Bank of Montreal (BMO) FY2025 40-F and Q3 FY2026 6-K Summary

Business

Source: annual report on Form 40-F for fiscal 2025, accession 0001193125-25-307982 (Exhibit 99.1 Annual Information Form; Exhibit 99.2 2025 Management's Discussion and Analysis; Exhibit 99.3 audited consolidated financial statements).

BMO Financial Group is a diversified North American bank. It sells deposits, mortgages, consumer and commercial loans, credit cards, cash-management and payment services, wealth and asset management, insurance, and investment banking and trading services to roughly 13 million personal, business, corporate, institutional and government clients in Canada, the United States and select global markets. Most of its income is the spread it earns lending and investing deposits: in fiscal 2025, net interest income was $15.32 billion of total revenue of $25.86 billion, about three-fifths. The rest is fee and trading income from wealth management, capital markets, cards, deposits and lending. At October 31, 2025 BMO had total assets of $1.05 trillion. It described itself as the seventh-largest bank in North America by assets. It had more than 53,000 full-time-equivalent employees and more than 1,800 branches.

The bank operates through four segments, with Corporate Services (treasury, technology and operations, and unallocated items) supporting them. Fiscal 2025 results by segment:

• Canadian Personal and Commercial Banking: Personal and Business Banking (deposits, mortgages, consumer lending, cards, everyday advice) and Commercial Banking (financing, treasury and payment solutions, risk management products), sold through branches, contact centres and digital channels. Revenue was $8.74 billion and net income $2.35 billion.
• U.S. Banking: U.S. Personal and Business Banking, U.S. Commercial Banking and U.S. Private Wealth. These were combined into one segment in the fourth quarter of fiscal 2025, with U.S. wealth moved out of Wealth Management. The business is run mainly through BMO Bank N.A. under the Chicago-based BMO Financial Corp. Revenue was $8,186 million and net income $2,007 million (reported in US dollars).
• Wealth Management: Canadian private wealth, the BMO InvestorLine digital brokerage, Global Asset Management and BMO Insurance (life, critical illness, annuities, segregated funds, pension de-risking). Revenue was $3.78 billion and net income $984.39 million.
• Capital Markets: Investment and Corporate Banking (debt and equity underwriting, M&A advisory, lending, treasury services) and Global Markets (sales, trading and research across rates, credit, FX, equities, commodities and securitization), with about 2,700 professionals in 38 locations. Revenue was $5.31 billion and net income $1.41 billion.
• Corporate Services: a net loss of $526.05 million.

The U.S. franchise exists in its current size mainly because BMO bought Bank of the West from BNP Paribas on February 1, 2023 for $13.8 billion in cash. BMO now counts itself among the ten largest U.S. banks by assets. Earlier, in June 2023, it bought the AIR MILES rewards business for $160 million. On November 1, 2025, just after the fiscal year ended, it bought Burgundy Asset Management, a Canadian investment-counsel firm (described under the current quarter). Founded in 1817, the bank is chartered under Canada's Bank Act and supervised by OSFI. It is designated a domestic systemically important bank and is subject to Canada's bail-in regime. In the U.S., BMO Financial Corp. is a Category III institution under the Federal Reserve's enhanced prudential standards and goes through annual CCAR and Dodd-Frank stress tests. BMO Bank N.A. is supervised by the OCC.

Management's strategic priorities are a "One Client" advice-led client experience, a high-performance culture, a "digital-first, AI-powered" operating model, and risk management. Its medium-term objectives, measured on an adjusted basis over three to five years, are:

• adjusted EPS growth of 7–10% a year;
• return on equity of 15% or more;
• return on tangible common equity of 18% or more;
• operating leverage of 2% or more;
• a CET1 ratio above the regulatory requirement.

In fiscal 2025 adjusted ROE was 11.3% and adjusted ROTCE 14.7%, so both remained short of target. Management said improving U.S. Banking profitability, more normal credit losses, capital optimization and efficiency were the levers for closing that gap.

Risk Factors

Source: Enterprise-Wide Risk Management section, "Risks That May Affect Future Results," of the fiscal 2025 MD&A (accession 0001193125-25-307982, Exhibit 99.2), updated by the Third Quarter 2026 MD&A and interim financial statements (6-K accession 0000927971-26-000108, Exhibits 99.1 and 99.2).

