(Unaudited) (Canadian $ in millions, except as noted)
For the three months ended
January 31,
October 31,
January 31,
2026
2025
2025
Interest, Dividend and Fee Income
Loans
$
9,243
$
9,531
$
10,121
Securities (Note 2)
3,951
3,835
4,120
Securities borrowed or purchased under resale agreements
1,383
1,519
1,565
Deposits with banks
586
633
817
15,163
15,518
16,623
Interest Expense
Deposits
6,248
6,855
8,124
Securities sold but not yet purchased and securities lent or sold under repurchase agreements
2,270
2,274
2,189
Subordinated debt
109
112
111
Other liabilities
893
781
801
9,520
10,022
11,225
Net Interest Income
5,643
5,496
5,398
Non-Interest Revenue
Securities commissions and fees
316
320
288
Deposit and payment service charges
449
446
442
Trading revenues
866
557
802
Lending fees
340
329
362
Card fees
261
204
219
Investment management and custodial fees
678
620
574
Mutual fund revenues
421
403
363
Underwriting and advisory fees
426
455
380
Securities gains, other than trading (Note 2)
85
114
58
Foreign exchange gains, other than trading
76
68
76
Insurance service results (Note 5)
69
118
91
Insurance investment results (Notes 2 and 5)
76
39
60
Share of profit in associates and joint ventures
41
83
49
Other revenues
77
89
104
4,181
3,845
3,868
Total Revenue
9,824
9,341
9,266
Provision for Credit Losses (Note 3)
746
755
1,011
Non-Interest Expense
Employee compensation
3,552
2,978
3,235
Premises and equipment
1,140
1,215
1,086
Amortization of intangible assets
294
290
288
Advertising and business development
180
224
174
Communications
81
79
86
Professional fees
168
219
146
Association, clearing and annual regulator fees
71
70
76
Other
267
481
336
5,753
5,556
5,427
Income Before Provision for Income Taxes
3,325
3,030
2,828
Provision for income taxes (Note 11)
836
735
690
Net Income
$
2,489
$
2,295
$
2,138
Attributable to:
Bank shareholders
$
2,490
$
2,288
$
2,134
Non-controlling interest in subsidiaries
(1)
7
4
Net Income
$
2,489
$
2,295
$
2,138
Earnings Per Common Share (Canadian $) (Note 10)
Basic
$
3.40
$
2.98
$
2.84
Diluted
3.39
2.97
2.83
Dividends per common share
1.67
1.63
1.59
The accompanying notes are an integral part of these interim consolidated financial statements.
40 BMO Financial Group First Quarter Report 2026
Interim Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
(Unaudited) (Canadian $ in millions)
For the three months ended
January 31,
October 31,
January 31,
2026
2025
2025
Net Income
$
2,489
$
2,295
$
2,138
Other Comprehensive Income (Loss), net of taxes
Items that will subsequently be reclassified to net income
Net change in unrealized gains on fair value through OCI debt securities
Unrealized gains on fair value through OCI debt securities arising during the period (1)
203
147
120
Reclassification to earnings of (gains) during the period (2)
(11)
(33)
(6)
192
114
114
Net change in unrealized gains (losses) on derivatives designated as cash flow hedges
Gains (losses) on derivatives designated as cash flow hedges arising during the period (3)
(569)
853
375
Reclassification to earnings of losses on derivatives designated as cash flow hedges during the period (4)
173
254
341
(396)
1,107
716
Net gains (losses) on translation of net foreign operations
Unrealized gains (losses) on translation of net foreign operations
(1,931)
784
2,612
Unrealized gains (losses) on hedges of net foreign operations (5)
532
(208)
(541)
(1,399)
576
2,071
Items that will not be subsequently reclassified to net income
Net unrealized (losses) on fair value through OCI equity securities arising during the period (6)
(3)
–
(11)
Net gains on remeasurement of pension and other employee future benefit plans (7)
56
88
22
Net gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value (8)
(242)
10
(88)
(189)
98
(77)
Total Other Comprehensive Income (Loss), net of taxes
(1,792)
1,895
2,824
Total Comprehensive Income
$
697
$
4,190
$
4,962
Attributable to:
Bank shareholders
$
698
$
4,183
$
4,958
Non-controlling interest in subsidiaries
(1)
7
4
Total Comprehensive Income
$
697
$
4,190
$
4,962
(1)Net of income tax (provision) of $(73) million, $(52) million, $(45) million for the three months ended.
(2)Net of income tax provision of $3 million, $12 million, $2 million for the three months ended.
(3)Net of income tax (provision) recovery of $221 million, $(324) million, $(148) million for the three months ended.
(4)Net of income tax (recovery) of $(67) million, $(96) million, $(129) million for the three months ended.
(5)Net of income tax (provision) recovery of $(205) million, $80 million, $208 million for the three months ended.
(6)Net of income tax recovery of $1 million, $nil million, $4 million for the three months ended.
(7)Net of income tax (provision) of $(21) million, $(34) million, $(8) million for the three months ended.
(8)Net of income tax (provision) recovery of $93 million, $(4) million, $34 million for the three months ended.
The accompanying notes are an integral part of these interim consolidated financial statements.
BMO Financial Group First Quarter Report 2026 41
Interim Consolidated Financial Statements
Consolidated Balance Sheet
(Unaudited) (Canadian $ in millions)
As at
January 31,
October 31,
2026
2025
Assets
Cash and Cash Equivalents
$
67,378
$
67,484
Interest Bearing Deposits with Banks
2,870
2,838
Securities (Note 2)
Trading
195,815
192,303
Fair value through profit or loss
22,505
21,354
Fair value through other comprehensive income
110,894
113,209
Debt securities at amortized cost
92,117
96,610
421,331
423,476
Securities Borrowed or Purchased Under Resale Agreements
109,725
129,421
Loans (Note 3)
Residential mortgages
194,089
196,033
Consumer instalment and other personal
91,841
92,741
Credit cards
12,120
12,649
Business and government
375,252
380,788
673,302
682,211
Allowance for credit losses (Note 3)
(5,067)
(5,050)
668,235
677,161
Other Assets
Derivative instruments
69,398
57,151
Customers’ liability under acceptances
1,081
711
Premises and equipment
6,140
6,252
Goodwill
16,619
16,797
Intangible assets
5,015
4,758
Current tax assets
2,181
1,970
Deferred tax assets
2,602
2,732
Receivable from brokers, dealers and clients
45,203
43,167
Other
40,354
42,884
188,593
176,422
Total Assets
$
1,458,132
$
1,476,802
Liabilities and Equity
Deposits (Note 4)
$
954,789
$
976,202
Other Liabilities
Derivative instruments
65,392
58,729
Acceptances
1,081
711
Securities sold but not yet purchased
47,409
54,876
Securities lent or sold under repurchase agreements
132,280
134,967
Securitization and structured entities’ liabilities
56,809
51,562
Insurance-related liabilities (Note 5)
21,204
20,436
Payable to brokers, dealers and clients
43,335
45,170
Other
41,670
37,549
409,180
404,000
Subordinated Debt (Note 4)
8,412
8,500
Total Liabilities
1,372,381
1,388,702
Equity
Preferred shares and other equity instruments (Note 6)
7,706
8,956
Common shares (Note 6)
23,708
23,359
Contributed surplus
379
373
Retained earnings
47,718
47,377
Accumulated other comprehensive income
6,194
7,986
Total shareholders’ equity
85,705
88,051
Non-controlling interest in subsidiaries
46
49
Total Equity
85,751
88,100
Total Liabilities and Equity
$
1,458,132
$
1,476,802
The accompanying notes are an integral part of these interim consolidated financial statements.
42 BMO Financial Group First Quarter Report 2026
Interim Consolidated Financial Statements
Consolidated Statement of Changes in Equity
(Unaudited) (Canadian $ in millions)
For the three months ended
January 31,
January 31,
2026
2025
Preferred Shares and Other Equity Instruments (Note 6)
Balance at beginning of period
$
8,956
$
8,087
Redeemed during the period
(1,250)
(300)
Balance at end of period
7,706
7,787
Common Shares (Note 6)
Balance at beginning of period
23,359
23,921
Issued under the Stock Option Plan
75
49
Treasury shares purchased
(8)
(7)
Purchased for cancellation
(199)
(40)
Issued for acquisition (Note 13)
481
–
Balance at end of period
23,708
23,923
Contributed Surplus
Balance at beginning of period
373
354
Stock option expense, net of options exercised
7
8
Net premium (discount) on sale of treasury shares
(1)
1
Balance at end of period
379
363
Retained Earnings
Balance at beginning of period
47,377
46,469
Net income attributable to bank shareholders
2,490
2,134
Dividends on preferred shares and distributions payable on other equity instruments
(81)
(65)
Dividends on common shares
(1,179)
(1,159)
Common shares purchased for cancellation (Note 6)
(889)
(136)
Balance at end of period
47,718
47,243
Accumulated Other Comprehensive Income (Loss) on Fair Value through OCI Securities, net of taxes
Balance at beginning of period
(89)
(321)
Unrealized gains on fair value through OCI debt securities arising during the period
203
120
Unrealized (losses) on fair value through OCI equity securities arising during the period
(3)
(11)
Reclassification to earnings of (gains) during the period
(11)
(6)
Balance at end of period
100
(218)
Accumulated Other Comprehensive Income (Loss) on Cash Flow Hedges, net of taxes
Balance at beginning of period
527
(1,519)
Gains (losses) on derivatives designated as cash flow hedges arising during the period
(569)
375
Reclassification to earnings of losses on derivatives designated as cash flow hedges during the period
173
341
Balance at end of period
131
(803)
Accumulated Other Comprehensive Income on Translation of Net Foreign Operations, net of taxes
Balance at beginning of period
6,778
6,381
Unrealized gains (losses) on translation of net foreign operations
(1,931)
2,612
Unrealized gains (losses) on hedges of net foreign operations
532
(541)
Balance at end of period
5,379
8,452
Accumulated Other Comprehensive Income on Pension and Other Employee Future Benefit Plans, net of taxes
Balance at beginning of period
1,011
874
Gains on remeasurement of pension and other employee future benefit plans
56
22
Balance at end of period
1,067
896
Accumulated Other Comprehensive (Loss) on Own Credit Risk on Financial Liabilities Designated at Fair Value, net of taxes
Balance at beginning of period
(241)
4
(Losses) on remeasurement of own credit risk on financial liabilities designated at fair value
(242)
(88)
Balance at end of period
(483)
(84)
Total Accumulated Other Comprehensive Income
6,194
8,243
Total Shareholders’ Equity
85,705
87,559
Non-Controlling Interest in Subsidiaries
Balance at beginning of period
49
36
Net income (loss) attributable to non-controlling interest in subsidiaries
(1)
4
Other
(2)
1
Balance at end of period
46
41
Total Equity
$
85,751
$
87,600
The accompanying notes are an integral part of these interim consolidated financial statements.
