Key Morningstar Metrics for Bank of Montreal
Bank of Montreal’s BMO wealth management and capital markets segments had a strong performance in fiscal 2025, with adjusted earnings growth of around 30% in both segments.
The bottom line: We are increasing our fair value estimate for narrow-moat Bank of Montreal to C$171 per share. After the increase, we still view the shares as slightly overvalued, as we believe the market is over-extrapolating the strong performance of the bank’s capital markets business.
- Around C$2 of the increase is driven by the time value of money, C$16 by better near-term growth and profitability, and the remaining C$2 by higher midterm profitability.
- We increased our normalized return on tangible common equity to 16.2% from 15.5%.
Big picture: While we believe the bank’s investment in its capital markets businesses should lead to some growth in the revenue base, we still view the 2025 level as over-earning from a midterm earnings perspective.
- Adjusted trading income grew by 68% and 9% in 2024 and 2025, respectively. On the other hand, underwriting and advisory fee income increased by 26% and 22%, respectively, in the past two years.
- We see trading income and advisory fee income declining by 10% and 8%, respectively, in 2026.
Key stats: We project the bank’s non-interest income to grow at a CAGR of 3.4% from 2025 to 2030. We forecast an adjusted expense growth of 4.4% in 2026, a slowdown from the 8.0% growth in 2025, when variable compensation was elevated.
- We expect net interest margin to be relatively stable between 1.66% and 1.67% over the next five years, compared with 1.65% in 2025. We forecast net interest income growth to grow at a CAGR of 3.9% from 2025 to 2030.
- For credit costs, we project provisioning for credit losses to be around 44 basis points of loans in fiscal 2026—lower than the more than 50 basis points in the past two years, but still elevated.
Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
The author or authors do not own shares in any securities mentioned in this article. Find out about
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