Financial
Results Highlights:
Fourth
Quarter 2009:
- Net income of $647 million, up $87 million or 16% from
a year ago
- EPS1 of $1.11 and cash EPS2 of $1.13, both up $0.05 from
a year ago
- Revenue increased 6.3% and expenses were reduced by 2.2%
from a year ago
- Provision for credit losses of $386 million, down $79
million from a year ago. There was a $150 million increase in the
general allowance last year and no change in the current quarter.
Fiscal
2009:
- Net income of
$1,787 million, compared with $1,978 million a year ago
- EPS of $3.08 compared with $3.76 a year ago and cash EPS of $3.14
compared with $3.83 a year ago
- Income Before Credit Provisions and Income Taxes of $3.7 billion
in fiscal 2009, up from $3.3 billion a year ago
- Provision for credit losses of $1,603 million comprised of specific
provisions of $1,543 million and an increase in the general allowance
of $60 million, compared with a provision for credit losses of $1,330
million a year ago comprised of specific provisions of $1,070 million
and an increase in the general allowance of $260 million
- Adjusted cash EPS2 of $4.02 after excluding certain capital markets
environment charges of $355 million after tax ($0.66 per share),
severance costs of $80 million after tax ($0.15 per share) in the
second quarter and an increase in the general allowance of $39 million
after tax ($0.07 per share) in the third quarter
Toronto,
November 24, 2009 – For the fourth quarter ended October
31, 2009, BMO Financial Group reported net income of $647 million or
$1.11 per common share. Canadian personal and commercial banking reported
strong results with net income of $394 million, up $70 million or 22%
from a year ago.
Today, we announced a first-quarter 2010 dividend of $0.70 per common
share, unchanged from the preceding quarter and reflective of an annual
dividend of $2.80 per common share.
“Defining great customer experience means delivering in ways
that are rooted in customer choice – with consistency at every
interaction. It’s a disciplined approach that, for us, is yielding
results,” said Bill Downe, President and Chief Executive Officer,
BMO Financial Group. “Particularly during this past year, individuals
and businesses needed to know that their banker would be there for
them. BMO stood by its customers, listened, helped them make sense
of the environment as it related to their individual circumstances
and worked with them to make sure they were well-positioned for the
recovery. By doing so, we also attracted new customers looking for
a better banking experience.
“P&C
Canada had another very good quarter, with $394 million of net income,
up 22%
from a year ago. Commercial banking continues
to experience strong growth, with revenue up $55 million or 16%. Our
market share for loans to small and medium-size businesses increased
from the prior year. Our efforts to reach out to customers and help
them save money and choose the best products for them are working.
We have narrowed the gap to the industry leader on both personal and
commercial loyalty scores relative to a year ago.
“BMO Capital
Markets results for the quarter were strong. Although net income
was in line
with a year ago, in 2008 we benefited from significant
income tax recoveries. There were improved corporate banking revenues
and underwriting fees increased. In 2009, we saw very strong revenue
growth, with relatively modest expense growth which reflected focused
cost control. Net income for the year was up 49% to more than $1 billion.
“Private Client Group delivered good revenue growth in its business
lines for the second consecutive quarter, reflective of improved equity
markets and a continued focus on attracting new client assets. Net
income was up strongly from a year ago, when results were affected
by capital markets environment charges, and down somewhat from the
third quarter which benefited from a recovery of prior periods’ taxes.
Our U.S. retail banking franchise saw net income consistent with the
third quarter and up from a year ago. Our focus on new customer acquisitions,
lending and deposit gathering is enhancing our reputation in the U.S.
Midwest as a bank that is here to help.
“Our businesses gained strength over the course of 2009 as we
have achieved strong revenue growth while keeping a firm grip on expenses.
We maintained tight control over staffing levels and supplier costs
while continuing to leverage opportunities for process simplification.
We enter 2010 with strong capital and liquidity and the confidence
of knowing that our consistent approach is turning customers into advocates.