The bank names these as the risks that could most materially affect its results:

• Trade policy and geopolitics. BMO's clients depend on cross-border trade, and the bank has an integrated North American footprint. In fiscal 2025 the bank flagged the 2026 USMCA renegotiation as a major risk: if it failed, broad U.S. tariffs on Canadian exports would follow and would likely push Canada into recession. By the third quarter of fiscal 2026 that risk had grown. The U.S. declined to extend USMCA's initial terms on July 1, 2026, setting up annual reviews. U.S. tariffs of 50% on about 5% of goods imported from Canada took effect on August 22, 2026. The bank also cites the war involving Iran as its most immediate economic threat: a prolonged closure of the Strait of Hormuz would raise energy, food and transport costs.
• General economic conditions and foreign exchange. Growth, unemployment, inflation and interest rates drive loan demand and credit losses. In fiscal 2025, rising unemployment raised delinquencies in consumer lending. BMO does not hedge its US-dollar earnings stream, so movements in the Canadian/U.S. dollar rate pass straight through to reported results and capital ratios. The bank also flags the risk of a sharp correction in overvalued equity and credit markets.
• Canadian housing and consumer leverage. High household debt and mortgage renewals at higher payments could raise credit losses, particularly in unsecured consumer credit, where Canadian P&C impaired provisions rose sharply in fiscal 2025. At July 31, 2026, Ontario accounted for 43.9% of BMO's residential mortgages and British Columbia for 14.6%. The average loan-to-value on uninsured Canadian mortgages at origination was 70%, which the bank says limits the loss in a severe housing decline.
• Cyber and information security. BMO is frequently the target of attempted cyber attacks, increasingly AI-assisted and often launched through suppliers. A successful attack could expose customer data, disrupt services, and lead to litigation, regulatory action and reputational harm.
• Technology resilience, AI and third parties. Customers rely heavily on digital channels, and regulators expect operational resilience. Fast-moving technologies such as AI and digital currencies bring new competitors and new regulatory, strategic and reputational risks. More reliance on third-party providers creates exposure to data compromise and to outages of critical services.
• Regulation and capital requirements. Reforms could raise capital, liquidity and compliance requirements and lower returns. The bank specifically notes the cost if it were designated a global systemically important bank. Its CET1 ratio of 13.0% at July 31, 2026 compares with an 11.0% minimum including OSFI's Domestic Stability Buffer, which OSFI cut from 3.5% to 3.0% on June 19, 2026.
• Environmental and social risk. Physical climate events can hit operations and borrowers. Transition policies, such as carbon pricing, and changing demand can impair borrowers in exposed sectors. Climate-related disclosures and lending also carry litigation and reputational risk.
• Changes to the business portfolio. Acquisitions may underperform or prove hard to integrate. Divestitures depend on regulatory approvals and closing conditions. This risk matters now because BMO has three divestitures pending (138 U.S. branches, its Transportation Finance and Vendor Finance businesses, and its 50% stake in Moneris) and one acquisition (the Euroz Hartleys capital-markets business).
• Tax and legal matters. Canadian tax authorities have reassessed BMO for about $1.05 billion of additional tax and interest. The reassessments deny deductions on certain 2011–2018 dividends that the authorities treat as "dividend rental arrangements." The matter is before the Tax Court of Canada, and BMO says its filing positions were appropriate. The largest recent legal exposure has ended. A U.S. jury in 2022 had awarded $564 million against BMO Bank N.A., as successor to M&I Marshall and Ilsley Bank, in the Petters Ponzi-scheme case. The verdict was reversed on appeal in September 2024, which let BMO reverse a $875.58 million provision ($643.81 million after tax) in fiscal 2024. The U.S. Supreme Court denied review on May 27, 2025, ending the case.

Management's Discussion and Analysis, Fiscal 2025

Source: fiscal 2025 MD&A, accession 0001193125-25-307982 (Exhibit 99.2).

Returns improved in fiscal 2025 (the year ended October 31, 2025). Revenue rose 7.2% to $25.86 billion and reported net income rose 15.4% to $6.22 billion. Adjusted net income, which excludes acquisition intangible amortization and specified items, rose 20.3% to $6.59 billion. Reported diluted EPS was $8.15, against $7.00 in fiscal 2024; adjusted EPS was $8.67, against $7.12. Reported ROE improved to 10.6% from 9.7% and adjusted ROE to 11.3% from 9.8%. The adjusted efficiency ratio improved to 56.3% from 58.6%.

