BMO trimming 5% of workforce, with cuts spread across business
BMO didn't reveal details about where or when the job cuts will occur
TORONTO – The Bank of Montreal’s fourth-quarter profit fell to $1.19 billion as it was hit by a restructuring charge related primarily to severance that will affect about 5% of its global workforce.
The bank said Tuesday the quarter ended Oct. 31 included a $357-million restructuring charge as a result of a decision to accelerate delivery of digitization initiatives and simplification of the way it does business.
Part of reason for the move was lower margins from its personal and commercial banking business in the United States as a result of lower interest rates, as well as slower U.S. economic growth expected next year, officials said.
BMO didn’t reveal details about where or when the job cuts will occur, but it had about 45,513 employees at the end of October. A 5% cut suggests about 2,275 jobs would be affected.
Based on the geographic breakdown of BMO’s workforce, the restructuring could affect roughly 1,500 jobs in Canada and 675 in the United States.
Chief financial officer Tom Flynn said the efficiency initiatives announced Tuesday will provide annual savings of $200 million in its 2020 financial year, which began Nov. 1, and about $375 million by the first quarter of its 2021 financial year.
“I would expect the savings that we’ve talked about to flow through each of our businesses in a fairly representative way . . . both by operating group and by geography,” Flynn told analysts on a conference call.
Chief executive Darryl White said the cuts are a “sizable move” for the bank but reflects its strategy of continuous improvement and management discipline.
“We’re looking for people to invest in areas where we have opportunities for growth and slow down in areas where we don’t,” White said.
He said BMO clients and the bank have “general balanced optimism” about their momentum going into 2020.
“In Canada, we expect macroeconomic conditions to remain constructive in 2020, improving modestly from 2019 with stable interest rates and unemployment running at a four decade low of 5.6 per cent. In the U.S., we expect economic activity to slow modestly in 2020 in response to trade protectionism,” White said.
He added BMO expects to grow in the United States by winning market share and that the U.S. economy will be aided by three interest rate cuts announced over the past four months.
“Our financial objectives remain unchanged. Our goals over the medium-term are to achieve average earnings per share growth of 7% to 10%.”
In reporting its results Tuesday, BMO said it will now pay a quarterly dividend of $1.06 per share, up three cents from its previous rate.
The increased payment to shareholders came as BMO reported its net profit amounted to $1.78 per share for the quarter ended Oct. 31. The result was down from a profit of nearly $1.70 billion or $2.58 per share a year ago, when the fourth quarter included a $203-million after-tax benefit from the remeasurement of an employee benefit liability.
This year’s fourth quarter included $253 million in total provisions for credit losses, up from $175 million a year earlier, but lower than the $306 million announced for the quarter ended Aug. 31.
On an adjusted basis, BMO says it earned nearly $1.61 billion in the quarter, up from $1.53 billion in the same quarter last year. The adjusted profit amounted to $2.43 per share, up from $2.32 per share a year ago.
Analysts on average had expected a profit of $2.41 per share, according to financial markets data firm Refinitiv.
BMO was the second of Canada’s big banks to release fourth-quarter results, following Bank of Nova Scotia. Royal Bank of Canada and National Bank report their results Wednesday and TD Financial Group and CIBC report on Thursday.
Scotiabank which said Nov. 26 that its net profit increased to $2.31 billion or $1.73 per diluted share from $2.27 billion or $1.71 billion in the fourth quarter of 2018.