While we expect credit losses to remain elevated into 2010, we believe
that we are well positioned for further growth as the economy improves,” concluded
Mr. Downe. 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 at the end of Management’s Discussion and
Analysis (MD&A), where such non-GAAP measures and their closest
GAAP counterparts are outlined. Adjusted cash EPS is also a non-GAAP
measure; please see details in the Notable Items section and also
the GAAP and Related Non-GAAP Measures section.
Segment Overview
P&C Canada
Net income was a strong $394 million, up $70 million or 22% from
a year ago. Revenue increased across each of our personal, commercial and
cards businesses, led by volume growth across most products and improved
net interest margin. There was particularly strong growth in personal and
commercial deposits. Good revenue growth together with effective management
of operating expenses, while investing for the future, has resulted in
strong cash operating leverage of 8.7%.
Our strategy, of focusing on providing an excellent customer experience
and improving productivity, is working. We have narrowed the
gap to the industry leader on
both personal and commercial loyalty scores relative to a year ago.
In personal
banking, we focus on product offers that are consistent with our
brand promises, such as BMO SmartSteps. Since the
launch of this offer, more
than 100,000 BMO customers have taken advantage of at least one of the steps
we recommend to make more from their hard-earned money. The First Home Essentials
kit, targeted to potential homebuyers and launched in November 2008, proved
very popular and helpful to customers over the course of the past year. We
continue
to focus on expanding and upgrading our branch network in priority markets
and on driving revenue growth and customer loyalty through effective use
of our robust
performance management system. In fiscal 2009, we opened 12 new branches,
redeveloped 20 and closed two. We also closed 93 Instore branches,
responding to our customers’ preference
for the full-service branches offering professional advice and relationship
management capabilities, combined with the convenience of electronic
banking channels.
In commercial banking, our goal is to become the bank of choice
for businesses across Canada. We rank second in Canadian business
market share. We are leveraging
this success to grow revenues by having value-added conversations with
our customers, offering them both business and personal solutions
and delivering
on a complete
customer experience as a trusted advisor that meets all their financial
needs.
In the
cards business, we are the largest MasterCard issuer in Canada. We
have simplified and enhanced our entire suite of
credit card products
by
eliminating
annual fees for 400,000 customers and doubling AIR MILES rewards for
another 1.2 million customers, providing a best in class product
offering for our
customers. We are growing our cards business with prudent credit management
and have a
low credit loss rate relative to our peers.
Today, we announced that we have signed a definitive
agreement to purchase the Diners Club North American franchise from
Citigroup, a
transaction that on completion will more than double BMO’s corporate
card business. The deal gives BMO exclusive rights to issue Diners
Club cards to corporate and professional clients in the United States
and Canada, and will add net receivables of almost US$1 billion. Diners
Club is recognized around the world as a premier card program for employee
Travel & Entertainment expense cards and the North American franchise
also benefits from worldwide MasterCard acceptance. The acquisition
will immediately enhance our competitive position by placing us among
the top commercial card issuers in North America. The transaction,
subject to satisfactory completion of certain closing conditions including
regulatory approval, is anticipated to close before March 31, 2010.
P&C U.S. (all
amounts in U.S. $)
Net income was $23 million, up $12 million from a year ago.
Results benefited from reductions in integration costs and changes in
the Visa litigation accrual. Higher levels of impaired loans and the
costs of managing this portfolio have reduced net income in the quarter
by $12 million (by $9 million a year ago).
Cash net income was $39 million, including a severance charge of
$2.4 million after tax, on a basis that adjusts for the impact
of impaired loans, integration
costs and the Visa litigation accrual. This is in line with the last five quarters
where cash net income on this basis had exceeded $40 million.
Deposits grew $1.5 billion or 7.7%. The deposit increase reflects
our continued commitment to provide the right products and services
for our customers. We
have maintained our number two ranking for retail deposit market share in
our Chicago
area markets while network banks lost market share.
