BMO

Image source: The Motley Fool. Tuesday, Aug. 25, 2026 at 7:15 a.m. ET Investor Relations - Christine Viau Chief Executive Officer - Darryl White Chief Financial Officer - Rahul Nalgirkar Chief Risk Officer - Piyush Agrawal Group Head, Canadian Personal and Business Banking - Matt Mehrotra Group Head, Canadian Commercial Banking - Sharon Haward-Laird Group Head, U.S. Banking - Aron Levine Group Head, BMO Capital Markets - Alan Tannenbaum Group Head, Wealth Management - Deland Kamanga BMO U.S. CEO - Darrel Hackett Operator: Good morning, and welcome to the BMO Financial Group's Q3 2026 Earnings Release and Conference Call for August 25, 2026. Your host for today is Christine Viau. Please go ahead. Christine Viau: Thank you. Good morning, everyone. We'll begin today with remarks from Darryl White, BMO's CEO; followed by Rahul Nalgirkar, our Chief Financial Officer; and Piyush Agrawal, our Chief Risk Officer. Also present to answer questions are our group heads, Matt Mehrotra, Canadian Personal and Business Banking; Sharon Haward-Laird, Canadian Commercial Banking; Aron Levine, U.S. Banking; Alan Tannenbaum, BMO Capital Markets; Deland Kamanga, Wealth Management; and Darrel Hackett, BMO U.S. CEO. A reminder that our call will end at 8:15 this morning. As noted on Slide 2, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darryl and Rahul will be referring to adjusted results in their remarks unless otherwise noted as reported. With that, I'll turn the call over to Darryl. Darryl White: Thank you, Christine, and good morning, everyone. This morning, we reported another quarter of strong operating performance with EPS of $3.96, up 22% year-over-year and pre-provision pretax earnings of $4.5 billion, up 13%. These results reflect our ongoing focused execution on the strategy we outlined at our Investor Day in March to elevate returns and accelerate growth. Every business segment delivered record pre-provision, pretax earnings with sustained momentum in Capital Markets and Wealth and continued commercial loan growth in both Canada and the U.S. as we deepen One Client relationships across our franchise. We delivered double-digit revenue growth and positive operating leverage of 1.6%, managing expenses in line with revenue and continuing to reinvest for growth. We continue to make meaningful progress against our ROE targets. Return on equity improved again this quarter to 14%, up 200 basis points from last year and extending the momentum we've built over the last 7 quarters. The strength of our core operating performance this quarter reinforces our confidence in delivering a sustainable 15% ROE exiting fiscal 2027. Since outlining our path to higher returns, we've consistently demonstrated that diversified revenue growth, disciplined expense management, strong risk management and proactive capital management delivers tangible and sustainable results. Our progress continues to be supported by each of the key drivers we identified at our Investor Day. We're seeing continued client growth, healthy fee-based revenue and improved productivity across the enterprise. Credit performance improved with impaired provisions at the lowest level in the last 10 quarters, a result of proactive risk management and our well-diversified portfolio. Our capital position remains strong with a CET1 ratio of 13%. The impact of our announced divestitures closing, which Rahul will cover in his remarks, is expected to contribute an additional 50 basis points of capital and support returns through reallocation to areas where we have attractive, higher return and longer-term growth opportunities. These strong capital levels are providing ongoing flexibility to support client needs, invest for growth and return capital to shareholders through a combination of dividends and share buybacks. Turning now to our businesses where, as I highlighted, each business delivered record PPPT this quarter. In Canadian P&C, our deposit-led growth strategy continues to drive performance with operating deposits up 7% year-over-year as clients are choosing BMO for trusted advice, innovative digital capabilities and personalized solutions. At the same time, clients are consolidating more of their financial relationships with BMO. Mutual fund sales through our financial centers were up 33% over last year, with strong market share gains driving a higher penetration of investment products in our retail client base. We're building deeper client loyalty, including strong early engagement following the launch of BMO Blue Rewards with a 65% increase in weekly enrollments since launch and strong engagement with partner offers that help clients make real financial progress. Canadian Commercial Banking continues to perform with good lending momentum up 3% and strong TPS fee growth up 13% from last year. Year-to-date, new client acquisition is healthy and 20% higher than last year with particular strength in mid-market. As the official and exclusive financial services partner to Canada Soccer, we're proud to continue our decades-long legacy of growing the game from the grassroots to the most global of events, including our support of the men's national team through the World Cup this summer and looking ahead to the Women's World Cup in 2027. Our integrated marketing campaign around this year's World Cup reached 30 million Canadians and contributed to a 40% lift in bmo.com visits, contributing to our strongest net client growth quarter of the year. Our U.S. banking business continues to build momentum with ROE of 9.8% and up 90 basis points year-over-year and ROTCE of 17.3%. Investments in talent, technology and integrated market strategies are leading to good progress in net client growth. We continue to see positive commercial lending activity with the first quarter of annual commercial loan growth since completing our optimization efforts in Q2. Loan balances were up 4% sequentially with record TPS revenues up 15% from last year. In U.S. Retail Banking, core customer deposits were up 2% over last year across the franchise, led by 3% growth in California. And we're seeing good progress in our mass affluent strategy with investment flows up 17% over last year. In U.S. Banking, we've now made the transition from optimization to an inflection point where we can drive an acceleration in profitable growth. Wealth Management delivered another strong quarter with record net income driven by broad-based growth across the franchise, including higher private banking penetration among affluent households and sustained growth in net new assets. Our differentiated lineup of ETFs and mutual funds continues to attract client assets and strengthen our position as one of Canada's leading investment managers. Long-term mutual fund gross sales and ETF flows are both up 19% from the prior year, reflecting strong fund performance and innovative offerings. In Capital Markets, performance remained strong with record PPPT of $903 million, reflecting the benefits of our diversified franchise and leading sector expertise. We had strong contributions across Global Markets and Investment and Corporate Banking with strong equity trading and debt underwriting results driven by our franchise strength and One Client connectivity. The results this quarter reinforce the earnings capacity of our Capital Markets business. As demand for critical minerals, energy infrastructure and resource investment continues to grow, BMO is helping clients execute transformative transactions that strengthen the economy and support long-term economic growth. We also recently announced an agreement to acquire the Capital Markets business of Euroz Hartleys Group, combining BMO's globally leading metals and mining franchise with one of Australia's premier investment banking and equity distribution platforms to create a truly integrated global capability for our clients. Across all our businesses, the power of our One Client strategy is creating measurable value. Increased referrals, stronger connectivity across business lines and higher level of client engagement are generating sustainable growth opportunities across the enterprise. At our Investor Day, we highlighted the many ways that AI is already creating significant value -- business value for our clients and our teams by personalizing client experiences, augmenting our teams and automating processes to drive business value. We continue to advance and integrate these important initiatives. This quarter, BMO Insurance launched another AI-powered platform, SmartDecision. It uses predictive modeling to deliver underwriting decisions in as little as 10 seconds compared with an industry average of 28 business days or more. Our Lumi frontline chatbot brings speed and efficiency to a new level, simplifying access to policy information across Canadian personal and business banking, increasing productivity amongst new employees by 17%. Lumi is being extended and scaled to support client conversations, starting with mortgage renewals. We're now taking the next step in our evolution, further enhancing our operating model, scale our efforts across the organization and accelerate value creation. On the trade front, the Canada-U.S. relationship is going through a period of adjustment and the uncertainty that brings represents a headwind in both countries for trade-related sectors and domestic affordability more broadly. The relationship will remain an extraordinarily important one to both countries, but some of the assumptions that businesses have relied on for decades, particularly around the predictability of trade policy have been tested in the last 1.5 years. For the bank, there are 2 implications. First, we're closely monitoring the effect on our clients and our portfolios, and we're working with them on liquidity, investment decisions, supply chain adjustments and market diversifications. And I can report today that they are adjusting very well. Second, our competitive position in Canada and the United States is a strategic advantage for