BMO Gets Regulatory Approval to Buy Back Up to 25 Million Shares

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Bank of Montreal has cleared the final regulatory hurdles for another major share repurchase program, giving one of Canada’s largest banks considerably more room to return capital to shareholders. BMO said on September 2 that both the Toronto Stock Exchange and the Office of the Superintendent of Financial Institutions had approved its normal course issuer bid to purchase and cancel as many as 25 million common shares.

The authorization arrives shortly after BMO reported a 13.0% Common Equity Tier 1 capital ratio and strong adjusted earnings growth in its fiscal third quarter. It does not mean all 25 million shares will necessarily be purchased. Instead, the approval gives management a year-long framework to buy shares when market conditions, pricing and the bank’s capital position make doing so attractive.

The Two Regulatory Approvals Are Now in Place

BMO’s August announcement originally described the 25-million-share program as an intention because two important approvals were still outstanding. Those conditions have now been satisfied. The bank confirmed on September 2 that both the Toronto Stock Exchange and Canada’s federal banking regulator, the Office of the Superintendent of Financial Institutions, had given their approval for the normal course issuer bid.

That distinction matters for a large regulated bank. Repurchasing stock is not simply a decision about whether management likes the share price. A buyback removes capital from the institution and therefore intersects with regulatory requirements designed to ensure that banks maintain enough financial capacity to absorb losses. The TSX, meanwhile, imposes rules governing how publicly listed companies conduct normal course purchases. Receiving both approvals means BMO can move from announcing its intentions to actually operating the program once its September 8 start date arrives.

BMO Can Repurchase as Many as 25 Million Shares

The headline number is substantial: BMO has permission to buy back and cancel up to 25 million common shares. As of August 31, the bank had 695,092,237 common shares issued and outstanding, meaning the full authorization represents approximately 3.6% of that total. BMO separately reported a public float of 694,808,416 shares, against which the maximum repurchase also works out to roughly 3.6%.

A 3.6% authorization is large enough to make a noticeable difference to the share count without fundamentally changing the bank’s ownership structure. If BMO eventually bought all 25 million shares and there were no offsetting issuances or other changes, the starting share count would fall to roughly 670.1 million. That is only an illustration because shares can also be issued through compensation and other programs. Still, it demonstrates why the authorization is meaningful to investors tracking per-share results.

The New Program Starts September 8

BMO’s new normal course issuer bid is scheduled to begin on September 8, 2026. It can continue until September 7, 2027, although the program could end earlier. That gives management roughly one year in which to decide how aggressively it wants to use the authorization rather than forcing the bank to purchase 25 million shares immediately.

The long window provides valuable flexibility because market conditions can change considerably over twelve months. Bank valuations respond to interest rates, loan growth, credit losses, economic expectations and capital-market conditions, among many other factors. A price that looks attractive to management in one quarter may look less compelling several months later. BMO has therefore created purchasing capacity without committing itself to a fixed timetable. Investors should distinguish between a maximum regulatory authorization and a promise to spend enough money to reach that maximum.

Every Share Bought Under the Program Will Be Cancelled

Shares acquired through the normal course issuer bid are intended to be purchased for cancellation. That separates a true capital-return program from transactions in which a company temporarily acquires shares for another corporate purpose. Once shares are cancelled, they are removed from the outstanding share count rather than continuing to exist as publicly traded shares.

That can influence several per-share measurements. If a company earns the same amount of net income while having fewer shares outstanding, earnings attributable to each remaining share can mathematically increase because the denominator is smaller. The same basic principle applies to other per-share metrics. Repurchases should not, however, automatically be interpreted as creating economic value. The price paid matters. Academic research on share repurchases has repeatedly examined whether buybacks reflect undervaluation, excess cash, capital-structure decisions or other motivations, and the evidence shows that an authorization by itself does not guarantee superior returns.

BMO Is Not Committing to Buy All 25 Million

One of the most important details in BMO’s announcement is that the bank retains discretion over how much of the authorization it actually uses. Management will determine the number of shares purchased, the timing of those transactions and their price while considering factors including market conditions and BMO’s capital adequacy.

