BMO Sees Loan Demand Surge as Returns Rise Toward 2027 Targets

Loan demand is accelerating: BMO reported that loan closings nearly doubled from last year, with strong commercial-lending pipelines and continued client activity despite Canada-U.S. trade uncertainty.

Returns are improving broadly: Third-quarter ROE rose to 14% from 9.8% at the end of 2024, while revenue increased 11% and earnings per share grew 22%. BMO is targeting 15% ROE and 18% return on tangible equity by 2027.

BMO is prioritizing organic growth and efficiency: The bank is focusing on improving profitability in its existing U.S. operations rather than pursuing acquisitions, while investing in AI tools that support efficiency and are expected to deliver C$1 billion in annual pre-provision, pre-tax income benefits by 2030.

Chief Financial Officer Rahul Nalgirkar said the bank is seeing stronger client activity and loan demand despite uncertainty surrounding Canada-U.S. trade negotiations, while maintaining its focus on improving returns through core operating performance. Speaking at an investor event, Nalgirkar said loan closings this year were nearly double the prior year’s level following a slower 2025, with commercial lending pipelines and client conversations remaining strong. He said clients are seeking greater confidence as trade negotiations progress, and that BMO’s North American commercial banking presence positions it to support cross-border, supply-chain and export-related needs.

Nalgirkar said BMO’s third-quarter performance reflected continued execution against the plan it outlined at its investor day. The bank reported a 14% return on equity, up from 9.8% at the end of 2024, representing an improvement of about 220 basis points. He said the improvement was broad-based, with all four of BMO’s business units contributing to the expansion. Revenue increased 11% year over year, while pre-provision, pre-tax income rose 13% to a record C$4.5 billion. All four units reported record pre-provision, pre-tax income, he said. Earnings per share grew 22%, while return on tangible common equity reached 18%.

BMO is targeting a 15% return on equity and 18% return on tangible common equity by the end of 2027. Nalgirkar said an estimated 50% to 60% of the remaining improvement needed to reach that target is expected to come from core operating performance, including growth in fees and deposits and continued strength in personal and commercial banking, wealth management and capital markets. The remainder is expected to come from credit normalization and capital optimization.

The CFO said BMO’s U.S. banking business generated a 9.8% return on equity and a 17.3% return on tangible common equity in the third quarter. The U.S. banking return on equity improved 90 basis points year over year. He attributed the progress to actions including a unified operating structure, core operating deposit growth, capital optimization, normalized provisions for credit losses, technology investments and talent upgrades. Transaction and payment services fees in the U.S. rose about 14% year over year, he said. To reach BMO’s 12% U.S. banking return-on-equity target, Nalgirkar said the remaining progress is expected to be divided roughly evenly among fee growth, deposit growth, and other initiatives involving costs and capital allocation. He added that the former Bank of the West operations have been fully integrated into BMO and are no...