Our Performance
Total Shareholder Return (TSR)
- BMO’s average annual five-year TSR of 19.1% improved from 13.8% a year ago and was better than the average return from the financial services industry and the broader market indices.
- BMO’s one-year TSR of 24.1% in 2006 improved our five-year TSR and marks returns of more than 15% in four of the past five years.
Peer Group Comparison
Five-Year TSR (%)
- BMO’s average annual five-year TSR of 19.1% was below the Canadian peer group average of 19.6% but substantially above the North American peer group average of 14.4%.
- Our strong one-year TSR narrowed the gap to the Canadian peer group average and improved our advantage over the North American peer group average.
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Our Performance
Earnings per Share (EPS) Growth
- EPS rose 11.2% to $5.15 in 2006, the fourth consecutive year of record earnings. The increase was driven by business growth, low and stable provisions for credit losses and a lower effective tax rate.
- Excluding changes in the general allowance for credit losses in 2006 and 2005, EPS grew 11.6%, exceeding our 2006 target of 5% to 10% growth on this basis.
Peer Group Comparison
EPS Growth (%)
- BMO’s EPS growth of 11.2% in 2006 improved but was below a Canadian peer group average of 59.2% that was elevated by the impact of litigation provisions in 2005 and a significant gain on the sale of a business in 2006. These same factors contributed to a strong North American peer group average of 21.0%.
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Our Performance
Return on Equity (ROE)
- ROE of 19.2% was up from 18.8% in 2005 and was the second highest in the past 20 years, and above our 2006 target of 17% to 19%. In 2007, we are targeting ROE of 18% to 20%.
- We increased our medium-term target to 18% to 20% ROE from 18% to 19% ROE at the end of 2006.
Peer Group Comparison
ROE (%)
- ROE of 19.2% in 2006 was below the Canadian peer group average of 23.2% but above the North American peer group average of 17.5%.
- BMO has earned ROE of more than 13% in each of the past 17 years, the only major North American bank with this record of earnings consistency.
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Our Performance
Net Economic Profit (NEP) Growth
- NEP, a measure of added economic value, grew 10.3% to a record $1,230 million.
- Results in Private Client Group and Corporate Services drove the improvement, as the other operating groups were allocated higher capital in 2006.
Peer Group Comparison
NEP Growth (%)
- NEP growth of 10.3% in 2006 was below the Canadian peer group average of 92.1% and the North American peer group average of 37.7%. The averages were favourably affected by the 2005 litigation provisions and the 2006 gain on sale of a business.
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Our Performance
Revenue Growth
- Revenue* increased $154 million or 1.5% in 2006, but increased 5.9% excluding the effects of the sale of Harrisdirect and the weaker U.S. dollar. On this basis, revenue in each of our operating groups improved, with most of this improvement reflected in P&C Canada and Private Client Group.
Peer Group Comparison
Revenue Growth (%)
- Revenue growth of 1.5% in 2006 was below the Canadian peer group average of 7.2% and the strong North American peer group average of 8.4%. Excluding the sale of Harrisdirect and the impact of the weaker U.S. dollar, BMO’s revenue growth was 5.9%.
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Our Performance
Expense-to-Revenue Ratio (Productivity Ratio)
- The productivity ratio improved 77 basis points to 62.8% in 2006. The cash productivity ratio improved 25 basis points to 62.4%, following 538 basis points of total improvement in the three previous years. We had targeted an improvement of 100 to 150 basis points in the cash productivity ratio in 2006.
Peer Group Comparison
Expense-to-Revenue Ratio (%)
- BMO’s productivity ratio of 62.8% was worse than the Canadian peer group average of 60.8% and the North American peer group average of 57.3%.
- BMO is targeting to improve the cash productivity ratio by 100–150 bps in 2007.
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Our Performance
Credit Losses
- Provisions for credit losses were low and stable, at $176 million. Specific provisions were $211 million and there was a $35 million reduction in the general allowance, both comparable to a year ago.
- The provision represented 9 basis points of average net loans and acceptances, down from 11 basis points in 2005.
Peer Group Comparison
Provision for Credit Losses as a % of Average Net Loans and Acceptances
- BMO’s provision for credit losses of 0.09% of average net loans and acceptances was better than the Canadian peer group average of 0.17% and the North American peer group average of 0.53%.
- BMO’s credit loss experience has been better than the average of the Canadian peer group in 14 of the past 15 years.
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Our Performance
Impaired Loans
- Gross impaired loans and acceptances were $666 million, compared with $804 million in 2005, and represented 3.8% of equity and allowances for credit losses, down from 4.9% a year ago.
- Formations of new impaired loans and acceptances, a key driver of credit provisions, were $420 million, in line with a year ago, as credit conditions remained favourable.
Peer Group Comparison
Gross Impaired Loans and Acceptances as a % of Equity and Allowances for Credit Losses
- BMO’s ratio of 3.8% was better than the Canadian peer group average of 4.3% but worse than the North American peer group average of 2.6%.
- BMO’s ratio has approximated the Canadian average but has been higher than the North American average in recent years.
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Our Performance
Cash and Securities-to-Total Assets
- The cash and securities-to-total assets ratio was up slightly from a year ago at 27.2%.
- Liquidity remains sound and continues to be supported by broad diversification of deposits.
Peer Group Comparison
Cash and Securities as a % of Total Assets (%)
- BMO’s liquidity ratio of 27.2% was below the Canadian peer group average of 33.5% and the North American peer group average of 31.2%.
- Our liquidity ratio was higher than a year ago and remains at an acceptable level.
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Our Performance
Capital Adequacy
- The Tier 1 Capital Ratio was 10.22%, down slightly from 10.30% last year but above our minimum target of 8.0%.
- The Total Capital Ratio was 11.76%, down slightly from 11.82% in 2005.
- BMO has $3.6 billion of excess capital relative to our targeted minimum Tier 1 Capital Ratio.
Peer Group Comparison
Tier 1 Capital Ratio (%)
- Our Tier 1 Capital Ratio at 10.22% was slightly below the Canadian peer group average of 10.36%.
- On a U.S. regulatory basis, our Tier 1 Capital Ratio was 9.93% and was above the North American peer group average of 8.53%.
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Our Performance
Credit Rating (Standard & Poor’s)
- Our credit rating, as measured by Standard & Poor’s (S&P) senior debt ratings, remained at AA–, matching two competitors and exceeding the rating of the other three major Canadian banks.
- S&P’s ratings outlook on BMO remains stable.
Peer Group Comparison
Credit Rating (Standard & Poor’s)
- BMO’s credit rating of AA–, as measured by S&P’s senior debt ratings, was in the upper half of the Canadian peer group, with two of the banks in our peer group rated as highly as BMO and three rated lower. BMO’s rating was consistent with the median rating of the North American peer group.
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Our Performance
Credit Rating (Moody’s)
- Our credit rating, as measured by Moody’s senior debt ratings, remained at Aa3, slightly below the highest-rated Canadian bank and consistent with the highest-rated of the remaining major Canadian banks.
- Moody’s ratings outlook on BMO remains stable.
Peer Group Comparison
Credit Rating (Moody’s)
- BMO’s credit rating of Aa3, as measured by Moody’s senior debt ratings, was comparable to the median of the Canadian peer group but slightly higher than the North American peer group median.
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