That makes the 25-million figure a ceiling rather than a forecast. A company can receive approval for a large normal course issuer bid and ultimately purchase significantly fewer shares if circumstances change. Credit conditions could deteriorate, attractive lending opportunities could emerge, regulatory expectations could shift or BMO’s shares could rise to a valuation at which management prefers other uses of capital. Conversely, favourable earnings and strong capital generation could give the bank more freedom to repurchase shares. The actual buying activity will therefore tell investors more than the size of the authorization alone.

Daily Open-Market Purchases Face a Limit

BMO cannot simply enter the TSX on a normal trading day and purchase millions of shares without restriction. For purposes of the new bid, the bank reported an average daily trading volume of 2,231,845 common shares during the six months ended August 31. Under the applicable TSX calculation, BMO’s normal daily purchase maximum is 557,961 shares, subject to the exchange’s block-purchase exception.

That daily figure is almost exactly one-quarter of the reported average volume, reflecting the TSX framework that generally limits normal course issuer bid purchases to 25% of average daily trading volume for a listed security, apart from specified exceptions. The restriction is designed to prevent an issuer’s own purchases from overwhelming regular trading. For BMO investors, it also means even a determined repurchase effort would normally unfold over time rather than appearing as a single enormous open-market transaction.

Block Purchases Can Provide Additional Flexibility

The daily purchase restriction is not absolute. TSX rules contain a block-purchase exception that can permit an issuer to make a larger transaction under defined circumstances. BMO specifically noted that its daily maximum of 557,961 common shares is subject to this exception, while its broader authorization also permits block purchases where applicable.

The purpose of the exception is practical. Occasionally, a substantial block of shares becomes available naturally in the market, and allowing an issuer to purchase that block can prevent the transaction from causing unnecessary disruption. TSX guidance has historically restricted how the exception may be used, including rules intended to prevent dealers from artificially assembling smaller positions simply to circumvent normal daily limits. For BMO, the mechanism gives management another possible route for executing the program while leaving the broader safeguards governing issuer purchases intact.

BMO Is Setting Up an Automatic Purchase Plan

The bank will establish an automatic securities purchase plan on September 8, the same day the new issuer bid begins. Under that arrangement, BMO Nesbitt Burns Inc. can purchase BMO common shares at certain times according to a predefined set of criteria established for the program.

Automatic plans are especially useful because corporations regularly enter periods when management has access to material information or when internal policies prevent discretionary trading. A predefined plan can allow purchases to continue under previously established parameters rather than requiring a fresh management decision every time shares are acquired. BMO nevertheless made clear that the overall scale, price and timing of its repurchases remain connected to management’s assessment of market conditions and capital adequacy. The automatic mechanism should therefore be understood as an execution tool within the approved program, not evidence that 25 million shares are already scheduled to be purchased.

Purchases Are Not Limited to the Toronto Stock Exchange

Although BMO’s shares trade prominently on the TSX, the authorization gives the bank several possible venues for purchases. The bank said transactions may occur through the TSX, other designated exchanges and alternative Canadian trading systems. Purchases can also be made through other methods permitted by securities regulators.

Those additional methods can include automatic purchase plans, block purchases, private agreements and share repurchase programs conducted under regulatory exemption orders. Such flexibility matters for a stock as heavily traded as BMO because Canadian equity volume is distributed across multiple trading venues rather than occurring exclusively on the primary exchange. The framework gives the bank’s broker several channels through which repurchases may be executed while still requiring compliance with applicable securities and exchange rules. For ordinary investors, the key point remains simpler: BMO has approval to acquire shares through a structured regulatory program rather than an unrestricted buying mandate.

Ordinary Purchases Will Be Made at Market Prices

BMO said common shares repurchased under the newly approved bid will be acquired at the market price at the time of purchase. That means the eventual amount of capital used by the program cannot be determined from the 25-million-share authorization alone because the cost depends heavily on where the stock trades when individual purchases occur.

