Bank of Montreal

Good morning and welcome to the BMO Financial Group's Q1 2026 earnings release and conference call for February 25th, 2026. Your host for today is Christine Viau. Please go ahead.

Christine Viau. Thank you and good morning, everyone. We will begin today with remarks from Darrell White, BMO CEO, followed by Rahul Malgakar, our Chief Financial Officer, and Piyush Agrawal, our Chief Risk Officer. Also present today to answer questions are our group heads, Matt Marotra, Canadian Personal Business Banking, Sharon Hayward-Laird, Canadian Commercial Banking, Aaron Levine, U.S. Banking, Alan Tunnenbaum, BMO Capital Markets, Dallin Kamenga, Wealth Management, and Daryl Hackett, BMO U.S. CEO. As noted on slide two, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darrell and Raul will be referring to adjusted results in their remarks unless otherwise noted as reported. And I will now turn the call over to Darrell.

Thank you, Christine, and good morning, everyone. First quarter results were very strong, building on our momentum from last year. We're executing on our commitment to deliver higher returns and profitable earnings growth. Adjusted EPS were $3.48, up 15% from last year, and included a previously announced severance charge of $202 million that reduced EPS by 21 cents. And we saw continued momentum in our ROE improvement. The bank achieved record pre-provision pre-tax earnings of $4.1 billion, powered by record revenue in each of our operating segments. Strong fee growth in our market-driven businesses and margin expansion in our Canadian and U.S. banking businesses from deposit growth and mix optimization positions us particularly well for when loan growth resumes. Our commitment to expense management and operational efficiency continues to enable strategic investments in technology and talent. Underlying expense growth was well managed, and we continue to target positive operating leverage again this year. Credit performance remains in line with our expectations and our CET1 ratio of 13.1% remains strong and above our target even as we continue to buy back 6 million shares during the quarter. We're executing against a consistent strategy outlined back in Q4 of 2024 towards achieving and sustaining ROE of 15%. The progress we made last year and this quarter strengthens my conviction that we can achieve that goal as we exit 2027. We delivered peer-leading ROE improvement in 2025 of 150 basis points and that momentum continued into the first quarter. Underlying ROE reached 13.1%, up 180 basis points from a year ago and 130 basis points from Q4. Consistent with last year, this reflected strong core operating performance across our businesses, including in U.S. banking, where underlying ROE was up 150 basis points from Q1 of last year. Broad-based line of business operating performance contributed to strong underlying EPS growth of 21%, and momentum is growing. Turning to our operating segments. In Canadian P&C, we're attracting more customers with deeper relationships leading to consistent growth in core operating deposits, a key driver of earnings growth, which was up 8% from last year. Canadian commercial banking revenue grew 10%. New client acquisition is healthy and trending higher than last year. Clients continue to adopt our innovative treasury and payment solutions, driving 9% growth in operating deposits and 13% increase in TPS fees. Our one-client approach is key to our success. and client referrals between commercial and wealth increased to 34%, resulting in a 75% increase in referral revenue. In Canadian retail, we continue to see above-market growth in checking accounts and operating deposits, as well as strong growth in mutual fund sales of 13%, leveraging our personal bankers and our digital capabilities to drive fuller customer relationships. Our strategy to deepen engagement and loyalty will be further strengthened as we transition from air miles to our reimagined Blue Rewards loyalty program this summer. Available to all Canadians, this program delivers personalized benefits, new partnerships, and an intuitive digital platform, giving millions of members a simple, flexible way to earn and redeem rewards, and will be fully integrated into the BMO mobile app. In U.S. banking, we continue to execute on our strategy to accelerate performance and delivered record revenue and strong margin expansion. We're seeing momentum in personal account acquisition and net client growth over last year with a solid 3% growth in non-interest bearing deposits. By the end of next quarter, we will be effectively complete with our balance sheet optimization efforts and expect to see positive commercial loan growth in the second half of the year supported by currently strong pipelines. With the U.S. economy expected to outpace Canada for a fourth straight year, and with our business mix, we're well positioned to capture growth opportunities as business activity expands. Wealth management earnings were up 16% on stronger markets and net new asset growth. We successfully integrated Burgundy asset management, and we're seeing good client and employee retention and engagements. Our distinctive strength in innovation and speed to market continued to drive momentum across global asset management with the launch of BMO's broad commodity ETF and expansion of our European CDR lineup. Our commitment to delivering high-quality solutions for investors was recognized at the 2025 Fundata Fund Grade A-plus Awards, where BMO ETFs and mutual funds earned a combined 27 awards reinforcing BMO's position as one of Canada's leading investment managers. Capital markets had a very strong quarter with PPPT of $893 million, driven by strong trading activity and higher advisory fee revenue. Our performance reflects continued strength in market-leading franchises, including a number one ranking in ECM and a number two position in investment banking share of wallet in Canada and robust equities trading and M&A activity in the U.S. Record results in our commodities trading business this quarter reflects our leadership position in the sector. We've been consistently ranked as the world's best metals and mining investment bank by Global Finance Magazine now for the 17th year, and this week we hosted our 35th global conference, the world's leading forum on this topic. Looking ahead, BMO is uniquely positioned to serve our clients playing leading roles in the AI infrastructure cycle and those in industries at the center of economic change. We have highly competitive and differentiated strengths across areas critical to future economic growth, including our metals and mining franchise, our leadership position in the Canadian energy sector, and robust infrastructure, power, and utilities capabilities. We're proud to be the official bank of the Canadian Defence Community, serving members of the military, reservists, and their families. Across our Canadian capital markets and commercial banking businesses, we're supporting efforts to help growing defense industries, including participating in the development group for the Defense Security and Resilience Bank. As we evolve our own AI journey across BMO, our digital-first, AI-powered strategy is focused on scaling rapidly, advancing capabilities to deliver world-class client experiences and drive business value. We're creating a responsible AI-enabled ecosystem of tools where innovation supports human insight. Building on last year's launch of our generative AI-powered digital assistant and personal banking, we've introduced the same capabilities for the Canadian Commercial Bank, enabling our teams to quickly access policy and lending information. These are examples of how we're scaling AI-enabled intelligent tools to make every interaction faster and more confident, augmenting our teams' and streamlining workflows to enhance client experience. In closing, our performance this quarter demonstrates momentum and progress. We're delivering value for our clients through world-class one-client experiences and for our shareholders through significant ROE and earnings growth since we outlined our clear path five quarters ago and we're not done yet. We look forward to sharing further insights into our strategy and progress at the upcoming All Bank Investor Day on the 26th of March. Before I turn the call to Rahul, I would like to welcome him to his first quarterly call as our CFO. Rahul joined BMO in 2022 as CFO for our U.S. operations and commercial banking and brings deep experience across leading organizations with a strong focus on execution. Rahul, over to you.