BMO CEO Bill Downe says oil doom overdone, but loan loss provisions will rise

Bank of Montreal chief executive Bill Downe told shareholders Tuesday that the degree of apprehension about markets and also the cost of oil continues to be “disproportionate towards the evidence” as a result of the 24-hour news cycle.

“Real insight needs time to work to emerge in order to be processed and understood. So when details are speeding around the globe in terabits per second, updates every few minutes can become a repetitive blur,” Downe said at the bank’s annual meeting in Toronto.

“To the purveyors of news, or at least some, wrapping each new perspective within the cloak of catastrophe is often the only way to keep our attention.”

Bank of Montreal’s loan-loss provisions are expected to increase from a very low level because of the price of oil and other commodities, but the market price correction “does not imply that an enviable national asset has suddenly become a liability,” Downe said.

“The direct impact on the performance of the bank is going to be moderated by the experience we have within the sector and the relative low concentration in a diversified portfolio, just two per cent in our outstanding loans,” he told shareholders.

Downe said hello is worth noting that economic fundamentals both in Canada and the Usa remain positive, and consumer expenses are strong in many regions because of low interest rates, steady job growth, and cheaper fuel prices.

“We still believe that we’ll experience positive GDP growth of close to two per cent in Canada and above two percent within the U.S.,” he explained.

A report from TD Economics on Tuesday upgraded the outlook for that Canadian economy in 2016 and 2017, driven by a recent pick-up in export growth. However, the forecast upgrades are largely concentrated within the provinces of Quebec, Ontario, Manitoba, and British Columbia that rely more heavily on non-energy manufacturing.

“In contrast, the negative economic hit from low oil prices is now likely to deepen in Alberta, Newfoundland and Labrador, and Saskatchewan,” the report from TD Economics said. “Together, 2015 and 2016 will mark the sharpest economic underperformance of oil dependent economies in accordance with the remainder of Canada because the oil crash from the 1980s.”