The difference can become substantial over millions of shares. BMO’s current issuer bid provides an illustration: shares purchased through August 31 were acquired at a volume-weighted average price of approximately C$197.76. In its fiscal third quarter alone, the bank bought 3.8 million shares at an average price of C$239.37. Applying those two historical prices to 25 million shares would produce very different hypothetical expenditures—roughly C$4.94 billion versus nearly C$5.98 billion. Those figures are illustrations, not forecasts, but they show why management’s price discipline will matter.

The Existing 30-Million-Share Program Is Almost Finished

The new authorization follows an even larger normal course issuer bid that began on September 5, 2025. That existing program permitted BMO to purchase up to 30 million common shares and is scheduled to continue only through September 4, 2026. The newly approved 25-million-share bid begins four days later on September 8.

This creates a relatively smooth transition between capital-return programs rather than a long period without repurchase authority. It also demonstrates that buybacks have become a recurring part of BMO’s recent capital-management approach. In its 2025 annual report, the bank disclosed that it had already repurchased 22.2 million common shares during that fiscal year across two separate issuer bids. The new approval therefore extends an established strategy rather than introducing repurchases to BMO’s capital plan for the first time.

BMO Used Nearly 79% of Its Current Authorization

As of August 31, BMO had repurchased 23,667,500 common shares under the 30-million-share program that began in September 2025. That represents approximately 78.9% of the maximum authorization, leaving a little more than 6.3 million shares theoretically available before the existing program expires on September 4.

The figures offer a useful reminder that maximum buyback authorizations are not always fully utilized. Even after almost an entire year, BMO had not reached the 30-million-share ceiling. That history is relevant when considering the newly approved 25-million-share program. Investors should not automatically build forecasts on the assumption that every authorized share disappears. Management has repeatedly emphasized that repurchases depend on market conditions and available capital. Actual activity during the next twelve months will therefore determine whether the new program approaches its maximum or serves primarily as additional financial flexibility.

The Current Program Represents Billions in Repurchases

BMO reported that the 23,667,500 shares purchased under its current issuer bid through August 31 were acquired at a volume-weighted average price of approximately C$197.76. Multiplying those reported figures implies purchases worth roughly C$4.68 billion before considering the precise accounting and tax treatment associated with individual transactions.

That scale puts the new 25-million-share authorization into perspective. Share repurchases at a major Canadian bank can involve several billion dollars of capital rather than being a marginal treasury operation. Every dollar allocated to repurchases is capital that management must weigh against lending growth, acquisitions, technology investment, dividends and the need to preserve a substantial cushion against financial stress. BMO itself describes the new program as providing flexibility to manage its capital position, language that appropriately frames the buyback as one component of a much larger capital-allocation decision.

BMO Was Already Buying Shares Heavily in the Third Quarter

The bank’s fiscal third-quarter results show that repurchases were active even before the new program received approval. During the three months ended July 31, BMO purchased and cancelled 3.8 million common shares under its existing normal course issuer bid at an average price of C$239.37 per share.

At that average price, the quarter’s purchases represent roughly C$910 million of stock, illustrating how quickly repurchases can consume capital when shares trade at higher values. BMO nevertheless maintained its CET1 ratio at 13.0% at quarter-end. The bank specifically said internal capital generation was offset by share purchases and higher source-currency risk-weighted assets, leaving the CET1 ratio unchanged from the second quarter. That relationship highlights the balancing act: profits can replenish capital while repurchases deliberately return part of that capital to shareholders.

Capital Management Is the Stated Reason for the Bid

BMO’s announcement does not frame the buyback as an explicit declaration that its shares are undervalued. Instead, the bank says the normal course issuer bid will provide additional flexibility to manage its capital position. That wording is significant because share repurchases can serve several purposes, and assigning motives beyond what management actually disclosed would risk overstating the announcement.

Research on corporate repurchases has found that companies may use buybacks to distribute excess capital, alter capital structures, support per-share financial measures or signal views about valuation. Academic work also cautions that an authorization alone is not necessarily a reliable signal of undervaluation because managers retain flexibility over whether purchases occur. In BMO’s case, the strongest evidence is therefore the bank’s own explanation: the approved program gives management another instrument for allocating capital as conditions evolve.

