The rumour mill on the Bank of Montreal issue is reaching a fever pitch.
I am told that several local ATM's have had literal 'runs' on withdrawls due to fears of a possible 'bank holiday' during the week. One ATM I visited was 'closed for maintenance'.
Clearly some are concerned that it might be important to have cash on hand for Monday just in case.
As we have covered in the preceeding two posts, there is speculation on a number of US financial blogs that BMO will be unable to fulfill a fat dividend payment of $1.5 billion. The speculation is that, should this come to pass, it will trigger a massive selling of stock and a cascade of withdrawls from the bank.
This is significant because BMO basically has deposit liabilities of $397 billion and cash assets of $21 billion - not uncommon for a bank but deadly if confidence in the bank was questioned. Let's face it, BMO would have to shut it's doors if 8% of it's customers attempted to withdraw thier money.
Which is why people are paying signficant attention to the claims being made by Dan Amoss. This was posted on Stockgumshoe.com:
"On Monday, August 24th, at noon, Dan Amoss will expose the biggest banking lie of the past 64 years. Given the past 21 months of market action — that’s no small claim. If recent mainstream headlines make you believe that banks have weathered the storm. You better think again. Dan’s caught another major bank he thinks is lying about being able to pay their massive $1.5 billion dividend scheduled for 2009. He believes this bank’s using every shady accounting trick possible to hide losses from their shareholders."
Amoss has also been cited on Pennysleuth.com as saying:
"If you think Canada escaped the downward trend in U.S. banking, think again. While the country may not have plunged headfirst into subprime mortgages, it did dip heavily into risky derivatives. The leverage it took on generated impressive returns on equity in good times, but that same leverage is set to wipe out equity today.
Shareholders in one 'safe' Canadian bank will have to rethink their loyalty. Its looming solvency crisis practically guarantees a dividend cut. And that’s our catalyst for this month’s short play action – offering us a chance for 200% profit potential.
Accounting secrets have not yet obliterated Canadian bank earnings – like those of U.S. banks – because the Canadians have not yet accounted for the coming tsunami of mortgage, consumer loan, and corporate loan losses. Here’s how they loaded those loan books with hidden risk."
These warnings have triggered a virtual frenzy on the internet this weekend. It is possible that this 'buzz' could even trigger a sell-off of BMO stock in the US tomorrow morning?
Quick internet research confirms BMO is under stress. Quarterly results are down a massive $284 million from the same period a year earlier. The money it had to set aside for bad loans has jumped by over $220 million to $372 million.
And since that quarterly report, the situation has worsened.
However the reality is that BMO still earned a pre-tax return of half a billion in the last reporting period. It seems difficult to believe that BMO could actually crumble.
But the stock market is not rational. People are not rational.
And it will be interesting to see what develops overnight and tomorrow prior to Amoss's report at 12:00.
We do live in interesting times.
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