BMO Financial Group First Quarter Report 2026 43
Interim Consolidated Financial Statements
Consolidated Statement of Cash Flows
(Unaudited) (Canadian $ in millions)
For the three months ended
January 31,
January 31,
2026
2025
Cash Flows Provided by Operating Activities
Net Income
$
2,489
$
2,138
Adjustments to determine net cash flows provided by operating activities:
Securities (gains), other than trading (Note 2)
(85)
(58)
Depreciation of premises and equipment
251
253
Depreciation of other assets
2
4
Amortization of intangible assets
294
288
Provision for credit losses (Note 3)
746
1,011
Deferred taxes
16
171
Share of (profit) in associates and joint ventures
(41)
(49)
Changes in operating assets and liabilities:
Trading securities
(8,295)
(8,092)
Derivative assets
(12,497)
(8,302)
Derivative liabilities
8,140
8,383
Current income taxes
(218)
24
Accrued interest receivable and payable
(315)
(249)
Insurance-related liabilities
768
771
Brokers, dealers and clients receivable and payable
(3,866)
683
Other items and accruals, net
3,086
(9,171)
Deposits
(5,534)
(9,042)
Loans
(824)
1,306
Securities sold but not yet purchased
(6,473)
8,058
Securities lent or sold under repurchase agreements
490
8,260
Securities borrowed or purchased under resale agreements
17,301
2,911
Securitization and structured entities’ liabilities
6,365
5,574
Net Cash Provided by Operating Activities
1,800
4,872
Cash Flows (Used in) Financing Activities
Net increase (decrease) in liabilities of subsidiaries
3,054
(994)
Repayment of subordinated debt (Note 4)
(25)
–
Redemption of preferred shares (Note 6)
(1,250)
(300)
Net proceeds from issuance of common shares (Note 6)
68
44
Net purchase of treasury shares
(9)
(7)
Common shares repurchased for cancellation (Note 6)
(1,068)
(173)
Cash dividends and distributions paid
(1,318)
(1,283)
Repayment of lease liabilities
(79)
(60)
Net Cash (Used in) Financing Activities
(627)
(2,773)
Cash Flows Provided by Investing Activities
Interest bearing deposits with banks
(114)
452
Purchases of securities, other than trading
(13,563)
(18,556)
Maturities of securities, other than trading
4,988
16,700
Proceeds from sales of securities, other than trading
9,419
9,127
Net purchases of premises and equipment and software
(384)
(386)
Acquisition (Note 13) (1)
(48)
–
Net Cash Provided by Investing Activities
298
7,337
Effect of Exchange Rate Changes on Cash and Cash Equivalents
(1,577)
1,926
Net increase (decrease) in Cash and Cash Equivalents
(106)
11,362
Cash and Cash Equivalents at Beginning of Period
67,484
65,098
Cash and Cash Equivalents at End of Period (2)
$
67,378
$
76,460
Supplemental Disclosure of Cash Flow Information
Net cash provided by operating activities includes:
Interest paid in the period (3)
$
9,826
$
11,677
Income taxes paid in the period
883
480
Interest received in the period
14,667
16,113
Dividends received in the period
583
726
(1) This amount is net of $13 million cash and cash equivalents acquired as part of the acquisition of Burgundy Asset Management Ltd. (Burgundy) for the three months ended January 31, 2026.
(2) We are required to maintain reserves or minimum balances with certain central banks, regulatory bodies and counterparties, totalling $87 million as at January 31, 2026 ($108 million as at October 31, 2025).
(3) Includes dividends paid on securities sold but not yet purchased.
The accompanying notes are an integral part of these interim consolidated financial statements.
44 BMO Financial Group First Quarter Report 2026
Notes to Interim Consolidated Financial Statements
January 31, 2026 (Unaudited)
Note 1: Basis of Presentation
Bank of Montreal (the bank or BMO) is a chartered bank under theBank Act (Canada)and is a public company incorporated in Canada. We are a highly diversified financial services company, providing a broad range of personal and commercial banking, wealth management and investment banking products and services. The bank’s head office is at 129 rue Saint Jacques, Montreal, Quebec. Our executive offices are at 100 King Street West, 1 First Canadian Place, Toronto, Ontario. Our common shares are listed on the Toronto Stock Exchange (TSX) and the New York Stock Exchange.
These condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard (IAS) 34,Interim Financial Reporting as issued by the International Accounting Standards Board (IASB) using the same accounting policies as disclosed in our annual consolidated financial statements for the year ended October 31, 2025, except as outlined below. These condensed interim consolidated financial statements should be read in conjunction with the notes to our annual consolidated financial statements for the year ended October 31, 2025. We also comply with interpretations of International Financial Reporting Standards (IFRS) by our regulator, the Office of the Superintendent of Financial Institutions (OSFI). These interim consolidated financial statements were authorized for issue by the Board of Directors on February 25, 2026.
Use of Estimates and Judgments
The preparation of the interim consolidated financial statements requires management to make estimates and judgments that affect the carrying amounts of certain assets and liabilities, certain amounts reported in net income and other related disclosures.
The most significant assets and liabilities for which we must make estimates and judgments include the allowance for credit losses (ACL); financial instruments measured at fair value; pension and other employee future benefits; impairment of securities and investments in associates and joint ventures; income taxes and deferred tax assets; goodwill and intangible assets; insurance contract liabilities; provisions including legal proceedings and severance charges; transfers of financial assets and consolidation of structured entities. We make judgments in assessing the business model for financial assets as well as whether substantially all risks and rewards have been transferred in respect of transfers of financial assets and whether we control structured entities. If actual results were to differ from the estimates, the impact would be recorded in future periods.
The economic outlook is subject to several risks that could lead to a less favourable outcome for the North American economy. The most immediate threat stems from further escalation of U.S. tariffs. Canadian businesses face longer-term risks if renegotiation of the United States-Mexico-Canada Agreement (USMCA) is unsuccessful, as significant tariffs could then apply to more goods exported to the U.S., potentially leading to a recession in Canada. If the USMCA is renegotiated, some tariffs are likely to persist, which could result in slower growth. Other risks include an escalation of the Russia-Ukraine war; heightened tensions between the U.S. and Iran that could destabilize the Middle East; and a potential escalation of the U.S.’s involvement in Venezuela. Elevated equity valuations also pose the risk of a destabilizing correction. Longer term, substantial business spending to develop and adopt AI systems, while providing material support to the economy, presents new challenges for workers and industries, such as software. Although AI has not yet led to significant job losses, it could increasingly affect hiring decisions and drive significant shifts in workforce composition, requiring displaced workers to learn new skills. The impact on our business, results of operations, reputation, financial performance and condition, including the potential for credit, counterparty and mark-to-market losses, our credit ratings and regulatory capital and liquidity ratios, as well as the impacts to our customers and competitors, will depend on future developments, which remain uncertain. By their very nature, the estimates and judgments we make for the purposes of preparing our consolidated financial statements relate to matters that are inherently uncertain. However, we have detailed policies and internal controls in place that are intended to ensure the judgments made in estimating these amounts are well controlled and independently reviewed, and that our policies are consistently applied from period to period. We believe that our estimates of the value of our assets and liabilities are appropriate as at January 31, 2026.
Allowance for Credit Losses
As detailed further in Note 1 of our annual consolidated financial statements for the year ended October 31, 2025, ACL consists of allowances on impaired loans, which represent estimated losses related to impaired loans in the portfolio provided for but not yet written off, and allowances on performing loans, which is our best estimate of impairment in the existing portfolio for loans that have not yet been individually identified as impaired.
The expected credit losses (ECL) model requires the recognition of credit losses generally based on 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.
The determination of a significant increase in credit risk takes into account many different factors and varies by product and risk segment. The bank’s methodology for determining a significant increase in credit risk is based on the change in probability of default between origination, and reporting date, assessed using probability-weighted scenarios as well as certain other criteria, such as 30 days past due and watchlist status. The assessment of a significant increase in credit risk requires experienced credit judgment.
In determining whether there has been a significant increase in credit risk and in calculating the amount of ECL, we must rely on estimates and exercise judgment, based on what we know at the end of the reporting period, regarding matters for which the ultimate outcome is unknown. These judgments include changes in circumstances that may cause future assessments of credit risk to be materially different from current assessments, which could require an increase or a decrease in the ACL. The calculation of ECL includes the explicit incorporation of forecasts of future economic conditions. We have developed models incorporating specific macroeconomic variables that are relevant to each portfolio. Key economic variables for our retail portfolios include our primary operating markets of Canada, the United States and regional markets, where considered significant. Forecasts are developed internally by our Economics group, considering external data and our view of future economic conditions. We exercise experienced credit judgment to incorporate multiple economic forecasts, which are probability-weighted, in the determination of the final ECL. The allowance is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario.
Additional information regarding the ACL is included in Note 3.
BMO Financial Group First Quarter Report 2026 45
Note 2: Securities
Classification of Securities
The following table summarizes the carrying amounts of the bank’s securities by classification:
(Canadian $ in millions)
January 31, 2026
October 31, 2025
Trading securities (1)
$
195,815
$
192,303
Fair value through profit or loss securities (FVTPL)
FVTPL securities mandatorily measured at fair value
7,726
7,818
FVTPL investment securities held by Insurance subsidiaries designated at fair value
14,779
13,536
Total FVTPL securities
22,505
21,354
Fair value through other comprehensive income (FVOCI) securities (2)
110,894
113,209
Amortized cost securities (3)
92,117
96,610
Total
$
421,331
$
423,476
(1)Trading securities include interests of $41,679 million as at January 31, 2026 ($32,048 million as at October 31, 2025) in Collateralized Mortgage Obligations (CMO). We receive CMO in return for our sales of Mortgage Backed Securities (MBS) to certain structured vehicles that we do not consolidate. When we subsequently sell these CMO to third parties, but do not transfer substantially all risks and rewards of ownership to the third-party investor, or we maintain an interest in the sold instrument, we retain these CMO on our Consolidated Balance Sheet. Refer to Note 6 of our annual consolidated financial statements for the year ended October 31, 2025 for further discussion on these vehicles.
