Would Bank of Montreal (BMO) Face Tough Times Ahead?


Bank of Montreal (NYSE: BMO) is a gigantic entity. It’s the fourth largest bank in Canada in terms of assets, while the eighth largest bank across North America. It’s a provider of diversified financial services having a market capitalization of $78.83. Beta value of 1.2 means that the stock experiences is expected to face risk going forward in the future. The news and recent developments which have impacted the general market conditions, including the inflationary pressure and the geopolitical conflict, indicate that bears would dominate the stock soon, however, in the long run, bulls are expected to take a lead.

BMO Acquired Bank of the West

Bank of Montreal is known in the industry for always seeking opportunities to expand its business. In this regard, it took a crucial step recently by signing a definitive agreement with BNP Paribas for the acquisition of Bank of the West and its subsidiaries. BMO was to acquire Bank of West for a cash purchase price of $16.3 billion. With the closing of the deal, BMO saw an expansion of its footprint to 32 states and has a strong position in 3 of the top 5 US markets.

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The Revenue and Earnings Scenario

On the revenue front, BMO had a successful last quarter (i.e. Q1 2022), when it was able to generate $7.64 billion against the estimates of $6.67 billion, while during Q1 2021, the revenue was calculated to be $6.37 billion. The earnings also beat the consensus estimates by $0.47 and were calculated to be $2.60 for the first quarter of 2022. As for the upcoming quarter, the earnings estimate for the stock stands at $2.52.

Risks and Hazards

Although the facts and figures are pointing towards a robust movement for BMO stock, it could face certain risks during its journey. Being a part of the larger financial sector, BMO could face tough times in case of a recession or case of terrible economic conditions; just like the world the going through a phase currently after the pandemic has had a deleterious impact on the financial sector. The tightening measures by regulatory authorities could also prove to be disadvantageous for the cause of the banking sector.

Final Remarks

Despite all the risks, banks are among the best sectors for the investors to invest in, the reason being most of them pay dividends to the shareholders, including BMO as well as their strong association with the economy of the country, which in turn aids them in formulating better strategies for investors.


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