John Kingston
3 min read
In This Article:
The improvement in trucking credit conditions seen in the first-quarter earnings of Canada-based bank BMO came to a halt in the second quarter, with only a few signs of a strengthening market alongside other numbers pointing to more deterioration.
BMO (NYSE: BMO), the former Bank of Montreal, is a major lender to the trucking industry. Its quarterly earnings break out results for various sectors, including transportation, which is believed to be more than 90% lending to trucking companies. Its credit results are seen as a sign of broader lending conditions in the trucking sector.
BMO’s fiscal year begins Nov. 1. The latest report is for the second quarter, ended April 30.
One of the more notable statistics in the report was the figure for gross loans and acceptances in the transportation group. That is the size of the bank’s book of business in the sector before deducting loan loss reserves.
That number fell to $14.06 billion, down from almost $14.9 billion in the prior quarter. It’s the lowest figure since the fiscal first quarter of 2023, when it was less than $14 billion. It could be a one-quarter aberration or may signal a reluctance to lend on the part of the bank, which does not comment on the results, except occasionally on earnings calls with analysts.
The contrast between the latest gross loans figure for BMO’s transportation sector is particularly stark in comparison to the more than $15.6 billion it posted in the fourth fiscal quarter of 2023.
The biggest number suggesting conditions are not improving in trucking were that gross impaired loans and acceptances soared to $503 million, up from $410 million. This is easily the largest figure in the history of BMO data, which dates back to when the bank acquired the transportation lending operations of GE Capital in late 2015.
To illustrate the contrast between current conditions and the peak of the post-pandemic trucking boom, gross impaired loans in the third fiscal quarter of 2022, which ended in July 2022, were $72 million.
An impaired loan has been defined as one for which a lender is unlikely to collect all the monies due, including principal and interest.
After reserves are accounted for, net loans and acceptances for the transportation sector was just under $14 billion, down from $14.82 billion in the prior quarter.
There were small areas of improvement. Allowances for credit losses were $57 million in the quarter, down from $61 million one quarter earlier and $68 million the quarter before that. A year ago, in 2024’s second fiscal quarter, allowances were $24 million.
