Bank of Montreal to cut about 1,850 positions in bid to trim costs

The Bank of Montreal said Wednesday it is cutting about1,850 positions from its workforce as consumers shift more of theirbanking online and technological advancements allow it to digitizesome of its operations.

There were 46,166 full-time equivalent employees at the bankas of the second quarter, a decline of 616 employees fromthe previous quarter.

The lender said it will trim its head count by an additional fourper cent, which amounts to roughly 1,846 positions, as it took a$132 million restructuring charge relating to severance costs foremployees.

Increased use of technology

"The underlying activity that drives the charge really relatesto the increased use of technology in our business," BMO chieffinancial officer Thomas Flynn said during a conference call todiscuss the bank's quarterly earnings.

"And that's true both on the customer-facing side, wherecustomers are increasingly doing things in a digital way eithermobile or online but also in terms of how we use technology todrive efficiency in our business."

BMO was the first of the big Canadian banks to reportits second-quarter earnings results. CIBC, Royal Bankand TD Bank will follow on Thursday, andScotiabankwill wrap up the earnings parade next week.

• Bank of Montreal Q1 profit rises 7% to $1.07B
• BMO 1st of big banks to offer online robo-adviser portfolio manager

The bank said its second-quarter profit slipped three per cent asit set aside more money for bad loans to the oil and gas sector, inaddition to feeling the brunt of the restructuring costs.

It reported net income of $973 million during the quarter or$1.45 per share, down from $999 million or $1.49 per share, duringthe same period last year.

Other banks to follow suit?

Restructuring charges have emerged as a common theme amongCanada's biggest banks in recent quarters, as the lenders look toreduce costs and digitize certain functions in response to a tougheconomic environment and changing consumer behaviours.

"The banks are responding to a very difficult loan growth andrevenue growth environment by getting a lot more aggressive withexpenses," said Edward Jones analyst Jim Shanahan.

"Ultimately, this is really bad for financial services industryemployment in the greater Toronto market."

Shanahan added that other banks could also report similarrestructuring charges if not this quarter, then perhaps in thesecond half of the year.

"I don't think this is over," he said.

Despite the fact that BMO increased its provisions for creditlosses to $201 million during the quarter ended April 30, up from$161 million a year ago, Shanahan said he's still concerned that thebank isn't setting aside enough money for bad oilpatch loans.

"I'd still argue that outstanding reserves aren't reallyadequate relative to this large and growing oil and gas exposure
that they have," he said.

On an adjusted basis, BMO earned $1.152 billion or $1.73 pershare, up from $1.146 billion or $1.71 per share a year ago. Thatincludes a $79 million writedown of an equity investment. Excludingthe writedown, the bank said its adjusted net income was up sevenper cent.

Revenue increased to $5.10 billion from $4.53 billion during thesecond quarter of last year.

BMO also announced its quarterly dividend will go up by two centsto 86 cents per share, effective Aug. 26.