(2)As these securities are presented at fair value on the Balance Sheet, ACL of $5 million ($6 million as at October 31, 2025) is included in Accumulated Other Comprehensive Income.
(3)Amounts are net of ACL of $2 million ($4 million as at October 31, 2025).
Amortized Cost Securities
The following table summarizes the carrying value and fair value of amortized cost debt securities:
(Canadian $ in millions)
January 31, 2026
October 31, 2025
Carrying value
Fair value
Carrying value
Fair value
Issued or guaranteed by:
Canadian federal government
$
830
$
829
$
949
$
943
Canadian provincial and municipal governments
6,348
6,416
6,182
6,220
U.S. federal government
41,676
39,003
43,468
40,432
U.S. states, municipalities and agencies
160
162
165
167
Other governments
469
468
525
523
NHA MBS, U.S. agency MBS and CMO (1)
35,540
32,835
37,770
34,838
Corporate debt
7,094
6,914
7,551
7,325
Total
$
92,117
$
86,627
$
96,610
$
90,448
(1)These amounts are either supported by insured mortgages or issued by U.S. agencies and government-sponsored enterprises. NHA refers to the National Housing Act.
The carrying value of securities that are part of fair value hedging relationships are adjusted for related gains (losses) on hedge contracts.
Unrealized Gains and Losses on FVOCI Securities
The following table summarizes the unrealized gains and losses on FVOCI securities:
(Canadian $ in millions)
January 31, 2026
October 31, 2025
Cost or
Gross
Gross
Cost or
Gross
Gross
amortized
unrealized
unrealized
amortized
unrealized
unrealized
cost
gains
losses
Fair value
cost
gains
losses
Fair value
Issued or guaranteed by:
Canadian federal government
$
44,932
$
290
$
(10)
$
45,212
$
44,894
$
443
$
(2)
$
45,335
Canadian provincial and municipal governments
6,932
110
(16)
7,026
5,525
132
(13)
5,644
U.S. federal government
18,399
264
(41)
18,622
20,515
327
(33)
20,809
U.S. states, municipalities and agencies
4,751
73
(53)
4,771
5,622
77
(65)
5,634
Other governments
3,594
23
(3)
3,614
4,039
35
(9)
4,065
NHA MBS, U.S. agency MBS and CMO
27,154
318
(194)
27,278
26,946
291
(222)
27,015
Corporate debt
4,169
25
(12)
4,182
4,491
37
(13)
4,515
Corporate equity
166
23
–
189
165
27
–
192
Total
$
110,097
$
1,126
$
(329)
$
110,894
$
112,197
$
1,369
$
(357)
$
113,209
Unrealized gains (losses) may be offset by related (losses) gains on hedge contracts.
Interest Income on Debt Securities
The following table presents interest income calculated using the effective interest method:
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
FVOCI securities
$
1,045
$
1,097
Amortized cost securities
529
805
Total
$
1,574
$
1,902
46 BMO Financial Group First Quarter Report 2026
Non-Interest Revenue
Net gains and losses from securities, excluding gains and losses on trading securities, have been included in our Consolidated Statement of Income as
follows:
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
FVTPL securities
$
68
$
49
FVOCI securities - net realized gains (1)
14
9
Impairment on FVOCI and amortized cost securities
3
–
Securities gains, other than trading
$
85
$
58
(1)Gains are net of (losses) on hedge contracts.
Interest and dividend income and gains on securities held in our Insurance business are recorded as a component of non-interest revenue, insurance investment results, in our Consolidated Statement of Income as follows:
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
Interest and dividend income
$
146
$
136
Gains (losses) from securities designated at FVTPL (1)
(199)
281
Realized gains from FVOCI securities
1
–
Total interest and dividend income and gains held in our Insurance business
$
(52)
$
417
(1) Gains (losses) on these securities may be offset by certain (losses) gains from changes in insurance-related liabilities.
Note 3: Loans and Allowance for Credit Losses
Allowance for Credit Losses
The ACL recorded in our Consolidated Balance Sheet is maintained at a level we consider adequate to absorb credit-related losses on our loans and other credit instruments. The ACL amounted to $5,753 million as at January 31, 2026 ($5,739 million as at October 31, 2025) of which $5,067 million ($5,050 million as at October 31, 2025) was recorded in loans and $686 million ($689 million as at October 31, 2025) was recorded in other liabilities in our Consolidated Balance Sheet. Changes in gross balances, including originations, maturities, sales, write-offs and repayments in the normal course of operations, impact the ACL.
The following tables show the continuity in the loss allowance by product type for the three months ended January 31, 2026 and January 31, 2025. Transfers represent the amount of ECL that moved between stages during the period, for example, moving from a 12-month (Stage 1) to lifetime (Stage 2) ECL measurement basis. Net remeasurements represent the ECL impact due to transfers between stages, as well as changes in economic forecasts and credit quality. Model changes include the ECL impact of new calculation models or methodologies.
BMO Financial Group First Quarter Report 2026 47
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
Stage 1
Stage 2
Stage 3 (1)
Total
Stage 1
Stage 2
Stage 3 (1)
Total
Loans: Residential mortgages
Balance as at beginning of period
$
56
$
179
$
12
$
247
$
56
$
186
$
19
$
261
Transfer to Stage 1
22
(21)
(1)
–
45
(44)
(1)
–
Transfer to Stage 2
(4)
18
(14)
–
(2)
7
(5)
–
Transfer to Stage 3
–
(14)
14
–
–
(8)
8
–
Net remeasurement of loss allowance
(20)
27
20
27
(42)
51
13
22
Loan originations
3
–
–
3
5
–
–
5
Derecognitions and maturities
(2)
(6)
–
(8)
(1)
(4)
–
(5)
Total PCL (2)
(1)
4
19
22
5
2
15
22
Write-offs (3)
–
–
(2)
(2)
–
–
(1)
(1)
Recoveries of previous write-offs
–
–
3
3
–
–
1
1
Foreign exchange and other
–
(3)
(15)
(18)
1
3
(12)
(8)
Balance as at end of period
$
55
$
180
$
17
$
252
$
62
$
191
$
22
$
275
Loans: Consumer instalment and other personal
Balance as at beginning of period
$
200
$
555
$
160
$
915
$
197
$
471
$
175
$
843
Transfer to Stage 1
84
(81)
(3)
–
73
(67)
(6)
–
Transfer to Stage 2
(17)
27
(10)
–
(13)
25
(12)
–
Transfer to Stage 3
(2)
(47)
49
–
(2)
(42)
44
–
Net remeasurement of loss allowance
(72)
116
134
178
(68)
131
138
201
Loan originations
6
–
–
6
9
–
–
9
Derecognitions and maturities
(4)
(9)
–
(13)
(5)
(9)
–
(14)
Total PCL (2)
(5)
6
170
171
(6)
38
164
196
Write-offs (3)
–
–
(184)
(184)
–
–
(170)
(170)
Recoveries of previous write-offs
–
–
33
33
–
–
28
28
Foreign exchange and other
(2)
(3)
4
(1)
3
5
(14)
(6)
Balance as at end of period
$
193
$
558
$
183
$
934
$
194
$
514
$
183
$
891
Loans: Credit cards
Balance as at beginning of period
$
188
$
603
$
–
$
791
$
233
$
472
$
–
$
705
Transfer to Stage 1
94
(94)
–
–
66
(66)
–
–
Transfer to Stage 2
(17)
17
–
–
(22)
22
–
–
Transfer to Stage 3
(2)
(120)
122
–
(2)
(107)
109
–
Net remeasurement of loss allowance
(63)
201
62
200
(60)
175
79
194
Loan originations
9
–
–
9
15
–
–
15
Derecognitions and maturities
(3)
(12)
–
(15)
(2)
(9)
–
(11)
Total PCL (2)
18
(8)
184
194
(5)
15
188
198
Write-offs (3)
–
–
(208)
(208)
–
–
(223)
(223)
Recoveries of previous write-offs
–
–
42
42
–
–
53
53
Foreign exchange and other
(1)
(2)
(18)
(21)
1
5
(18)
(12)
Balance as at end of period
$
205
$
593
$
–
$
798
$
229
$
492
$
–
$
721
Loans: Business and government
Balance as at beginning of period
$
931
$
1,997
$
858
$
3,786
$
892
$
1,698
$
537
$
3,127
Transfer to Stage 1
114
(110)
(4)
–
159
(143)
(16)
–
Transfer to Stage 2
(71)
97
(26)
–
(111)
149
(38)
–
Transfer to Stage 3
(2)
(86)
88
–
(2)
(138)
140
–
Net remeasurement of loss allowance
(60)
182
308
430
(147)
388
406
647
Loan originations
84
–
–
84
78
–
–
78
Derecognitions and maturities
(37)
(113)
–
(150)
(38)
(85)
–
(123)
Total PCL (2)
28
(30)
366
364
(61)
171
492
602
Write-offs (3)
–
–
(237)
(237)
–
–
(253)
(253)
Recoveries of previous write-offs
–
–
57
57
–
–
61
61
Foreign exchange and other
(26)
(75)
(100)
(201)
29
69
(84)
14
Balance as at end of period
$
933
$
1,892
$
944
$
3,769
$
860
$
1,938
$
753
$
3,551
Total as at end of period
$
1,386
$
3,223
$
1,144
$
5,753
$
1,345
$
3,135
$
958
$
5,438
Comprising: Loans
$
1,107
$
2,871
$
1,089
$
5,067
$
1,093
$
2,825
$
874
$
4,792
Other credit instruments (4)
279
352
55
686
252
310
84
646
(1)Includes changes in the allowance for purchased credit impaired (PCI) loans.
(2)Excludes PCL on other assets of $(5) million for the three months ended January 31, 2026 ($(7) million for the three months ended January 31, 2025).
(3)Generally, we continue to seek recovery on amounts that were written off during the year, unless the loan is sold, we no longer have the right to collect or we have exhausted all reasonable efforts to collect.
(4)Other credit instruments, including off-balance sheet items, are recorded in other liabilities in our Consolidated Balance Sheet.
48 BMO Financial Group First Quarter Report 2026
Credit Risk Exposure
The following table sets out our credit risk exposure for all loans carried at amortized cost, FVOCI or FVTPL as at January 31, 2026 and October 31, 2025. Stage 1 represents performing loans carried with up to a 12-month ECL, Stage 2 represents performing loans carried with a lifetime ECL, and Stage 3 represents loans with a lifetime ECL that are credit impaired.
