Bank of Montreal Q3 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Just want to ask about the US, well, loan and revenue growth outlook. There's quite a few moving pieces in there. I know earlier in the year, the outlook was for a strong second half, but obviously, a lot of changed in the macro environment. So I'm just wondering what the updated view on loan growth would be? And if you can layer into that answer, the impact of I'll call it, de-banking, whatever you want to call it, because it sounds like there's some lending or client exposures that you're exiting because they don't meet your ROE targets. There was a story in the pressed last week that you're maybe looking to sell the Transportation Finance business. I don't think you want to comment specifically on that one, but may be generally. And yes, let's just go with that.

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Just a quick one. You're moving the US Wealth business into the segment makes sense geographically for us. Does that mean were we looking at $60 million of earnings and your 12% ROE target for the business will increase?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : I guess just wanted to follow up on the Canada macro. So I guess maybe Darryl or Piyush. It sounds like as I put together -- I think Darryl, you mentioned client conversation Canadian P&C also picking up. So things seem to be on the improving trajectory. Would love to get your feedback around -- yes, there's tariff uncertainty. But as you look forward, are you more optimistic where growth and credit outlook within Canada is headed? And I ask this because there ongoing debate around whether the economy is still stuck in some version of a recession relative to how kind of bank stocks are priced. So I would love to get your perspective on where you think directionally, we are headed? And then can the administration in Canada increase the speed of that improvement if, in fact, you believe things are getting better?

Question: Ebrahim Poonawala - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Got it. And if I could follow up, I guess, maybe for Aaron. So one, congratulations on the new role. But just talk to us, like looking at the slide 9, I think, Aaron, you mentioned strong foundation, great customer relationships. As we think about the US P&C ROE at 8.7% headed towards 12% plus, -- it seems like the credit leverage is more or less baked in when we look at Q3 numbers. Just talk to us what you think in terms of identifying areas where you see the biggest bridge sort of to get that ROE improved. One, how quickly do you think it can be achieved? And does it require like tech investments, hiring of personnel to get there?

Question: Doug Young - Desjardins Securities Inc - Analyst : Just maybe bigger picture, going back to just some of the prepared remarks. I mean, Daryl, you mentioned in yours, I think credit improving, helping driving EPS growth. And then Tayfun, I think you talked about credit migration and the benefits that should have moving forward on ROEs. And so what I'm trying to go with this is, are you signaling basically that PCLs peak like this quarter is kind of the new high level and that we should be thinking about PCLs improving from Q3 levels over the coming year. And just trying to get a sense of that and thinking about the evolution of the impaired and the performing over that period.

Question: Doug Young - Desjardins Securities Inc - Analyst : And just one is, one follow-up. It sounds like you're seeing even some if this is right, you seem more confident in the US versus Canada. Is that a fair interpretation?

Question: Paul Holden - CIBC World Markets Corp - Analyst : I want to talk about the operating leverage a bit. Obviously, a very good result as you've highlighted year-to-date positive 4.7%. Wondering how we should think about that going forward? I know your medium-term objective is roughly 2 points a year. So you're running ahead of objective this year. Does that mean any of the forward benefit or opportunity has been pulled forward? Or can we still expect sort of 2 points a year in future periods? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 11:15AM, BMO.TO - Q3 2025 Bank of Montreal Earnings Call

Question: Paul Holden - CIBC World Markets Corp - Analyst : Okay. Good. And then Piyush, you've made a number of interesting comments. One that particularly caught me was when you're talking about the US business and the speed of credit migration and improvement there has been better than expected. So we've spent a lot of time talking about the macro factors. Maybe you can talk a little bit about that speed and to what extent that's related to specific actions taken by BMO or maybe the specific lending credits? And if that's really just US or also we're seeing improvements in other geographies as well because of -- be more specific factors?

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Piyush, you referred to uncertainty a fair bit. But as I listened to Darryl go through his opening remarks in response to questions, I think you've highlighted USMCA like -- and I think your own economist estimates that the effective tariff rate of goods from Canada, the US is only 5.5%, talked about government spend support, monetary policy. There's a lot of things that would suggest less uncertainty. So Piyush or Darryl, when you do talk about uncertainty, what are you really referring to here? Are you referring to the renegotiation of USMCA in 2026? Are you talking about the housing market? Or is there something else I'm not picking up on?

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Okay. Slightly different question. Back in 2024, when PCLs were elevated, especially in the US. One of the questions that came up was would this result in weaker loan growth in the US. And I certainly didn't get the impression then that that's what we'd expect. And so now we're seeing this optimization. What I'm trying to figure out now is -- is this a response to the PCLs? Or is this just an ROE optimization story? Or does it really matter? --

Question: Mario Mendonca - Cowen and Company LLC - Analyst : Well, what I was getting at is if it's a PCLs issue, then these have -- tend to have a lasting effect. If it's PCLs and you have to change your risk outlook or your risk culture, your underwriting process, these tend to last a lot longer. So I'm trying to figure out which one this is, or does it matter in your mind?

Question: Mario Mendonca - Cowen and Company LLC - Analyst : But potentially 2026 because the US banks, the regionals, the money centers are all putting up pretty strong growth. So the market is there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. AUGUST 26, 2025 / 11:15AM, BMO.TO - Q3 2025 Bank of Montreal Earnings Call

Question: Shalabh Garg - Veritas Investment Research Corp - Analyst : So impaired credit performance is improving and delinquency levels seem stable. Can you provide some color on the changes in asset quality that drove the credit RWA higher? And also on what helped the decline in the asset price piece?

Question: Shalabh Garg - Veritas Investment Research Corp - Analyst : And is there a specific sector where this was reflected more? Like I'm guessing unsecured within the Canadian portfolio could be one. Just if you can provide some color on this?