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Credit-ratings agency S&P Global Ratings has boosted the Bank of Montreal’s creditworthiness, citing good loan diversification and lower credit losses compared with its peers.

On Tuesday, the ratings agency raised BMO’s standalone creditworthiness, a measure that looks at the bank’s fundamentals without factoring in the likelihood of government support, to A from A-.

“We believe BMO is well-positioned vis-à-vis its peers to navigate potential headwinds associated with highly leveraged Canadian consumers and the recent slowdown in Canadian housing, given its focus on commercial lending and lower–than-peers' exposure to Canadian consumer loans," the ratings agency wrote.

However, S&P also lowered BMO’s government support uplift, a rating it uses to describe the odds that the government will step in in the unlikely event of a failure, to one notch, from two notches previously.

Overall, that leaves BMO’s senior unsecured debt rating unchanged at A+.

CIBC is now the only big Canadian bank with a two-notch rating for government support, according to a note by Vivek Selot, an analyst at Royal Bank of Canada’s capital markets division.

However, Mr. Selot says in his note that he expects the ratings agency to bring CIBC’s government support uplift down to one notch as well.

The ratings agencies have made a number of changes in their methodology for Canadian banks recently to address Ottawa’s new “bail-in” regulations. The new rules are aimed at avoiding the use of taxpayer dollars to bail out financial institutions in the event that they fail.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 17/05/24 4:00pm EDT.

SymbolName% changeLast
BMO-T
Bank of Montreal
+0.79%129.63
BMO-N
Bank of Montreal
+0.82%95.22

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