The transportation segment at Canada's Bank of Montreal (BMO) has seen a significant improvement in its quarterly earnings, indicating a strengthening trucking market. The bank's first fiscal quarter ended January 31, which accounts for about half of the three-month period, saw a notable increase in trucking rates. This trend is considered a strong indicator of trucking credit health, and BMO's numbers are closely watched by industry analysts. With this improvement, it appears that the worst period of trucking credit deterioration may be coming to an end.
BMO's transportation segment has a client base predominantly oriented towards trucking, making its quarterly numbers a crucial gauge of the industry's credit situation. The bank's earnings report released on Wednesday showed no major changes in various areas, but the data clearly suggests that the worst is behind us. This is a positive sign for the trucking industry, which has been facing challenges in recent years. With BMO's strong quarterly numbers, it appears that improvements are underway.
Gross impaired loans, a measure of all loans deemed at risk of not being repaid in full, declined to CAD 563 million (USD 411 million) from CAD 585 million in the fourth quarter of 2025. This represents a decrease of about 3% compared to the previous quarter. While this number is still higher than the CAD 424 million seen in the third quarter and CAD 503 million in the second, it indicates a gradual improvement in trucking credit health.
The provisions taken by BMO, which are considered more forward-looking, plummeted to CAD 39 million from CAD 57 million in the fourth quarter. This significant decrease suggests that conditions have strengthened enough for the bank to reassess its risk exposure. The total provisions figure for fiscal 2025 was CAD 196 million, a decrease from CAD 424 million in the previous year.
Net writeoffs, where BMO removes loans as an asset from its balance sheet, fell to USD 24 million from USD 43 million in the prior quarter. This represents a decrease of about 44% compared to the previous quarter. The reduction in net writeoffs is a positive sign for trucking credit health, indicating that the industry is becoming more resilient.
However, allowances for credit losses rose to USD 77 million from USD 71 million, which may indicate some concerns still lingering in the market. Allowances are taken against problem loans and impact bank earnings, while provisions are considered more forward-looking. The increase in allowances suggests that BMO is taking a cautious approach to its risk exposure.
The transportation book of business at BMO has continued to decline, with gross loans and acceptances falling to USD 12.42 billion from USD 12.98 billion in the prior quarter. This represents a decrease of about 3% compared to the previous quarter. The size of BMO's book of business in transportation was USD 15.6 billion in the fourth quarter of 2023.
Despite rumors suggesting that BMO might be looking to sell its transportation unit, the bank is still actively engaging with its customers and participating in industry events. BMO has a strong presence at various conferences and often sponsors key industry events, such as the annual meeting of the Truckload Carriers Association. This suggests that the bank remains committed to supporting the trucking industry.
The latest increase in allowances, combined with the reduction in gross loans and acceptances, resulted in a net book of business down to USD 12.34 billion from USD 15.6 billion in the fourth quarter of 2023. While this represents a decline, it suggests that BMO is taking a more conservative approach to its risk exposure. The data from BMO indicates that trucking credit is showing signs of improvement, and further growth may be on the horizon.
The data from BMO suggests that the worst is behind trucking credit, and improvements are on the horizon.
