Bank of Montreal: Buy, Sell, or Hold in 2025?

Canada’s oldest bank and dividend pioneer could be a “strong buy” for three compelling reasons.

Canada’s Big Six banks reported mixed earnings results in fiscal 2024, with increased business lending and mortgage activities in Q4 2024. The Bank of Canada cut its policy rate four times before the presentation of the quarterly reports. Its fifth and last cut for the year was December 11, 2024.  

The Office of the Superintendent of Financial Institutions (OSFI) maintained the Domestic Stability Buffer (DBS) at 3.5%. Canada’s banking giants need to have a buffer or rainy-day fund to cover losses in case of financial uncertainties. The OSFI believes the country’s financial system remains generally stable after assessing its vulnerabilities and risks.

The Bank of Montreal (TSX: BMO) is the pre-eminent choice for investors seeking exposure to Canada’s banking sector. Its share price has risen 2.1% in the last five days following an upgrade by sector peers. If you invest today, the share price is $142.10, while the dividend offer is 4.6%.

Concept of multiple streams of income

Source: Getty Images

Stock upgrade from peers

On January 8, 2025, analysts at the Royal Bank of Canada raised the rating from “sector perform” to “outperform” and increased their price target for BMO to $161 (+13.3%). The Bank of Nova Scotia and Canadian Imperial Bank of Commerce have the same ratings for BMO with price targets between C$150 and C$160.

The bank analysts agree that the 5% year-over-year dividend increase announced last month reflects the bank’s financial strength and commitment to rewarding shareholders. BMO rewarded investors with an overall return of 11.7%-plus in 2024 on top of the dividend hike.

Financial performance

“We’re entering 2025 with a strong foundation and significant balance sheet capacity for growth,” said Darryl White, CEO of BMO Financial Group. In the 12 months ending October 31, 2024, revenue increased 12.1% to $32.8 million compared to fiscal 2023.

BMO’s net income climbed 65.1% to $7.3 billion from a year ago, notwithstanding the 159.8% year-over-year jump in provision for credit losses (PCLs) to $3.1 billion. The Personal and Commercial business segments in Canada ($11.4 billion) and the U.S. ($9.8 billion) contributed the most to total revenues in fiscal 2024. The contribution from the Bank of the West will also show in the coming quarters.    

According to White, BMO delivered good pre-provision pre-tax earnings growth across all operating groups. It also met management’s commitment to positive operating leverage for the last three quarters and the whole year.  He expects the quarterly provisions to moderate through 2025 as the business environment improves.

Screaming buy

BMO is a buy-and-hold stock, especially for income-focused investors. The dividend payment history of Canada’s oldest and third-largest financial institution is unmatched; the track record is 195 years and counting. This $103.7 billion bank is the TSX’s dividend pioneer.

On January 14, 2025, the London Metal Exchange (LME) approved and accepted BMO as a category 2 member. The world’s oldest and largest market for industrial metals will soon announce when the Canadian bank stock will start trading.

The positive outlook of sector peers, commitment to increasing shareholder returns, and exposure to investors outside North America will make BMO a “strong buy” in 2025.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

More on Bank Stocks

customer uses bank ATM
Stocks for Beginners

Your GIC Is Maturing as Rates Rise: I Wouldn’t Automatically Lock It Up Again

A maturing GIC may offer an attractive guaranteed rate, but long-term investors could sacrifice considerably more growth by renewing automatically.

Read more »

RRSP (Registered Retirement Savings Plan) on wooden blocks and Canadian one hundred dollar bills.
Stocks for Beginners

Your RRSP Could Be Too Large by 71: Here’s What I’d Do in My 60s

A large RRSP can eventually force substantial taxable withdrawals, making the years before 71 unusually valuable for tax planning.

Read more »

a person searches for information on the internet
Bank Stocks

Still Not Collecting Dividends? Here’s 1 Stock to Start With

This Canadian bank’s growing dividends, strong stock performance, and improving earnings could give new income investors an appealing place to…

Read more »

Group of people network together with connected devices
Bank Stocks

Everyone’s Snapping Up These Stocks: Should You?

These two popular Canadian financial stocks have already delivered strong gains, but their strong fundamentals suggest there is still plenty…

Read more »

coins jump into piggy bank
Bank Stocks

Thinking About Bank Stocks? Here’s What to Know in September

After a strong run so far this year, here’s what Canadian investors should know about the big bank stocks in…

Read more »

Fed Chairman Jerome Powell speaks with U.S. president Donald Trump
Stocks for Beginners

Bank Stocks Wilted After the Fed Raised Interest Rates: Is Now the Time to Buy the Big Six?

Why waiting before buying the Big Six may be a prudent move for Canadian investors.

Read more »

shopper carries paper bags with purchases
Stocks for Beginners

Are You Spending More Just to Use Your Credit Card Perks?

Credit-card rewards lose their appeal quickly when earning them pushes you to spend money you never planned to spend.

Read more »

young adult uses credit card to shop online
Stocks for Beginners

Credit-Card Rewards Keep Changing: What Does That Mean for Bank Stocks?

Changing credit card rewards show how hard Canadian banks are competing to attract spending and deepen customer relationships.

Read more »