BMO Leads Canadian Banks’ Dividend Bonanza With 25% Increase
(Bloomberg) -- Bank of Montreal raised its dividend 25% and announced its intention to buy back 3.5% of its shares, leading an avalanche of capital-return plans by Canada's banks after being freed from pandemic-era payout restrictions.
Bank of Montreal's outsize payouts reflect its strong earnings performance since the country's banking regulator froze dividends and temporarily banned buybacks in March 2020 to protect the financial system. The lender benefited from its diversification, including a large presence in the U.S. as well as in Canada, where the hot housing market has supported mortgage lending, and its large capital-markets business, which has benefited from heightened trading and dealmaking activity throughout the pandemic.
The bank also deserves credit for doing “a very good job” in keeping its costs in check, said Barclays Plc analyst John Aiken. Bank of Montreal on Friday reported that net income rose 36% to C$2.16 billion ($1.69 billion) in the three months through October. Excluding some items, profit was C$3.33 a share, topping analysts' average estimate of C$3.21.
“In an environment where revenue growth was challenged, a focus on costs and efficiency gave them much better leverage to the bottom line,” Aiken said in an interview.
| Bank | Dividend % Increase | Buyback as % of Shares | Buyback cost (as of announcement) |
|---|---|---|---|
| Bank of Montreal | 25% | 3.5% | C$3 billion |
| National Bank of Canada | 23% | 2.1% | C$695 million |
| Toronto-Dominion Bank | 13% | 2.7% | C$4.6 billion |
| Bank of Nova Scotia | 11% | 2% | C$1.95 billion |
| Royal Bank of Canada | 11% | 3.2% | C$5.68 billion |
| Canadian Imperial Bank of Commerce | 10% | 2.2% | C$1.4 billion |
Bank of Montreal's dividend was increased to C$1.33 a share, and the buyback is for as many as 22.5 million shares. The repurchase would cost about C$3 billion at the Toronto-based company's share price when the plan was announced.
The lender's shares surged 3.7% at 9:34 a.m. in Toronto, and have advanced 44% this year, the best performance in the eight-company S&P/TSX Commercial Banks Index. Profit in the bank's U.S. personal and commercial banking business rose 66% to $408 million in the fiscal fourth quarter. In Canada, net income in the business rose 42% to C$921 million
All of Canada's six largest banks this week announced dividend increases and plans to buy back shares. Montreal-based National Bank of Canada had the second-largest dividend boost, at 23%. Royal Bank of Canada announced the largest buyback in absolute size, at C$5.68 billion. Canada's Office of the Superintendent of Financial Institutions last month removed the temporary ban on dividend increases and share buybacks.
©2021 Bloomberg L.P.
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