Bank of Montreal

Good morning, and welcome to BMO Financial Group's Q2 2026 earnings release and conference call for May 27th, 2026. Your host for today is Christine Viau. Please go ahead.

Thank you, and good morning, everyone. We will begin today with remarks from Daryl White, BMO CEO, followed by Rahul Nagarkar, 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 and Business Banking, Sharon Hayward-Laird, Canadian Commercial Banking, Aaron Levine, U.S. Banking, Alan Tunnenbaum, BMO Capital Markets, Dellen Kamenga from BMO 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. Daryl and Rahul will be referring to adjusted results in their remarks unless otherwise noted as reported. And with that, I will now turn the call over to Daryl.

Thank you, Christine, and good morning, everyone. At our March Investor Day, we laid out a clear execution-focused plan to elevate returns and accelerate growth. Our second quarter results continued to demonstrate meaningful progress and momentum against these commitments. We once again strengthened return on equity and delivered strong EPS growth, driven by our focus on deepening client relationships, innovating to drive business value, and optimizing for performance. Adjusted EPS was $3.67, up 40% from last year with pre-provisioned pre-tax earnings of $4.4 billion, up 16%, and record net income of $2.7 billion, driven by robust fee revenue across capital markets, wealth management, and treasury and payment solutions. Operating leverage was strong at 4.1%. Credit remains well-managed and in line with our expectations, with PCL stable from last quarter. We're well-reserved with performing loan coverage at 69 basis points. Our CET1 ratio is strong at 13% and does not include the pro forma impact of the sale of the transportation and vendor finance businesses, which we expect will add 28 basis points. This provides us with ongoing flexibility to support growth and return capital to our shareholders. We bought back 6 million shares this quarter and announced a dividend increase of 5% to $1.71. At Investor Day, we laid out a clear plan to deliver sustainably higher ROE and earnings growth. This quarter's results reinforce that trajectory. Building on peer leading performance in 2025, where we had number one ROE and number one EPS growth, we continued that momentum in Q1 and again this quarter. with Q2 ROE up 370 basis points from a year ago to 13.5% and EPS up 40%. Year-to-date, underlying ROE is up 200 basis points and EPS is up 30%. ROTCE strengthened to 17.6%, a measure that underscores the strength of our core franchise and our ability to generate top-tier returns on capital deployed. Our progress has been driven by core operating performance, the strength of our diversified businesses, and our discipline around cost management, risk optimization, and capital allocation. In U.S. banking, ROE momentum continues to build up 220 basis points from last year to 9.3%. And with optimization actions now behind us, we delivered a strong sequential loan growth in the quarter. As expected, We believe that we've now reached an inflection point in this business that will drive an acceleration in profitable growth going forward. All of these improvements position us well to achieve and sustain our number one imperative of a 15% ROE as we exit fiscal 2027. Each of our businesses delivered strong results this quarter. In Canadian P&C, we continue to execute our deposit-led client growth strategy with core operating deposits up 7% in retail and 8% in commercial year-over-year. Canadian commercial banking saw strong customer acquisition across segments. New client growth was up 18% compared with last year, with particular strength in our mid-market segment, supporting stronger loan growth up 2% from last year and last quarter. Treasury and payment solutions continues to anchor our client relationships, with fees up 12%. In Canadian personal and business banking, we're translating deposit strength to deepen investment relationships. Our teams delivered record mutual fund sales this quarter, up 49% over last year, including continued strength in our preferred program for investors. In US banking, we're executing against our multi-pronged profitable growth levers. In Q2, we delivered record PPPT of $924 million, as our client focus and optimization efforts continue to lay the path to accelerated growth and elevated returns. Leveraging our top-tier commercial platform, unified U.S. banking model, and differentiated treasury and capital markets capabilities, we delivered sequential quarterly commercial loan growth in the U.S. banking segment of 4% point-to-point and grew TPS and advisory fees. Core retail operating deposits grew by 4%, we're making progress on our de novo strategy where over the next six months we expect to open an average of one financial center per month in southern california together with our ongoing renovations and digital enhancements these centers are designed to build deeper relationships bringing together a full suite of personal business and wealth advice and products to meet our clients financial needs wealth management delivered record earnings