiken also noted that the current easing cycle by central banks is unlikely to provide immediate relief.
In contrast to BMO, Bank of Nova Scotia exceeded analysts’ expectations, with its shares rising by 1.8 percent to $66.78. Scotiabank reported a profit of $1.63 per share on an adjusted basis for the fiscal third quarter, slightly above the average estimate of $1.62.