BANK MONTREAL QUE earnings calls

Path to 12% U.S. ROE

Q (Matthew Lee · Canaccord Genuity): Analyst asked Aron to rank the key drivers to move U.S. ROE from about 10% to 12%—loan growth, wealth, credit normalization, or balance sheet moves—and whether that ranking changed since Investor Day.

A: There was no substantive management answer in this exchange due to technical issues; the call team asked for a moment while they reconnected. The analyst repeated the question later in the call.

"Sorry, just give us a moment here. Operator, are you there?" — Christine Viau

Technical issues on the call

Q (Matthew Lee · Canaccord Genuity): Analyst checked audio after the technical interruption and asked if everyone could hear him.

A: This exchange records operator messages about technical difficulties and the analyst confirming audio. No management content answered the analyst's substantive question in this exchange.

Drivers for ROE improvement

Q (Matthew Lee · Canaccord Genuity): Analyst asked again how to get U.S. ROE from about 10% to 12% and whether the ranking of drivers changed since Investor Day.

A: Management said the path is roughly one-third client balance growth, one-third fee income growth, and one-third efficiencies and PCL normalization. They noted positive trends across loan momentum, fee growth (TPS +15% year-over-year), consumer deposit growth, and efficiency improvements, and said ROE was at 9.8% and ROTCE at 17.3% this quarter.

"So if you remember what we said in Investor Day and we repeated, the way to think about the path is really in 1/3, 1/3, 1/3, right?" — Aron Levine

Tariffs and AI CapEx effects

Q (Ebrahim Poonawala · BofA): Analyst asked Darryl for a mark-to-market view on tariff impacts for the Canadian economy and how much U.S. lending could be affected by the AI CapEx cycle.

A: Darryl said the recent tariff impact is manageable and that Canada still shows growth and lower unemployment, noting governments may provide support and clients are adjusting. He added the U.S. economy is largely driven by its own factors and the AI CapEx cycle is real; the bank participates in parts of that ecosystem.

"When we step back, I'm going to reinforce the point I made earlier, which is that we're focused on helping our clients navigate change." — Darryl White (CEO)

Use of excess capital after DSB cut

Q (Stephen Boland · Raymond James): Analyst asked whether lower DSB means excess capital will be used for higher-margin or higher-risk loans, or for government-directed areas like defense infrastructure.

A: Darryl said there is no change in target capital levels or risk appetite; the CET1 target remains 12.5% to 13%. He said the quarter shows capital generation that allows supporting client growth, investing in the growth agenda, and leaving room for dividends and buybacks.

"I think the short answer to your question is no change." — Darryl White (CEO)

Capital Markets earnings and liquidity effect on NIM

Q (Doug Young · Desjardins Bank): Analyst asked if Capital Markets' strong quarter and >16% ROE is sustainable, and how much holding extra liquidity pushed down NIM this quarter and if that drag will continue.

A: Management said the earnings capacity of Capital Markets is higher than historically due to investments and broader, diversified capabilities, so they expect stronger sustainable results. They also said the 3 basis point quarter-over-quarter NIM decline included almost 2 basis points related to higher liquidity in Corporate, and they expect much of that liquidity to normalize after planned dispositions in Q4.

"Short answer is, yes, the earnings capacity is higher than it had been historically." — Darryl White (CEO)

Card loan losses and U.S. M&A stance

Q (Mario Mendonca · TD): Analyst asked why card PCLs fell sharply—special items or consumer improvement—and whether the wide valuation gap makes U.S. bank M&A more likely for BMO.

A: Piyush said the card PCL decline reflects Canadian macro improvement, seasonal insolvency patterns, and deliberate portfolio actions to reduce risk and refocus on premium customers; Matt added premium account growth is up 47% year-over-year. Darryl said M&A remains subject to strict conditions and the top priority is organic growth, so they would only pursue deals that meet tight criteria and do not delay ROE targets.

"What you're seeing is a combination of improvement over time in the Canadian macro environment." — Piyush Agrawal

Capital use priorities and deposit strategy

Q (Paul Holden · CIBC): Analyst asked if RWA growth could use more CET1 (e.g., 20 basis points) instead of buybacks and whether deposit strategies can prevent NIM compression with loan growth.

A: Darryl said increased RWA usage is possible and capital allocation is market-driven—they won't turn away good client growth in favor of buybacks, which are treated as leftover. Aron said NIM focus is on ROE, deposit optimization has improved NIM 20 basis points year-over-year, and they are executing targeted strategies (mass affluent, bank-at-work, TPS) to grow core operating deposits and support margins.

"I don't find myself in a position today of turning away a single good opportunity for client growth in favor of buying back a share." — Darryl White (CEO)

Capital Markets fit with infrastructure spending

Q (David Konrad · KBW): Analyst asked how Capital Markets' product strengths align with possible Canadian government infrastructure and spending programs.

A: Alan said the bank has strengths in metals and mining, PU&I and industrial sectors, and sees AI-related opportunities aligning with their investments. He said the combination of specific opportunities, business diversification, and prior investments gives confidence they can continue to grow these businesses over coming years.

"So it's the theme of specific areas of opportunity, the diversification of our business, the investments that we've made, that's really what gives us confidence that there's room for us to continue to grow these businesses over the coming years." — Alan Tannenbaum

Corporate mix, NIM resilience, credit outlook

Q (Gabriel Dechaine · National Bank Financial): Analyst asked whether corporate balance-sheet mix issues (low-yield securities) will be adjusted after dispositions and whether U.S. margins could fall if deposit growth lags loans; also asked about Q4 impaireds and 2027 guidance.

A: Rahul said Corporate Services had lower revenues and higher expenses this quarter from prudent liquidity management and low-yielding assets, and they expect Q4 to be broadly consistent with Q3. He emphasized NIM resilience in core businesses and noted core operating deposits were up 8% year-over-year while total deposits were flat. Piyush said it's too soon to give 2027 guidance; they will do that at the end of Q4 and they have high conviction Q4 impairments should be in line with Q3.

"Our core operating deposits were up 8% year-over-year, while the total deposits were flat." — Rahul Nalgirkar (CFO)

Dispositions impact on earnings and CET1

Q (Darko Mihelic · RBC): Analyst asked where earnings lost from dispositions (e.g., Moneris) were reported by segment and how much common equity will drop after selling U.S. branches and the transportation finance business.

A: Rahul said the lost earnings mix was not dominated by Moneris; the 138 branches had about $5 billion in deposits and transportation finance was almost USD 10 billion, CAD 16 billion in loans, and overall roughly 2/3 impact in U.S. banking and 1/3 in Canadian P&C. He said the dispositions were strategic, Investor Day targets remain unchanged, and the transactions will generate 50 basis points of CET1 to replenish capital.

"Overall, these dispositions will generate 50 basis points of CET1 for us." — Rahul Nalgirkar (CFO)