Bank of Montreal (BMO) RBC Capital Markets Canadian Bank CEO Conference 2025 summary

Credit loss provisions and outlook

• Provisions for credit losses (PCLs) peaked in 2024, with expectations for a gradual decline through 2025, ending at a similar average level as 2024 but with a different trajectory.

• Capital markets are expected to see a significant and rapid drop in PCLs, while Canadian retail unsecured continues to show negative migration and more insolvencies.

• Commercial portfolios in both Canada and the U.S. are trending positively, with lower provisioning outlooks, though variability is expected quarter to quarter.

• Performing loan provisions will continue to build prudently, but not at the elevated Q4 2024 pace; no releases are expected in 2025.

• Recoveries are not embedded in forecasts, as provisions are based on best estimates at the time of impairment, with recoveries realized only if circumstances improve.

ROE improvement strategy and timing

• A 500 basis point ROE improvement is the top priority, with four main drivers: U.S. segment improvement, operating leverage, credit normalization, and capital optimization.

• U.S. segment targets 12%-13% ROE, which would enable the total bank to reach 15% ROE, with further upside from continued U.S. improvement.

• Revenue synergies from the Bank of the West acquisition are ramping up, with $450M-$550M targeted over the next few years.

• Capital optimization includes both share repurchases and reallocating capital to higher-return opportunities, leveraging data analytics for more granular decisions.

• The ROE rebuild is expected over three to five years, with a goal to achieve it on the earlier end if market conditions remain stable.

Market environment and regulatory landscape

• U.S. clients report less uncertainty compared to a year ago, with a pro-growth agenda and more clarity on monetary policy.

• Canadian clients face increased uncertainty due to political factors and unclear policy outlooks, leading to more cautious capital deployment.

• Reduced U.S. bank regulation may benefit smaller domestic banks, but competitive dynamics for large foreign-owned banks are not expected to change materially.

• Commitment to high compliance and risk standards remains, regardless of temporary regulatory easing in the U.S.