The drivers were wider margins, lower U.S. credit losses and strong markets. Net interest income rose 6.9% to $15.32 billion, and the reported net interest margin widened 7 basis points to 1.65% as deposit and loan margins improved. Total provisions for credit losses fell 6.8% to $2.58 billion (53 basis points of loans, against 57). Provisions on performing loans fell to $335.02 million from $511.37 million. Provisions on impaired loans were $2.24 billion, down 0.6% in US-dollar terms. In Canadian dollars they rose slightly: higher losses in Canadian P&C, driven by unsecured consumer lending and commercial accounts, more than offset lower provisions in U.S. Banking and Capital Markets. Non-interest expense rose 4.9% to $15.05 billion, mainly on performance-based pay, technology, premises and professional fees. Reported results also included a goodwill write-down tied to the planned sale of 138 U.S. branches and a charge to align employee-vacation accounting.

Segment performance diverged:

• Canadian P&C: net income fell 7.7% to $2.35 billion. Revenue grew 7% in Canadian dollars on higher balances and a 5 basis-point wider margin, but provisions rose to $1.69 billion (70 basis points of loans, up from 51) as rising unemployment pushed up unsecured consumer losses.
• U.S. Banking: net income rose 35% to $2,007 million. Lower credit losses, 3% revenue growth and lower expenses all helped, and the net interest margin widened 9 basis points to 3.82% as deposit optimization improved deposit margins.
• Wealth Management: net income rose 25.4% to $984.39 million on stronger markets, net sales and a gain on the sale of a portfolio of insurance contracts.
• Capital Markets: net income rose 28.4% to $1.41 billion on higher trading revenue across products and strong Canadian M&A, underwriting and advisory activity.

Capital returns resumed. BMO bought back and cancelled 22.2 million common shares during the year, which helped lower the CET1 ratio to 13.3% from 13.6%, and declared dividends of $4.59 per share. Going into fiscal 2026, management's Canadian P&C outlook expected continued trade uncertainty, modest Canadian GDP growth with policy rates easing, pressure on Canadian unsecured consumer credit from slightly higher unemployment, and slowing deposit growth as clients moved into equity markets.

Current Quarter, Third Quarter of Fiscal 2026 (three months ended July 31, 2026)

Source: interim report on Form 6-K, accession 0000927971-26-000108 (Exhibit 99.1 Third Quarter 2026 MD&A, including Corporate Events; Exhibit 99.2 interim consolidated financial statements, Note 13), the earnings release on Form 6-K, accession 0000927971-26-000106 (Exhibit 99.1); and, for the June 2026 senior notes, Form 6-K accession 0001193125-26-253845.

Headline: a goodwill charge masked a strong underlying quarter. Reported net income fell 26.4% to $1.25 billion from $1.70 billion, and reported diluted EPS fell to $1.70 from $2.29. Reported ROE was 8.4%, against 11.6% a year earlier. The decline came from a $779.78 million pre-tax charge ($686.95 million after tax), mostly goodwill, recorded when the planned sale of the Transportation Finance and Vendor Finance businesses met held-for-sale accounting. A smaller drag was a $44.99 million rise in the fair value of contingent consideration owed for Burgundy, booked as a reduction in revenue. In total, adjusting items reduced net income by $791.92 million. Excluding them, adjusted net income rose 16.8% to $2.04 billion and adjusted EPS rose 20.2% to $2.83 from $2.35. Adjusted ROE reached 14.0%, up from 12.0% a year earlier and closer to the 15% target. CEO Darryl White said every operating segment delivered record pre-provision, pre-tax earnings. He presented the quarter as execution against commitments made at the bank's March 2026 Investor Day to raise ROE and accelerate growth.

Revenue and margins. Revenue rose 7.9% to $7.07 billion. Non-interest revenue rose 21.5% to $3.09 billion. Trading non-interest revenue roughly doubled, rising 105.3% to $606.97 million, and wealth management fees and underwriting and advisory fees were also higher. Net interest income was $3.98 billion, down 0.7% in US-dollar terms because net interest income in the Global Markets trading business fell (that decline is offset in trading revenue). Excluding Global Markets, net interest income rose on wider margins and balance growth. The total reported net interest margin was 1.60%, down 9 basis points. On the bank's preferred basis, excluding Global Markets and Insurance, the margin was 2.26%, up 5 basis points on higher deposit margins.

Expenses and credit. Reported non-interest expense rose 28.3% to $4.77 billion because of the divestiture charge. Adjusted expense rose 7.0% to $3.91 billion on performance-based pay, technology and advertising, plus the stronger U.S. dollar. The adjusted efficiency ratio improved to 54.9% from 55.8%, with adjusted operating leverage of 1.6%. Credit improved. Provisions fell 11.2% to $515.57 million (41 basis points of loans, against 47), mainly on lower impaired-loan provisions in Canadian P&C and U.S. Banking. Gross impaired loans were $4.85 billion, 0.97% of gross loans, down from 1.01% the prior quarter. The total allowance for credit losses was $4.30 billion.

