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

Bank of Montreal (TSX:BMO) has long been a staple in many Canadian portfolios, known for its strong dividend and consistent performance. But after a year of rising credit losses, market volatility, and changing investor sentiment around banks, it’s fair to ask: Should investors buy, sell, or hold BMO stock right now?

Recent moves

Let’s start with the stock price. BMO shares recently traded at around $154 as of early August 2025. That’s up over 37% from its 52-week low of $109, and not far off its high of $157.80. Investors who held through the volatility were rewarded. But looking ahead, things are a bit more complicated.

In its latest earnings report for the second quarter of 2025, BMO stock reported net income of $1.96 billion, up slightly from $1.87 billion the year before. Adjusted net income was also up, $2.05 billion compared to $2.03 billion last year. Earnings per share (EPS) came in at $2.50 on a reported basis and $2.62 adjusted, both showing mild year-over-year gains. So, while growth wasn’t explosive, it was steady.

However, one red flag stands out: provisions for credit losses jumped to $1.05 billion from $705 million the previous year. That’s a 49% increase. The bulk of this came from performing loans, meaning loans that haven’t gone bad yet but could, depending on the economic outlook. This is where BMO stock’s results get interesting. On one hand, the bank is building reserves to stay ahead of potential trouble. On the other hand, it raises questions about how confident management is in the current environment.

What to know

CEO Darryl White tried to calm nerves, saying, “We delivered strong revenue and pre-provision, pre-tax earnings growth … while we bolstered performing allowances.” So, BMO’s core business is doing well, but it’s playing defence just in case. The bank is also buying back shares and just increased its dividend to $1.63 per quarter, a 5% hike year over year and 3% from last quarter. That translates into a forward yield of 4.26%, comfortably above the TSX average.

From a valuation standpoint, BMO stock doesn’t look expensive. Its trailing price-to-earnings (P/E) ratio sits at 14.20, with a forward P/E of just 11.71. The price-to-book (P/B) ratio is also a modest 1.31. Compared to U.S. banks or even some of its Canadian peers, BMO looks like a bargain, especially given its consistent dividend and common equity tier-one capital ratio of 13.5%, which is well above regulatory requirements.

Buy, sell, or hold?

So, where does that leave investors? If you’re already holding BMO stock, there’s a strong case for staying put. The dividend is safe and growing, the capital base is robust, and the bank is being conservative with its loan book. The increased loan-loss provisions aren’t necessarily a reason to panic, and could even be viewed as a strength in this uncertain environment.

If you’re looking to buy, the current price may not be a screaming deal, but it’s still attractive for long-term investors. The stock offers a solid dividend yield, reasonable valuation, and proven leadership. Plus, with interest rates still relatively high, BMO stock continues to benefit from strong net interest margins.

However, if you’re thinking of selling, it might be a bit premature, unless you need cash or believe the broader banking sector is in for a prolonged downturn. Despite the spike in credit loss provisions, BMO stock is clearly managing the risk and preparing for a range of outcomes. In fact, you could even be earning dividends of $417 per year!

Bottom line

In short, BMO isn’t going to shoot the lights out. But it remains one of the more stable, shareholder-friendly bank stocks on the TSX. It’s likely best suited for income-focused investors who want steady returns and can stomach a little short-term turbulence. For now, a “hold” rating feels most appropriate, with a lean toward “buy” on any meaningful dip.