Indianapolis - Circa June 2017: Signage and Logo of BMO Harris Bank. BMO Harris is one of the Largest Banks in the Midwest V

BMO Financial Group’s third-quarter profit took a hit in part from severance costs and rising provisions for bad loans as the bank prepares for an extended stretch of economic strain.

“As we look ahead, we’re all aware of the macro headwinds facing the industry,” said chief executive Darryl White on an analyst call Tuesday.

“These external forces are influencing the environment we’re all operating in, and I believe they could persist for some time to come.”

Those headwinds include high interest rates that are slowing some lending demand and deal-making, heavy competition among Canadian banks on mortgage rates, and wider concerns about a general economic slowdown.

Given the challenges, White said the bank was accelerating its efficiency push and focused on disciplined expense and risk management.

Costs related to layoffs totalled $223 million pre-tax in the quarter, though the bank did not disclose the number of employees let go.

BMO isn’t the only bank cutting back. RBC said in its results last week that it had already cut 1% of its staff, amounting to some 800 positions. RBC expects to cut another 1-2% of staff this year, which could mean upwards of 1,800 more jobs eliminated this year after overhiring by thousands.

The spike in severance costs at BMO will likely be a one-quarter phenomenon, said chief financial officer Tayfun Tuzun on the call.

The bank, however, expects to take a $45-million impairment charge next quarter as it cuts its real estate footprint.

BMO also recorded $83 million in legal provisions this past quarter related to settlements with U.S. regulators. The penalties stemmed from record-keeping violations after employees used personal texts and WhatsApp to communicate with clients.

Despite the charges and headwinds, the bank reported earnings of $1.45 billion or $1.97 per diluted share for the quarter ended July 31, up from $1.37 billion or $1.95 per diluted share a year earlier.

Revenue totalled $7.93 billion, up from $6.10 billion in the same quarter last year, as the bank continues to integrate its US$16.3 billion Bank of the West acquisition.

On an adjusted basis, BMO says it earned $2.78 per diluted share, down from an adjusted profit of $3.09 per diluted share a year earlier.

Analysts on average had expected an adjusted profit of $3.13 per share, based on estimates compiled by financial markets data firm Refinitiv.

The miss was largely driven by severance and legal charges, said Scotiabank analyst Meny Grauman in a note.

The results showed strain in the U.S. banking segment that was most evident on interest-related profit margins, a trend that other banks have also reported this quarter, he said

“The only good news here is that BMO’s U.S. margin pressure is certainly not the worst we have seen this quarter,” said Grauman.

BMO said provisions for credit losses totalled $492 million, up from $136 million in its third quarter last year.

The higher provisions come as concerns increase over the health of consumers under the weight of higher rates, but BMO chief risk officer Piyush Agrawal said mortgage clients are holding up well so far.

“We continue to view the risk from higher rates as modest,” said Agrawal on the call.

“Delinquency rates and losses remain low, and based on data over the last couple of quarters, customers renewing are able to absorb the impact of the higher interest rates.”

BMO’s wealth management operations earned $303 million, down from $324 million a year earlier, while the bank’s capital markets business earned $310 million, up from $262 million in the same quarter last year.

BMO’s Canadian personal and commercial banking business earned $915 million, down from $965 million in the same quarter last year as rising revenue due to higher net interest income and higher non-interest revenue was more than offset by increased expenses and provisions for credit losses.

In the U.S., the bank’s personal and commercial banking business earned $576 million, up from $568 million a year earlier, helped by a stronger U.S. dollar.

The bank’s corporate services division reported a loss of $650 million compared with a loss of $754 million a year earlier.