Bank of Montreal (BMO) Grew Adjusted Income 19% While Reported Income Fell 25%. What Did the Finance-Business Sale Cost?

Bank of Montreal (BMO) experienced a 25% decline in reported net income, falling to C$1.75 billion for the third quarter, while adjusted net income increased by 19% to C$2.86 billion. The adjusted results were driven by the sale of its Transportation Finance and Vendor Finance businesses to Stonepeak. The transaction resulted in a C$1.09 billion pretax charge, primarily due to a reduction in goodwill.

The sale of 138 U.S. branches also contributed to C$973 million in after-tax divestiture adjustments. Bank of Montreal plans to retain a 19.9% equity interest in the sold businesses, with the transaction expected to close in the fourth quarter of fiscal 2026, pending regulatory approvals. Despite the divestiture, each business segment generated record pre-provision, pre-tax earnings.

The bank's non-GAAP adjusted return on equity improved to 14.0% from 12.0%. The after-tax charge mainly reflects the reduction in goodwill allocated to the finance businesses, but the actual sale price remains undisclosed, making it difficult for investors to compare cash proceeds, retained stake, and released capital with historical costs.

While the divestiture could enhance capital efficiency and improve the CET1 ratio, the exact cash sale price and the retained stake's impact on future returns remain uncertain.