(Canadian $ in millions)
For the three months ended
January 31, 2026
October 31, 2025
Stage 1
Stage 2
Stage 3 (1)
Total
Stage 1
Stage 2
Stage 3 (1)
Total
Loans: Residential mortgages (2)
Exceptionally low
$
–
$
–
$
–
$
–
$
1
$
–
$
–
$
1
Very low
115,868
1,031
–
116,899
110,299
844
–
111,143
Low
42,607
5,539
–
48,146
50,148
3,051
–
53,199
Medium
4,732
6,747
–
11,479
7,048
6,713
–
13,761
High
239
3,299
–
3,538
240
3,032
–
3,272
Not rated (3)
12,125
953
–
13,078
12,802
952
–
13,754
Impaired
–
–
949
949
–
–
903
903
Gross residential mortgages
175,571
17,569
949
194,089
180,538
14,592
903
196,033
ACL
55
179
17
251
56
178
12
246
Carrying amount
175,516
17,390
932
193,838
180,482
14,414
891
195,787
Loans: Consumer instalment and other personal
Exceptionally low
10,076
1
–
10,077
9,984
1
–
9,985
Very low
39,548
788
–
40,336
21,962
35
–
21,997
Low
7,478
1,812
–
9,290
26,238
2,682
–
28,920
Medium
6,919
5,852
–
12,771
6,991
5,566
–
12,557
High
830
2,533
–
3,363
670
2,164
–
2,834
Not rated (3)
14,253
1,127
–
15,380
14,812
1,009
–
15,821
Impaired
–
–
624
624
–
–
627
627
Gross consumer instalment and other personal
79,104
12,113
624
91,841
80,657
11,457
627
92,741
ACL
174
530
183
887
182
532
160
874
Carrying amount
78,930
11,583
441
90,954
80,475
10,925
467
91,867
Loans: Credit cards (4)
Exceptionally low
1,512
–
–
1,512
1,643
–
–
1,643
Very low
2,014
9
–
2,023
2,129
4
–
2,133
Low
1,757
62
–
1,819
1,846
80
–
1,926
Medium
3,475
993
–
4,468
3,550
1,191
–
4,741
High
777
1,153
–
1,930
592
1,232
–
1,824
Not rated (3)
247
121
–
368
260
122
–
382
Impaired
–
–
–
–
–
–
–
–
Gross credit cards
9,782
2,338
–
12,120
10,020
2,629
–
12,649
ACL
137
526
–
663
125
527
–
652
Carrying amount
9,645
1,812
–
11,457
9,895
2,102
–
11,997
Loans: Business and government (2)(5)
Acceptable
Investment grade
191,811
2,825
–
194,636
188,707
3,873
–
192,580
Sub-investment grade
133,302
22,813
–
156,115
139,069
22,700
–
161,769
Watchlist
119
20,173
–
20,292
123
21,466
–
21,589
Impaired
–
–
5,290
5,290
–
–
5,561
5,561
Gross business and government
325,232
45,811
5,290
376,333
327,899
48,039
5,561
381,499
ACL
741
1,636
889
3,266
756
1,720
802
3,278
Carrying amount
324,491
44,175
4,401
373,067
327,143
46,319
4,759
378,221
Total gross loans and acceptances
589,689
77,831
6,863
674,383
599,114
76,717
7,091
682,922
Total net loans and acceptances
588,582
74,960
5,774
669,316
597,995
73,760
6,117
677,872
Commitments and financial guarantee contracts
Acceptable
Investment grade
205,704
1,298
–
207,002
202,913
1,544
–
204,457
Sub-investment grade
62,564
13,025
–
75,589
65,393
13,733
–
79,126
Watchlist
14
8,157
–
8,171
6
9,086
–
9,092
Impaired
–
–
1,755
1,755
–
–
1,660
1,660
Gross commitments and financial guarantee contracts
268,282
22,480
1,755
292,517
268,312
24,363
1,660
294,335
ACL
279
352
55
686
256
377
56
689
Carrying amount (6) (7)
$
268,003
$
22,128
$
1,700
$
291,831
$
268,056
$
23,986
$
1,604
$
293,646
(1)Includes PCI loans.
(2)Includes $60 million ($79 million as at October 31, 2025) of residential mortgages and $15,125 million ($13,231 million as at October 31, 2025) of business and government loans that are classified and measured at FVTPL, and not subject to ECL.
(3)Includes purchased portfolios and certain cases where an internal risk rating is not assigned. Alternative credit risk assessments, rating methodologies, policies and tools are used to manage credit risk for these portfolios.
(4)Credit card loans are immediately written off when principal or interest payments are 180 days past due, and as a result are not reported as impaired in Stage 3.
(5)Includes customers’ liability under acceptances.
(6)Represents the total contractual amounts of undrawn credit facilities and other off-balance sheet exposures, excluding personal lines of credit and credit cards, which are unconditionally cancellable at our discretion.
(7)Certain commercial borrower commitments are conditional and may include recourse to counterparties.
BMO Financial Group First Quarter Report 2026 49
Loans Past Due Not Impaired
Loans that are past due but not classified as impaired are loans where our customers have failed to make payments when contractually due but for which we expect the full amount of principal and interest payments to be collected. The following table presents loans that are past due but not classified as impaired as at January 31, 2026 and October 31, 2025. Loans for which payment is less than 30 days past due are excluded as they are not generally representative of the borrower’s ability to meet their payment obligations.
(Canadian $ in millions)
January 31, 2026
October 31, 2025
30 to 89 days
90 days or more (1)
Total
30 to 89 days
90 days or more (1)
Total
Residential mortgages
$
837
$
12
$
849
$
854
$
7
$
861
Credit cards, consumer instalment and other personal
700
176
876
661
171
832
Business and government
540
9
549
616
8
624
Total
$
2,077
$
197
$
2,274
$
2,131
$
186
$
2,317
(1) Fully secured loans with amounts over 90 days past due that we have not classified as impaired totalled $12 million as at January 31, 2026 ($7 million as at October 31, 2025).
ECL Sensitivity and Key Economic Variables
The ECL model requires the recognition of credit losses generally based on 12 months of expected losses for performing loans and the recognition of lifetime losses on performing loans that have experienced a significant increase in credit risk since origination.
The allowance for performing loans is sensitive to changes in both economic forecasts and the probability weight assigned to each forecast scenario. Many of the factors have a high degree of interdependency, although there is no single factor to which loan loss allowances as a whole are sensitive.
The upside scenario as at January 31, 2026 assumes a stronger economic environment than the base case forecast, with lower unemployment rates.
As at January 31, 2026, our base case scenario depicts a moderate economic recovery over the medium term as trade policy uncertainty diminishes and interest rates decline further in the U.S. Our base case forecast as at October 31, 2025 broadly depicted a weaker economic environment.
If we assumed a 100% weight on the base case forecast and included the impact of loan migration by restaging, with other assumptions held constant, including the application of experienced credit judgment, the allowance on performing loans would be approximately $2,925 million as at January 31, 2026 ($3,125 million as at October 31, 2025), compared to the reported allowance for performing loans of $4,609 million ($4,709 million as at October 31, 2025).
As at January 31, 2026, our downside scenario involves a sharp contraction in the Canadian and U.S. economies in the near term, followed by a relatively slow recovery. Our severe downside scenario depicts an even deeper contraction in the Canadian and U.S. economies than in the downside scenario. The severe downside scenario as at October 31, 2025 broadly depicted a similar economic environment over the projection period. If we assumed a 100% weight on the severe downside forecast and included the impact of loan migration by restaging, with other assumptions held constant, including the application of experienced credit judgment, the allowance on performing loans would be approximately $7,950 million as at
January 31, 2026 ($7,975 million as at October 31, 2025), compared to the reported allowance for performing loans of $4,609 million ($4,709 million as at October 31, 2025).
Actual results will differ as our portfolio will change through time due to migration, growth, changes in geopolitical risks, risk mitigation actions and other factors. In addition, our allowance will reflect the four economic scenarios used in assessing the allowance, with often unequal weightings attached to each scenario, which can change through time.
The following tables show the key economic variables used to estimate the allowance for performing loans forecast over the next 12 months or lifetime measurement period. The variables as at January 31, 2026 include the impact of tariffs and trade policy uncertainty on the economic outlook. While the values disclosed below are national variables, we use regional variables in the underlying models and consider factors impacting particular industries where appropriate.
As at January 31, 2026
Scenarios
All figures are average annual values
Upside
Base
Downside
Severe downside
First 12
Remaining
First 12
Remaining
First 12
Remaining
First 12
Remaining
months
horizon (1)
months
horizon (1)
months
horizon (1)
months
horizon (1)
Real GDP growth rates (2)
Canada
4.3%
3.0%
1.4%
2.1%
(2.4)%
1.6%
(3.8)%
1.2%
United States
4.8%
2.5%
2.0%
1.9%
(2.2)%
1.5%
(3.3)%
1.3%
Corporate BBB 10-year spread
Canada
1.2%
1.8%
1.8%
2.0%
3.5%
3.0%
4.2%
3.5%
United States
0.8%
1.5%
1.5%
1.9%
3.5%
3.0%
4.6%
3.6%
Unemployment rates
Canada
5.8%
5.3%
6.6%
6.4%
9.4%
9.6%
10.0%
10.5%
United States
3.7%
3.3%
4.7%
4.3%
7.1%
7.5%
7.8%
8.7%
Housing Price Index (2)
Canada (3)
3.2%
5.4%
(1.0)%
3.0%
(11.1)%
(1.3)%
(20.2)%
(5.0)%
United States (4)
4.3%
3.9%
1.2%
2.5%
(11.1)%
(1.1)%
(20.1)%
(4.3)%
(1)The remaining forecast period is two years.
(2)Real gross domestic product (GDP) and housing price index are averages of quarterly year-over-year growth rates.
(3)In Canada, we use the Housing Price Index Benchmark Composite.
(4)In the United States, we use the National Case-Shiller House Price Index.
50 BMO Financial Group First Quarter Report 2026
As at October 31, 2025
Scenarios
All figures are average annual values
Upside
Base
Downside
Severe downside
First 12
Remaining
First 12
Remaining
First 12
Remaining
First 12
Remaining
months
horizon (1)
months
horizon (1)
months
horizon (1)
months
horizon (1)
Real GDP growth rates (2)
Canada
3.6%
2.8%
1.1%
2.1%
(2.7)%
1.6%
(4.0)%
1.2%
United States
4.5%
2.4%
1.7%
1.8%
(2.3)%
1.4%
(3.5)%
1.3%
Corporate BBB 10-year spread
Canada
1.2%
1.8%
1.7%
2.0%
3.4%
3.0%
4.2%
3.5%
United States
0.8%
1.5%
1.5%
1.9%
3.5%
3.0%
4.6%
3.6%
Unemployment rates
Canada
6.0%
5.5%
7.1%
6.4%
9.4%
9.6%
9.9%
10.5%
United States
3.6%
3.1%
4.5%
4.4%
6.8%
7.5%
7.5%
8.4%
Housing Price Index (2)
Canada (3)
3.9%
5.8%
(0.4)%
3.4%
(10.5)%
(0.7)%
(19.4)%
(5.0)%
United States (4)
3.7%
3.9%
0.7%
2.4%
(11.6)%
(1.1)%
(20.0)%
(4.3)%
(1)The remaining forecast period is two years.