our clients. Our businesses operate across a diversified North American platform, and we can help our clients navigate in both markets. Canada and the United States are deeply connected and North America remains one of the most attractive economic regions in the world. We're disciplined on risk, staying close to our clients and are ready to support them as government policy and the environment evolves. Against that backdrop, the world is looking for places that can deliver long-term growth and support resiliency in an increasingly uncertain environment, and Canada has real advantages, a stable financial system, abundant resources, world-class talent and a platform to export globally through the world's most comprehensive set of free trade agreements. The upcoming Investment Summit is a good example of Canada putting those strengths in front of investors to compete for capital on the global stage. And BMO is uniquely positioned to capture growth opportunities in this environment. Our premium commercial banking franchise was once again recognized by World Finance Magazine as the Best Commercial Bank in Canada and in the U.S. Our leadership in TPS was recognized by Global Finance as the best bank for transaction banking in North America for continued innovation across automation, real-time payments, data and AI capabilities. Our differentiated capital markets expertise, particularly in metals and mining, energy and infrastructure play to this market opportunity, all of which is supported by a growing wealth platform and strong deposit foundation, providing significant opportunities to continue expanding client relationships and generate sustainable earnings growth. Most importantly, we remain focused on our #1 imperative of delivering and sustaining a 15% ROE as we exit fiscal 2027 by executing on the commitments we made at our Investor Day, stronger returns, faster earnings growth and a more resilient franchise, all anchored in growing and deepening client relationships, innovating for business value and optimizing performance. I want to thank all employees of the BMO team. It's their commitment to our clients and communities that powers our combined success and my confidence in continuing to deliver long-term value for our shareholders. And with that, I'll turn it over to Rahul. Rahul Nalgirkar: Thank you, Darryl. Good morning, everyone. My comments will start on Slide 10. Third quarter reported EPS was $2.38 and net income was $1.8 billion. Adjusting items are on Slide 45 and included a $973 million charge largely related to goodwill on the announced sale of the transportation finance and vendor finance businesses. The remainder of my comments will focus on adjusted results. EPS was $3.96, up 22% from last year on record net income of $2.9 billion. ROE of 14% increased 200 basis points year-over-year. ROTCE of 18% increased 240 basis points and ROA was 72 basis points. These results demonstrate strong execution of our strategic priorities and core operating performance across all our businesses while continuing to optimize the portfolio and invest for future growth. PPPT grew 13% year-over-year to $4.5 billion with record PPPT in all 4 operating segments and positive operating leverage of 1.6%. Revenue growth of 11% was broad-based, reflecting the benefits of our diversified business mix. Wealth Management and Capital Markets continued to generate strong fee growth, while Canadian P&C and U.S. Banking benefited from NIM expansion and balance sheet growth. Total PCL decreased to $722 million with lower impaired and performing provisions, and Piyush will speak to this in his remarks. As Darryl mentioned, we have announced 3 strategic transactions that optimize our business portfolios, including the sale of 138 U.S. branches outside our core footprint, the transportation and vendor finance businesses and Moneris Canada. While these businesses contributed modestly to the current quarter revenue and earnings, they did not meet our long-term growth and ROE objectives. We expect these transactions to add 50 basis points to our CET1 ratio on closing, be overall accretive to ROE and position us to well deliver our Investor Day growth and return targets as we deploy capital and resources to opportunities which meet our growth and return expectations. Turning to the balance sheet on Slide 11. We are seeing loan growth momentum on both Canada and the U.S., positioning us to deliver ongoing NII growth. Average loans were up 3% year-over-year and up 2% sequentially. With balance sheet optimization actions complete, year-over-year U.S. commercial loan growth turned positive this quarter and was up 4% sequentially. Canadian commercial loans were up 3% year-over-year and up 2% sequentially. Canadian consumer loans had modest growth across all lending products. Average deposit balances were flat both year-over-year and sequentially. Core operating deposits grew 8% year-over-year and offset by deliberate reduction in term deposits in both the countries. Deposit mix improvement remains an important source of our margin resilience. Turning to Slide 12. NII ex Markets was up 5% year-over-year, driven primarily by margin expansion and loan growth in Canadian P&C and U.S. Banking, partly offset by lower NII in corporate. NIM ex Markets was 226 basis points, up 5 basis points year-over-year, reflecting continued deposit margin expansion from higher ladder reinvestment rates and improved deposit mix. NIM ex Markets declined 3 basis points sequentially with higher operating segment margins more than offset by higher levels of low-yielding liquid assets and lower NII in corporate. Our focus on growing core operating deposits and disciplined loan growth is reflected in the stable NIM trends in U.S. Banking and Canadian P&C, notwithstanding the deposit competition and loan mix headwinds. In Canadian P&C, NIM was up 2 basis points sequentially with higher deposit margins offset by lower loan margins. In U.S. Banking, NIM decreased 1 basis point sequentially as higher deposit and loan margins were offset by the impact of loans growing faster than deposits. Looking ahead, we expect core margin trends in Canadian P&C and U.S. Banking to remain resilient. In the near term, while the quarterly NIM may fluctuate modestly with prudent liquidity management and divestiture-related balance sheet mix, our underlying NIM performance is supported by the deposit mix improvement, ladder reinvestment and disciplined pricing. We are focused on growing NII while maintaining NIM stability. Moving to noninterest revenue on Slide 13. NIR increased 26% year-over-year or 15%, including -- excluding trading and reflects our ongoing success in deepening client relationships across all our businesses. Growth was driven by higher wealth management fees, debt underwriting fees, TPS fees and lending fees, which was partly offset by the gain on sale of a nonstrategic insurance portfolio in the prior year. Turning to Slide 14. Expenses grew 9% and were up 6%, excluding FX and higher performance-based compensation. We continue to closely manage expenses in line with revenue growth to deliver positive operating leverage. This performance reflects realized benefits from our efficiency program while selectively reinvesting in key growth areas, including talent, technology and marketing. Our efficiency ratio improved to 54.9% and operating leverage was 1.6%. We remain on track to deliver against our guidance of mid-single-digit core expense growth and positive operating leverage for the full year. Turning to Slide 15. Our CET1 ratio remained strong at 13%, unchanged from last quarter with strong capital generation net of dividends of 33 basis points, supporting growth and share repurchases. Disciplined capital allocation is foundational to our operating model. Given our strong capital position, today, we announced a new normal course issuer bid for up to an additional 25 million shares or approximately 3.6% of shares outstanding beginning in September, pending regulatory approval. Moving to the operating segments and starting on Slide 16. Canadian P&C net income was up 15%, reflecting good PPPT growth of 7% and lower PCLs. Revenue was up 6% from higher NII on margin expansion, loan growth and strong core deposit growth. Noninterest revenue increased 13%, driven by higher mutual fund distribution fees, TPS fees and card revenue, partly offset by the reduction to retail deposit fees. Expense growth of 4% reflected higher operating costs and technology investments. Efficiency ratio improved to 42.8% with positive operating leverage of 1.6%. Turning to U.S. Banking on Slide 17, which speaks to U.S. dollar performance. Net income was up 9% year-over-year with ROE expanding 90 basis points year-over-year to 9.8% and ROTCE of 17.3%, representing a strong return on marginal capital deployed. This was supported by strong core operating performance, including PPPT of $972 million, up 7% year-over-year. Revenue was 5% on higher NII from margin expansion and commercial loan growth. NIR grew 4%, primarily driven by record TPS fees and higher investment management fees. Expense growth of 3% reflected continued investments in talent and technology, largely funded by efficiency improvements with positive operating leverage of 1.7%. We are seeing strong momentum across our U.S. franchise to enhance returns and accelerate growth. Moving to Slide 18. Wealth Management net income was up 22% year-over-year. Strong performance was driven by record wealth and asset management revenue, up 24% year-over-year, reflecting stronger markets and continued growth of net new assets, deposits and loans. Insurance revenue was down due to the gain on sale in the prior year, partially offset by the impact of favorable market movements in the current quarter. Expenses were up 22%, driven by higher employee-related expenses, including higher revenue-based costs. Turning to Slide 19. Capital Markets net income was up 45% year-over-year, driven by record PPPT of $903 