Bank of Montreal profit misses mark as credit losses loom

(Reuters) - Bank of Montreal on Wednesday reported quarterly profit below analysts' estimates as it set aside more money to cover potential loan losses stemming from the coronavirus pandemic.

Canadian banks are expecting to book higher loan losses this year and the next as the COVID-19 pandemic ravages economies and household incomes. They also expect a hit from a plunge in oil prices, which has hurt the energy sector globally.

BMO set aside C$1.12 billion for future loan losses, vastly higher than C$176 million a year earlier.

The figure includes a $705 million provision for credit losses on performing loans in the current quarter, compared with a $26 million provision a year earlier.

Bank of Nova Scotia kicked off bank earnings for the first quarter on Tuesday and revealed that credit provisions more than doubled to C$1.85 billion from a year earlier, highlighting the damage from the pandemic.

Analysts expect second-quarter profit at Canada's biggest banks to slide by more than a third from a year earlier also due to margin pressure from decade-low interest rates.

BMO said net income fell to C$689 million ($501.05 million), or C$1 per share, in the second quarter ended April 30 from C$1.49 billion, or C$2.26 per share, a year earlier.

Adjusted net income fell to C$1.04 per share from C$2.30 per share a year earlier. Analysts had expected C$1.22 a share.

BMO's capital markets unit reported a net loss of $74 million from a profit a year earlier, while its wealth management, Canadian, and U.S. personal and commercial businesses all posted a drop in net income.

The bank's return on equity was 5.3%, compared with 13.6% in the prior year. It however, maintained its dividend from the previous quarter.

(Reporting by Noor Zainab Hussain in Bengaluru; Editing by Anil D'Silva)