(2)Real gross domestic product (GDP) and housing price index are averages of quarterly year-over-year growth rates.
(3)In Canada, we use the Housing Price Index Benchmark Composite.
(4)In the United States, we use the National Case-Shiller House Price Index.
The ECL approach requires the recognition of credit losses generally based on 12 months of expected losses for performing loans (Stage 1) and the recognition of lifetime expected losses for performing loans that have experienced a significant increase in credit risk since origination (Stage 2). Under our current probability-weighted scenarios, if all of our performing loans were in Stage 1, our models would generate an allowance for performing loans of approximately $3,350 million ($3,375 million as at October 31, 2025), compared to the reported allowance for performing loans of
$4,609 million ($4,709 million as at October 31, 2025).
Note 4: Deposits and Subordinated Debt
Deposits
Payable on demand
Non-interest
Payable
Payable on a
(Canadian $ in millions)
Interest bearing
bearing
after notice (1)
fixed date (2) (3)
January 31, 2026
October 31, 2025
Amortized cost deposits by:
Banks (4)
$
4,291
$
2,002
$
1,337
$
19,870
$
27,500
$
27,621
Business and government (5)
82,298
42,382
215,722
231,298
571,700
585,497
Individuals (5)
3,830
38,243
153,647
102,069
297,789
306,922
Total amortized cost deposits
90,419
82,627
370,706
353,237
896,989
920,040
Deposits at FVTPL
–
–
–
57,800
57,800
56,162
Total (6)
$
90,419
$
82,627
$
370,706
$
411,037
$
954,789
$
976,202
Booked in:
Canada
$
76,717
$
72,479
$
170,234
$
291,514
$
610,944
$
620,858
United States
13,549
10,148
197,989
72,206
293,892
305,472
Other countries
153
–
2,483
47,317
49,953
49,872
Total
$
90,419
$
82,627
$
370,706
$
411,037
$
954,789
$
976,202
(1)Includes $44,615 million of non-interest bearing deposits as at January 31, 2026 ($43,766 million as at October 31, 2025).
(2)Includes $63,575 million of senior unsecured debt as at January 31, 2026 subject to the Bank Recapitalization (Bail-In) regime ($62,843 million as at October 31, 2025). The Bail-In regime provides certain statutory powers to the Canada Deposit Insurance Corporation, including the ability to convert specified eligible shares and liabilities into common shares if the bank becomes non-viable.
(3)Deposits totalling $27,258 million as at January 31, 2026 ($27,819 million as at October 31, 2025) can be redeemed early, either fully or partially, by customers without penalty. These are classified as payable on a fixed date, based on their remaining contractual maturities.
(4)Includes regulated and central banks.
(5)The carrying value of deposits that are part of fair value hedging relationships are adjusted for related gains (losses) on hedge contracts.
(6)Includes $487,379 million of deposits denominated in U.S. dollars as at January 31, 2026 ($508,058 million as at October 31, 2025), and $62,680 million of deposits denominated in other foreign currencies ($59,697 million as at October 31, 2025).
The following table presents deposits payable on a fixed date and greater than one hundred thousand dollars:
(Canadian $ in millions)
Canada
United States
Other
Total
As at January 31, 2026
$
242,406
$
64,712
$
47,317
$
354,435
As at October 31, 2025
259,670
69,206
47,386
376,262
The following table presents the maturity schedule for deposits payable on a fixed date greater than one hundred thousand dollars, which are booked in Canada:
(Canadian $ in millions)
Less than 3 months
3 to 6 months
6 to 12 months
Over 12 months
Total
As at January 31, 2026
$
38,290
$
34,993
$
53,699
$
115,424
$
242,406
As at October 31, 2025
51,591
32,105
56,129
119,845
259,670
BMO Financial Group First Quarter Report 2026 51
Subordinated Debt
On December 15, 2025, $25 million of the $150 million Subordinated Debentures Series 20 matured. $25 million will mature December 15 every three years starting 2025 with the final maturity in 2040.
Note 5: Insurance
Insurance Results
Insurance service results in our Consolidated Statement of Income are as follows:
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
Insurance revenue
$
401
$
470
Insurance service expenses
(358)
(351)
Net income (expenses) from reinsurance contracts
26
(28)
Insurance service results
$
69
$
91
Insurance investment results in our Consolidated Statement of Income are as follows:
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
Investment return
$
(58)
$
559
Insurance finance income (expense) from insurance and reinsurance contracts held
118
(473)
Movement in investment contract liabilities
16
(26)
Insurance investment results
$
76
$
60
Insurance Contract Liabilities
Insurance contract liabilities by remaining coverage and incurred claims comprise the following:
(Canadian $ in millions)
For the three months ended January 31, 2026
For the three months ended January 31, 2025
Liabilities for
Liabilities for
Liabilities for
Liabilities for
remaining coverage
incurred claims
Total
remaining coverage
incurred claims
Total
Insurance contract liabilities, beginning of period
$
18,667
$
199
$
18,866
$
17,047
$
201
$
17,248
Insurance service results
(603)
585
(18)
(423)
321
(102)
Net finance expenses from insurance contracts
(108)
–
(108)
531
–
531
Total cash flows
1,493
(596)
897
658
(308)
350
Other changes in the net carrying amount of the insurance contract
(1)
(2)
(3)
1
4
5
Insurance contract liabilities, end of period (1)
$
19,448
$
186
$
19,634
$
17,814
$
218
$
18,032
(1) The liabilities for incurred claims relating to insurance contracts in our creditor and reinsurance business were $98 million as at January 31, 2026 and $116 million as at January 31, 2025.
Contractual service margin (CSM) from contracts issued was $63 million for the three months ended January 31, 2026 ($18 million for the three months ended January 31, 2025). Total CSM for insurance contracts issued and reinsurance contract held was $1,653 million and $345 million, respectively, as at January 31, 2026 ($1,528 million and $312 million, respectively, as at October 31, 2025). Onerous contract losses for the three months ended January 31, 2026 and 2025 were not material.
We use the following rates for discounting fulfilment cash flows for our insurance contract liabilities, which are based on a risk-free yield adjusted for an illiquidity premium that reflects the liquidity characteristics of the liabilities:
Portfolio duration:
January 31, 2026
October 31, 2025
1 year
3.32
%
3.24
%
3 years
3.73
%
3.54
%
5 years
4.11
%
3.89
%
10 years
4.86
%
4.67
%
20 years
5.41
%
5.25
%
30 years
5.24
%
4.99
%
Ultimate
5.00
%
5.00
%
52 BMO Financial Group First Quarter Report 2026
Insurance Risk Management
The table below reflects the estimated immediate impact on, or sensitivity of, income before taxes to certain changes in interest rates, and includes the estimated impact of hedging arrangements and our exposure to equity price risk arising from our investment in equity securities.
(Canadian $ in millions)
For the three months ended
January 31, 2026
January 31, 2025
Interest Rate Sensitivity(1) (2)
50 basis point increase
$
(8)
$
3
50 basis point decrease
6
(3)
Equity Market Sensitivity(3)
10% increase
$
6
$
28
10% decrease
(6)
(29)
(1)Estimated impact on, or sensitivity of, income before taxes to a 50 basis point increase or decrease in interest rates.
(2)Interest rate sensitivities assume a parallel shift in assumed interest rates across the entire yield curve as at the end of the period with no change in the ultimate risk-free rate.
(3)Estimated impact on, or sensitivity of, income before taxes to a 10% increase or decrease in our exposure to equity price risk arising from our investment in equity securities at the reporting date, assuming all other variables remain constant.
Note 6: Equity
Preferred and Common Shares Outstanding and Other Equity Instruments (1)
(Canadian $ in millions, except as noted)
January 31, 2026
October 31, 2025
Number
Dividends declared
Number
Dividends declared
of shares
Amount
per share (2)
of shares
Amount
per share (2)
Convertible into
Preferred Shares – Classified as Equity
Class B – Series 44
16,000,000
$
400
$
0.43
16,000,000
$
400
$
1.70
Class B - Series 45
(3) (4)
Class B – Series 50
500,000
500
–
500,000
500
73.73
Not convertible
(4)
Class B – Series 52
650,000
650
–
650,000
650
70.57
Not convertible
(4)
Preferred Shares – Classified as Equity
$
1,550
$
1,550
Recourse to
Other Equity Instruments
4.800% Additional Tier 1 Capital Notes (AT1 Notes)
$
658
$
658
–
(4) (5) (6)
4.300% Limited Recourse Capital Notes, Series 1 (LRCNs, Series 1) (7)
–
1,250
–
(6)
5.625% Limited Recourse Capital Notes, Series 2 (LRCNs, Series 2)
750
750
Preferred Shares Series 49
(4) (6) (8)
7.325% Limited Recourse Capital Notes, Series 3 (LRCNs, Series 3)
1,000
1,000
Preferred Shares Series 51
(4) (6) (8)
7.700% Limited Recourse Capital Notes, Series 4 (LRCNs, Series 4)
1,356
1,356
Preferred Shares Series 53
(4) (6) (8)
7.300% Limited Recourse Capital Notes, Series 5 (LRCNs, Series 5)
1,023
1,023
Preferred Shares Series 54
(4) (6) (8)
6.875% Limited Recourse Capital Notes, Series 6 (LRCNs, Series 6)
1,369
1,369
Preferred Shares Series 55
(4) (6) (8)
Other Equity Instruments
6,156
7,406
Preferred Shares and Other Equity Instruments
7,706
8,956
Common Shares
706,195,754
$
23,708
$
1.67
708,905,679
$
23,359
$
6.44
(9) (10) (11) (12)
(1)For additional information refer to Notes 16 and 20 of our annual consolidated financial statements for the year ended October 31, 2025.
(2)Represents year-to-date dividends declared per share as at reporting date. Non-cumulative dividends on preferred shares are payable quarterly as and when declared by the Board of Directors, except for Class B – Series 50 and 52 preferred share dividends, which are payable semi-annually.
