Bank of Montreal

The stable outlook reflects our expectation that over our two-year outlook horizon, due to its strong earnings power BMO is well positioned to absorb any remaining fallout from the pandemic, including higher credit losses, which we expect will increase but be manageable. We also expect operating performance will continue to strengthen and that the productivity ratio could improve further to reach the peer average. We expect the S&P Global Ratings forecast RAC ratio will remain in our adequate range (8.4% at year-end 2020), over the next 18-24 months, reflecting improving operating performance in 2021 from sharply lower provisions for loan losses; this is likely to be somewhat offset by higher RWA growth as loan growth picks up in the latter

...Bank of Montreal (BMO) to benefit from the strong rebound of the Canadian and U.S. economies. BMO is among the top five Canadian banks in the Canadian banking market. It benefits from a No. 2 market share position in commercial banking. It also has a strong retail and commercial franchise in the U.S. It stands to benefit as the Canadian and U.S. economies are recovering well from the COVID-19 pandemic, but low interest rates will continue to weigh on its margins. BMO's reserves for performing and impaired loans are lower than those of peers. However, they are likely sufficient to cover ultimate COVID-19-related credit losses as economic and credit conditions have vastly improved. Like other large Canadian banks, BMO saw its provisions for loans losses rise sharply in the early part of 2020 due to the pandemic. Credit losses, however, have remained low due to the Canadian government's fiscal and monetary stimulus. We expect losses to rise, but only slightly, because loans remaining on deferral...

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