BMO records about $700M charge on equipment finance sale

BMO Financial Group recorded an approximately $700 million after-tax charge in its fiscal third quarter related to the pending sale of its Transportation Finance and Vendor Finance businesses to capital investment firm Stonepeak. 

The charge totaled CA$962 million ($692.6 million), about 6.9% more than the $648 million estimate BMO announced May 11, and was primarily related to goodwill, according to the bank’s Aug. 25 earnings release.  

In the acquisitions, BMO announced that Stonepeak would acquire the combined U.S. and Canadian loan and lease portfolio totaling $10.4 billion as of March 31.  

Transportation Finance provides truck and trailer financing primarily through dealers, while Vendor Finance offers equipment financing through original equipment manufacturers and dealer networks, according to the May 11 release. 

Transportation Finance held nearly $10 billion in loan balances, Chief Financial Officer Rahul Nalgirkar said during BMO’s Aug. 25 earnings call. About two-thirds of the balances were reported through U.S. Banking and one-third through Canadian Personal and Commercial Banking, he said. 

“These businesses did not meet our long-term growth and return objectives,” Nalgirkar said of the divestitures. The businesses generated single-digit returns on equity and made a modest earnings contribution, he said. 

Additionally, BMO reported Q3 net income of $1.26 billion, down 25% YoY, while adjusted net income increased 19% YoY to $2.06 billion, according to the release. 

Editor’s note: All amounts have been converted to U.S. dollars.  

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