Results by operating segment, and for Corporate Services:

• Canadian P&C: net income rose 13.2% to $699.8 million and revenue 3.8% to $2.33 billion. The net interest margin widened 6 basis points to 2.90% on higher deposit margins, fees rose, and provisions fell. Average loans grew 2% and average deposits fell 1%, with term deposits running off (both changes in Canadian dollars).
• U.S. Banking (reported in US dollars): net income rose 11% to $620 million and adjusted net income 9% to $661 million. Revenue rose 5% to $2,167 million, and the net interest margin widened 20 basis points to 4.02% on deposit mix and loan margins. Average loans grew 1% and average deposits fell 3% as the bank continued to optimize deposits. Private Wealth assets under management rose 17% to $88.8 billion.
• Wealth Management: reported net income rose 2.0% to $291.35 million, held back by the Burgundy contingent-consideration remeasurement. Adjusted net income rose 19.1% to $342.76 million, and revenue rose 13.4% to $1.13 billion on stronger markets, net sales and the addition of Burgundy. Assets under management rose 33% in Canadian dollars from a year earlier. Insurance earnings fell because the prior year included a portfolio-sale gain.
• Capital Markets: net income rose 43.1% to $460.58 million and revenue 17.4% to $1.52 billion. Global Markets revenue rose 27% in Canadian dollars, mainly on equities trading, and Investment and Corporate Banking rose 10% on corporate banking and debt underwriting.
• Corporate Services: the net loss widened to $821.91 million from $87.4 million because of the divestiture charge. The adjusted loss was $127.11 million, against $89.58 million, on lower revenue and higher expenses.

Year to date. For the nine months, reported net income rose 8.7% to $4.97 billion and adjusted net income 23.1% to $5.89 billion. Reported EPS was $6.72 (against $6.02) and adjusted EPS $8.03 (against $6.32). Provisions for credit losses fell 21.5% to $1.60 billion, largely because the prior year included heavy provisions on performing loans. Adjusted ROE was 13.3%, against 11.1%.

Balance sheet, capital and funding. At July 31, 2026:

• total assets were $1.10 trillion, net loans $497.84 billion and deposits $726.04 billion;
• book value per share was $80.65;
• the CET1 ratio was 13.0%, unchanged from the prior quarter and down from 13.5% a year earlier. Internal capital generation was offset by buybacks and higher risk-weighted assets, which stood at $324.42 billion;
• the leverage ratio was 4.2%, the TLAC ratio 29.2%, the liquidity coverage ratio 125% and the net stable funding ratio 114%.

In the quarter BMO repurchased 3.8 million shares at an average price of $170.93 ($658.38 million in total). Over nine months it repurchased 15.8 million shares for $2.31 billion. It redeemed its $713.32 million of 1.928% Series K subordinated medium-term notes at par on July 22, 2026, and in June 2026 issued senior notes of $750 million due 2029, $750 million due 2032 and $1.25 billion due 2037. Earlier in the year it redeemed its $891.84 million Series 1 limited recourse capital notes (November 12, 2025).

Portfolio reshaping. Management says its divestitures improve capital efficiency and free resources for core markets with attractive long-term growth. The bank estimates that, once closed, the divestitures announced so far (the branch sale, the Transportation and Vendor Finance sale, and the post-quarter Moneris sale) will add about 50 basis points to the CET1 ratio. Together those businesses contributed about 2% of the quarter's revenue, about 1% of expenses, and 5% of reported (3% of adjusted) net income. The deals:

