Deteriorating credit conditions in trucking may have reached their low point.
Quarterly data released by Canadian bank BMO, a major lender to the trucking industry, showed improved numbers for some of the key data on the financing extended to the transportation sector, about 90% of which is believed to be financing of trucking activities at the former Bank of Montreal (NYSE: BMO).
The category of gross impaired loans and acceptances, which is a measure of all the loans that a bank has determined are unlikely to be repaid in full, fell to CA$410 million ($288.5 million) in fiscal year 2025’s first quarter ended Jan. 31. (All other figures are in Canadian dollars.)
That number peaked at $464 million in the fourth quarter of fiscal 2024 and came in at $424 million and $305 million in the two prior quarters, respectively.
In the fourth quarter of fiscal 2021, in the midst of the great post-pandemic trucking market, gross impaired loans and acceptances totaled about $13 million.
Other key numbers as measured by the size of allowances and provisions taken by BMO were improved in Q1 2025 compared to the fourth quarter of fiscal 2024. As Fincyclopedia has described them, both allowances and provisions are “at times used to state the same meaning: a management’s estimate of a certain probability that may adversely impact the value of its assets, whether based on historical data (as is the case with an allowance) or a future prediction (as is the case with a provision).” Allowances are charged against a company’s income, and provisions are a charge that shows up in a company’s balance sheet.
Allowances in the transportation group at BMO were $61 million in the first quarter of fiscal 2025. Notably, even though the transportation group at BMO is more heavily weighted toward U.S. trucking, the split in allowances was $40 million for Canadian loans and $21 million for U.S. loans.
Total allowances were down from $68 million in the fourth quarter of 2024. But the improved number for Q1 2025 was still more than the $54 million in the third quarter and the $24 million in the second quarter.
In the first quarter of 2022, at the height of the strong market, transportation sector allowances at BMO were $14 million.
Provisions for credit losses fell to $44 million from $85 million in the fourth quarter of 2024 and $77 million from the quarter before that.
In 2022’s first quarter, provisions were negative $2 million.
Write-offs in the transportation sector also were down, declining to $46 million. They were $63 million one quarter earlier. The write-offs in the first three quarters of fiscal 2024 were, respectively, $31 million, $52 million and $38 million.
There’s no sign of BMO pulling back from the transportation business. The sector’s figure for gross loans and acceptances, which are not affected by the allowances and provisions that result in a net figure for loans and acceptances, rose to its highest since the fourth quarter of 2023. At $14.889 billion, it was the highest number since a $15.617 billion book of business at the end of 2023’s fiscal year.
The geographic split for that book of business in the first quarter was $9.961 billion in the U.S., $4.898 billion for Canada and $30,000 for other countries.
A transcript of the company’s earnings call with analyst Tuesday morning shows no references to the transportation group in the discussion.
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