up 39% on strong markets and increased client assets. AUM was up 30% with continued strength in ETF market share and higher mutual fund sales reflecting strong fund performance. This past weekend in the Globe and Mail's Best ETFs for 2026 ranking, BMO was firmly among the leaders with 20 funds recognized for providing investors with differentiated value, performance, and ease of investing, underscoring the breadth and the strength of our ETF lineup. Capital markets showed sustained momentum with PPPT of $900 million driven by equities trading and underwriting and advisory fees. We continued building strength in our market leading franchises, including a number one ranking in ECM and the top position in investment banking share of wallet in Canada, as well as growing M&A activity in the US. Our world-leading metals and mining business led the way with multiple transactions this quarter. As we outlined at our investor day, we're anchoring our performance on three clear enterprise priorities. First, growing and deepening client relationships, grounded in one client advice that leverages the strength of our commercial bank. That approach continues to drive tangible benefits in Q2, contributing to higher fee income and client primacy. In Canada, we had solid momentum in referral activity between commercial and capital markets and a 74% increase in referral revenue between commercial and wealth. And we continue to extend our leading treasury and payments business, including adding over 2,500 new business banking accounts across Canada and the U.S. year to date. Second, we're driving innovation for business value through digital-first, AI-powered solutions and actively advancing new use cases focused on relationship-led intelligence, applying AI insights to proactively identify and solve client needs. Our announcement this quarter to introduce 24-7 tokenized cash capabilities in partnership with the CME Group and Google Cloud reflects the growing importance of digital finance to our clients, an area where we're well positioned to lead. We further advanced our AI strategy through the launch of the BMO Institute for Applied Artificial Intelligence and Quantum dedicated to the responsible application, governance, and oversight of AI at scale, reflecting our commitment to innovating, developing, and integrating technologies that will shape the future of financial services. We're consistently recognized for innovation leadership, including ranking first in eMarketer's 2026 Canada Mobile Banking Features benchmark for the third consecutive year. The third priority, optimizing performance. As you'll hear from Rahul, we remain disciplined in optimizing performance through expense management and efficiency improvements. And we're also allocating capital to the highest return opportunities and continuing to strengthen the balance sheet, ensuring the flexibility to support growth and capital return to shareholders. Earlier this month, we announced the sale of our transportation and vendor finance businesses, a transaction that is accretive to both capital ratios and our OE. through our 19.9% equity investment will benefit from ongoing income participation in a more capital efficient way while allocating resources to core markets with deeper client relationship opportunities. With the closing of this transaction and the previously announced branch sale in the fourth quarter of this year, we've effectively and successfully completed the balance sheet optimization program in the US banking segment over the course of the last six quarters. These deliberate actions have strengthened ROE and set the foundation to capture growth in our core US markets where the economic environment remains resilient with GDP growth expected to be 2.1% in 2026. The outlook for the Canadian economy remains mixed with modest near-term growth in GDP expected amid inflation and unemployment challenges in certain segments. In the medium term, the combination of greater clarity on USMCA and the impact of infrastructure investments have the potential to drive a stronger growth outlook for both Canada and the United States. Our business clients consistently tell us that improving Canadian regulatory competitiveness is essential to unleashing Canadian growth and unlocking Canada's potential. Recent federal measures such as setting firm deadlines for project reviews and approvals within one year, streamlining consultations, establishing special economic zones and trade corridors nationally and simplifying regulatory reporting are positive and they're a good start. Businesses operate across multiple jurisdictions and meaningful growth will depend on a coordinated approach and alignment across governments to drive a more competitive environment for business investments in Canada. In closing, Q2 is another step forward in delivering what we committed to at our investor day, stronger returns, faster earnings growth, and a more resilient franchise. We're executing with discipline, the strategy is working, and I remain confident in our ability to continue building long-term value for our shareholders. With that, I will turn it over to Rahul.