million, up 39%. Revenue was up 20% year-over-year with continued strength in Global Markets revenue, which increased 27% on strong activity in equities trading. Investment and Corporate Banking revenue increased 10%, driven by corporate banking and strong debt underwriting activity. Expenses were up 9%, mainly driven by higher employee and technology costs. These results reflect both constructive market conditions and the benefits of our investments in product capabilities, resource deployment and sector expertise. Turning to Slide 20. Corporate Services reflected a net loss of $178 million compared with $123 million in the prior year, reflecting lower revenues and higher expenses. Our results this quarter demonstrate continued progress towards our Investor Day priorities to elevate returns and accelerate growth. We are advancing multiple BMO-specific levers, including stronger U.S. returns, core operating performance, capital efficiency and disciplined balance sheet growth. With adjusted ROE at 14% this quarter, we are confident in achieving our medium-term objective of 15% ROE exiting fiscal 2027. And with that, I will now turn it over to Piyush. Piyush Agrawal: Thank you, Rahul, and good morning, everyone. The North American economies continue to demonstrate resilience amid elevated geopolitical risks and evolving trade landscape. Economic growth has resumed in Canada and growth in the U.S. remains solid, supported by AI-driven expansion. At the same time, Canadian labor markets remain softer than historical norms. Energy-driven inflation has created near-term volatility and this weekend's announcement of additional tariffs present downside risks. Turning to our performance this quarter. We are seeing the benefits of the actions we have taken over the past several years to strengthen portfolio quality, maintain disciplined underwriting standards and proactively manage emerging risks. As shown on Slide 22, total provision for credit losses were $722 million, down from $739 million in the prior quarter, driven by lower impaired provisions. Impaired losses decreased $26 million to $708 million or 41 basis points. By operating segment, Canadian Personal and Commercial impaired losses were $447 million, down $30 million from the prior quarter, driven by lower losses in the unsecured retail portfolios. While consumer insolvencies remain elevated, we are starting to see some signs of stabilization as a result of proactive risk management actions. We remain vigilant given the uncertainty of ongoing trade policies and continue to actively manage the portfolio through enhanced monitoring and early client engagement. In U.S. Banking, losses were $223 million, down $14 million from the prior quarter with lower losses in both consumer and commercial segments. And Capital Markets impaired losses were $30 million. Turning to Slide 23. Our performing allowance position remains a key strength. The $14 million performing provision this quarter was primarily driven by changes in the macroeconomic outlook relating to higher long-term rates, partially offset by improvement in portfolio credit quality. The bank remains well reserved with $4.8 billion of performing allowance and 69 basis points coverage over performing loans. Overall, underlying credit trends improved during the quarter. The wholesale portfolio continued to experience net positive migration, resulting in further $1 billion decrease in watch list balances. Gross impaired loans were $6.8 billion or 97 basis points, down 4 basis points from the prior quarter, as shown on Slide 24. Formations were $1.5 billion, stable to prior quarter. Looking ahead, we are encouraged by the positive trends in our portfolios. Commercial watch list and impaired loan trends continue to improve, and our portfolio continues to demonstrate strong borrower fundamentals. At the same time, the recent tariff announcement is an important development, and we are watching the potential second order effects on Canadian growth, employment and business investment very closely. That said, we do not see this as a broad-based credit event today. Our portfolio is well diversified. We have stress tested the areas most exposed to trade disruption and our underwriting remains disciplined. Direct exposure remains manageable at less than 1% of the loan book and a significant portion is to investment-grade borrowers. The bigger variable for us continues to be broader macroeconomic implications for Canada. We will continue to support our clients as they navigate through these policy changes. We also believe government measures will help lessen the impact on workers and businesses. So we are appropriately cautious in the environment and confident in the resilience of our portfolio. Against this backdrop, we expect fourth quarter impaired PCL to be in line with third quarter with no change to our 2026 guidance. To conclude, the bank enters the fourth quarter from a position of strength with robust reserve coverage, diversified exposures, solid borrower fundamentals and capital and liquidity levels that provide significant flexibility across a range of economic scenarios. We believe these factors position BMO well to continue supporting our customers while prudently managing risk through the cycle. With that, I will now turn the call back to the operator for the Q&A portion of this call. Operator: [Operator Instructions] Our first question comes from Matthew Lee from Canaccord Genuity. Matthew Lee: Maybe one for Aron. U.S. ROE is progressing pretty quickly now in the 10% range. Can you maybe rank the key drivers... Christine Viau: Operator, do we have the first question? Matthew Lee: Whether that's accelerating core banking loan growth, continued growth in wealth, normalization of credit or further balance sheet optimization? And has that ranking changed at all since the Investor Day, just given the progress you made so far? Christine Viau: Sorry, just give us a moment here. Operator, are you there? Operator: Yes. Can you hear me? Ladies and gentlemen, we're experiencing technical difficulties on the line. [Technical Difficulty] Our first question comes from Matthew Lee from Canaccord Genuity. Matthew Lee: Can everyone hear me? Operator: Yes, we can hear you, Matt. Sorry for the delay. Matthew Lee: Yes, no problem. Just maybe one for Aron. U.S. ROE is progressing quickly now in the 10% range. Can you maybe rank the key drivers to go from 10% to 12%, whether that's accelerating core banking loan growth, growth in wealth, credit normalization or further balance sheet optimization? And just how has that ranking changed at all since Investor Day, just given the progress you made so far? Aron Levine: Matthew, it's Aron. Can you hear me now? Matthew Lee: Hi, Aron. I can hear you now. Aron Levine: Okay. Great. Sorry for the technical challenges. I think I heard your question was related to the path to 12%, the ROE path. So I'll answer that, and I think that's what you have. So if you remember what we said in Investor Day and we repeated, the way to think about the path is really in 1/3, 1/3, 1/3, right? 1/3 client balance growth, 1/3 fee income growth and 1/3 efficiencies and PCL normalization. And across all 3 of those, we are really seeing some positive trends. We talked about the good loan momentum in commercial loan growth, 4% quarter-over-quarter, and that's after achieving the growth in the second quarter. We're seeing strong fee income growth, in particular with our TPS, which we grew at 15% year-over-year on top of 23% the prior year. We are seeing a good growth in our consumer business with a 3% core consumer operating deposit growth. And then, of course, on our efficiencies and PCL normalization, our efficiencies have improved 90 basis points year-over-year and actually 300 basis points since 2024. So across all of those, it's good progress. There's work to be done. We have to continue to execute the strategy as we've laid out, driving quality loan and deposit growth, really work closely as we have been across all of our fee-generating businesses, TPS, Capital Markets and wealth and continue to deliver strong efficiencies through expense management and PCL normalization, as Piyush pointed out. I will say critically important, we are investing within that expense management, strong increases in talent. We've delivered more investments in our technology model. So we continue to invest in a long-term growth because this is all about long-term success. And with the quarter now at 9.8% ROE and 17.3% ROTCE, we're clearly making progress, and we'll continue to work each quarter towards our ultimate goals. Matthew Lee: All right. That's helpful. So just about 1/3 each for the next 200 basis points. Operator: Our next question comes from Ebrahim Poonawala from Bank of America. Ebrahim Poonawala: I guess maybe, Darryl, and then Aron and Matthew, if you want to jump in, just give us a mark-to-market around -- Darryl, you addressed that the tariff impact could be manageable potentially. But as we think about the momentum, maybe starting with the Canadian economy, it felt like things were picking up steam, commercial growth, housing stabilizing. Just give us a sense of what's your best expectation in light of the tariff uncertainty of what that means for the Canadian economy. And on the U.S. side, how much of lending do you think can get influenced or impacted by the AI CapEx cycle, either direct or second round effects? Darryl White: Ebrahim, it's Darryl. So thanks for the question. Look, you surmised in your question that we thought that the impact of the recent round of tariffs was manageable. I think I heard [indiscernible] potentially. I think it's absolutely manageable is the first point I would make, and I'll explain to you why. When we step back, I'm going to reinforce the point I made earlier, which is that we're focused on helping our clients navigate change. That's not new. Liberation Day was 16 months ago. There's been a lot of change that has been navigated. I will point