Bank of Montreal (BMO.TO)(BMO) shares rose on Wednesday after RBC Capital Markets hiked its price target by over 20 per cent, while boosting its rating on the stock to “Outperform.”
BMO shares fell in December after the Toronto-based lender reported setting aside more than $1.5 billion in the fourth quarter to guard against potential bad loans, up from $446 million in Q4 2023. Analysts had expected the bank to squirrel away about $1.04 billion in so-called provisions for credit losses.
Speaking on a post-earnings conference call at the time, BMO’s chief risk officer Piyush Agarwal told investors that while the bank expects provisions to remain elevated, the fourth quarter of 2024 “represents the high point.”
RBC’s Darko Mihelic sees BMO’s credit problems as “mostly over.”
“We believe BMO is likely past its credit concerns as it identified loans in the 2021 vintage that resulted in elevated credit losses in 2024,” he wrote in a note to clients on Wednesday.
“We see more upside to valuation.”
Mihelic hiked his price target on Toronto-listed BMO shares from $133 to $161, while upgrading his rating to “Outperform” from “Sector perform.” The stock added 1.8 per cent to $141.62 per share as of 12:35 p.m. ET, outpacing the BMO Equal Weight Banks Index ETF (ZEB.TO), a basket of Canada’s biggest lenders.
Wednesday’s upgrade from RBC Capital Markets echoes the view of analysts at Scotiabank and CIBC, who upgraded their ratings on BMO shares shortly after the bank released its fourth quarter results on Dec. 5.
BMO’s stock is up about 6.7 per cent over the past 12 months, lagging peers Royal Bank of Canada (RY.TO)(RY), CIBC (CM.TO)(CM), and Bank of Nova Scotia (BNS.TO)(BNS). TD Bank (TD.TO)(TD) shares fell about eight per cent over the same period as investors responded to the lender’s U.S. anti-money-laundering scandal.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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