BMO Financial Group Reports Solid Second Quarter Results With Good Earnings Momentum

Strategic Focus On Canadian Personal And Commercial Businesses Paying Off With Strong Financial Performance, Improved Customer Loyalty and Gains in Market Share

Record Earnings in Private Client Group

BMO Capital Markets Results Up From The First Quarter And Exposure To Risk Reduced

Financial Results Highlights:
Second Quarter 2008 Compared with Second Quarter 2007:
•	Net income of $642 million compared with $671 million in 2007 as provisions for credit losses rise from the low levels of a year ago
•	EPS1 of $1.25 compared with $1.29 and cash EPS2 of $1.26 compared with $1.31
•	Strong tier 1 capital ratio, at 9.42% on a Basel II basis
Year-to-Date 2008 Compared with a Year Ago:
•	Net income of $897 million, compared with $1,019 million in 2007
•	EPS of $1.72 compared with $1.96 and cash EPS of $1.75 compared with $1.99

1 All Earnings per Share (EPS) measures in this document refer to diluted EPS unless specified otherwise.

2 The adjustments that change results under generally accepted accounting principles (GAAP) to cash results are outlined in the Non-GAAP Measures section in the Financial Performance Review, where all non-GAAP measures and their closest GAAP counterparts are outlined.

Toronto, May 27, 2008 – BMO Financial Group reported solid second quarter results, with good earnings in many of our businesses and the benefit from risk reduction activities in our capital markets business and disciplined credit risk management. For the second quarter ended April 30, 2008, BMO Financial Group reported net income of $642 million or $1.25 per share.

P&C Canada, our Canadian personal and commercial banking unit, had strong results and one of its best quarters ever, improving significantly from the first quarter and year-over-year after adjusting for insurance and investment gains that increased results in the prior year. “Our focus on the customer is building momentum and we are seeing real progress on a number of important customer metrics with improved loyalty scores, a growing customer base and strengthening customer relationships,” said Bill Downe, President and Chief Executive Officer, BMO Financial Group. “Our market share has now improved for 6 consecutive quarters in personal lending while commercial loans market share has improved in 5 of the last 6 quarters.

“Private Client Group delivered record net income. Diversified revenues and active, effective cost management have produced another quarter of very impressive results.

“Results in BMO Capital Markets reflect current market conditions as activity in the investment banking business was slow in the quarter.” In the current quarter, results reflect a net $28 million after-tax recovery related to the capital markets environment, compared with $324 million of after-tax charges in the first quarter. “Our outlook is improving as there are indications that concerns are easing in credit markets as credit spreads are trending towards more normal levels and we are encouraged by these developments,” said Downe. During the quarter, we reversed a portion of the charges recorded on Apex/Sitka Trust in preceding periods in light of the increased likelihood of completing a restructuring. “Subsequent to the quarter end, on May 13, 2008, we completed the restructuring of Apex, preserving asset value and placing it on a solid footing,” announced Mr. Downe. As the restructuring has now been completed, we anticipate recording a further reversal in the third quarter.

“Results in our U.S. personal and commercial banking group were also up from a year ago and the first quarter on a reported basis in a competitive and difficult economic environment. We closed the transactions to acquire the two Wisconsin-based banks during the quarter and we are managing their integration effectively. We’re very pleased with the acquisitions’ contribution to date,” added Mr. Downe.

Operating Segment Overview
P&C Canada
Net income was $331 million, up $4 million or 1.1% from a year ago. Results a year ago included a $26 million insurance gain and a $14 million investment gain that together increased net income by $32 million. Adjusted for these items, net income increased $36 million or 12%.

Revenue rose $11 million and 0.8%, or $51 million and 4.3% adjusted for last year’s insurance and investment gains. On this basis, revenue growth exceeded expense growth by 2.8 percentage points. There was continued strong volume growth across most products. Our focus on high-spread products has led to a favourable mix and resulted in net interest margin improving year-over-year and quarter-over-quarter, despite competitive pressures.