(3)If converted, the holders have the option to convert back to the original preferred shares on subsequent redemption dates, subject to certain conditions.
(4)The instruments issued include a NVCC provision, which is necessary for the preferred shares, AT1 Notes and by virtue of the recourse to the Preferred Shares Series 49, Preferred Shares Series 51, Preferred Shares Series 53, Preferred Shares Series 54 and Preferred Shares Series 55 (collectively, the LRCN Preferred Shares) for LRCNs, Series 2, Series 3, Series 4, Series 5 and Series 6 (collectively, the LRCNs), respectively, to qualify as regulatory capital under Basel III. As such, they are convertible into a variable number of our common shares if OSFI announces that the bank is, or is about to become, non-viable or if a federal or provincial government in Canada publicly announces that the bank has accepted or agreed to accept a capital injection, or equivalent support, to avoid non-viability. In such an event, each preferred share, including the LRCN Preferred Shares and AT1 Notes, is convertible into common shares pursuant to an automatic conversion formula and a conversion price based on the greater of: (i) a floor price of $5.00 and (ii) the current market price of our common shares based on the volume weighted average trading price of our common shares on the TSX. The number of common shares issued is determined by dividing the value of the preferred share or other equity instrument, including declared and unpaid dividends, by the conversion price and then applying the multiplier.
(5)The notes had an initial interest rate of 4.800% and reset on August 25, 2024 to 6.709%.
(6)The rates represent the annual interest rate percentage applicable to the notes issued as at the reporting date.
(7)On November 12, 2025, we redeemed the $1,250 million 4.300% Limited Recourse Capital Notes, Series 1 (NVCC) and the corresponding $1,250 million Preferred Shares Series 48.
(8)Non-deferrable interest is payable semi-annually on the LRCNs, Series 2 and Series 3, and quarterly on the LRCNs, Series 4, Series 5 and Series 6 at the bank’s discretion. Non-payment of interest will result in a recourse event, with the noteholders’ sole remedy being the holders’ proportionate share of trust assets, which comprises the LRCN Preferred Shares, each series of which is issued concurrently with the corresponding LRCNs and are eliminated on consolidation. In such an event, the delivery of the trust assets will represent the full and complete extinguishment of our obligations under the LRCNs. In circumstances where the LRCN Preferred Shares are converted into common shares of the bank under the NVCC provision, the LRCNs would be redeemed and the noteholders’ sole remedy would be their proportionate share of trust assets, which would then comprise common shares of the bank received by the trust on conversion.
(9)The stock options issued under the Stock Option Plan are convertible into 5,854,625 common shares as at January 31, 2026 (5,699,134 common shares as at October 31, 2025) of which 2,706,330 are exercisable as at January 31, 2026 (2,245,942 as at October 31, 2025).
(10) During the three months ended January 31, 2026, we issued 608,909 common shares under the Stock Option Plan (474,410 common shares during the three months ended January 31, 2025).
(11) Common shares are net of 42,560 treasury shares as at January 31, 2026 (nil treasury shares as at October 31, 2025).
(12) As part of the acquisition of Burgundy on November 1, 2025, we issued 2,723,726 common shares with an aggregate value of $481 million to shareholders of Burgundy. Refer to Note 13 for more
information.
BMO Financial Group First Quarter Report 2026 53
Other Equity Instruments
The AT1 Notes and existing LRCNs are compound financial instruments that have both equity and liability features. On the date of issuance, we assigned an insignificant value to the liability components of both instruments and, as a result, the full amount of proceeds has been classified as equity and forms part of our additional Tier 1 Capital. Distributions on the AT1 Notes and LRCNs are recognized as a reduction in equity when payable. The AT1 Notes and LRCNs are subordinate to the claims of the depositors and certain other creditors in right of payment.
Common Shares
We have a normal course issuer bid (NCIB) to purchase up to 30 million of our common shares for cancellation which commenced on September 5, 2025 and ending no later than September 4, 2026. The timing and amount of purchases under the NCIB are determined by management, based on factors such as market conditions and capital levels. During the three months ended January 31, 2026, we purchased for cancellation 6 million common shares under the NCIB, at an average price of $178.05 per share for a total amount of $1,088 million, including tax. The bank has purchased a total of 11.8 million common shares for cancellation under the NCIB as at January 31, 2026.
Shareholder Dividend Reinvestment and Share Purchase Plan
Until further notice, common shares under the Shareholder Dividend Reinvestment and Share Purchase Plan will be purchased on the open market without a discount.
Note 7: Fair Value Measurements
Fair Value of Financial Instruments Not Carried at Fair Value on the Balance Sheet
Set out in the following table are the amounts that would be reported if all financial instruments not currently carried at fair value were reported at their fair values. Refer to Note 17 of our annual consolidated financial statements for the year ended October 31, 2025 for further discussion on the determination of fair value.
(Canadian $ in millions)
January 31, 2026
October 31, 2025
Carrying value
Fair value
Carrying value
Fair value
Securities (1)
Amortized cost
$
92,117
$
86,627
$
96,610
$
90,448
Loans (1) (2)
Residential mortgages
193,778
193,615
195,708
194,755
Consumer instalment and other personal
90,954
91,119
91,867
91,937
Credit cards
11,457
11,457
11,997
11,997
Business and government
356,859
357,436
364,265
364,866
653,048
653,627
663,837
663,555
Deposits(3)
896,989
897,722
920,040
920,927
Securitization and structured entities' liabilities(4)
17,952
17,760
20,211
20,100
Other liabilities (5)
3,045
2,915
3,103
2,953
Subordinated debt
8,412
8,680
8,500
8,756
This table excludes financial instruments with a carrying value approximating fair value, such as cash and cash equivalents, interest bearing deposits with banks, securities borrowed or purchased under resale agreements, certain other assets, certain other liabilities and securities lent or sold under repurchase agreements.
(1)Carrying value is net of ACL.
(2)Excludes $60 million of residential mortgages classified as FVTPL, $15,125 million of business and government loans classified as FVTPL and $2 million of business and government loans classified as FVOCI
($79 million, $13,231 million and $14 million, respectively, as at October 31, 2025).
(3)Excludes $50,471 million of structured note liabilities, $604 million of money market deposits, $2,125 million of embedded options related to structured deposits carried at amortized cost and $4,600 million of metals deposits measured at fair value ($49,093 million, $1,129 million, $1,967 million and $3,973 million, respectively, as at October 31, 2025).
(4)Excludes $38,857 million of securitization and structured entities’ liabilities classified as FVTPL ($31,351 million as at October 31, 2025).
(5)Other liabilities include certain investment contract liabilities in our insurance business measured at amortized cost, as well as certain other liabilities of subsidiaries.
Fair Value Hierarchy
We use a fair value hierarchy to categorize assets and liabilities carried at fair value according to the inputs we use in valuation techniques to measure fair value.
Valuation Techniques and Significant Inputs
We determine the fair value of assets and liabilities using quoted prices in active markets (Level 1) when these are available. When quoted prices in active markets are not available, we determine the fair value of financial assets and liabilities using models such as discounted cash flows with observable market data for inputs, such as yields or broker quotes and other third-party vendor quotes (Level 2). Fair value may also be determined using models where significant market inputs are not observable due to inactive markets or minimal market activity (Level 3). We maximize the use of observable market inputs to the extent possible.
Our Level 2 trading securities are primarily valued using discounted cash flow models with observable spreads or broker quotes. The fair value of Level 2 FVOCI securities is determined using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry standard models and observable market information.
54 BMO Financial Group First Quarter Report 2026
The extent of our use of actively quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and models using one or more significant unobservable inputs (Level 3) in the valuation of securities, loans classified as FVTPL and FVOCI, other assets, fair value liabilities, derivative assets and derivative liabilities is presented in the following table:
(Canadian $ in millions)
January 31, 2026
October 31, 2025
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Trading Securities
Issued or guaranteed by:
Canadian federal government
$
1,214
$
9,181
$
–
$
10,395
$
757
$
11,554
$
–
$
12,311
Canadian provincial and municipal governments
–
10,457
–
10,457
–
9,035
–
9,035
U.S. federal government
3,003
26,056
–
29,059
3,308
27,594
–
30,902
U.S. states, municipalities and agencies
–
244
–
244
–
1,144
–
1,144
Other governments
226
3,174
–
3,400
199
3,927
–
4,126
NHA MBS, and U.S. agency MBS and CMO
–
65,978
–
65,978
–
56,450
–
56,450
Corporate debt
–
14,028
–
14,028
–
11,614
–
11,614
Trading loans
–
3,907
–
3,907
–
4,568
–
4,568
Corporate equity
57,598
749
–
58,347
61,495
658
–
62,153
62,041
133,774
–
195,815
65,759
126,544
–
192,303
FVTPL Securities
Issued or guaranteed by:
Canadian federal government
103
1,766
–
1,869
56
1,563
–
1,619
Canadian provincial and municipal governments
–
2,125
–
2,125
–
1,578
–
1,578
U.S. federal government
–
1,583
–
1,583
–
1,495
–
1,495
NHA MBS, and U.S. agency MBS and CMO
–
18
–
18
–
18
–
18
Corporate debt
–
8,988
–
8,988
–
8,908
–
8,908
Corporate equity
1,381
923
5,618
7,922
1,090
822
5,824
7,736
1,484
15,403
5,618
22,505
1,146
14,384
5,824
21,354
FVOCI Securities
Issued or guaranteed by:
Canadian federal government
230
44,982
–
45,212
1,158
44,177
–
45,335
Canadian provincial and municipal governments
–
7,026
–
7,026
–
5,644
–
5,644
U.S. federal government
7
18,615
–
18,622
16
20,793
–
20,809
U.S. states, municipalities and agencies
–
4,771
–
4,771
–
5,634
–
5,634
Other governments
19
3,595
–
3,614
37
4,028
–
4,065
NHA MBS, and U.S. agency MBS and CMO
–
27,278
–
27,278
–
27,015
–
27,015
Corporate debt
–
4,182
–
4,182
–
4,515
–
4,515
Corporate equity
–
–
189
189
–
–
192
192
256
110,449
189
110,894
1,211
111,806
192
113,209
Loans
Residential mortgages
–
60
–
60
–
79
–
79
Business and government loans
–
14,788
339
15,127
–
12,921
324
13,245
–
14,848
339
15,187
–
13,000
324
13,324
Other Assets (1)
7,618
–
1,505
9,123
8,521
–
1,483
10,004
Fair Value Liabilities (2)
Deposits (3)
–
57,800
–
57,800
–
56,162
–
56,162
Securities sold but not yet purchased
14,150
33,259
–
47,409
14,998
39,878
–
54,876
Other liabilities (4)
2,200
39,583
128
41,911
2,142
32,096
–
34,238
16,350
130,642
128
147,120
17,140
128,136
–
145,276
Derivative Assets
Interest rate contracts
21
9,735
–
9,756
15
8,666
–
8,681
Foreign exchange contracts
962
34,631
–
35,593
43
30,474
2
30,519
Commodity contracts
3,421
3,469
–
6,890
225
1,224
13
1,462
Equity contracts
56
17,072
8
17,136
275
16,203
10
16,488
Credit default swaps
6
17
–
23
–
1
–
1
4,466
64,924
8
69,398
558
56,568
25
57,151
Derivative Liabilities
Interest rate contracts
16
9,806
–
9,822
18
10,081
–
10,099
Foreign exchange contracts
–
28,693
13
28,706
–
26,049
–
26,049
Commodity contracts
359
3,925
14
4,298
196
1,412
–
1,608
Equity contracts
71
22,476
–
22,547
175
20,793
5
20,973
Credit default swaps
2
17
–
19
–
–
–
–
448
64,917
27
65,392
389
58,335
5
58,729
(1)Other assets include precious metals, segregated fund assets and investment properties in our insurance business, carbon credits, certain receivables and other items measured at fair value.
