Bank of Montreal (NYSE:BMO) reported third-quarter net income of C$1.75 billion, down 25% from a year earlier, while company-defined non-GAAP adjusted net income increased 19% to C$2.86 billion. Reported diluted EPS fell 24% to C$2.38, but company-defined non-GAAP adjusted diluted EPS rose 22% to C$3.96.
The divergence primarily reflected Bank of Montreal’s (NYSE:BMO) announced sale of its Transportation Finance and Vendor Finance businesses to Stonepeak. The transaction produced a C$1.09 billion pretax charge, or C$962 million after tax, primarily related to a reduction in goodwill.
Including costs associated with the separate sale of 138 U.S. branches, Bank of Montreal (NYSE:BMO) reported aggregate after-tax divestiture adjustments of C$973 million. The rounded components—C$962 million and C$10 million—do not sum exactly to the reported total.
The finance-business transaction includes related loan portfolios in Canada and the United States. Bank of Montreal (NYSE:BMO) plans to retain a 19.9% equity interest, while the sale is expected to close in the fourth quarter of fiscal 2026, subject to regulatory approvals.
Bull Case
The adjusted results show that Bank of Montreal’s (NYSE:BMO) operating businesses strengthened during the quarter. The bank said every business segment generated record pre-provision, pre-tax earnings, a company-defined performance measure.
Company-defined non-GAAP adjusted net income increased 15% in Canadian P&C, 11% in U.S. Banking, 22% in Wealth Management and 45% in Capital Markets. Bank of Montreal (NYSE:BMO) also expanded its company-defined non-GAAP adjusted return on equity to 14.0% from 12.0%.
Credit costs moved in the right direction. Total provisions for credit losses declined to C$722 million from C$797 million. Provisions on impaired loans fell by C$65 million to C$708 million, while provisions on performing loans declined to C$14 million from C$24 million.
The divestiture could also improve capital efficiency. Bank of Montreal (NYSE:BMO) expects the finance-business sale to add approximately 28 basis points to its CET1 ratio and improve return on equity without significantly affecting future run-rate earnings.
Bear Case
The C$962 million after-tax charge primarily records a reduction in goodwill allocated to the finance businesses after they were classified as held for sale. It reduced reported earnings but does not represent the transaction’s undisclosed cash sale price.
The sale price was not disclosed, limiting investors’ ability to compare cash proceeds, the retained stake, and released capital with the businesses’ historical acquisition and operating costs.
Capital remains another constraint. Bank of Montreal’s (NYSE:BMO) CET1 ratio was 13.0%, unchanged sequentially but down from 13.5% a year earlier. Internal capital generation was offset during the quarter by share repurchases and higher source-currency risk-weighted assets. The anticipated capital benefit from the finance-business transaction depends on the sale closing.
Corporate Services also recorded a company-defined non-GAAP adjusted loss of C$178 million, compared with C$123 million a year earlier, as lower revenue and higher expenses outweighed the benefit of excluding the divestiture charge.
Hedge Fund Sentiment
The hedge-fund filings cited here reflect positions held before Bank of Montreal (NYSE:BMO) reported its fiscal third-quarter results. Insider Monkey’s most recently published count showed 18 hedge funds holding Bank of Montreal (NYSE:BMO) at the end of the second quarter of 2026, down from 20 funds three months earlier.
Conclusion
Bank of Montreal (NYSE:BMO) delivered stronger underlying earnings, broader segment growth, and lower credit provisions. However, the C$962 million after-tax charge records a substantial reduction in the goodwill assigned to the finance businesses. The sale may still improve future returns through released capital and a leaner portfolio, but assessing the earlier capital-allocation decision requires the undisclosed sale proceeds, the value of the retained 19.9% stake and evidence that the projected CET1 and ROE benefits materialize.
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Disclosure: None. This article is originally published at Insider Monkey.
