BMO released third-quarter earnings on Tuesday that may represent the final quarterly report before its transportation unit transfers to private equity firm Stonepeak. The bank announced plans to divest the unit in May, with the transaction expected to close before year-end. The next earnings release is scheduled for December 2.
Key credit metrics signaled improvement in the trucking lending environment. Provisions for credit losses declined substantially to $15 million from $41 million in the prior quarter and $50 million a year prior, marking the lowest level since the first quarter of 2023. Allowances for credit losses also decreased to $73 million from $86 million in the preceding quarter. Gross impaired loans fell significantly to $440 million compared with $576 million one quarter earlier and $585 million in the fourth quarter of last year.
Net writeoffs in the quarter ended July 31 remained largely flat at Ca $24 million (US $17.32 million) versus $25 million in the prior period. Gross loans and acceptances in the transportation sector stood at $12.78 billion, up slightly from $12.65 billion in the second quarter, though down from a peak of $15.6 billion in the third quarter of 2023.
The improving metrics reflected strength in freight markets benefiting BMO’s transportation lending book, which comprises approximately 90% trucking exposure. However, loan originations in the transportation group showed signs of the bank’s preparation for the pending sale, dropping to $11 million in the third quarter from $114 million in the second quarter.
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