BMO Entered the Process With a 13.0% CET1 Ratio

BMO reported a Common Equity Tier 1 ratio of 13.0% as of July 31, unchanged from the previous quarter. CET1 capital is central to banking regulation because it represents the highest-quality form of regulatory capital available to absorb losses while a bank continues operating.

The ratio provides essential context for the buyback approval. Repurchasing common shares reduces common equity and can therefore affect capital ratios, which is why regulators pay close attention to distributions by large banks. BMO said its third-quarter internal capital generation was offset by repurchases and higher source-currency risk-weighted assets. Even after those pressures, the CET1 ratio remained at 13.0%. The new authorization gives management the ability to continue returning capital, but the pace of purchases can be adjusted if the bank’s capital cushion narrows or the economic environment becomes more demanding.

OSFI’s Current Supervisory Expectation Is 11.0%

In June 2026, OSFI lowered the Domestic Stability Buffer applied to Canada’s largest banks from 3.5% to 3.0% of risk-weighted assets. The change reduced the regulator’s stated CET1 supervisory expectation for domestic systemically important banks to 11.0%. BMO’s reported 13.0% CET1 ratio at July 31 was therefore two percentage points above that published expectation.

The comparison should not be interpreted as meaning every point above 11% is freely available for buybacks. Banks maintain their own management buffers, face institution-specific risks and must consider potential changes in risk-weighted assets and earnings. Still, the regulatory backdrop is relevant. OSFI said the June adjustment was intended to provide Canada’s largest banks with greater flexibility to deploy capital while preserving substantial resilience. BMO received approval for its new issuer bid a little more than two months after that change took effect.

BMO Is One of Canada’s Systemically Important Banks

OSFI classifies Bank of Montreal as one of six domestic systemically important banks, alongside Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Canadian Imperial Bank of Commerce and National Bank of Canada. Institutions with that designation face an additional capital surcharge because their size and role make their resilience particularly important to the Canadian financial system.

The designation helps explain why an OSFI approval is a meaningful part of BMO’s repurchase process. Under Canada’s capital framework, banks that move into specified capital conservation ranges can face restrictions on distributions such as dividends and share buybacks. Regulators are therefore concerned not simply with whether a repurchase benefits shareholders but with whether a bank can continue absorbing losses and supporting the economy under adverse conditions. Approval allows BMO to proceed, but ongoing capital strength remains an important constraint on how aggressively the authorization is used.

The Buyback Follows a Strong Adjusted Earnings Quarter

BMO reported adjusted net income of C$2.859 billion for the third quarter of fiscal 2026, up 19% from C$2.399 billion a year earlier. Adjusted diluted earnings per share increased 22% to C$3.96 from C$3.23. Adjusted return on equity rose to 14.0% from 12.0%.

Those numbers provide a more favourable picture of underlying operations than the bank’s headline reported earnings, which were affected by a large divestiture-related charge. Strong earnings generation is relevant to capital returns because retained profits help replenish common equity. CEO Darryl White said BMO was reallocating and deploying capital toward profitable loan growth, technology and artificial-intelligence capabilities while also returning capital through dividends and repurchases. The newly approved issuer bid gives management another year in which to continue balancing those competing uses of earnings and capital.

Reported Earnings Tell a Different Story

On a reported basis, BMO’s fiscal third-quarter net income fell 25% year over year to C$1.75 billion from C$2.33 billion. Diluted earnings per share declined to C$2.38 from C$3.14, while reported return on equity dropped to 8.4% from 11.6%.

The sharp difference between reported and adjusted results largely reflects a significant charge connected with the announced sale of BMO’s Transportation Finance and Vendor Finance businesses. Corporate Services recorded a C$962-million after-tax charge, primarily related to goodwill, from that transaction. Adjusted measures exclude specified items that management argues may obscure underlying operating trends, although BMO also cautions that non-GAAP measures do not have standardized meanings. For investors assessing the buyback, both sets of numbers matter: reported earnings show the accounting impact of strategic changes, while adjusted results provide another view of ongoing earnings capacity.