out to all of us that over the course of that time, as adjustments are being made in supply chains, we've got a growing Canadian economy, in fact, an increase in the growth rate as well as a reduction in the unemployment rate. So that sets the backdrop for where we are today. I think it is important to remove the emotion from the topic and have a clinical lens, so I won't add to the emotion. I will add to the clinicians' work, which is the difference between last weekend and today, if we bring to a status quo is the imposition of the 338 tariffs, which are acute, but they are, at the same time, applied to 5% of the exports that go from Canada to the U.S. Within that 5%, Piyush took you through our position from a lending and risk perspective, which I would say is very, very manageable. I think we have to recognize that whatever impact this might have has a very high chance of being mitigated in many ways. Later today, we do expect the Canadian government to announce its support mechanisms. There is a lot of fiscal capacity. And I mentioned earlier, Ebrahim, that the clients have adjusted very well and have proven that they can adjust very well. Last thing I'll say on this, I think it's a very interesting point and another helpful catalyst where I will say what I've said before, which is there's an opportunity for the Canadian federal and provincial governments to recognize the moment for what it is and use it to drive transformational policy change around really truly knocking down interprovincial trade barriers, keeping the pace of project reviews and approval processes up, ensuring Canadian competitiveness on taxation is real and not let this moment go to waste. So I think when you put it all together, I'll come back to where I started. Is it manageable? Of course, it is. And in fact, there may be some opportunities in the challenge that we've got in front of us. On the U.S. side, I don't think this really has much impact whatsoever on the U.S. economy, which is mostly geared towards its own drivers, and that includes the downstream effect, of course, from the AI trade and the CapEx cycle, which is real, and we participate in that as many do in various parts of that ecosystem. I hope that helps. Operator: Our next question comes from Stephen Boland from Raymond James. Stephen Boland: Just one question. If you could just talk a little bit about the lowering of the DSB. This is going to obviously drive a little bit more excess capital hopefully into the loan book. So I'm just wondering where your focus is going to be. Is it going to be higher margin, possibly higher risk loans? Or are you going to kind of follow the government agenda with focus on defense infrastructure, which may have lower credit risk, but also lower margin. So how is that excess capital going to be deployed in the loan book? Darryl White: Yes. So thanks for the question. It's Darryl again. I think the short answer to your question is no change. You've seen with the lowering of the DSB, we have not outlined any change in our target capital levels. We had said at our Investor Day that we intend to operate between 12.5% and 13% -- pardon me, CET1. That is unchanged as we sit here today. I think we've demonstrated in the quarter, we've got -- quarter is actually a great example in the last couple of quarters where the generative capacity is now at 33 basis points, as you saw, which is if you go back and looking at [ Rahul ] several quarters, that would have been in the high teens, low 20s. So that's very helpful in terms of being able to drive a menu that allows us to meet the good client growth where it is in both countries, first and foremost. And at the same time, invest in our growth agenda, which you saw this quarter, we took some real opportunities to do that. And then finally, there's plenty left over for dividends and share buybacks. So really, there is no change. There's certainly no change in risk appetite. There's certainly no change in going after chasing a different part of the risk curve or the yield curve. The strategy is exactly as we outlined it at Investor Day. I hope that helps. Operator: Our next question comes from Doug Young from Desjardins Bank Capital Markets. Doug Young: Darryl, I think you talked about the -- this quarter demonstrates the earnings capacity of the Capital Markets division. I know capital markets can be all over the map, but this quarter was over 16% ROE. I think you're targeting 15%. So can you talk about the sustainability of the earnings relative to the past? And is the earnings capacity of this division higher than it has been in the past? And maybe you can talk a bit about why? Darryl White: Yes. So thanks for the question. Maybe you addressed me, so I'll begin the answer, but I'll also ask Alan to chip in here as he's running the business day-to-day. Short answer is, yes, the earnings capacity is higher than it had been historically. We have had constructive markets. The teams have done a really good job serving our clients within those constructive markets. But at the same time, I remind us that over the course of the last few years, we've invested very heavily in the capabilities in this business on both sides of the border and internationally. So what you're seeing is the combination of the market demand and our ability to service that demand, but also an elevation of our own capabilities. And therefore, from a sustainable basis, I would say we absolutely expect more of ourselves than we might have 1.5 years or 2 years ago. Alan, why don't you jump in? Alan Tannenbaum: Thanks, Darryl. The only thing I would add, and Doug, I appreciate the question is, as Darryl mentioned, we've gone through an investment cycle in people, technology and broadening out our product set. You see that Doug, reflected in the diversity of our results, right? This quarter, we'll highlight strength around our equity derivative businesses and some of our issuance businesses. Earlier in the year, we talked about our strength in our commodities businesses and our metals and mining M&A. So that investment cycle and diversification of our business gives us confidence that these results are sustainable. Doug Young: I appreciate that. And then just a quick one it sounds like you're holding more liquidity than normal. Can you quantify what the impact that had on NIMs this quarter? And is that something like at the all bank level, obviously? And then is this something a drag that should continue for a few more quarters? Rahul Nalgirkar: If I were to quantify of the 3 basis points NIM decline, which we had quarter-over-quarter, almost 2 basis points is related to higher liquidity, which we have in corporate. I think -- and if you think about it, I would characterize this as prudent liquidity management. You're aware, we've got some pending dispositions here, especially in the fourth quarter, macro geopolitical developments. And also we were opportunistic about prefunding some debt maturities. So when you put it all together, that's how we were looking at liquidity management here. We do expect, though, largely a lot of this to normalize post fourth quarter once the dispositions are behind us. Operator: Our next question comes from Mario Mendonca from TD Securities. Mario Mendonca: Going to card PCLs, I appreciate it's not a big part of BMO's business, but it seems like it's -- it can be a pretty helpful indicator of Canadian consumer credit. Could we speak about -- could you speak about why that may have dropped so abruptly? And I'm referring to the decline in card PCLs year-over-year and quarter-over-quarter. Is there something special in the quarter? Or is that just a healing of the Canadian consumer? Piyush Agrawal: Mario, it's Piyush. So I'll begin and maybe I'll invite Matt to join. What you're seeing is a combination of improvement over time in the Canadian macro environment. You saw unemployment tick down. There's been some seasonal changes in insolvencies that have been helpful. But really, it's a very deliberate set of actions we've been taking to proactively manage and reduce risk in our portfolio while refocusing on the premium segment. This has resulted in some moderation in the balance growth, which we believe is turning the corner. And we are seeing positive quarter-over-quarter momentum and expect continued improvement in the portfolio performance as we move through next year, which is why the overall confidence in our Q4 embeds, knowing that there are going to be some second order impacts as we go into '27 from some of the policy changes. Matt? Mathew Mehrotra: Yes. And just to build on the growth side for just a second, we've seen quarter-over-quarter balance growth for the first time in 5 quarters, which is excellent. And our premium account growth is up 47% year-over-year. So to Piyush's comments, the strategy is working. We've taken deliberate action to reposition the portfolio, and we're growing in the segments that we set out at Investor Day. Mario Mendonca: All right. Slightly different kind of question. It's been many years since Canadian investors want to talk about U.S. bank M&A. Your bank has been an acquirer. The valuation spread between our Canadian banks and U.S. regionals, for example, is about as wide as I've seen it. Does that influence your outlook on U.S. M&A? Darryl White: Mario, it's Darryl. Look, there's a lot of things that go into the rubric of how we think about M&A. I don't think today, acknowledging there have been some dynamics that are supportive, as you pointed out in your question, but I don't think our posture has changed. Our #1 imperative is to drive our business to the ROE targets that we've outlined for you all over the last couple of years and reinforced at Investor Day. I've said it before. So at the risk of boring with repetition, I'll say it again, might we engage in M&A in the U.S.? Only if it meets very, very strict conditions. We think about it in the category of furthering our strategies around regional density and regional