Expenses increased slightly from a year ago and decreased from the first quarter. We are following through on our commitment to manage tactical spending while continuing to invest in strategic initiatives. We continue to invest in the business through the expansion and renovation of our branch network, as well as increasing our mortgage specialist and financial planner workforce. Our customers are reporting an improved customer experience as a result of the strategic initiatives we are focusing on. We expect to continue to defer non-essential initiatives in the current revenue environment.

In personal banking, our loan growth was a strong 18% with market share increasing 81 basis points from the prior year and 7 basis points from the first quarter. We saw growth in our mortgage portfolio again this quarter as new originations outpaced the impact of exiting from the third-party and broker mortgage channels. Personal deposit balances were relatively unchanged from the first quarter, but the number of active chequing account customers is on the rise and the percentage of households retained and the number of products per household are showing positive trends.

In commercial banking, loans grew a strong 11% from the second quarter of 2007 and market share of business lending improved 80 basis points from the prior year and 23 basis points from the first quarter. BMO ranks second in Canadian business banking market share at 19.6% and our objective is to be the market leader.

Cards and payment services revenues increased with growth in transactions and accelerating balance growth.

Subsequent to the end of the quarter, we entered into an agreement to transfer the liability associated with our credit card loyalty rewards program to Loyalty Management Group Canada Inc. (LMGCI), our partner in the AIR MILES Reward Miles program. There will be no gain or loss on the transfer. In addition, we have renegotiated and extended the term of our agreement with LMGCI for the issuance of AIR MILES reward miles. Under the terms of the agreement, we will no longer retain a liability for future AIR MILES reward miles redemptions and as a result will no longer have exposure to changing redemption patterns. We expect negligible change in run-rate costs as a result of the agreement.

P&C U.S.
Net income was US$30 million, up US$5 million or 20% from a year ago on a reported basis. There was volume growth and increased fee income. Net interest margin was down slightly from the first quarter and down from a year ago, limiting revenue growth. Results included a net US$13 million after-tax benefit related to Visa Inc. IPO proceeds less an associated litigation reserve. The benefit was largely offset by continued investment in our business banking capabilities and mortgage origination sales force, the incremental costs of new branches opened in 2007 and a number of small items that negatively impacted expenses in the current quarter. There were also impacts on both revenue and expense of a more difficult credit environment.

Results include one month of revenue and expense of Wisconsin-based Merchants and Manufacturers Bancorporation Inc. and Ozaukee Bank following the successful closing of these transactions in the quarter. The acquisitions added 41 full-service branches to our banking network.

Private Client Group
Net income of $109 million increased $10 million or 10% to record levels in a more difficult operating environment, reflective of diversified revenues and effective management of discretionary expenses.

Revenue fell slightly, but increased adjusted for the impact of the weaker U.S. dollar and a $7 million investment gain in the prior year. On this basis, revenue growth outpaced expense growth by 4.0 percentage points. There were higher deposit balances in brokerage businesses and term investment products, and higher loan and deposit balances in North American Private Banking. Commission revenue decreased in the brokerage businesses as a result of lower transactional revenue including the impact of competitive pricing in the direct brokerage business.

Assets under management and administration have been affected by softer market conditions. However, we are encouraged by term investment products balance growth and the 8 basis points improvement in market share over the prior year. Term deposit market share was stable relative to the prior quarter, increasing by 1 basis point.

The group continues to be recognized for its products and services. Four funds managed by Private Client Group received a 2008 Lipper Award in their categories (BMO Resource Fund, BMO Dividend Fund and Guardian Group Global Technology Fund as well as Phoenix Insight Value Equity Fund, sub-advised by Harris Investment Management).

BMO InvestorLine was recognized as the fastest online brokerage website in Canada by Gomez Canada.