We are maintaining our focus on new customer acquisition in both
the consumer and commercial businesses, while continuing to make
loans and provide deposit
services to our customers and prudently manage expenses. Mortgage originations
have moderated in the quarter but remain strong with some growth in new
home buyer activity. We continue to focus on the customer experience
as reflected
in our sustained high loyalty scores. Our retail net promoter score was
44 for 2009, compared with 42 in 2008, while the average scores
of our large
bank competitors
declined. These efforts have positioned us well as we come out of the current
economic downturn.
Given the economic environment in fiscal 2009 and its impact on our
loan portfolios, we have strengthened our review and monitoring
processes. We
have also added
expertise to our problem loan resolution teams to help our customers
and to ensure effective management of our exposures.
Private
Client Group (PCG)
Net income in the fourth quarter increased $26 million or 32%
from the same quarter a year ago to $110 million. Results a year ago included
charges of $31 million ($19 million) after tax associated with the decision
to purchase certain holdings from our U.S. clients in the difficult market
environment. The BMO Life Assurance acquisition increased net income by
$9 million. Revenues were lower in the brokerage businesses but effective
expense control contributed to improved results.
Net income for the quarter decreased $10 million from the third quarter.
Results in the prior quarter included a $23 million recovery
of prior periods’ income
taxes. Our lines of business achieved good revenue growth for the second consecutive
quarter, as we remain focused on continuing to deliver the high level of service
and advice that our clients expect, especially in the current economic environment.
PCG net income excluding the insurance business was $69 million,
up $16 million or 29% from the third quarter. Revenue grew by
6.1% as there was continued
improvement in equity markets and we maintained our focus on attracting new
client assets.
Assets under management and administration improved by $9 billion or 3.7%.
Net income in the insurance business was $41 million, a decrease
of $26 million from the third quarter due primarily to that quarter’s $23 million recovery
of income taxes.
PCG announced
the expansion of the exchange traded fund (ETF) product suite by launching
nine new funds to offer a total of 13
funds. The ETF
product line is part of our commitment to providing our clients with
the most diverse
group of products and solutions, and the best education and support in
the field
of investments, a testament to our dedication to helping clients make
sense of their finances. BMO remains the only major Canadian
financial institution
to
offer a family of these low-cost, easy-to-understand, risk-diversifying
investment products.
The Globe
and Mail ranked BMO InvestorLine best of the bank-owned
brokerages in its 2009 online brokerage rankings. BMO Capital Markets
Net income for the quarter was $289 million, in line with the prior
year. However, results a year ago benefited from a $52 million recovery
of prior periods’ income taxes and a higher proportion of tax-exempt
revenue. In this quarter, there were no capital markets environment
charges. The prior year included largely offsetting gains and losses
with respect to the capital markets environment.
Revenue for the quarter increased $172 million from a year
ago to $894 million. Corporate banking revenues increased
significantly primarily as a result of higher
lending fees and higher net interest income. Equity and debt underwriting fees
were also up from the prior year. Trading revenues were down from a year ago
and investment securities gains increased.
To better serve clients with a more focused and integrated
capital markets business, on November 16, 2009, we
announced our definitive agreement with
Paloma Securities,
L.L.C to hire its securities lending team and acquire assets used in the
securities lending business of Paloma Securities. The
addition of this team will allow
BMO Capital Markets to increase the scope of our existing North American
securities lending operations. The transaction, which
is subject to regulatory approval,
is expected to close in mid-December.
Our continued commitment to our clients is being noticed.
During the quarter, BMO Capital Markets received the
best FX Bank Canadian Dollar award from
FX Week in their annual rankings and was named the best foreign exchange
bank
in Canada
by European CEO magazine. We also achieved the top market share and research
quality rankings in the Canadian Fixed Income annual survey conducted by
Greenwich Associates, an independent research firm.
