BMO Bank of Montreal Posts Strong Earnings. BMO U.S. Banking Operations Contribute to Profit. BMO Dividend is Strong.

BMO Bank of Montreal (TSE: BMO) released very promising results recently. Bloomberg Markets reports that profit at the Canadian bank rose 19 percent on higher investment banking earnings and positive results from its recent U.S. acquisitions.


Income at BMO rose to $793 million, or $1.27 per share for the quarter. BMO has now increased its profit for nine straight quarters and is showing incredible consistency and stability in its operations. It now has the longest streak for increasing profits among the six large Canadian banks. It is clear now that the Canadian banks are in very good shape. BMO is now Canada's 4th largest bank by assets.


In the United States, the BMO completed its $4.1 billion takeover of Marshall & Ilsley on July 5. This doubled its total U.S. branches and deposits in the area. Incredibly the bank now has more branches in Chicago than Toronto. Marchall & IIsley contributed $32 million in profits to the bank this quarter. Much better than previous losses it was experiencing.


Happy Investing : )

More Canadians are Expanding into the Wine Business. How to Invest in Canadian Wine.

An increasing number of Canadians are choosing to make their fortune an old fashioned way, in the wine business. In this country, growth in the wine industry is outstripping growth in the other beverage sectors. Having grown at annual rate 7.6% since 1998, growth in wine production in Canada is outstripping many other areas of the economy. But beer, however, remains the beverage of choice for Canadians as this country has about 10 million beer drinkers. 

The dominance of beer in the country, however, is coming under attack, and producers like Molson Coors (NYSE: TAP) are taking note. The stock is essentially flat on the year, but profit margins have been coming under increasing pressure from foreign competition, spirits, and now wine. 

"However, domestic vineyards are facing a number of challenges and are going to have to fight to retain their share of the Canadian market," says the Bank of Montreal. Our industry is heavily reliant on domestic consumption. This basically means that it is mostly Canadians who buy Canadian wine, with little being exported abroad. Indeed, between 2001 and 2010 exports actually dropped from 15% to 4% of production volume. With countries like Australia, Argentina, Italy, and France all producing very good wine, it is difficult for Canada to compete.

But for those investors looking for something different in their portfolio, there are a couple of Canadian stocks you could look at:

Andrew Peller Ltd. (TSE: ADW. A)

Magnotta Winery (TSE: MGN)

BMO's Marshall & Ilsley has 10th Straight Loss... Home Turf is Much Safer.

According to a recent Dow Jones newswire, Marshall & Ilsley Corp., (MI) the American bank that was recently bought by Canada's Bank of Montreal, (BMO, BMO.T) has now had its 10th straight quarterly loss. The bank, however, based in Wisconsin, has been improving in recent months as the amount of money that it must put aside for defaulting loans has been declining. Nonetheless, the bank is struggling desperately to make a profit and it still owes the U.S. government 1.72 trillion dollars in bailout money. BMO has agreed to cover the loan once their deal to buy the troubled bank closes. 


In the last three months, Marshall & Ilsley lost 116.6 million dollars. Which is why the fact that BMO paid 4.1 billion dollars for the bank is so disturbing for many shareholders, like myself. Net charge-offs, loans lenders don't think are collectible, rose to 4.8% of average loans from 3.9% a year earlier, and Non-performing loans, those near default, fell to 4.5% from 4.6%. 


Merging their U.S. Harris banking unit with under performing Marshall & Ilsley may not bode well for investors. But economies of scale are very important in the U.S. banking industry and BMO hopes that more branches and more assets down south will help them finally generate a reasonable return on their American investments... which as of yet, account for less than 10 percent of the bank's income... well behind the Canadian leader in the U.S., TD Bank.  

BMO Sneaking into the Annuity Business: Guaranteed Payments for Life.

Competitors in the banking and insurance industries are crying foul as the Bank of Montreal is releasing a new product promising mutual fund customers over the age of 55 the opportunity to deposit a lump-sum and receive 6 percent annual payments for life after 10 years. 


The Globe and Mail described the product today as follows:


"In the case of a BMO (TSE: BMO) product, a customer makes a deposit that is invested in the bank’s line of mutual funds and after 10 years receives guaranteed cash payments equal to 6 per cent a year, paid monthly. Those payments continue for 15 years. After that, the customer continues to receive 6-per-cent interest income (based on the original deposit) on an annual basis for the rest of her life or as long as they hold the product."


Of course, the product sounds quite simple, reasonable, and popular... so what is the problem? While, in Canada, banks are prohibited from selling insurance products in their branches, and BMO's competitors are declaring that this product is basically an annuity sold under the guise of a savings product. On the surface, I would have to agree with them. An annuity is essentially a regular income until death or for a fixed period of time purchased from a life insurance company for a lump sum. And that is eactly what the BMO is providing.


Other banks sell insurance products, but they have to do this outside the confines of their branches. Most have skirted around this requirement by simply building insurance businesses attached to their branches, but BMO has not done this yet. If their competitors get their way, perhaps they will have to. Either way, however, for the intelligent investor, BMO's new product sounds like an interesting and fairly sound choice.   

Canadian Banks Generating Huge Profits: CIBC and National Bank Lead the Way.

Earnings season for the Canadian banks were off to a great start on Thursday when CIBC (TSE:CM) reported a $799 million profit. This was more than what industry experts were expecting and could bode very well for investors in Canada's other major banks as well.

Last year, the bank reported earnings of $652 million during the same three month period. This growth is an indication of an improved lending environment in Canada, as well as an improved environment for investment fund managers, of which CIBC Mutual Funds is a large player. When stock markets increase in value, the amount of money that CIBC charges its clients to manage money (usually around 2-2.5%) goes up as well. 

CIBC said it would maintain an 87 cent per share dividend, but investors were hoping that they would boost it, giving the other banks motivation to do the same. Currently CIBC is only paying out about 45 percent of its earnings to shareholders, which is a very reasonable number and a number that could be increased in the future. For the intelligent investor, the ability for CIBC to raise its dividend in the future is a sign of financial health and a good catalyst for a rise in the share price in the future. 

In addition, the company has more than enough capital on hand to make acquisitions or initiate share buybacks. Share buybacks are great for shareholders as they increase earnings per share by reducing the number of shares, which increases your share of the business pie.  

National Bank (TSE: NA) also reported a record profit of $312 million. Last year, quarterly profits came in at $215 million. This massive increase will surely bode well for shareholders when the company reviews its dividends and perhaps decides to increase the amount of money that they want to pay out to shareholders. 

Both National Bank and CIBC have provided an excellent window into the health of the Canadian financial landscape. As a Canadian investor, it is important to ensure that one of Canada's financial conglomerates, whether it be CIBC, National Bank, Royal Bank (TSE:RY), Scotiabank (TSE:BNS), TD (TSE:TD), or the Bank of Montreal (TSE:BMO), make up a portion of your investment portfolio. The balance sheets are healthy, business is booming, and dividend increases are sure to start coming down the road. Just be careful not to get too greedy and overpay for them on a day when other investors have bid up the share prices. Wait for a down day and gradually buy your way in.

Happy Investing : )

For more information on this topic check out:

http://www.vancouversun.com/news/CIBC+earnings+ahead+expectations+share/4344970/story.html

http://www.winnipegfreepress.com/business/cibc-q1-exceeds-expectations-116904108.html