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No weakness in trucking evident in BMO quarterly data 

Transportation sector write-offs near zero; allowances for future losses decline too

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If there are financing difficulties with independent owner-operators as well as small to midsize fleets, there was no evidence in the quarterly earnings report of Canadian bank BMO.

BMO (TO: BMO) is a major lender to the trucking industry. The precise size of its customer base is not public, but it is believed to be well into five figures and possibly more. 

The data it releases for its transportation group each quarter is seen as a strong indicator of the health of the trucking industry. The base of financial activity contributing to the numbers is far bigger than that of large publicly traded trucking companies that report their earnings each quarter and gets down to the independent owner-operator level.

Write-offs in BMO’s transportation sector in its fiscal second quarter ending April 30 fell about as low as they can go — to CA$1 million (US$780,000). That marked a decline of CA$1 million from the prior month. 

Although there are non-trucking activities in BMO’s transportation sector, trucking is believed to account for roughly 90% of its book of business.

But what’s remarkable is the road it has taken to get down to that CA$1 million figure. In the second quarter of 2020, which was the height of the pandemic, write-offs in BMO’s transportation sector were CA$35 million. They dropped to CA$30 million in the third quarter and have been down or flat every quarter since then, ranging from CA$12 million to the latest CA$1 million.

But write-offs are the end of the process that usually begins with a company’s debts being considered troubled enough that a bank takes an allowance for potential losses.  

In that category, once again, the second-quarter numbers do not reflect a troubled industry. Allowances declined CA$2 million to CA$12 million in the second quarter. Similar to write-offs, allowance numbers have either been down or flat in every quarter since 2020’s third quarter, when they were CA$36 million. They are now a third of that. 

The data reported by BMO also suggests that the bank is not pulling back from the industry. Gross loans and acceptances for transportation came in at CA$13.6 million. That is the highest in recent history, even exceeding the CA$13.4 million recorded in the second quarter of 2020, when many clients pulled down all or part of their revolving credit lines as they faced the uncertainty of the pandemic. Paying back those loans brought the size of the book down to CA$12.2 million in the second quarter of 2021, but it has since rebounded about CA$1.4 million. 

More articles by John Kingston

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One Comment

  1. Ken Plyler

    The truck sectors is not getting any better.As you can see trying to sell trucks at retail is a big mountain to climb.If it was me I would put them in one place and try to retail as hard as possible.

Comments are closed.

John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.