Bank of Montreal Q4 FY2025 earnings call

• Rebuilt ROE by 150 basis points from 9.8% to 11.3% in 2025, with EPS growing 26% and net income reaching $9.2 billion. • Achieved positive operating leverage of 4% with PPPT up 18% to $15.8 billion. • Impaired provisions moderated, and CET1 ratio remained at 13.3% above target. • Launched digital-first AI-powered strategy, including Gen AI tools for employees and acquisition of Burgundy Asset Management. • Wealth Management received 12 Lipper Fund Awards; Capital Markets had strong PPPT growth; Canadian Commercial Banking saw client and deposit growth; U.S. banking optimized branches and invested in talent.

Wealth Management, the highest ROE business, had record revenues and net income driven by client asset growth and constructive markets. Capital Markets was a key contributor to diversified earnings with strong PPPT growth throughout the year. Canadian Investment Banking ranked #1 in M&A deals and #2 in ECM league tables. Canadian Commercial Banking saw 7% loan growth and 5% deposit growth despite a complex environment. U.S. banking showed progress towards a 12% medium-term ROE target, with 7% PPPT growth, 10% recurring fee revenue growth, and branch optimization efforts.

• Anticipates GDP growth of 1.8% in the U.S. and 1.4% in Canada in 2026. • In Canada, expects low single-digit loan growth with improving conditions later in the year due to fiscal initiatives and policy rate easing. • In the U.S., expects to largely complete balance sheet optimization early in 2026 and see loan growth strengthen to mid-single digits by year-end. • Plans to continue share repurchases while supporting business growth and maintaining a strong capital position with a CET1 target of 12.5%.

• Muted GDP growth in the U.S. and Canada poses challenges. • Canadian unemployment rate likely to remain above 7% through mid-2026, impacting consumer credit. • Persistent trade uncertainty pending review of the USMCA agreement. • Softness in the Canadian economy led to higher losses in the Canadian Personal and Commercial business.

Q: On ROE, asked if the 15% target is realistic to achieve by 2027.

A: Darryl White stated the 15% is a medium-term target (3-5 years) and they aim to reach it in the early part of that range assuming constructive environments.

Q: On CET1 ratio, asked about comfort with dropping below 13% before peers.

A: Tayfun Tuzun responded they consider regulatory minimums, macroeconomic backdrop, and peer group distribution, and are comfortable with a 12.5% CET1 management target.

Q: On commercial loan growth and U.S. economy, asked about signs of tax bill impact and loan growth pickup.

A: Aron Levine said U.S. clients are optimistic, seeing activity pickup and pipeline growth, and hiring of commercial bankers will benefit loan growth.

Q: On Canadian credit card book delinquency, asked about implications.

A: Matt Mehrotra noted macro conditions affect the lower credit spectrum, but the premium segment has good growth with 16,000 accounts acquired.

Q: On U.S. M&A, asked about willingness to do deals.

A: Darryl White said M&A decisions are evaluated on strategic and ROE objectives, with focus on organic growth and densification in U.S. markets first, but would consider tuck-in deals that accelerate ROE.