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Bank of Montreal Loses Big on Bet
The Bank of Montreal, Canada’s fourth largest bank, will lose 1/3 of their “pretax profit” this quarter. This is a result of betting on natural gas prices. Gas prices are extremely volatile and as a result will lose approximately $403 million in U.S. dollars.
On April 27, CEO William Downe said “the bank failed to adequately recognize the vulnerability of the portfolio. The biggest trading debacle in Canadian history may wipe out at least a third of Bank of Montreal’s pretax profit for the quarter that ends today, and shows deposit-taking institutions may be unprepared for the kinds of risks that led to record first-quarter profits on Wall Street.
Bank of Montreal said it will record a pretax loss of C$350 million (US 316 million) to C$50 million (US $403 million), or 45 cents to 55 cents a share. The loss will reflect the reduced value of its natural gas options contracts. The company’s stock fell C$1.27 to C$70, the biggest drop in two months, after the announcement.
The complete article can be found at: http://www.resourceinvestor.com/pebble.asp?relid=31344
Pam
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