BMO Capital Markets
Net income of $182 million decreased $15 million or 7.5% from a year ago. Results for the quarter reflect current market conditions with a beneficial impact from valuation adjustments of $42 million ($28 million after tax). This gain related to: a net recovery of $26 million ($18 million after tax) in respect of the partial reversal of Apex/Sitka Trust mark-to-market losses less charges on the capital notes in the Links and Parkland SIVs and commercial paper of third-party Canadian conduits affected by the Montreal Accord; a $35 million ($24 million after tax) recovery in respect of trading portfolios affected by credit spreads; and net charges of $19 million ($14 million after tax) related to four smaller items. See the Effects of the Capital Markets Environment section for more details.

Net income a year ago was lowered by $90 million in respect of $171 million of losses in our commodities business net of $33 million of reduced performance-based compensation and income tax. Commodities losses were $18 million ($12 million after tax) in the second quarter of 2008 and $30 million ($20 million after tax) for the year to date.

Revenue rose $34 million or 5.3% to $685 million due to increased trading revenue as the prior year’s results included significant commodities losses. Activity in certain of our investment banking businesses remains slow in the more cautious capital markets environment but there are indications that credit concerns are easing as credit spreads are trending toward more normal levels. Our equity and debt underwriting revenues were down from the strong levels of a year ago but up from the first quarter. The Group continues to review the businesses in Capital Markets with the goal of reducing volatility of results and producing high, stable return on equity.

During the quarter, we announced signing a definitive agreement to acquire Chicago-based Griffin, Kubik, Stephens & Thompson Inc. On closing in early May, BMO became the largest bank-qualified municipal bond dealer in Illinois and sixth-largest in the United States. Municipal bonds are a client-driven business and fit well with our overall business strategy.

BMO Capital Markets was involved in 92 new issues in the quarter including 34 corporate debt deals, 19 government debt deals, five issues of preferred shares and 34 common equity transactions, raising $39.5 billion.

Performance Targets
As indicated at the end of the first quarter, we do not expect to achieve our annual earnings targets. We previously indicated that the specific provision for credit losses of $170 million recorded in the first quarter would be indicative of the quarterly run-rate for the balance of the year. Although specific provisions were lower in the current quarter, we now anticipate that average quarterly specific provisions over the balance of the year will be higher than in the first quarter, given continued deterioration in the credit environment including the U.S. real estate and particularly the residential real estate related sectors.

The above table contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Caution Regarding Forward-Looking Statements
Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the ‘safe harbor’ provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2008 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian and U.S. economies.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; interest rate and currency value fluctuations; changes in monetary policy; the degree of competition in the geographic and business areas in which we operate; changes in laws; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions; critical accounting estimates; operational and infrastructure risks; general political conditions; global capital market activities; the possible effects on our business of war or terrorist activities; disease or illness that impacts on local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors could adversely affect our results. For more information, please see the discussion on pages 28 and 29 of BMO’s 2007 Annual Report, which outlines in detail certain key factors that may affect BMO’s future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statement, whether written or oral, that may be made, from time to time, by the organization or on its behalf. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented and our strategic priorities and objectives, and may not be appropriate for other purposes.

Assumptions about the level of asset sales, expected asset sale prices and risk of default of the underlying assets of the structured investment vehicles were material factors we considered when establishing our expectations of the amount to be drawn under the BMO liquidity facilities provided to the structured investment vehicles discussed in this document. Key assumptions included that assets would continue to be sold with a view to reducing the size of the structured investment vehicles, under various asset price scenarios.

Assumptions about the level of defaults and losses on defaults were material factors we considered when establishing our expectation of the future performance of the transactions that Apex and Sitka Trusts have entered into. Key assumptions included that the level of defaults and losses on defaults would be consistent with historical experience. Material factors which were taken into account when establishing our expectations of the future risk of credit losses in Apex/Sitka Trust as discussed in this document included industry diversification in the portfolio, initial credit quality by portfolio and the first-loss protection incorporated into the structure.

