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Truck market weakness yet to show up in BMO quarterly transportation data

Major lender to trucking industry sees slight uptick in write-offs but reduced allowances for bad loans

Third-quarter data from the transportation group at BMO, the former Bank of Montreal, showed little deterioration in the financial performance of its thousands of clients.

BMO’s transportation group is believed to have about 90% of its roughly CA$13.5 billion ($10.37 billion) book of business in the trucking sector. Despite its Canadian base, it is a large lender in the U.S. Its third quarter ended July 31.

The bank’s quarterly report breaks out the performance of its various sectors, providing a detailed look at the lending finances in BMO’s transportation business, which at a minimum has 10,000 customers. The bank has not provided more detailed estimates on the number of customers, but it is known to be an active lender to small fleets and independent owner-operators. 

One key measure of lending health, allowances for credit losses, improved at BMO’s transportation group in the quarter. It fell to CA$8 million from CA$12 million. 

The third-quarter figure is the lowest level of credit losses for BMO’s transportation group since a CA$7 million figure in the first quarter of 2017. But the size of the company’s book of business in transportation then was CA$10.2 million, so as a percentage of the book, the latest quarter is smaller. 

The transportation sector’s CA$13.54 billion bank of business at BMO in the third quarter was down slightly from CA$13.6 billion in the second quarter.

The decline in allowances for credit losses in the transportation group was somewhat unique for the quarter. Overall, business loans at BMO saw allowances of CA$380 million in the quarter, down from CA$407 million in the prior quarter. But the oil and gas sector saw its allowances decline CA$22 million, accounting for much of the overall decline. Throw in the CA$4 million in transportation and it shows that allowances in many other sectors increased during the three months.

Write-offs in the transportation sector doubled from the prior quarter. But they were only CA$1million in the second quarter, and at CA$2 million in the third quarter were tied for the second lowest in the history of the BMO data, which goes back to the first quarter of 2016. That was just after BMO bought the business from GE Capital.

Gross impaired loans, another sign of fiscal health, declined to CA$72 million, down from CA$76 million. That set a new record low at BMO for that category of financial weakness, with CA$73 million in the first quarter of BMO ownership the only lower figure, albeit on a smaller bank of business. 

Net impaired loans were CA$64 million, a figure that is reached by taking gross impaired loans and subtracting allowances. That figure was unchanged from the second quarter and was down CA$1 million from the first quarter. Net impaired loans just prior to the pandemic, in the first quarter of 2020, which ended Jan. 31, were CA$131 million in the transportation sector.

More articles by John Kingston

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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.