(2)Interest expense for liabilities carried at fair value is $871 million for the three months ended January 31, 2026 ($720 million for the three months ended January 31, 2025). Interest expense for liabilities carried at amortized cost is $8,649 million for the three months ended January 31, 2026 ($10,505 million for the three months ended January 31, 2025).
(3)Deposits include structured note liabilities, money market and metals deposits designated at FVTPL and certain embedded options related to structured deposits carried at amortized cost.
(4)Other liabilities include certain investment contract liabilities and segregated fund liabilities in our insurance business, certain securitization and structured entities’ liabilities measured at FVTPL, as well as the contingent consideration liability from the acquisition of Burgundy Asset Management Ltd. Refer to Note 13 for more information.
BMO Financial Group First Quarter Report 2026 55
Quantitative Information about Level 3 Fair Value Measurements
The table below presents the fair values of our significant Level 3 financial instruments measured at fair value on a recurring basis, the valuation techniques used to determine their fair values and the value ranges of significant unobservable inputs used in the valuations. We have not applied any other reasonably possible alternative assumptions to the significant Level 3 categories of private equity investments, as the net asset values are provided by the investment or fund managers.
(Canadian $ in millions, except as noted)
January 31, 2026
Reporting line in fair
Significant
Range of input values (1)
value hierarchy table
Fair value of assets
Valuation techniques
unobservable inputs
Low
High
Private equity
Corporate equity
$
5,807
Net asset value
Net asset value
na
na
EV/EBITDA
Multiple
6
28
Investment properties
Other assets
1,380
Income approach
Capitalization rate
6
%
7
%
Burgundy contingent consideration (2)
Other liabilities
128
Income approach
Discount rate
na
na
Forecasted assets under management
na
na
(1)The low and high input values represent the lowest and highest actual level of inputs used to value a group of financial instruments in a particular product category. These input ranges do not reflect the level of input uncertainty, but are affected by the specific underlying instruments within each product category. The input ranges will therefore vary from period to period based on the characteristics of the underlying instruments held at each balance sheet date.
(2)Range of inputs not applicable as the value is modeled using a Monte Carlo simulation.
na - not applicable
Significant Transfers
Our policy is to record transfers of assets and liabilities between fair value hierarchy levels at their fair values as at the end of each reporting period, consistent with the date of the determination of fair value. Transfers between Level 1 and Level 2 are dependent on the recency of issuance and availability of quoted market prices in the active market. There were no significant transfers between Level 1 and Level 2 during the three months ended January 31, 2026 and 2025.
Changes in Level 3 Fair Value Measurements
The tables below present a reconciliation of all changes in Level 3 financial instruments for the three months ended January 31, 2026 and
2025, including realized and unrealized gains (losses) included in earnings and other comprehensive income as well as transfers into and out of Level 3. Transfers from Level 2 into Level 3 were due to an increase in unobservable market inputs used in pricing the securities. Transfers out of Level 3 into Level 2 were due to an increase in observable market inputs used in pricing the securities.
56 BMO Financial Group First Quarter Report 2026
Change in fair value
Movements
Transfers
Change in
unrealized gains
Included
(losses) recorded
Fair Value
in other
Transfers
Transfers
Fair Value
in income
For the three months ended January 31, 2026
as at October 31,
Included in
comprehensive
Issuances/
Maturities/
into
out of
as at January 31,
for instruments
(Canadian $ in millions)
2025
earnings
income (1)
Purchases
Sales
Settlement
Level 3
Level 3
2026
still held (2)
Trading Securities
Corporate equity
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
$
–
Total trading securities
–
–
–
–
–
–
–
–
–
–
FVTPL Securities
Corporate debt
–
–
–
–
–
–
–
–
–
–
Corporate equity
5,824
(112)
(74)
276
(292)
–
–
(4)
5,618
(58)
Total FVTPL securities
5,824
(112)
(74)
276
(292)
–
–
(4)
5,618
(58)
FVOCI Securities
Corporate equity
192
–
(4)
1
–
–
–
–
189
na
Total FVOCI securities
192
–
(4)
1
–
–
–
–
189
na
Business and Government Loans
324
2
(10)
23
–
–
–
–
339
2
Other Assets
1,483
15
(2)
27
(10)
(8)
–
–
1,505
15
Derivative Assets
Foreign exchange contracts
2
(2)
–
–
–
–
–
–
–
(2)
Commodity contracts
13
(13)
–
–
–
–
–
–
–
(13)
Equity contracts
10
–
–
–
–
–
1
(3)
8
–
Total derivative assets
25
(15)
–
–
–
–
1
(3)
8
(15)
Other Liabilities
–
16
–
112
–
–
–
–
128
16
Derivative Liabilities
Foreign exchange contracts
–
13
–
–
–
–
–
–
13
13
Commodity contracts
–
14
–
–
–
–
–
–
14
14
Equity contracts
5
–
–
–
–
–
–
(5)
–
–
Credit default swaps
–
–
–
–
–
–
–
–
–
–
Total derivative liabilities
5
27
–
–
–
–
–
(5)
27
27
Change in fair value
Movements
Transfers
Change in
unrealized gains
Included
(losses) recorded
Fair Value
in other
Transfers
Transfers
Fair Value
in income
For the three months ended January 31, 2025
as at October 31,
Included in
comprehensive
Issuances/
Maturities/
into
out of
as at January 31,
for instruments
(Canadian $ in millions)
2024
earnings
income (1)
Purchases
Sales
Settlement
Level 3
Level 3
2025
still held (2)
Trading Securities
Corporate equity
$
4
$
–
$
–
$
2
$
–
$
–
$
–
$
–
$
6
$
–
Total trading securities
4
–
–
2
–
–
–
–
6
–
FVTPL Securities
Corporate debt
35
(1)
–
1
–
–
–
(2)
33
(1)
Corporate equity
4,899
24
89
272
(82)
–
–
–
5,202
84
Total FVTPL securities
4,934
23
89
273
(82)
–
–
(2)
5,235
83
FVOCI Securities
Corporate equity
177
–
(15)
1
–
–
–
–
163
na
Total FVOCI securities
177
–
(15)
1
–
–
–
–
163
na
Business and Government Loans
302
13
6
6
–
(6)
–
–
321
13
Other Assets
1,717
(55)
–
194
–
(15)
–
–
1,841
(51)
Derivative Assets
Foreign exchange contracts
10
–
–
32
–
–
–
–
42
–
Commodity contracts
2
3
–
–
–
–
–
–
5
3
Equity contracts
–
–
–
–
–
–
13
–
13
–
Total derivative assets
12
3
–
32
–
–
13
–
60
3
Other Liabilities
–
–
–
–
–
–
–
–
–
–
Derivative Liabilities
Foreign exchange contracts
–
–
–
–
–
–
–
–
–
–
Commodity contracts
4
(4)
–
–
–
–
–
–
–
(4)
Equity contracts
2
–
–
–
–
–
–
–
2
–
Credit default swaps
1
–
–
–
–
–
–
–
1
–
Total derivative liabilities
7
(4)
–
–
–
–
–
–
3
(4)
(1) Foreign exchange translation on assets and liabilities held by foreign operations is included in other comprehensive income, net foreign operations.
(2) Changes in unrealized gains (losses) on Trading and FVTPL securities still held on January 31, 2026 and January 31, 2025 are included in earnings for the period.
Unrealized gains (losses) recognized on Level 3 financial instruments may be offset by (losses) gains on economic hedge contracts.
na – not applicable
BMO Financial Group First Quarter Report 2026 57
Note 8: Capital Management
Our objective is to maintain a strong capital position in a cost-effective structure that is appropriate given our target regulatory capital ratios and our internal assessment of required economic capital; underpins our operating segments’ business strategies and considers the market environment; supports depositor, investor and regulator confidence, while building long-term shareholder value; and is consistent with our target credit ratings.
As at January 31, 2026, we met OSFI’s target capital ratio requirements, which include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Surcharge for Domestic Systemically Important Banks (D-SIBs), a Countercyclical Buffer and a 3.5% Domestic Stability Buffer (DSB) applicable to D-SIBs. On December 18, 2025, OSFI announced that the DSB will remain at 3.5%. Our capital position as at January 31, 2026 is further detailed in the Capital Management section of our interim Management’s Discussion and Analysis.
Regulatory Capital and Total Loss Absorbing Capacity Measures, Risk-Weighted Assets and Leverage Exposures (1)
(Canadian $ in millions, except as noted)
January 31, 2026
October 31, 2025
CET1 Capital
$
57,801
$
58,286
Tier 1 Capital
65,425
65,890
Total Capital
74,890
75,562
TLAC
128,454
129,957
Risk-Weighted Assets
442,058
437,945
Leverage Exposures
1,488,813
1,521,813
CET1 Ratio
13.1
%
13.3
%
Tier 1 Capital Ratio
14.8
%
15.0
%
Total Capital Ratio
16.9
%
17.3
%
TLAC Ratio
29.1
%
29.7
%
Leverage Ratio
4.4
%
4.3
%
TLAC Leverage Ratio
8.6
%
8.5
%
(1)Calculated in accordance with OSFI’s Capital Adequacy Requirements Guideline, Leverage Requirements Guideline and Total Loss Absorbing Capacity (TLAC) Guideline.