scale and the strategies that Aron has been outlining quite clearly. And secondly, that we wouldn't look at anything that would delay our ROE promises from a timing perspective by a day. And so with that, you kind of get to a pretty narrow view of what you might do. And in the meantime, I can reconfirm to all of our shareholders that our #1 priority today is organic. Operator: Our next question comes from Paul Holden from CIBC. Paul Holden: So Darryl, on that organic priority and also your earlier comments on the CET1 organic capital generation, again, very strong at 33 basis points. I guess what I want to ask is sort of the use of that, right? So this quarter, we saw 21 basis points go to share buybacks and 12 for RWA. I probably want to see that like inverse, right, more go to balance sheet growth, organic capital deployment and a little bit less to share buybacks, still on the buybacks. But I guess my question there, is that a reasonable expectation? One is, could we see RWA growth account for 20 basis points or more of CET1 consumption? And two, if it is a reasonable expectation, kind of could we get there in 2027? Darryl White: Yes. Paul, thanks for the question. So the answer is we could. And what you pointed out in your question is that we've got the flexibility to solve in the various quadrants that you just mentioned. I think the key point is that we don't create demand. And to the extent that there is good demand for good growth in the client segments that we've targeted very consistently and explained to you, we're there to satisfy that. So I don't find myself in a position today of turning away a single good opportunity for client growth in favor of buying back a share. That's not the way it works. It works the other way around. So really, the market will drive the answer to your question, the market meaning the real economy. And to the extent that, that good growth is there, I mean, let's use commercial banking, for example, we've been pretty good at this, as you know, for decades in both countries, and we'll be there to support that growth, and we'll think about buybacks as the leftover as opposed to the driver. Paul Holden: And one more, if that's okay. In terms of the U.S. business, obviously seeing good loan growth there as you've highlighted, like a little bit of NIM compression. Is there anything strategically you can do in terms of deposit growth to keep NIM flattish? Or do we have to expect that with strong loan growth that there will be some NIM compression? Aron Levine: Yes, it's Aron. I'll take that. So remember, when we think about NIM, our first focus continues to be on the ROE path. We've done a lot of work over the last 12 months on deposit optimization. You can see NIM improved 20 basis points year-over-year. And now we have -- we do turn to sort of growth, both on the loan side, which we talked about and on the deposit side. We have great relationships in our commercial bank, and we're seeing really good progress on driving against those relationships with TPS growth, both on the deposit side and the fee side. And in the consumer business, as we laid out on Investor Day, we have a really key clear strategy that we're executing against. I highlight sort of 3 key areas of focus. One is the mass affluent, which is our partnership between consumer and wealth. You heard some stats earlier about where that's making good progress. Second is our bank at work partnership between consumer and commercial, again, an area of real opportunity for us. And then finally, as we really focus in on driving the client experience and just overall financial center productivity across our network, there's opportunity to continue to drive deposit growth, especially core operating accounts, which is where we're focused. So that combination of delivering against our TPS business, which really covers everything from our business banking through our emerging middle market all the way up to our larger middle market and driving the kind of core operating accounts in consumer through a variety of initiatives, we feel good about the path we're on. Operator: Our next question comes from David Konrad from KBW. David Konrad: Most of my questions have been asked and answered, but just a follow-up on the sustainability of capital markets. I mean maybe talk a little bit about how some of your core expertise in your product set may kind of fit with potential budget of the Canadian government in spending and infrastructure. Alan Tannenbaum: Thanks, David. I appreciate the question. And great opportunity for me to highlight, as you articulate some of the strengths around our business around metals and mining, PU&I, the industrial sectors where I feel we shine. So we feel like as we think about the macro trends, you highlight some of the infrastructure investment in Canada, which, again, we think is going to be a fantastic opportunity. We touched on in earlier questions, the AI opportunity, which we see in multiple dimensions. We see a number of opportunities that align well with the areas that we've invested in. And at the same time, as we're all aware, you see shifts in markets and some of the areas that have been less productive for us and our competitors this year, some of the core fixed income businesses which have experienced very low volatility, we see as having potential to reverse and create better opportunities for us on a go-forward basis. So it's the theme of specific areas of opportunity, the diversification of our business, the investments that we've made, that's really what gives us confidence that there's room for us to continue to grow these businesses over the coming years. Operator: Our next question comes from Gabriel Dechaine from National Bank Financial. Gabriel Dechaine: Just want to go back to the margin and the divergence between corporate and the segments. Can you give a sense of when the corporate, whatever balance sheet mix issues are, like a large number of lower-yielding securities. Is that going to be adjusted in the next few quarters when those dispositions are closed? And then as far as the margin, specifically on the U.S. and maybe in Canada as well, you used the term resilient. If -- and I'd pinpoint more the U.S. here, but the loan growth is accelerating clearly. If deposit growth is still lagging loan growth, how -- do you expect margins to be flat? Or could we actually see them be down maybe beyond Q4 when the funding from the transportation finance business is reallocated? Rahul Nalgirkar: Yes. Thank you, Gabe. This is Rahul. So let me take the 2 questions. I'll start with corporate and then go to NIM. So on Corporate Services, it was a combination of lower revenues and higher expenses. As I mentioned, a part of the lower revenues had to do with the prudent liquidity management and extra low-yielding assets we are carrying because of that. In addition to that, there's always normal market volatility from hedges and interest rates impacting the balance sheet positions. That changes from quarter-to-quarter. Those are some of the reasons why we had lower revenues, and we were expecting that direction as we have previously shared in the last quarter. In addition to that, as we talk about some higher expenses, as I mentioned in my prepared remarks, we were deliberate about some investments in growth opportunities, especially on brand marketing, and that was what was in there. So when you look at it together, lower revenues, higher expenses is where we landed. And I think we expect fourth quarter to be broadly consistent with third quarter is how we are looking at the composition. So that's the first part of your question. Let me come to the second part, which is NIM. And we -- in my prepared remarks, I talked about the resilience of NIM in the core businesses, which is Canadian P&C and U.S. Banking, I do recognize that the loan mix as loans grow faster and also the competition for higher for longer is going to put pressure. But both Matt and Sharon and Aron have talked about the deliberate efforts on growing core operating deposits. Our core operating deposits were up 8% year-over-year, while the total deposits were flat. And also, we've been very good at optimizing high-priced deposits when the balance sheet need wasn't there. So when you look at the concerted efforts to grow good core deposits while managing the balance sheet liquidity, that is the offset to the headwinds which we have, and that's how our approach is for resilience. Gabriel Dechaine: Sure. And just to the credit outlook, just to reiterate, do you expect a similar level of impaireds in Q4? And I'm not clear what you're saying about 2027, if you said anything at all? Is it kind of up in the air considering this tariff dispute? Piyush Agrawal: Gabe, it's Piyush. So too soon to give you '27 guidance. We generally do that at the end of Q4, and we will do that at that point of time. But as I step back, again, we've seen the drivers of our impaireds show some real strength. So as we look at watch list, our gross impaired loan balances, and our retail performance that we just spoke to, we have a high degree of conviction around where Q4 impaired should come out, which is in line with Q3. And again, there is always some basis point volatility for some of the wholesale files, but that should round out to our overall guidance we gave at the beginning of '26. I was just said 3 days ago, had you asked me on '27, I would have the conviction of the Investor Day that we would end '27 in the mid-30s, but we'll continue to update that as we go through the trade policy files and any second order impacts and come back to you at the end of fourth quarter. Operator: Our last question comes from Darko Mihelic from RBC. Darko Mihelic: I'll be quick and brief. Just trying to model in a couple of things. First, with respect to the dispositions, I'm suspecting that Moneris was the bigger contributor to earnings that will be lost in the future. Can you just remind me where the earnings from Moneris in which