When it comes to choosing between two of Canada’s banking heavyweights like Bank of Montreal (TSX:BMO) and National Bank of Canada (TSX:NA), investors have much to consider. Both institutions have recently released their first-quarter 2025 earnings, shedding light on their current performance and future prospects. But which one came out on top? Let’s dive into the details to see which bank might be the better buy right now.
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Into earnings
BMO reported a robust net income of $2.14 billion for the quarter ending Jan. 31, 2025, a significant increase from $1.29 billion in the same period last year. This translates to earnings per share (EPS) of $2.83, up from $1.73 year over year. On an adjusted basis, which excludes certain one-time items, net income was $2.29 billion. Plus, it reported adjusted earnings per share (EPS) of $3.04, marking a notable rise from the previous year’s $2.56.
National Bank also showcased strong performance, posting a net income of $997 million for the same quarter, up 8% from $922 million the previous year. Diluted EPS stood at $2.78, compared to $2.59 in the prior year. On an adjusted basis, net income reached $1.05 billion, with an adjusted EPS of $2.93, reflecting a 13% increase year over year.
Growing businesses
BMO’s revenue for the quarter totalled $9.27 billion, a 21% increase from the previous year. This growth was driven by higher net interest income and non-interest revenue across all operating segments. Notably, BMO Capital Markets and BMO Wealth Management reported significant contributions to this uptick.
National Bank’s revenue amounted to $3.18 billion, up from $2.71 billion in the same quarter last year. The Wealth Management segment shone brightly, with net income of $242 million, a 23% increase from the previous year. The Financial Markets segment also performed admirably, with net income rising 35% to $417 million.
Still saving
Both bank stocks have been proactive in setting aside funds to cover potential loan defaults, reflecting a cautious stance amid economic uncertainties. BMO’s provisions for credit losses (PCL) stood at $1.01 billion, up from $627 million in the same quarter last year. National Bank’s PCL increased to $254 million from $120 million year over year.
Return on equity (ROE) is a key metric for assessing a bank’s profitability relative to shareholders’ equity. BMO reported an ROE of 10.6% for the quarter, up from 7.2% in the previous year. On an adjusted basis, ROE was 11.3%, reflecting improved profitability. National Bank’s ROE stood at 16.7%, slightly down from 17.1% the previous year, indicating sustained strong performance.
Value and income
That’s a lot to consider, so what do investors gain now? For income-focused investors, dividends are a crucial consideration. BMO declared a quarterly dividend of $1.59 per common share, unchanged from the prior quarter, equating to an annual dividend of $6.36 per share. National Bank announced a dividend of $1.14 per common share, so both offer income as well.
Yet, the bank stocks are still valuable. BMO’s market capitalization was approximately $108.41 billion at writing, with a trailing price-to-earnings (P/E) ratio of 13.90. National Bank’s market capitalization stood at $47.06 billion, with a trailing P/E ratio of 10.91. These figures suggest that National Bank is trading at a lower valuation relative to its earnings, which could be attractive to value-focused investors.
Furthermore, National Bank recently completed its acquisition of Canadian Western Bank, aiming to accelerate its growth across Canada and enhance its banking capabilities nationwide. BMO continues to focus on expanding its presence in both Canadian and U.S. markets, leveraging its diversified business model to drive growth.
Bottom line
Both BMO and National Bank have demonstrated strong financial performance in the first quarter of 2025. BMO boasts higher absolute earnings and a larger market capitalization, reflecting its extensive operations. National Bank, however, offers a higher ROE and lower P/E ratio, suggesting efficient operations and potential undervaluation. Plus, its recent acquisition of Canadian Western Bank positions it for enhanced growth across Canada. Investors should consider their individual investment strategies and risk tolerance when choosing between these two robust bank stocks. But both look like solid investments on the TSX today.