In establishing our expectation that we will reverse a portion of the charges recorded in preceding periods on Apex/Sitka Trust as discussed in this document, we considered the fact that the Trust was restructured on May 13th and assumed that the credit environment would be reasonably consistent with recent experience.

In establishing our expectations regarding the run-rate costs of our credit card loyalty rewards program discussed in this document, we took into account the terms of the agreement that was entered into with Loyalty Management Group Canada Inc. subsequent to the end of the quarter.

Assumptions about the performance of the Canadian and U.S. economies in 2008 and how it will affect our businesses were material factors we considered when setting our strategic priorities and objectives, and when determining our financial targets, including provisions for credit losses and our expectations about achieving those targets and our outlook for our businesses. Key assumptions were that the Canadian economy will expand at a moderate pace in 2008 while the U.S. economy expands modestly, and that inflation will remain low in North America. We also assumed that interest rates in 2008 will decline slightly in Canada and the United States, and that the Canadian dollar will trade at parity to the U.S. dollar at the end of 2008. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies. In the first quarter, we anticipated that there would be weaker economic growth in Canada and that the United States would slip into a mild recession in the first half of 2008. We also updated our views to expect lower interest rates and a somewhat weaker Canadian dollar than when we established our 2008 financial targets. Our views remain unchanged from the first quarter. Tax laws in the countries in which we operate, primarily Canada and the United States, are material factors we consider when determining our sustainable effective tax rate.

Economic Outlook
The Canadian economy is expected to grow in 2008 at its slowest rate in 16 years. Although low interest rates and high commodity prices have supported domestic demand, the weak U.S. economy and strong Canadian dollar will continue to weigh on exports. Housing markets and residential mortgage growth are expected to moderate as past increases in prices have reduced affordability. Consumer spending and personal credit growth will likely moderate from elevated rates of recent years amid slower employment gains. Business investment is also expected to moderate, although the vibrant resource sector should provide ongoing support to business loan growth. Canadian interest rates are projected to decline further but modestly as the Bank of Canada addresses a slowing economy. The Canadian dollar is expected to trade below par with the U.S. dollar this year, as high commodity prices are unlikely to prevent a further deterioration in the trade balance. The resource-based western provinces should continue to outperform Central and Atlantic Canada, as manufacturers face challenging conditions.

The U.S. economy may have slipped into a mild recession in the first half of 2008. The deep correction in housing markets continues, implying further weakness in mortgage demand. Consumer confidence and spending have been depressed by tighter credit standards, lower home values and rising fuel and grocery bills. Personal consumption is expected to slow sharply this year, curbing growth in personal credit. Companies are also scaling back their spending, resulting in slower growth in business credit. Capital markets activity is expected to remain depressed until the stress in credit markets abates. After reducing interest rates 325 basis points since September, the Federal Reserve is at, or near, the end of one of the most aggressive easing cycles on record. Past rate reductions and sizeable personal tax rebates should spur a modest economic recovery in the second half of the year.

This Economic Outlook section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Effects of the Capital Markets Environment on Second Quarter Results
Global wholesale funding markets have improved in recent weeks as reflected by investment grade corporate credit spreads trending lower and Canadian BA/T-Bill and U.S. LIBOR/T-Bill spreads narrowing. Combined with central banks continuing to support orderly market liquidity, we are cautiously optimistic on the improving outlook for our capital markets businesses.

BMO’s results in the second quarter included a net benefit of $42 million ($28 million after tax) in respect of charges/recoveries related to the capital markets environment. The charges/recoveries consist of:

The net benefit of $42 million above was reflected in trading non-interest revenue ($71 million), other revenue ($6 million) and securities gains/losses other than trading (-$35 million).

The effects of significant items affecting comparative period results are discussed on page 28.

Given the uncertainty in the capital markets environment, our investments in ABCP, SIVs, structured finance vehicles, Fairway and mark-to-market investments could experience further valuation gains and losses due to changes in market value.