Note 9: Employee Compensation
Stock Options
During the three months ended January 31, 2026, we granted a total of 764,400 stock options (716,633 stock options during the three months ended January 31, 2025) with a weighted-average fair value of $32.09 per option ($18.46 per option for the three months ended January 31, 2025).
To determine the fair value of the stock option tranches (i.e. the portion that vests each year) on the grant date, the following ranges of values were used for each option pricing assumption:
For stock options granted during the three months ended
January 31, 2026
January 31, 2025
Expected dividend yield
2.5% - 2.6%
3.6
%
Expected share price volatility
18.5% - 18.6%
16.7
%
Risk-free rate of return
3.0
%
2.8
%
Expected period until exercise (in years)
6.5 - 7.0
6.5 - 7.0
Exercise price ($)
181.30
141.00
Changes to the input assumptions can result in different fair value estimates.
Pension and Other Employee Future Benefit Expenses
Pension and other employee future benefit expenses are determined as follows:
(Canadian $ in millions)
Pension plans
Other employee future benefit plans
For the three months ended
January 31, 2026
January 31, 2025
January 31, 2026
January 31, 2025
Current service cost
$
44
$
44
$
2
$
2
Net interest (income) expense (1)
(14)
(12)
8
9
Impact of plan amendments
–
(19)
–
–
Administrative expenses
2
5
–
–
Benefits expense
32
18
10
11
Government pension plans expense (2)
112
101
–
–
Defined contribution expense
116
109
–
–
Total pension and other employee future benefit expenses
recognized in our Consolidated Statement of Income
$
260
$
228
$
10
$
11
(1) Net interest (income) expense is increased by $nil million for pension benefit plans and $1 million for other employee future benefit plans for the three months ended January 31, 2026 ($nil million for pension benefit plans and $nil million for other employee future benefit plans for the three months ended January 31, 2025) as a result of assets written down through other comprehensive income due to the asset ceiling.
(2) Includes Canada Pension Plan, Quebec Pension Plan and U.S. Federal Insurance Contribution Act.
58 BMO Financial Group First Quarter Report 2026
Note 10: Earnings Per Share
Basic earnings per share is calculated by dividing net income attributable to bank shareholders, after deducting dividends payable on preferred shares and distributions payable on other equity instruments, by the daily average number of fully paid common shares outstanding throughout the period.
Diluted earnings per share is calculated in the same manner, with further adjustments made to reflect the dilutive impact of instruments convertible into our common shares.
The following tables present our basic and diluted earnings per share:
Basic Earnings Per Common Share
(Canadian $ in millions, except as noted)
For the three months ended
January 31, 2026
January 31, 2025
Net income attributable to bank shareholders
$
2,490
$
2,134
Dividends on preferred shares and distributions on other equity instruments
(81)
(65)
Net income available to common shareholders
$
2,409
$
2,069
Weighted-average number of common shares outstanding (in thousands)
708,402
729,564
Basic earnings per common share (Canadian $)
$
3.40
$
2.84
Diluted Earnings Per Common Share
(Canadian $ in millions, except as noted)
For the three months ended
January 31, 2026
January 31, 2025
Net income available to common shareholders
$
2,409
$
2,069
Weighted-average number of common shares outstanding (in thousands)
708,402
729,564
Dilutive impact of stock options (1)
Stock options potentially exercisable
5,306
6,245
Common shares potentially repurchased
(3,542)
(5,119)
Weighted-average number of diluted common shares outstanding (in thousands)
710,166
730,690
Diluted earnings per common share (Canadian $)
$
3.39
$
2.83
(1)The dilutive effect of stock options was calculated using the treasury stock method. In computing diluted earnings per share, we excluded average stock options outstanding of 515,139 with a weighted-average exercise price of $203.51 for the three months ended January 31, 2026 (482,948 with a weighted-average exercise price of $153.89 for the three months ended January 31, 2025), as the average share price for the periods did not exceed the exercise price.
Note 11: Income Taxes
Tax Assessments
Canadian tax authorities have reassessed us for additional income tax and interest in an amount of approximately $1,465 million in respect of certain 2011–2018 Canadian corporate dividends. These reassessments denied certain dividend deductions on the basis that the dividends were received as part of a “dividend rental arrangement”. In general, the tax rules raised by the Canadian tax authorities were prospectively addressed in the 2015 and 2018 Canadian federal budgets. We filed Notices of Appeal with the Tax Court of Canada and the matter is in litigation. We remain of the view that our tax filing positions were appropriate and intend to challenge all reassessments. However, if such challenges are unsuccessful, the additional expense would negatively impact our net income.
BMO Financial Group First Quarter Report 2026 59
Note 12: Operating Segmentation
Operating Segments
We conduct our business through four operating segments, each of which has a distinct mandate. Our operating segments are Canadian Personal and Commercial Banking (Canadian P&C), U.S. Banking, Wealth Management and Capital Markets, along with a Corporate Services unit.
For additional information refer to Note 25 of our annual consolidated financial statements for the year ended October 31, 2025.
Our results and average assets, grouped by operating segment, are as follows:
(Canadian $ in millions)
Canadian
Wealth
Capital
Corporate
For the three months ended January 31, 2026
P&C
U.S. Banking (1)
Management
Markets (1)
Services (1) (2)
Total
Net interest income
$
2,523
$
2,267
$
290
$
700
$
(137)
$
5,643
Non-interest revenue
735
629
1,210
1,512
95
4,181
Total Revenue
3,258
2,896
1,500
2,212
(42)
9,824
Provision for credit losses on impaired loans
497
202
2
29
9
739
Provision for (recovery of) credit losses on performing loans
18
17
(4)
(21)
(3)
7
Total provision for credit losses
515
219
(2)
8
6
746
Depreciation and amortization
173
230
63
81
–
547
Non-interest expense
1,264
1,504
967
1,243
228
5,206
Income (loss) before taxes and non-controlling interest in subsidiaries
1,306
943
472
880
(276)
3,325
Provision for (recovery of) income taxes
358
201
120
223
(66)
836
Reported net income (loss)
$
948
$
742
$
352
$
657
$
(210)
$
2,489
Non-controlling interest in subsidiaries
$
–
$
(2)
$
–
$
–
$
1
$
(1)
Net income (loss) attributable to bank shareholders
$
948
$
744
$
352
$
657
$
(211)
$
2,490
Average assets (3)
$
346,381
$
244,203
$
56,164
$
593,769
$
271,824
$
1,512,341
Canadian
Wealth
Capital
Corporate
For the three months ended January 31, 2025
P&C
U.S. Banking (1)
Management
Markets (1)
Services (1) (2)
Total
Net interest income
$
2,385
$
2,322
$
238
$
699
$
(246)
$
5,398
Non-interest revenue
658
642
1,082
1,374
112
3,868
Total Revenue
3,043
2,964
1,320
2,073
(134)
9,266
Provision for credit losses on impaired loans
491
312
1
35
20
859
Provision for (recovery of) credit losses on performing loans
51
102
(1)
11
(11)
152
Total provision for (recovery of) credit losses
542
414
–
46
9
1,011
Depreciation and amortization
153
252
55
85
–
545
Non-interest expense
1,140
1,500
828
1,166
248
4,882
Income (loss) before taxes and non-controlling interest in subsidiaries
1,208
798
437
776
(391)
2,828
Provision for (recovery of) income taxes
331
163
109
187
(100)
690
Reported net income (loss)
$
877
$
635
$
328
$
589
$
(291)
$
2,138
Non-controlling interest in subsidiaries
$
–
$
–
$
–
$
–
$
4
$
4
Net income (loss) attributable to bank shareholders
$
877
$
635
$
328
$
589
$
(295)
$
2,134
Average assets (3)
$
341,485
$
265,677
$
52,550
$
578,952
$
282,850
$
1,521,514
(1) Operating segments report on a taxable equivalent basis (teb). Net interest income, revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent before-tax basis to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the groups’ teb adjustments is reflected in Corporate Services net interest income, revenue and provision for income taxes.
(2) Corporate Services includes Technology and Operations.
(3) Included within average assets are average earning assets, which comprise deposits with other banks, deposits at central banks, securities borrowed or purchased under resale agreements, loans and securities. Total average earning assets for the three months ended January 31, 2026 are $1,334,388 million, including $344,866 million for Canadian P&C, $224,843 million for U.S. Banking, and $764,679 million for all other operating segments including Corporate Services (for the three months ended January 31, 2025 - Total: $1,319,541 million, Canadian P&C: $339,325 million, U.S. Banking: $243,645 million and all other operating segments: $736,571 million).
Certain comparative figures have been reclassified to conform with the current period’s presentation.
Note 13: Acquisition
Burgundy Asset Management Ltd.
On November 1, 2025, we completed the acquisition of Burgundy Asset Management Ltd., a leading independent wealth manager in Canada, providing discretionary investment management for private clients, foundations, endowments, pensions and family offices. Burgundy operates as a wholly-owned subsidiary of BMO. The purchase price of $654 million comprised $61 million in cash, $481 million in shares of a wholly-owned subsidiary of BMO that were exchanged into BMO common shares on close, and $112 million of contingent consideration payable in similarly exchangeable shares. The $112 million of contingent consideration represents the fair value of a holdback to be paid subject to Burgundy maintaining certain assets under management 18 months post-close and the fair value of a potential earn-out, payable in the future based on the achievement of certain growth targets. The acquisition was accounted for as a business combination, and the acquired business and corresponding goodwill are included in our Wealth Management reporting segment.
As part of this acquisition, we acquired customer relationship intangible assets valued at $375 million and goodwill of $319 million. Customer relationship intangible assets will be amortized over 12 years. Goodwill primarily reflects the expected future economic benefits from expanding our wealth advice and private investment counsel offering and is not deductible for tax purposes.
60 BMO Financial Group First Quarter Report 2026
The fair values of the assets acquired and liabilities assumed at the date of acquisition are as follows:
(Canadian $ in millions)
November 1, 2025
Customer relationship intangible assets
$
375
Other assets
89
Total assets
464
Deferred tax liabilities
99
Other liabilities
30
Total liabilities
129
Goodwill
319
Purchase price
$
654
The purchase price allocation for Burgundy is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.
Contingent consideration is remeasured at fair value each reporting period. During the quarter, the fair value of contingent consideration was remeasured to $128 million and the resulting $16 million increase was recorded as a reduction in non-interest revenue, other revenues. Changes in the fair value of the contingent consideration are not recognized for tax purposes.