Declining mortgage business... for banks?

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BMO is the first to release its quarterly figures; do they confirm – or deny – big bank mortgage business predictions?

Industry pundits forecasted moderating mortgage business for the big banks to close out the year, but BMO’s recent quarterly financial report shows the big bank’s mortgage lines continue to thrive.
 
BMO funded over $104 billion in residential mortgages during the third quarter of this year, and the bank expects its mortgage business to show higher percentage growth than its consumer credit lines for the rest of the year.
 
“Growth in residential mortgages is expected to remain steady near 5% this year, while consumer credit should grow close to 3%,” BMO writes in its Q3 investor’s report.
 
That optimism suggests BMO may be poised to get more aggressive with its mortgage business. In the past, the bank has made headlines with rate promotions that were credited with ignited rate wars with the big banks.
 
These numbers somewhat contradict recent analysis of bank mortgage portfolios.
 
“Growth in personal loans and residential mortgages looks to be moderating in line with recent trends,” the CIBC analysts said in a research note released mid-August.
 
The company credits its Spring Home Financing Campaign and its mobile apps for driving its mortgage growth last quarter.
 
BMO also posted impressive gains overall.
 
"BMO delivered very good results in the third quarter, with adjusted net income of $1.2 billion, up 6% from good results a year ago and up 7% from the second quarter," said Bill Downe, Chief Executive Officer, BMO Financial Group.
 
"These results were driven by good operating group performance, particularly in our combined Personal and Commercial Banking business which posted adjusted earnings of $792 million, up 13% from last year, and in Wealth Management where adjusted net income was up 10%. Credit provisions continued to be stable.”

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