segment is that reported? And are you willing to tell us how much of the lost earnings are by business unit at this time? Rahul Nalgirkar: Darko, this is Rahul. So thanks for the question. So as we think about the lost earnings, let me kind of characterize that in 2 ways. Moneris, in fact, was not the major part. As you are aware, we sold 138 branches. They had about $5 billion in deposits. So there's income related to that. Transportation finance was also a major part of it, almost USD 10 billion, CAD 15 billion -- CAD 16 billion in loan balances. So it was a mix. I would say, if you were to ask me, it's probably like 2/3, 1/3, 2/3 U.S. banking, 1/3 in Canadian P&C. But at that point, let me just remind you of one more item. There was a strategy behind these dispositions. These businesses did not meet our long-term growth and return objectives. We've been very rigorous about where we are allocating this capital and resources to client relationships, which will be at our higher growth, higher return expectations. And we had already factored this in, in our Investor Day path, which we gave you. So our Investor Day commitments on EPS growth, PPPT growth remain unchanged. And in fact, what we had factored in was as we replenish this capital from single-digit ROE businesses, though the contribution was modest to earnings to replenish it to 15-plus ROE businesses is our path. So that's how we are thinking about it. So hopefully, that answers your tactical question and also my strategic overview. Darko Mihelic: No, that's really helpful. And just real quick on the drop in average common equity for the U.S. business quarter-over-quarter. Is that the DSB? And what will the drop look like after you've disposed of the branches and transportation finance? Rahul Nalgirkar: Yes. As you are aware, so that was in our reported numbers. So I mentioned we have a goodwill charge, which we have taken ahead of quarter for the transportation business to be sold, and that's what's reflected in the change in equity for U.S. business. Darko Mihelic: Okay. I was confused because the charge was recorded. Rahul Nalgirkar: Sorry, repeat your question again. Darko Mihelic: I thought the charge for the goodwill was actually taken through the corporate segment. So that's my mistake, I guess. But in any event -- okay. And then with respect to the drop going forward, is there anything you can tell us about the expected decline to common equity once the U.S. branches and the transportation finance business is sold? Would just be one for one, like I can consider it. Rahul Nalgirkar: Overall, these dispositions will generate 50 basis points of CET1 for us. So as we take those -- that replenishment, we put it back in our capital framework. Obviously, loan growth, as Darryl mentioned, is the primary focus, and then we look at all other factors as a part of our dynamic capital management. Operator: We have no further questions. I'd like to turn the call back to Darryl White for closing. Darryl White: Yes. Thanks, operator, and thank you all for your questions this morning. I'd just very quickly conclude by saying that our performance this quarter and for the year-to-date reflect our continued discipline executing against the very strategy that we outlined at our Investor Day. We've strengthened our returns. We've delivered stronger earnings growth, and we're growing momentum across each of our businesses. And perhaps most importantly, we're positioned well to build on this performance. So in short, good results, good momentum, and we're not done yet. Thank you for joining us today, and we look forward to speaking to you again in December. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Before you buy stock in Bank Of Montreal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bank Of Montreal wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $437,097!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,355,077!* That performance is why people listen. 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BMO (BMO) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

NVDA reports Q2 earnings with Polymarket pricing a 97.5% beat probability, $91 billion in guidance, and shares closing at $213. Milchanowski said she 'hopes' but does not expect that 2027 will shift AI from three years of pilots to CFO-accountable, scaled enterprise deployments. Read More: Learn 7 secret wealth tips high net worth investors use that most investors miss (sponsor) The setup for NVIDIA (NASDAQ:NVDA) tonight is unusually clean. The company reports fiscal Q2 results after the close on August 26, 2026, and the sell-side consensus is baked so tightly into expectations that Polymarket bettors are pricing a beat at 0.975. Shares closed at $213.05 on August 25, 2026, up 2.19% on the session. The more interesting frame came earlier that same day from Kristin Milchanowski, Chief AI and Quantum Officer at BMO Financial Group, on CNBC's Squawk on the Street. She named 2027 as the year the AI trade needs to change shape, and Nvidia's next report is the first data point within that window. Milchanowski runs deployment inside a large bank, a different vantage than an equity analyst modeling supply. Her framing was specific. "What I hope for 27 is that we move away from use cases, and we're really focused on scalability across the industry," she said. "I think that shift is time. We've been dealing with tons of pilots and different use cases for about three years now, and I think most of us have the rhythm and the beat to knowing how to scale and really get this embedded in everyone's infrastructure." Her verb choice matters: she said hope, and specifically not expect. From someone who was named to American Banker's "Most Innovative People in Finance" in June 2026 and whose employer opened an Institute for Applied Artificial Intelligence and Quantum in April 2026, that word choice matters. It describes three years of pilots that have not yet been converted into scaled deployments. How do you continue to grow a seven-figure portfolio in retirement? The last thing you want is to run out of money, you want your money to generate lasting income while you enjoy your life. Learn seven strategies high net worth investors use with new report: The Seven Secrets of High Net Worth Investors from Fisher Investments. Get your guide here (sponsor) Her second point pushed further. "We've talked a lot, especially in the last 12 months, about expenditure and capex. And I think what we should see, what I would hope to see is a shift towards business value. So really, where's that return coming from." Nvidia's numbers are audited and specific. The most recent quarter, fiscal Q1 2027, reported on May 20, 2026, produced revenue of $82 billion, up 85% year-over-year, with data center revenue of $75 billion, up 92%, and free cash flow of $49 billion, up from $35 billion in Q4. Guidance for fiscal Q2 was $91 billion plus or minus 2%. Supply commitments and related inventory reached $145 billion, disclosed in the Q1 FY27 filing. The buyers have disclosed enormous capital budgets and almost nothing about what those budgets have earned. The same buildout is quietly rewarding a set of suppliers well beyond the chipmakers, from power to cooling to networking, which we walked through in a free report here. Both sides have been rewarded by the market on the same story: Nvidia sells and hyperscalers buy. Capital expenditure is visible by construction. It shows up in cash flow statements and press releases. The return on that spending is diffuse, landing across operating expenses in many departments and rarely appearing as a clean line item. That is genuinely hard accounting rather than evasion, and Milchanowski's ask is less rhetorical than it sounds. The third quote is worth rereading. "What changes is really the deliberate decision by your business leadership teams to focus on what is the business value outcome that you're trying to achieve. And when you're that focused on the big rocks moving the big revenue blocks, that conversation then turns inward to your CFO and you have all the parties at the table and you can really commit to that deployment activity yielding that result." A CFO commitment produces auditable numbers and an owner accountable for them. That is precisely what the AI trade currently lacks. Pilots owned by innovation teams do not generate the disclosure the market would need to reprice buyers on outcomes rather than announcements. Milchanowski's implication, from inside a large enterprise, is that this handoff has not yet happened at most companies. That squares with what Nvidia itself sees: hyperscale revenue was $38 billion, roughly 50% of data center revenue, with the rest coming from AI-native clouds, sovereign customers, and enterprise, where sovereign revenue increased by more than 80% year-over-year. Concretely, the evidence would be margin expansion at large AI buyers that cannot be explained by headcount cuts, or revenue explicitly attributed to a deployed AI capability rather than product mix. Companies would need to disclose it, and auditors would need to be comfortable with the attribution. That evidence is unlikely to arrive across the board in 2027, though a handful of companies will probably try. The gap between capex announcements and outcome disclosure is wide enough that most CFOs will resist attaching numbers to specific AI programs until the accounting is defensible. Nvidia's report tonight will move the stock either way. It will not answer Milchanowski's question because it is aimed at the other side of the trade. How do you continue to grow a seven-figure portfolio in retirement? The last thing you want is to run out of money, you want your money to generate lasting income while you enjoy your life. Learn seven strategies high net worth investors use with new report: The Seven Secrets of High Net Worth Investors from Fisher Investments. Get your guide here (sponsor) Contact [email protected] for any questions or corrections.