Credit Costs Improved From a Year Earlier

BMO recorded C$722 million in provisions for credit losses during the third quarter, down from C$797 million in the same period a year earlier. Provisions on impaired loans were C$708 million, while performing-loan provisions were C$14 million. Management attributed the lower impaired-loan provision largely to improvements in Canadian personal and commercial banking and U.S. Banking.

Credit performance is particularly relevant to bank buybacks because unexpected loan losses can quickly absorb earnings and capital. A repurchase program established during relatively favourable credit conditions can be slowed later if economic stress intensifies. BMO’s own forward-looking disclosures list factors including household leverage, the Canadian housing market, interest rates, trade policy and broader economic conditions among risks that can affect future performance. That flexibility is one reason the new issuer bid gives management discretion rather than requiring purchases on a fixed schedule.

Shareholders Are Also Receiving a C$1.71 Quarterly Dividend

The buyback is only one element of BMO’s shareholder distributions. Alongside its third-quarter results, the bank declared a fourth-quarter dividend of C$1.71 per common share. The payment was unchanged from the prior quarter but C$0.08, or approximately 5%, higher than the dividend in the comparable period a year earlier. At the current quarterly rate, the annualized dividend equals C$6.84 per share.

Dividends and repurchases return capital in different ways. A dividend distributes cash directly to shareholders who own the stock on the required dates, whereas a buyback reduces the share count by purchasing stock from shareholders who choose to sell into the market. Maintaining both tools gives BMO additional flexibility. The dividend provides a recurring cash distribution, while repurchases can be accelerated or slowed depending on valuation, earnings generation, capital requirements and market conditions.

Several Core Businesses Were Growing Before the Approval

BMO’s operating results show broad earnings momentum beneath the large corporate charge. Canadian Personal and Commercial Banking reported C$980 million in third-quarter net income, up 16% from a year earlier. U.S. Banking earned C$868 million, an increase of 13%. Wealth Management generated C$408 million, while Capital Markets reported C$645 million, up 46%.

The breadth of those contributions matters because sustainable capital returns are easier to support when profits are being generated across several businesses instead of depending on a single unusually strong division. BMO said every business segment delivered record pre-provision, pre-tax earnings during the quarter. Management also highlighted commercial loan growth in both Canada and the United States. The buyback therefore arrives during a period when the bank is simultaneously returning capital and continuing to deploy funds toward organic growth across its North American franchise.

BMO Remains a Very Large North American Institution

BMO reported total assets of approximately C$1.5 trillion as of July 31, 2026 and describes itself as the eighth-largest bank in North America by assets. Its operations span Canadian and U.S. personal and commercial banking, wealth management, global markets and investment banking, giving the institution a far broader capital agenda than the newly approved share program alone might suggest.

That scale helps put a potential multibillion-dollar repurchase into proportion. BMO must continuously allocate capital among lending, balance-sheet resilience, acquisitions and divestitures, technology, regulatory requirements, dividends and share repurchases. Its recent decisions demonstrate that process in action: the bank has been buying back shares while selling selected businesses and branches, investing in technology and pursuing growth in core banking operations. The 25-million-share authorization adds flexibility to that capital-allocation framework rather than defining it.

Canada’s 2% Share-Repurchase Tax Adds Another Cost

BMO’s future repurchases also operate under a federal tax regime that did not exist for much of the history of Canadian corporate buybacks. Canada applies a 2% tax to the annual net value of equity repurchased by qualifying publicly traded corporations, subject to specified rules and exceptions. The tax applies to repurchases and equity issuances occurring from January 1, 2024 onward.

Importantly, the levy is based on net repurchases, generally taking the fair market value of shares repurchased and reducing it by the fair market value of equity issued from treasury during the taxation year. That means the eventual tax effect cannot be calculated simply by multiplying BMO’s 25-million-share authorization by its stock price. Investors will ultimately need to watch several figures: how many shares BMO actually buys, the prices it pays, capital generation, new share issuance and the bank’s CET1 ratio. Regulatory approval opens the door; execution will determine the financial result.

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