BMO Capital Markets was involved in 131 new issues in the
quarter including 25 corporate debt and 27 government
debt deals, eight issues of preferred
shares and 71 common equity transactions, raising $45.8 billion, down
$4.8 billion
from
the previous quarter. Corporate Services
The net loss was $171 million for the quarter, with approximately two-thirds
due to provisions for credit losses and the balance to low revenue.
The net loss improved appreciably from the third quarter. There was
a significant improvement in revenue and provisions for credit losses
were better compared to the third quarter.
The net loss of $171 million in the quarter, compared with a net
loss of $150 million in the prior year. Reduced revenues were
partially offset by lower provisions
for credit losses. Net interest income and net income have improved in Corporate
Services in each quarter of 2009 due in part to management actions and more
stable market conditions.
BMO employs a methodology for segmented reporting purposes whereby
expected credit losses are charged to the operating groups
quarterly based on their
share of
expected credit losses. The difference between quarterly charges based on
expected losses and required quarterly provisions based on
actual losses, as well as
changes in the general allowance are charged (or credited) to Corporate Services.
Caution
The foregoing sections contain forward-looking statements. Please see
the Caution Regarding Forward-Looking Statements.
Medium-Term Performance Targets
BMO has medium-term objectives of, over time, increasing EPS by an
average of 10% per year, earning average ROE of between 17% and 20%,
achieving average annual cash operating leverage of at least 2 percentage
points, and maintaining a strong regulatory capital position.
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 harbour 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 2009 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 30 and 31 of the BMO 2008 Annual Report, which
outlines in detail certain key factors that may affect our 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, except as required by law. 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, net funding cost, credit quality and risk of default
and losses on default
of
the underlying
assets of the structured investment vehicles were material factors we
considered when establishing our expectations regarding the
structured investment
vehicles discussed in this document, including the amount to be drawn
under the BMO
liquidity facilities and the expectation that the first-loss protection
provided by the
subordinate capital notes will exceed future losses. 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,
and that
the level of defaults and losses will be consistent with the credit quality
of the underlying assets and our current expectations regarding challenging
market
conditions continuing.
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 Trust has entered into. Key
assumptions included
that the level of defaults and losses on defaults would be consistent
with historical experience. Material factors that were taken into account
when
establishing our
expectations of the future risk of credit losses in Apex Trust and
risk of loss to BMO included industry diversification in the
portfolio, initial
credit
quality
by portfolio, the first-loss protection incorporated into the structure
and the hedges that BMO has entered into.
Assumptions about the performance of the Canadian and U.S. economies
as well as overall market conditions and their combined effect on
the bank’s business,
including those described under the heading Economic Outlook, are material factors
we consider when determining our strategic priorities, objectives and expectations
for our business. 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.
To view the rest
of this news release consisting of:
INVESTOR AND
MEDIA PRESENTATION
Investor Presentation
Materials
Interested parties are invited to visit our website at www.bmo.com/investorrelations to
review this quarterly news release, presentation materials and a supplementary
financial information package online.
Quarterly
Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference
call on Tuesday, November 24, 2009, at 2:00 p.m. (EST). 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, March 1, 2010, by calling 416-695-5800 (from
within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering
passcode 3278113.
A live webcast
of the call can be accessed on our website at www.bmo.com/investorrelations.
A replay can be accessed on the site until Monday, March 1, 2010.
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
Andrew Chin, Senior Manager, andrew.chin@bmo.com, 416-867-7019
Chief Financial
Officer
Russel Robertson, Chief Financial Officer
russ.robertson@bmo.com, 416-867-7360
Corporate Secretary
Blair Morrison, Senior Vice-President,
Deputy General Counsel,
Corporate Affairs & Corporate Secretary
corp.secretary@bmo.com,
416-867-6785
Annual Meeting 2010
The next Annual Meeting of Shareholders will be held on Tuesday, March
23, 2010, in Winnipeg, Manitoba.
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