• Transportation Finance and Vendor Finance (agreement May 11, 2026). BMO is selling these businesses and their loan portfolios to Stonepeak. The portfolios totaled about $9.2 billion in U.S. Banking and $1.21 billion in Canadian P&C at July 31, 2026. Consideration is cash plus an earn-out tied to future performance; the cash amount was not disclosed. BMO will reinvest part of the proceeds for an equity interest of about 19.9% in the new entity. Closing is expected in the fourth quarter of fiscal 2026.
• 138 U.S. branches (agreement October 16, 2025). BMO is selling the branches to First-Citizens Bank & Trust Company for a net deposit premium of about 5%. As of July 31, 2026, the buyer would assume about $5.3 billion of deposits and buy about $0.7 billion of loans, down from $5.7 billion and $1.1 billion at announcement. Expected closing has moved from mid-calendar 2026 to the fourth quarter of fiscal 2026. BMO has written down $73 million of goodwill (fourth quarter of fiscal 2025) and a further $13 million (second quarter of fiscal 2026).
• Euroz Hartleys (agreement June 29, 2026). BMO agreed to buy the Australia-based metals-and-mining capital markets business of Euroz Hartleys Group Limited. Closing is expected in the fourth quarter of calendar 2026, subject to Euroz Hartleys shareholder and regulatory approvals. No price was disclosed, and the bank says the deal is not material.
• Burgundy Asset Management (completed November 1, 2025). The total purchase price was $466.61 million: $43.52 million in cash, $343.18 million in exchangeable shares and $79.91 million of contingent consideration (a holdback tied to retaining assets under management for 18 months, plus a growth earn-out). The deal added $267.55 million of customer-relationship intangibles and $227.60 million of goodwill to Wealth Management. The contingent consideration had been remeasured to $141.24 million by July 31, 2026, and each increase in its fair value is recorded as a reduction in revenue.

Outlook. BMO gives no numerical earnings guidance beyond its medium-term objectives. Its Third Quarter 2026 economic outlook (calendar years) calls for:

• Canadian GDP growth of 1.0% in 2026 and 2.0% in 2027;
• U.S. growth of 2.1% in 2026 and about 2.0% in 2027;
• a steady Bank of Canada policy rate, and a steady Federal Reserve rate through 2026 before easing in late 2027;
• moderate Canadian mortgage growth, with U.S. business and commercial real estate lending expected to stay strong on AI-related investment.

Management warns that higher tariffs would mean higher provisions for credit losses, more volatile capital markets and slower loan growth.

Subsequent Events

Sources: Note 13, "Subsequent Event," of the interim consolidated financial statements and the Corporate Events section of the Third Quarter 2026 MD&A (6-K accession 0000927971-26-000108); Forms 6-K accessions 0001193125-26-342827, 0001193125-26-364523, 0001193125-26-364526, 0001193125-26-380533, 0001193125-26-383647, 0001193125-26-391886 and 0001193125-26-393059.

These events occurred after the quarter ended on July 31, 2026:

• Sale of Moneris (agreement August 10, 2026). BMO and Royal Bank of Canada agreed to sell their jointly owned Canadian commerce-solutions and payments provider, Moneris Solutions Corporation, to Francisco Partners for cash of about $1.44 billion, half of it BMO's. BMO expects a gain on closing of about $445.18 million pre-tax ($430.82 million after tax). The gain will be recorded in non-interest revenue in Corporate Services and treated as an adjusting item. The bank expects the sale to add about 15 basis points to its CET1 ratio on a pro forma basis and not to affect run-rate earnings significantly. Closing is expected by the end of the first quarter of fiscal 2027, subject to regulatory approvals. On closing, BMO and RBC will enter new exclusive, long-term referral arrangements with Moneris.
• Dividend (August 25, 2026). The board declared a fourth-quarter common dividend of $1.24 per share, unchanged from the prior quarter and 5% higher than a year earlier, both in Canadian-dollar terms. It is payable November 26, 2026 to shareholders of record on October 30, 2026.
• New share buyback. BMO announced on August 25, 2026 a new normal course issuer bid for up to 25 million common shares, about 3.6% of the public float. It received TSX and OSFI approval on September 2, 2026. The bid runs from September 8, 2026 to September 7, 2027. Under the previous bid, BMO had repurchased 23,667,500 shares by August 31, 2026 at a volume-weighted average price of about $142.66. It had 695,092,237 common shares outstanding on that date.
• Funding and capital issuance. In September 2026, under its U.S. shelf registration, BMO issued:
  • $1.25 billion of 5.099% fixed/floating rate senior notes due 2030 (6-K of September 4, 2026);
  • $1.0 billion of floating rate notes due 2028 (6-K of September 15, 2026);
  • $1.0 billion of 7.375% Fixed Rate Reset Limited Recourse Capital Notes, Series 7 (NVCC) (6-K of September 16, 2026; underwriting agreement dated September 8, 2026). In connection with them, BMO issued 1,000,000 Non-Cumulative 5-Year Fixed Rate Reset Class B Preferred Shares, Series 56 (NVCC) to a limited recourse trust.
• Pending closings. As of the latest filings, both the 138-branch sale to First Citizens Bank and the Transportation Finance and Vendor Finance sale to Stonepeak were still expected to close in the fourth quarter of fiscal 2026 (by October 31, 2026). The Euroz Hartleys acquisition was expected to close in the fourth quarter of calendar 2026.