Broadcom (AVGO) has become one of the largest companies in the world, worth about $1.75 trillion. Yet the shares recently pulled back hard, dropping roughly 7% in five trading days and about 25% from their 2026 high. That kind of drop makes investors nervous. It also gets analysts talking. Now a new voice has entered with a clear message, and the timing matters. A fresh rating landed just before Broadcom reports earnings on Sept. 2, a date that could set the tone for chip stocks into the fall. Here is what the call says, why it arrived when it did, and what everyday investors should take from it. On Aug. 21, 2026, BMO Capital Markets began covering Broadcom with an Outperform rating, which is the firm’s version of a buy. Analyst Harsh Kumar set a price target of $455, according to Barchart. Kumar has covered semiconductor stocks at BMO for more than a decade. That track record gives his read on Broadcom’s AI position extra weight with investors. With shares near $368, that target points to more than 25% upside over the next year. Related: Broadcom stands to gain from new cloud deal Kumar’s reasoning is simple. He called Broadcom the “leading AI supplier in custom ASIC (XPU) and networking.” An ASIC is a chip built for one specific job. Companies like Google, OpenAI, and Anthropic use these custom chips to run their AI systems instead of relying only on off-the-shelf processors from Nvidia. Kumar ranks Broadcom as the No. 2 AI chip company in the world, sitting right behind Nvidia. Broadcom does two things that are tough to replace in an AI data center. First, it designs custom chips for the biggest tech companies, work it has done for more than a decade. Second, it builds the networking parts that let thousands of chips send data to each other at high speed. Big AI clusters lose much of their value if the chips cannot share data quickly, and this is where Broadcom’s gear becomes hard to replace. More AI Stocks: Wells Fargo strongly resets Marvell stock target before earnings Marvell’s $120 billion deal with Google has fine print Analyst rethinks Nvidia stock ahead of earnings That combination is why Kumar sees strong demand locked in for the next two years, TipRanks reported. Broadcom is working with nearly every major cloud provider and AI lab that is building its own chips. Management has guided toward more than $100 billion in AI chip revenue in fiscal 2027, a number CEO Hock Tan has repeated on earnings calls. This rating arrived during a stretch of heavy news for Broadcom. The company is in talks to raise more than $60 billion through debt financing, Bloomberg reported, to help finance AI chips for Anthropic and others. Blackstone and Apollo may take part, and the full package could reach $100 billion. Here is what that means in plain terms: Broadcom’s customers need enormous amounts of expensive hardware. This financing helps them pay for it, which helps Broadcom sell more chips. A bullish rating during that news gives investors a second opinion that the demand behind those deals is real. One fear has followed Broadcom for a while, and this fear is that giant customers like Google could design their own chips in-house and stop buying. BMO’s view cuts against that fear. Google’s growing spending and rising capacity targets actually increase near-term demand for Broadcom’s systems rather than reduce it. That said, the risk is not gone. On Aug. 19, Marvell (MRVL) expanded its own custom-chip deal with Google, a reminder that Broadcom has real competition for this work. Narrative aside, the recent results give the thesis something to stand on. In its fiscal second quarter, Broadcom’s revenue rose about 48% from a year earlier to about $22.19 billion, Broadcom reported. Profit margins have been recovering as the company folds in VMware, the software business it bought in 2023. A few things stand out for investors considering the stock: Revenue: $22.19 billion in fiscal Q2, up about 48% year over year AI target: More than $100 billion in AI chip revenue guided for fiscal 2027 Valuation: About 35 times forward earnings, a premium even to Nvidia Dividend yield: 0.71%, a small but steady payout for long-term holders The high valuation is the catch. Buyers are paying up today for growth that has not shown up. Interestingly, BMO is one of the more cautious bulls on Broadcom. The average analyst target sits at $506.29, which points to more than 37% upside from current levels. The consensus rating is Strong Buy. So BMO’s $455 is bullish, but it is not the highest number on the board. Mizuho and TD Cowen both carry targets of $500 or more, TradingView reported. For context, Broadcom is still up about 6% year to date even after the recent slide, and it trades well below its 52-week high of $495. Compared with the broader market, the stock has swung far more than the S&P 500 this year. That is the trade-off with AI chip names: bigger potential gains, but sharper drops when sentiment turns. Several things still need to go right for the bullish case to hold. Earnings on September 2: Watch whether management raises or reaffirms the $100 billion AI revenue goal for fiscal 2027. Margins: Look for continued improvement as VMware gets fully absorbed. Customer concentration: A handful of large buyers drive most of the growth, so any change in their spending matters a lot. Regulation: The European Commission is still pressing Broadcom over VMware, which could create friction. For long-term investors, BMO’s call is a good reason to keep Broadcom on the watch list going into the earnings report. For anyone chasing the stock at 35 times forward earnings, the smarter move may be to wait for the Sept. 2 report before committing new money, since that is when the demand story gets tested with fresh numbers. None of this is a guarantee, and the stock’s recent swings show how fast sentiment can shift. Do your own research and size any position to a level of risk you are comfortable with. Related: Michael Burry increases his bet against popular chip giant This story was originally published by TheStreet on Aug 25, 2026, where it first appeared in the Investing section. Add TheStreet as a Preferred Source by clicking here.

Bank of Montreal (TSX:BMO) reported third-quarter earnings that exceeded analyst estimates, supported by broad-based strength in U.S. banking, capital markets, and Canadian retail operations. BMO paired the earnings beat with a new share buyback program and confirmed its current dividend, signalling management confidence in the bank's financial position. Management commented that the impact from recent international tariffs remains manageable and reiterated calls for economic reform. For investors tracking how large banks like Bank of Montreal respond to these conditions, it can be useful to compare this update with a wider group of income-focused stocks available through 4 dividend fortresses. Bank of Montreal is a large North American bank with a CA$167.1b market cap, providing diversified financial services across retail banking, U.S. banking, and capital markets. For readers, this scale and breadth help explain why U.S. banking and capital markets results can have a meaningful impact on overall earnings. Is Bank of Montreal's dividend sustainable? Check out what every dividend investor needs to know in our dividend analysis. For Bank of Montreal, the Narrative is that digital investment and U.S. growth can support dependable earnings and capital returns even as credit and expense pressures persist. This earnings beat, paired with an unchanged common dividend, directly tests whether that income-focused story still holds. Read the full Bank of Montreal narrative to see the case behind these numbers Holding the quarterly dividend at $1.71 per share while also using buybacks fits a Narrative that prioritises steady, not aggressive, cash returns from a diversified earnings base. It suggests management views current cash flows as sufficient to service both income investors and share count reduction without stretching the balance sheet. The unresolved tension is the payout’s long-term headroom if credit costs rise or expenses stay high. Common and preferred dividend affirmations support the income-focused thesis, yet the Narrative still flags slower growth and credit migration as risks that could tighten the payout ratio if earnings pressure persists. Ultimately, interpreting news like this requires a clear view on where Bank of Montreal is heading, and that is exactly what a Narrative is designed to pin down for you. To ensure you're always in the loop on how the latest news impacts the investment narrative for Bank of Montreal, head to the community page for Bank of Montreal to never miss an update on the top community narratives. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include BMO.TO. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

