BMO reported a profit of $7.4 billion for 2024, with President and CEO Darryl White acknowledging the challenges in managing credit quality, particularly in the final quarter.
“Credit performance deteriorated more than we anticipated,” White said on the bank’s Q4 earnings call. “We continue to prudently manage our portfolio and are working closely with clients that are facing challenges. We expect quarterly provisions to moderate through 2025.”
As a result, the bank set aside $1.52 billion in loan loss provisions, up 240% from the $446 million set aside a year ago and from the $906 million in Q3.
“With current unemployment levels in Canada still elevated, I expect retail impaired losses to modestly increase through the first half of next year,” Chief Risk Officer Piyush Agrawal said.
“Looking ahead to fiscal 2025, we expect the client-specific challenges that we experienced this year to moderate and the overall portfolio to benefit from the impact of monetary easing and a more constructive business environment,” he added.
As far as impaired losses, Agrawal said he believes “Q4 was a high point,” and that losses will moderate next year. He pointed to detailed reviews of the bank’s watch list and impaired assets, noting that the resolution of several large files in Q4 has given him confidence that impairments will ease as they move into 2025.
BMO’s residential mortgage portfolio saw 90-plus-day delinquencies rise to 0.24% of its portfolio, up from 0.15% a year ago, and largely in line with other big banks that reported earnings this week, including RBC (0.26%) and Scotiabank (0.23%).
BMO mortgage portfolio: Amortization and maturity insights
BMO also disclosed details about its mortgage portfolio and the status of its fixed-payment variable-rate mortgage clients.
As of Q4, BMO still had $9.3 billion worth of mortgages in negative amortization, representing about 20% of its total variable-rate mortgage portfolio and 6% of its overall portfolio. This is down from a peak of 62% of its variable-rate mortgages in negative amortization Q2.
- What is negative amortization? Negative amortization impacts borrowers with fixed-payment variable-rate mortgages in an environment when prime rate rises significantly, resulting in the borrower’s monthly payment not covering the full interest amount. This causes the mortgage to grow rather than shrink.
Like other banks that offer fixed-payment variable-rate mortgages, such as TD, CIBC, and RBC, BMO is seeing average amortization periods fall.
The percentage of mortgages with amortizations of 36+ years dropped sharply, from 24.9% in Q4 2023 to just 10.1% in Q4 2024. This decline is attributed to a combination of borrowers making prepayments, mortgages resetting to their original contracted amortization at renewal, and the ongoing easing of variable-rate mortgages following Bank of Canada rate cuts.
Remaining amortizations for BMO residential mortgages
| Q4 2023 | Q3 2024 | Q4 2024 | |
|---|---|---|---|
| 16-20 years | 13.6% | 14.6% | 16.1% |
| 21-25 years | 32.1% | 32.4% | 33.8% |
| 26-30 years | 18% | 22.3% | 26.5% |
| 31-35 years | 2.1% | 4.1% | 3.6% |
| 36+ years | 24.9% | 16.8% | 10.1% |
BMO also anticipates that 17%, or $27.1 billion, of its mortgage balances will renew within the next 12 months, with an additional 80% of its mortgage portfolio set to renew after fiscal 2025.
The bank reported that $13.4 billion of mortgages renewed in fiscal 2024, with renewing customers facing an average increase of 15% in their regular payments for variable-rate mortgages and 13% for fixed-rate mortgages.
BMO earnings highlights
2024 net income (adjusted): $7.4 billion (-15% YoY)
Q4 net income (adjusted): $1.54 billion (-31% Y/Y)
Earnings per share (adjusted): $1.90
| Q4 2023 | Q3 2024 | Q4 2024 | |
|---|---|---|---|
| Residential mortgage portfolio | $150.6B | $155.8B | $158.9B |
| HELOC portfolio | $48.7B | $49.5B | $49.9B |
| Percentage of mortgage portfolio uninsured | 71% | 73% | 73% |
| Avg. loan-to-value (LTV) of uninsured book | 50% | 51% | 52% |
| Mortgages renewing in the next 12 months | $16.2B | $22.6B | $27.1B |
| % of portfolio with an effective amz of <25 yrs | 55% | 57% | 60% |
| 90-day delinquency rate (mortgage portfolio) | 0.15% | 0.24% | 0.25% |
| Canadian banking net interest margin (NIM) | 2.77% | 2.77% | 2.74% |
| Total provisions for credit losses | $446M | $906M | $1.5B |
| CET1 Ratio | 12.5% | 13.0% | 13.6% |
Note: Transcripts are provided as-is from the companies and/or third-party sources, and their accuracy cannot be 100% assured.
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Last modified: January 11, 2025
