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Operating Highlights

• Net Income of $301 Million, Diluted Cash EPS of $0.59¹ and Diluted EPS of $0.57
• Net Income in Personal and Commercial Client Group Up 26 Per Cent with Solid Growth in Volumes
• Harrisdirect Integration of CSFBdirect Successfully Completed with Strong Client Retention
• Expenses Down from First Quarter and Essentially Unchanged from Last Year, Excluding Acquisitions
• Revenue Growth Remains a Challenge in the Current Environment
• Gross Impaired Loans Decline Modestly from the First Quarter as a Result of Proactive Loan Portfolio Management
• Expected Loan Losses for the Year Unchanged from Previously Announced $775 to $825 Million
• Stock Options Costs to be Expensed Starting in Fiscal 2003

Bank of Montreal reported net income of $301 million and diluted earnings per share of $0.57 for its second quarter ended April 30, 2002. Excluding last year's non-recurring items, net income declined $121 million from the second quarter of 2001. This quarter's results were affected by the previously announced increase in the provision for credit losses due to BCE's announcement that it would discontinue its long-term support of Teleglobe Inc. Reported net income for the second quarter of last year was $607 million and diluted earnings per share were $1.10. Those unusually strong results included non-recurring net income of $185 million, which is detailed in the "Effects of Non-Recurring Items" section, but were largely attributable to gains on the sale of the Bank's investment in Bancomer.

"Improved performance in retail banking and success in limiting cost increases position the Bank well for the continued improvements expected in the economy," said Tony Comper, Chairman and Chief Executive Officer, Bank of Montreal. "While results continue to be affected by increased loss provisions and weak capital markets, we continue to invest in our growth strategies and aggressively compete for market share to benefit from the return to a more robust business environment."

Compared to the first quarter, net income was $71 million or 19 per cent lower due to the increase in the provision for credit losses. Revenues and expenses were both modestly higher than in the first quarter even though there are three fewer days in the most recent quarter. Harrisdirect results include two months revenues from CSFBdirect, contributing to the growth.

Year-to-date net income declined $350 million on a reported basis and $152 million after excluding the effect of last year's non-recurring items. Much stronger performance in retail and business banking was more than offset by higher provisions for credit losses and lower wholesale banking revenues in the weaker capital markets environment. Year-to-date comparatives benefited from the discontinuance of amortization of goodwill and more favourable income tax rates and tax benefits in fiscal 2002.

Due to the timing of last year's deterioration in economic conditions, provisions for credit losses in fiscal 2001 were concentrated in the fourth quarter, affecting year-over-year comparisons by quarter in 2002. Excluding non-recurring items, net income for the second quarter of 2002 and for the year-to-date would have been higher than the prior year's results in the absence of higher provisions for credit losses, notwithstanding the effects of this year's less favourable capital markets conditions.

Mr. Comper also noted that, "During the quarter, the Bank continued to grow its wealth management enterprises, as Harrisdirect successfully integrated CSFBdirect. Immediately following the quarter end, the Bank announced its direct investing base of client accounts will increase to approximately 1.5 million with the acquisition of Morgan Stanley online clients. On closing of this transaction, Bank of Montreal is expected to be the sixth largest direct investing firm in North America, based on the number of client accounts."

• Net Income in Personal and Commercial Client Group Up 26 Per Cent with Solid Growth in Volumes
  Personal and Commercial Client Group net income rose 26 per cent from a year ago, excluding non-recurring income. Strong revenue growth in the United States complemented tight expense management and solid volume increases in Canada.

• Harrisdirect Integration of CSFBdirect Successfully Completed with Strong Client Retention
  The acquisition of CSFBdirect closed on February 4, 2002 and two months of its activities are included in results for the quarter. The integration was completed on May 8, 2002 and client retention remains strong. CSFBdirect assets under administration totalled US$18.8 billion at the end of the quarter, up modestly from the closing of the transaction and up US$2.5 billion or 15 per cent from the announcement of the transaction. The 434,000 active accounts declined slightly from the closing but average account size increased.

  In addition, on May 10, 2002, the Bank announced, subject to requisite approvals, a transaction to acquire Morgan Stanley's online client accounts. The transaction represents yet another step in the Bank's selective and substantial expansion into the United States and the implementation of its transnational growth strategy.

• Expenses Down from First Quarter and Essentially Unchanged from Last Year, Excluding Acquisitions
  Excluding the costs of businesses acquired in the last year, expenses in the second quarter of this year increased less than one per cent from last year as the Bank focuses on cost containment in a difficult capital markets environment. Similarly, expenses declined from the first quarter, even after removing the benefits of three fewer days in the second quarter.

• Revenue Growth Remains a Challenge in the Current Environment
  Excluding non-recurring items, revenue increased slightly more than one per cent from the second quarter of last year but declined excluding acquired businesses. Weak capital markets, a competitive retail lending environment, low corporate loan demand and low equity valuations have affected revenue growth.

• Gross Impaired Loans Decline Modestly from the First Quarter as a Result of Proactive Loan Portfolio Management
  Excluding the impact from Teleglobe Inc. loans, the level of formation of new gross impaired loans was within management's expectations. Gross impaired loans declined two per cent to $2,150 million from $2,193 million at the end of the first quarter. The reduction was reflective of continued proactive management of the problem loan portfolios, including the sales of problem loans.

