SKN | BMO Nears Completion of U.S. Reset, Signals Loan Growth Rebound

Key Takeaways

• BMO Financial Group reported Q1 fiscal 2026 net income of $1.82 billion, up 16% year over year.

• U.S. optimization program is approximately 90% complete, with completion expected by April 2026.

• Management expects positive U.S. commercial loan growth in the second half of fiscal 2026.

• Company-wide profitability targets of 15% ROA and 12% U.S. ROA remain in focus.

Profit Growth Signals Execution Momentum

BMO posted first-quarter net income of $1.82 billion (U.S.), reflecting a 16% year-over-year increase. The results bring the bank closer to achieving its stated profitability objectives, including a 15% return on assets company-wide and 12% ROA for its U.S. banking operations.

Return on equity for the quarter reached 12.1%, underscoring improving operational efficiency and capital deployment.

U.S. Reset Nearly Complete

After spending much of 2025 reshaping its U.S. balance sheet, BMO now says the optimization effort is 90% complete. The initiative focused on shedding low-yield loans, reducing higher-cost deposits, and exiting underperforming portfolios.

The bank sold a nonrelationship credit card portfolio, exited certain franchise lending exposures, and agreed to sell 138 Midwest and Mountain West branches to First Citizens BancShares. The transaction is expected to close in the second half of 2026, sharpening BMO’s focus on higher-growth markets such as California.

According to management, remaining lower-return assets will gradually roll off, replaced by higher-return exposures designed to lift profitability metrics.

U.S. Segment Shows Improving Returns

For the quarter ended January 31, BMO’s U.S. segment generated $539 million in net income, up 21% year over year. Revenues rose 2% to $2.1 billion, while return on equity improved to 7.9% from 6.5% a year earlier.

While U.S. loan volumes declined 3% year over year and deposits fell 5%, executives emphasized that these figures reflect deliberate balance sheet repositioning rather than weakening demand.

Management now projects mid-single-digit U.S. loan growth, supported by strong commercial lending pipelines. The tone marks a clear shift from last year’s restructuring phase toward expansion.

Broader Franchise Strength

Outside the U.S., BMO’s Canadian personal and commercial banking revenue rose 7% year over year to $2.38 billion, supported by deposit growth.

Wealth management revenue climbed 14% to $1.1 billion, aided by the acquisition of Burgundy Asset Management.

CEO Darryl White described the quarter as evidence that the bank’s strategy is “coming together,” pointing to improving returns and profitable earnings growth.

Outlook

With the U.S. reset nearing completion and management signaling renewed loan growth, BMO appears to be transitioning from balance sheet optimization to expansion.

If commercial pipelines convert as expected and return metrics continue trending upward, the bank could approach its 15% company-wide ROA target by fiscal 2027. Sustained execution across both Canadian and U.S. operations will be key to maintaining momentum.

For confidential discussions regarding cross-border banking optimization strategies, North American loan growth positioning, and return-on-assets modeling within multinational financial institutions, our senior advisory team is available for discreet consultation tailored to institutional and cross-border mandates.