Credit Suisse Upgrades Bank of Montreal (BMO) to Neutral
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Credit Suisse upgraded Bank of Montreal (NYSE: BMO) from Underperform to Neutral with a C$93 PT.
Analyst Nick Stogdill commented, "We are upgrading BMO to Neutral from Underperform. Although it may take several quarters to regain confidence following the Oct. 4th downward revision to capital ratios, which reduced BMO's CET1 ratio to 10.0% from 10.5%, we believe an Underperform rating is no longer warranted. (1) BMO's premium valuation has declined ~400bps to a ~2% premium from ~6%; (2) its U.S. business has leverage to higher rates (BMO discloses 100 bps parallel increase in U.S. and Canada would increase revenue by C$175-200 million in the first year); and (3) we see the potential for BMO to get back to a 10.5% CET1 ratio faster than expected, potentially driven by its recently announced sale of its Moneris U.S. business for US$425 million (50/50 JV with RY) and the introduction of a 2% discount on shares issued under the DRIP. Concurrent with results, we forecast BMO will increase its quarterly dividend by C$0.02/sh or 2.3%."
Shares of Bank of Montreal closed at $65.71 yesterday.
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