• Expected Loan Losses for the Year Unchanged from Previously Announced $775 to $825 Million
  Management's guidance for annual provisions for credit losses remains unchanged at $775 to $825 million, as announced on April 25, 2002.

  The Bank's overall provision for credit losses reflects its best estimate of required provisions based on impairments identified in the portfolios and existing economic conditions. Provisions are allocated to the banking groups based on expected losses over an economic cycle. Differences between the total of the Bank's expected loss provisions and its required provisions under generally accepted accounting principles (GAAP) are allocated to the Corporate Support Group.

• Stock Options Costs to be Expensed Starting in Fiscal 2003
  Bank of Montreal will commence recognizing the fair value of stock options benefits as compensation expense next year. New requirements under GAAP come into effect at that time, requiring companies to either expense the value of the new benefits granted or disclose pro forma information that reflects the effects of the expense. The requirements encourage adopting the expense treatment.

2002 Earnings Outlook Unchanged
Results for the year-to-date fell short of the previously indicated interim target of earning cash EPS comparable to the first six months of last year. However, the Bank continues to expect cash EPS growth of 8 to 12 per cent for the full year, driven by lower provisions for credit losses and continued attention to expense management. The Bank also anticipates achieving its annual targets for cash ROE and Tier 1 Capital. As announced on April 25, 2002, the Bank now anticipates its provision for credit losses will approximate $775 million to $825 million for the year, or in a range about 55 basis points of average net loans and acceptances, up from its previously announced annual target of 40 to 50 basis points. This increase is directly attributable to BCE's announcement that it would cease to provide long-term support to Teleglobe Inc. Results in the second quarter included $140 million of provision for credit losses on the Bank's $163 million loan exposure to Teleglobe Inc.

Growth in the Canadian and U.S. economies is expected to remain strong through 2002. Highly stimulative monetary policies and reductions in U.S. personal income taxes will support consumer spending. In Canada, the combination of low mortgage rates and improving job growth should underpin housing markets. The jobless rate is expected to trend lower during the year. Canadian short-term interest rates have risen recently from four-decade lows and are expected to trend higher as the expansion progresses. While concern about the durability of the U.S. recovery has kept U.S. interest rates low, the Federal Reserve is widely expected to tighten policy in the second half of the year. Capital markets activity should improve as the economy strengthens through the year. The Canadian dollar is expected to appreciate modestly against the U.S. dollar amid supportive trade flows.

Note on Performance Analysis
Management and certain of the Bank's stakeholders believe that performance analysis is enhanced by focusing on cash results and results excluding non-recurring items. These adjustments and their effects are outlined in the "Effects of Non-Recurring Items" section. Securities regulators require that corporations caution readers that earnings as adjusted for such items do not have standardized meanings under GAAP and are unlikely to be comparable to similar measures used by other companies.

Management's Discussion and Analysis of Results of Operations (MD&A) is attached. A more comprehensive discussion of our businesses and strategies and objectives can be found in the MD&A in the Bank's 2001 Annual Report, which can be accessed on the Bank's web site indicated below.

OTHER INVESTOR AND MEDIA INFORMATION

Online Investor Presentations

Interested investors, the media and others are invited to visit our web site at www.bmo.com/investorrelations to also review the quarterly presentations and supplementary financial information package.

Quarterly Conference Call
Interested parties are also invited to join our quarterly conference call, in listen-only mode, on Tuesday May 28, 2002 at 3:30 p.m. (EDT). The call may be accessed by telephone at 1-800-213-1351 (toll free) or 416-641-6678 (from within Toronto). A replay of the conference call will be available until Friday June 7, 2002 by calling 1-800-558-5253 and quoting reservation number 19964012.

Webcast
A live webcast of the quarterly conference call can be accessed at www.bmo.com/investorrelations. A replay of the webcast can be accessed on our web site until August 26, 2002.

Document Copies
Copies of the quarterly news release, presentations and supplementary financial information package are also available at Bank of Montreal's offices at 100 King Street West, 1 First Canadian Place, 18th Floor, Toronto, Ontario, M5X 1A1.

Media Relations Contacts
Joe Barbera, Toronto, 416-867-3996
Ralph Marranca, Toronto, 416-867-3996
Ronald Monet, Montreal, 514-877-1101

Investor Relations Contacts
Susan Payne, Senior Vice President, Investor Relations, susan.payne@bmo.com, 416-867-6656
Lynn Inglis, Director, Investor Relations, lynn.inglis@bmo.com, 416-867-5452

Chief Financial Officer
Karen Maidment, Executive Vice President and Chief Financial Officer,
karen.maidment@bmo.com, 416-867-6776

Corporate Secretary's Contact
corp.secretary@bmo.com, 416-867-6785

CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This news release in respect of earnings for the second quarter of 2002 includes forward-looking statements, which are made pursuant to the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, comments with respect to our objectives, targets, strategies, financial condition, the results of our operations and our businesses, our outlook for our businesses and for the Canadian and U.S. economies, and risk management.

By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, targets, expectations, estimates and intentions expressed in such forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by the following factors: fluctuations in interest rates and currency values; regulatory developments; statutory changes; the effects of competition in the geographic and business areas in which we operate, including continued pricing pressure on loan and deposit products; and changes in political and economic conditions including, among other things, inflation and technological changes. We caution that the foregoing list of important factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank.

TO VIEW SECOND QUARTER 2002 MD&A CLICK HERE

TO VIEW FINANCIAL HIGHLIGHTS AND STATEMENTS CLICK HERE