This Effects of the Capital Markets Environment on Second Quarter Results section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Significant Items
Q2 2008
No amounts have been designated as significant items in the current quarter as the effects of charges related to the credit environment were not large on a net basis. Charges and reductions of prior charges are discussed in the preceding Effects of the Capital Markets Environment on Second Quarter Results section.

The impact of significant items in prior periods is discussed below and further set out in the GAAP and Related Non-GAAP Measures table.

Q2 2007
In the second quarter of 2007, BMO recorded $171 million ($90 million after tax and $0.18 per share) of charges. We recorded commodities trading losses in trading non-interest income of $171 million which, net of a $33 million reduction in performance-based compensation and income taxes, lowered net income in BMO Capital Markets in the second quarter of 2007 by $90 million.

Q1 2008
In the first quarter of 2008, BMO recorded $548 million ($362 million after tax and $0.72 per share) of charges for certain trading activities and valuation adjustments and an increase in the general allowance for credit losses. They included $488 million ($324 million after tax) in BMO Capital Markets in respect of: losses on exiting positions related to monoline insurer ACA Financial Guarantee Corporation ($158 million); trading and structured-credit related positions, preferred shares, third party Canadian conduits and other mark-to-market losses ($177 million); investments in Apex, a structured finance vehicle that BMO sponsored ($130 million); and capital notes in the Links and Parkland SIVs ($23 million). BMO has no further exposure to ACA. Reduced performance-based compensation associated with the charges has not been included in the determination of the impact of significant items.

The $177 million charge above was primarily due to the impact of widening credit spreads on a number of our trading portfolios. The charge was comprised of a number of items, the largest of which was $78 million for counterparty credit risk on our derivatives, with approximately half related to monoline insurers (other than ACA) and similar credit derivative default product companies. The $488 million charge included reductions in trading non-interest revenue ($420 million), investment securities gains ($23 million) and other income ($45 million).

Corporate Services results included a $60 million ($38 million after tax) increase in the general allowance for credit losses to reflect portfolio growth and risk migration.

YTD 2008
Significant items for 2008 include only those items discussed above for Q1 2008.

YTD 2007
Net income for the year-to-date 2007 was reduced by $415 million of significant items. They included $327 million after tax in respect of commodities losses of $680 million net of $120 million of reduced performance-based compensation. They also included the $88 million after-tax impact of a $135 million restructuring charge.

To view the rest of this news release consisting of:

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials
Interested parties are invited to visit our web site at www.bmo.com/investorrelations to review this quarterly news release, presentation materials and a supplementary financial information package online. Copies of these documents are also available at BMO Financial Group’s offices at 100 King Street West, 18th Floor, 1 First Canadian Place, Toronto, Ontario, M5X 1A1.

Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on Tuesday, May 27, 2008 at 3:30 p.m. (EDT). At that time, senior BMO executives will comment on results for the quarter and respond to questions from the investor community. The call may be accessed by telephone at 416-695-9753 (from within Toronto) or 1-888-789-0089 (toll-free outside Toronto). A replay of the conference call can be accessed until Monday, August 25, 2008 by calling 416-695-5800 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering passcode 648302.

A live webcast of the call can be accessed on our web site at www.bmo.com/investorrelations. A replay can be accessed on the site until Monday, August 25, 2008.

Media Relations Contacts
Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1873

Investor Relations Contacts
Viki Lazaris, Senior Vice-President, viki.lazaris@bmo.com, 416-867-6656
Steven Bonin, Director, steven.bonin@bmo.com, 416-867-5452
Krista White, Senior Manager, krista.white@bmo.com, 416-867-7019

Chief Financial Officer
Russel Robertson, Interim Chief Financial Officer
russ.robertson@bmo.com, 416-867-7360

Corporate Secretary
Blair Morrison, Vice-President & Corporate Secretary
corp.secretary@bmo.com, 416-867-6785