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BMO's profit falls 3 per cent

The Bank of Montreal saw its second-quarter profit slip three per cent from a year ago as it took a restructuring charge and set aside more money for bad loans.

The bank (TSX:BMO) reported net income of $973 million during the quarter, or $1.45 per share, down from $999 million, or $1.49 per share, during the same period last year.

BMO's net income included a $132 million restructuring charge that the bank said relates to its use of technology to improve the customer experience and drive efficiencies.

Edward Jones analyst Jim Shanahan said the restructuring item disclosed Wednesday is probably related to severance pay for layoffs "and it will involve probably a lot of headcount in Toronto."

BMO didn't announce details of the restructuring but has scheduled an afternoon conference call for analysts..

Restructuring charges have emerged as a common theme among Canada's biggest banks in recent quarters.

"The banks are responding to a very difficult loan growth and revenue growth environment by getting a lot more aggressive with expenses," Shanahan said.

BMO is the first of the big Canadian lenders to report its second-quarter earnings. CIBC (TSX:CM), Royal Bank (TSX:RY) and TD Bank (TSX:TD) will follow on Thursday, and Scotiabank (TSX:BNS) will wrap up the earnings parade next week.

Despite the fact that BMO raised its provisions for credit losses to $201 million during the quarter, from $161 million a year ago, Shanahan said he's still concerned that the bank isn't setting aside enough for bad oilpatch loans.

"I'd still argue that outstanding reserves aren't really adequate relative to this large and growing oil and gas exposure that they have," he said.

After excluding restructuring and other items, BMO's adjusted earning were $1.152 billion, or $1.73 per share, up from $1.146 billion, or $1.71 per share, a year ago.

That includes a $79 million write-down of an equity investment. Excluding the writedown, the bank said its adjusted net income would be up seven per cent.

Revenue increased to $5.10 billion, from $4.53 billion during the second quarter of last year.

BMO also announced its quarterly dividend will go up by two cents to 86 cents per share, effective Aug. 26, 2016.

"In the quarter, we were encouraged to see a more positive tone in the market environment for interest rates, currencies and commodities, while economic fundamentals remain healthy," CEO Bill Downe said in a statement.

"Our capital position is strong and we are progressing with the work of further differentiating the bank through our digital platforms while driving efficiency and growing customer loyalty as our first priority."



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