BMO Stock Forecast & Price Target

Bank of Montreal is expected to experience strong core earnings growth in the near future, driven by solid results in its US personal and commercial banking segment and higher margins in both the Canadian and US markets. The company also expects to see moderate growth in its mergers and acquisitions and equity capital markets activities. Additionally, the company's balance sheet optimization efforts, including the sales of its transportation and vendor finance portfolios and branches, are expected to positively impact its financials. However, BMO may face challenges from potential climate-related capital requirements, although it has made progress in achieving diversity on its board of directors and in its leadership roles. Overall, the company appears to be well-positioned for continued success and we see strong potential for stock price growth in the future.

Bank of Montreal is trading at a high valuation compared to its historical average and peers, and its target forward P/E multiple has been adjusted upwards based on a higher risk premium and a core ROE above current estimates. Additionally, BMO's full-year outlook for expenses remains unchanged, with a projected 5% growth in adjusted expenses in 2026. The bank also expects Corporate Services net losses to continue trending higher and be in a similar range to the last 2 years. However, BMO's non-interest income and total provision for credit losses were above expectations, and its Capital Markets segment saw strong earnings growth. Despite these positives, the bank's Canadian retail 90+ days past due increased and PCL estimates have been lowered for 2026 and 2027. Furthermore, BMO's U.S. Banking segment saw modest sequential ROE decline and the bank's overall balance sheet growth has been slow. While the bank's relative share price performance has been positive, there is still uncertainty regarding the bank's progress in the U.S. market and its ability to return to stronger balance sheet growth.