10:23 AM EDT, 10/03/2025 (MT Newswires) -- Bank of Montreal ( BNKD ) faces limited upside at its current valuation unless the company delivers significant earnings growth and further improves its return on equity, RBC Capital Markets said Friday in a report.

The bank is projected to have the lowest implied return to target among large Canadian lenders through fiscal Q4 2027, suggesting less room to boost core earnings and return on equity through capital levers, the report said.

"We view recent capital optimization activities as in line with its ROE improvement strategy but believe these actions may reduce its balance sheet short term and push out earnings growth," RBC said.

"Positive changes" in the bank's US business may take time, potentially pushing earnings and ROE improvements beyond 2027, the report said.

RBC downgraded Bank of Montreal ( BNKD ) stock to sector perform from outperform and lowered its price target to 163 Canadian dollars ($116.83) from CA$168.

Bank of Montreal's ( BNKD ) shares fell 2.1% in recent Friday trading.

Price: 127.59, Change: -2.69, Percent Change: -2.06