Bank of Montreal May Decline on Share Sale; Potash May Advance

By John Kipphoff

Dec. 16 (Bloomberg) -- Bank of Montreal may decline, based on bids on the Toronto Stock Exchange, after the lender announced plans to sell $890 million of discounted stock to shore up capital amid the global financial crisis.

Bank of Nova Scotia may also decline, bids showed, on speculation it may sell bonds in the next three months to bolster its financial strength. Also weighing on Canadian banks may be results from Goldman Sachs Group Inc., which reported its first quarterly loss since going public in 1999, as asset values and investment-banking fees declined.

Fertilizer maker Potash Corp. of Saskatchewan Inc. may advance, bids indicated, on an upgrade from Merrill Lynch & Co. Commodity producers may also benefit from higher oil, copper and wheat prices, and speculation that the U.S. Federal Reserve will cut its main interest rate to a record low today and pledge credit to businesses and consumers to boost spending.

The Standard & Poor’s/TSX Composite Index fell 0.6 percent to 8,461.83 yesterday in Toronto. The main Canadian equity benchmark has fallen 39 percent in 2008, poised for its worst- ever annual drop, on slumping commodity prices and global credit losses of almost $1 trillion.

Bank of Montreal may drop C$2.57 to C$30, bids already submitted in Toronto showed. Canada’s fourth-biggest bank plans to sell as much as C$1.1 billion in stock. About 33.3 million shares will be offered at C$30 apiece in a sale expected to close Dec. 24, the Toronto-based bank said.

Scotiabank may decline 75 cents to C$30.25, bids showed. Canada’s third-largest bank by assets has “capacity” to issue about C$800 million ($648.8 million) in notes, adding about 30 basis points to its so-called Tier 1 capital ratio, Merrill Lynch & Co. analyst Sumit Malhotra said yesterday.

Potash rose C$3.85 to C$89.44 in early Canadian trading. The world’s largest crop-nutrient producer was upgraded to “buy” from “underperform” by Merrill Lynch & Co. analyst Steve Byrne, who said, in a note to clients today, that “fertilizer fundamentals are nearing a bottom.”

Byrne, based in New York, left his “underperform” recommendation on Agrium Inc. (AGU CN) unchanged, saying North America’s third-largest fertilizer company faces a “potential large inventory devaluation in its retail business.” Potash rose 3.6 percent to C$85.59. Agrium was shown adding C$1.66 to C$39.50, based on bids.

U.S. stock-index futures and European stocks advanced on speculation about the Fed’s potential moves today.

To contact the reporter on this story: John Kipphoff in Toronto at jkipphoff@bloomberg.net.