This article first appeared on GuruFocus. EPS: Adjusted EPS of $3.96, up 22% year-over-year. Net Income: Record adjusted net income of $2.9 billion. Pre-Provision Pretax Earnings (PPPT): $4.5 billion, up 13% year-over-year, with record PPPT in all four operating segments. Revenue: Up 11% year-over-year, driven by broad-based growth. Return on Equity (ROE): 14%, up 200 basis points year-over-year. Return on Tangible Common Equity (ROTCE): 18%, up 240 basis points year-over-year. Operating Leverage: Positive 1.6%. Efficiency Ratio: Improved to 54.9%. Expenses: Grew 9% year-over-year, or 6% excluding FX and higher performance-based compensation. Net Interest Margin (NIM) ex-Markets: 226 basis points, up 5 basis points year-over-year. Provision for Credit Losses (PCL): Total PCL decreased to $722 million, with impaired provisions at the lowest level in 10 quarters. CET1 Ratio: 13%, unchanged from the prior quarter. Canadian P&C Net Income: Up 15% year-over-year, with revenue up 6%. US Banking Net Income: Up 9% year-over-year (in USD), with ROE of 9.8% and ROTCE of 17.3%. Wealth Management Net Income: Up 22% year-over-year, with record wealth and asset management revenue up 24%. Capital Markets Net Income: Up 45% year-over-year, with record PPPT of $903 million, up 39%. Corporate Services Net Loss: $178 million, compared with a $123 million loss in the prior year. Warning! GuruFocus has detected 8 Warning Signs with BMO. Is BMO fairly valued? Test your thesis with our free DCF calculator. Release Date: August 25, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record EPS of $3.96, up 22% year-over-year, with pre-provision pretax earnings up 13% to $4.5 billion. All four business segments delivered record pre-provision pretax earnings, with strong momentum in Capital Markets and Wealth Management. Return on equity improved to 14%, up 200 basis points year-over-year, with confidence in achieving a sustainable 15% ROE by fiscal 2027. Credit performance improved, with impaired provisions at the lowest level in 10 quarters and a $1 billion decrease in watch list balances. Strong capital position with CET1 ratio of 13%, supported by a new share buyback program and expected 50 basis points capital uplift from divestitures. US Banking ROE improved to 9.8% with ROTCE of 17.3%, driven by commercial loan growth and record TPS revenues. Canadian P&C saw strong deposit growth of 7% and mutual fund sales up 33%, with positive operating leverage of 1.6%. Wealth Management net income up 22% with record revenue, driven by strong net new assets and ETF flows. Capital Markets net income up 45% with record PPPT, reflecting diversified franchise and strong equity trading and debt underwriting. AI initiatives like Lumi and smart decision are driving productivity gains and faster underwriting, enhancing operational efficiency. Reported EPS of $2.38 was significantly lower due to a $973 million goodwill charge related to the sale of Transportation Finance and vendor finance businesses. NIM ex-Markets declined 3 basis points sequentially, partly due to higher low-yielding liquid assets and lower corporate NII. Total PCL of $722 million remains elevated, with Canadian consumer insolvencies still high, though showing signs of stabilization. Corporate Services segment reported a net loss of $178 million, reflecting lower revenues and higher expenses. Trade policy uncertainty, including recent tariffs, poses a headwind to Canadian economic growth and could impact credit quality. US Banking NIM decreased 1 basis point sequentially as loan growth outpaced deposit growth, potentially pressuring future margins. Expenses grew 9% year-over-year, driven by higher performance-based compensation and investments, though partially offset by efficiency gains. The divestitures of US branches, Transportation Finance, and Moneris will reduce future earnings, though expected to be accretive to ROE. Liquidity management actions, including prefunding debt, temporarily reduced NIM and are expected to normalize only after Q4. The bank faces potential second-order effects from tariffs on Canadian growth, employment, and business investment, requiring close monitoring. Q: Can you rank the key drivers to take US ROE from 10% to 12%, and has that ranking changed since Investor Day? A: Aron Levine, President, BMO US, reiterated the "third, third, third" framework from Investor Day: one-third client balance growth, one-third fee income growth, and one-third efficiencies and PCL normalization. He highlighted positive trends across all three, including 4% sequential commercial loan growth, 15% year-over-year TPS fee growth, and a 90-basis-point year-over-year improvement in efficiencies. He emphasized continued investment in talent and technology to drive long-term success, with the quarter's 9.8% ROE and 17.3% ROTCE demonstrating clear progress. Q: What is your best expectation for the Canadian economy in light of tariff uncertainty, and how much of US lending could be influenced by the AI CapEx cycle? A: CEO Darryl White stated the impact of the recent tariffs is "absolutely manageable," noting that clients have adjusted well over the past 16 months since "Liberation Day." He pointed out that the 338 tariffs apply to only 5% of Canadian exports to the US and that the Canadian government is expected to announce support mechanisms. He also highlighted the opportunity for transformational policy change in Canada. On the US side, he noted the economy is driven by its own factors, including the real AI CapEx cycle, which BMO participates in. Q: With the lowering of the Domestic Stability Buffer (DSB), where will the excess capital be deployedtowards higher-margin, higher-risk loans or government-agenda areas like defense infrastructure? A: CEO Darryl White confirmed there is no change to the bank's strategy or risk appetite. He reiterated the target CET1 range of 12.5% to 13% remains unchanged. The strong capital generation of 33 basis points in the quarter provides flexibility to support client growth, invest in the growth agenda, and return capital via dividends and buybacks. He emphasized the bank is not chasing a different part of the risk or yield curve. Q: Is the earnings capacity of the Capital Markets division higher than in the past, and is the strong performance sustainable? A: CEO Darryl White confirmed the earnings capacity is higher than historically, driven by constructive markets and significant investments in capabilities on both sides of the border. Alan Tannenbaum, CEO & Group Head of BMO Capital Markets, added that the investment cycle in people, technology, and product breadth has diversified results, citing strength in equity derivatives and issuance this quarter, and commodities and metals & mining M&A earlier in the year, giving confidence in sustainability. Q: Can you quantify the impact of holding higher liquidity on NIM, and will this drag continue? A: CFO Rahul Nalgirkar quantified that approximately 2 basis points of the 3-basis-point quarter-over-quarter NIM decline was due to higher liquidity held in Corporate. He characterized this as prudent liquidity management ahead of pending dispositions, macro geopolitical developments, and opportunistic prefunding of debt maturities. He expects this to largely normalize post-Q4 once the dispositions are completed. Q: Why did card PCLs drop so abruptly, and is this a sign of healing in the Canadian consumer? A: Chief Risk Officer Piyush Agrawal attributed the decline to a combination of an improving Canadian macro environment, seasonal changes in insolvencies, and deliberate actions to proactively manage risk while refocusing on the premium segment. Matt Mehrotra, Group Head of Canadian Personal and Business Banking, added that the portfolio saw its first quarter-over-quarter balance growth in five quarters, with premium account growth up 47% year-over-year, indicating the strategy is working. Q: Does the valuation spread between Canadian banks and US regionals influence your outlook on US M&A? A: CEO Darryl White stated the bank's posture on M&A has not changed. He reiterated that any US M&A would only be considered if it furthers strategies around regional density and scale and would not delay ROE promises. He reconfirmed that the number one priority is organic growth. Q: With strong organic capital generation, should we expect more capital to be deployed to balance sheet growth rather than share buybacks? A: CEO Darryl White explained that the bank does not create demand and will prioritize good client growth opportunities over buybacks. He stated, "I don't find myself in a position today of turning away a single good opportunity for client growth in favor of buying back a share." Buybacks are treated as the leftover after satisfying client demand, with the real economy driving the answer. Q: With accelerating US loan growth and deposit growth lagging, how do you expect margins to remain flat? A: CFO Rahul Nalgirkar acknowledged the headwinds from loan mix and competition but highlighted the bank's deliberate efforts to grow core operating deposits, which were up 8% year-over-year. He noted the offset to headwinds comes from concerted efforts to grow good core deposits while managing balance sheet liquidity, supporting the expectation of resilient NIM in core businesses. Q: Can you provide details on the lost earnings from the dispositions, and how will they impact the US business's common equity? A: CFO Rahul Nalgirkar explained the lost earnings are roughly two-thirds from US Banking and one-third from Canadian P&C, stemming from the sale of 138 branches, Transportation Finance, and Moneris. He emphasized these businesses did not meet long-term growth and return objectives, and the capital will be reallocated to higher-return opportunities, with Investor Day commitments unchanged. Regarding equity, the goodwill charge was reflected in the US business's equity, and the dispositions are expected to generate 50 basis points of CET1. For the complete transcript of the earnings call, please refer to the full earnings call transcript.