BMO’s quarterly earnings suggest truck credit might be improving
Credit data for the transportation segment at Canada’s BMO bank showed the first signs in several years of an improving trucking market in the quarter that ended at the close of January.
The client base at the transportation segment of BMO–the former Bank of Montreal–is overwhelmingly oriented toward trucking. BMO’s quarterly numbers for its transportation segment are considered strong indicators of trucking’s credit health.
Given that BMO’s first fiscal quarter ended January 31, about half or a little more than that of the three-month period would have occurred when trucking rates began to strengthen.
No particular area at BMO (NYSE: BMO) had a major change in the company’s earnings released Wednesday. But the data clearly suggests the worst in trucking credit deterioration could be over.
Gross impaired loans, which is a measure of all the loans that a lender believes are in danger of not being repaid in full, declined to Ca$563 million (US $411 million) from $585 million in the fourth quarter of 2025. But the number is still well above the $424 million from the third quarter and the $503 million from the second.
Provisions taken by a bank are a function of a future liability, so they are considered more forward-looking. Conditions have strengthened enough at BMO that the provisions figure for the first quarter plummeted to $39 million. It was $57 million in the fourth quarter.
For all of fiscal 2025, total provisions were $196 million.
Net writeoffs, where the bank removes the loan as an asset from its balance sheet, fell to $24 million from $43 million in the prior quarter.
The one benchmark number that rose was allowances for credit losses. Both provisions and allowances are taken against problem loans. But provisions impact bank earnings, while allowances are a hit on a bank’s balance sheet. Allowances rose to $77 million from $71 million.
A Bloomberg report in August said BMO had been looking to sell its transportation unit. One suggestion that report might have been accurate is that BMO’s transportation book of business–gross loans and acceptances–has continued to decline.
In the first quarter, it was $12.42 billion. That is down from $12.98 billion in the prior quarter. In the fourth quarter of 2023, the size of BMO’s book of business in transportation was $15.6 billion.
Loan formations up y-o-y, down sequentially
Loan formations in the quarter for the transportation sector–the origination and completion of new lending–were $65 million. In the first quarter of 2025, they were $54 million. But they were $131 million in the fourth quarter of 2025.
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