BMO grows originations despite mortgage rules

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BMO’s big mortgage numbers for this quarter come at a cost, and that is the inevitable margin compression from low interest rates.

Their first quarterly financial results released Tuesday show an increase in residential mortgages from $81.3 billion in Q1 2012 to $89 billion Q1 2013, an unexpected jump of 9.5 per cent ($7.7 billion).

However, the dramatic upswing in numbers for new mortgages is having a blowback effect for shareholders, as BMO officials expect a “continuing moderate decline” in profit margins, perhaps as high as 5 basis points.

“We’re in that environment for the foreseeable future,” BMO officials said during a Tuesday conference call, “as we continue to try and stem margin compression.”

That might be easier said than done as lenders, including monolines refocus on rates to attract and to retain clients in a slowing market. That's likely to put even greater pressure on margins for BMO and others.

Even in that environment, broker lenders are sweetening the pot for brokers in terms of commissions, another way of luring bringing new deals in.

 

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