TORONTO – BMO Financial Group raised its dividend as it reported a profit of $2.3 billion in the fourth quarter, boosted in part by a reduction in provisions for bad loans as it works to adjust its U.S. banking operations.
The bank has been trying to improve its U.S. loan book after credit performance deteriorated last year, and says it has made notable improvements.
The bank’s provisions for impaired loans in its U.S. division were down to $209 million in the quarter, from $446 million last year.
Chief risk officer Piyush Agrawal said on an earnings call Thursday that the bank’s credit performance this year was in line with expectations as it improves the U.S. profile.
“While it takes time to work through impaired files, we have seen a steady decline in new watchlist formations and expect that this will lead to lower impaired balances over time.”
Along with loan optimization, the bank has hired over 100 commercial bankers and private advisers in the U.S. over the past year to help drive future loan growth.
In the quarter, the bank also announced the sale of 138 branches in the U.S. where it saw lower growth potential, along with plans to open 150 new branches over the next five years where it sees better prospects.
The focus on the U.S. follows on BMO’s 2023 acquisition of Bank of the West for US$16.3 billion that dramatically increased its footprint in the country.
Analysts on the call questioned management about potential further acquisitions in the U.S., something chief executive Darryl White said the bank would only consider if it helps get the bank toward higher return on equity.
“Our top imperative is rebuilding our ROE together with profitable earnings growth,” he said.
“Across the bank and in U.S. banking, so every decision that we make is evaluated through that lens.”
The bank reported an adjusted return on equity for the year of 11.3 per cent, up from 9.8 per cent last year, but still well off its target of at least 15 per cent.
White said that hitting that target remains more of a medium-term goal over the next three to five years, with the potential to get there in the early part of the range if the environment is constructive.
The bank’s turnaround efforts in the U.S. helped that division earn $807 million, up from $281 million in the same quarter last year.
Its Canadian personal and commercial banking business earned $752 million, up from $750 million a year ago, as provisions rose there.
Like other banks, BMO benefited from higher capital markets activity to see earnings jump to $521 million, up from $251 million in the same quarter last year.
Overall, revenue for the quarter totalled $9.34 billion, up from $8.96 billion last year, while the bank’s provision for credit losses totalled $755 million, down from $1.52 billion a year ago.
On an adjusted basis, BMO says it earned $3.28 per diluted share, up from an adjusted profit of $1.90 per diluted share in the same quarter last year.
Analysts on average had expected an adjusted profit of $3.03 per share, according to estimates compiled by LSEG Data & Analytics.
BMO raised its dividend, saying it will now pay a quarterly dividend of $1.67 per share, an increase of four cents per share.
The bank also announced on Thursday the appointment of Tammy Brown to its board of directors.
Brown previously served as deputy chair of KPMG Canada’s board of directors and was a partner and national industry leader for industrial markets at the firm.
This report by The Canadian Press was first published Dec. 4, 2025.
Companies in this story: (TSX:BMO)
