Toronto, Ontario, September 12, 2006
 

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Title Slide: Delivering Sustainable High Returns

Thanks very much Kevin and good morning everyone. As always, it’s great to be here and I look forward to addressing questions following my presentation.

I’d like to highlight BMO’s track record for delivering competitive returns throughout the credit cycle; and, looking to the future, talk about the capability we are building to deliver more aggressive results while maintaining a low risk profile. My key message is a simple one: BMO continues to be a compelling value proposition for investors with an appetite for sustainable high returns.

Slide 1           Forward-Looking Statements

I’ll start with a quick recap of BMO’s record performance in the third quarter and our outlook for the balance of the year. And then, with the usual caution regarding forward-looking statements, I’ll talk about some of the steps we are taking to substantially increase returns to shareholders in the short and the long term.

Slide 2           Highlights of Record Performance in Q3

As you’ll recall, BMO had an excellent third quarter, delivering broad-based, high-quality results. Net income climbed 30% to a new high of $710 million driven by record earnings in the Personal and Commercial Client Group and very strong contributions from our other groups. Relative performance was also very solid in an exceptionally strong quarter for the Canadian banking industry.

Slide 3           Economic Outlook

We’re also feeling pretty good about the economic outlook for the year.

In Canada, steady economic expansion and stable interest rates should support our fee-based investment banking businesses. A disproportionate share of the strength is coming from the Western provinces. Alberta in particular is benefiting from high energy prices and has announced numerous energy-related projects. Nonetheless, we expect strong investment to be a mainstay of growth across Canada.

In the United States, continued strong business investment resulting from healthy corporate balance sheets should support growth in business loans while past increases in interest rates should continue to temper demand for residential mortgages and personal loans. The overheating of the housing market is more acute in areas outside the Midwest and we have seen limited price pressure in our target markets.

Slide 4           Annual Targets

We are aiming to achieve our annual targets while making substantial investments in our businesses to drive more aggressive future growth, and I’ll give you some examples.

Slide 5           Industry-Leading Dividend Payout Range

First, though, let me remind you that we increased BMO’s target dividend payout range in May to an industry-leading 45% to 55% of net income available to common shareholders. This increase, which was made possible by the stability of our earnings, reflects our confidence in our continued ability to increase earnings and our strong capital position. It also acknowledges the feedback we have been getting from investors about the increasing shareholder appeal of dividends given their improved tax treatment.

BMO has $3.3 billion of capital available for investment. This gives us the flexibility to return capital to our shareholders in the form of industry-leading dividend payouts while at the same time investing in business growth and making on-strategy, shareholder-friendly acquisitions.

Here’s a quick rundown of some recent and upcoming investments in key businesses.

Slide 6           Investing in Our Businesses: P&C Canada

In Canada, we are in the process of replacing all of our Automated Banking Machines to make our network more customer-friendly and secure. By the end of the third quarter we had replaced more than 1,000 ABMs and we are on track to replace the entire network by the end of the year.

We have also upgraded and refreshed 85% of our BMO Bank of Montreal branches over the past 18 months. And we continue to invest very substantially in our people. Since the end of 2005, for example, we have recruited and successfully deployed 1,000 additional people to provide a higher level of service to our Canadian banking customers. And looking further ahead, plans are in place to add branches in high-growth markets such as Alberta and British Columbia.

As outlined on the third-quarter conference call, we have taken actions to improve spread and are very pleased with the response to our simplified personal deposit product offering. Cross selling is a priority, and bookings of lines of credit and credit cards have been showing encouraging results in recent months.

With the recent announcement of our intention to purchase bcpbank Canada, increasing our presence in multicultural markets in the high-growth Toronto area, we also showed our determination to seize opportunities for profitable growth in retail banking.

Frank Techar and his team are capitalizing on all of these investments in people, branches and technology to continue to grow profitably in personal and commercial markets in Canada.

Slide 7           Investing in Our Businesses: Private Client Group (PCG)

In order to provide our retail banking customers with all the best that BMO has to offer, including the full suite of personal investing products and services provided by BMO Nesbitt Burns and BMO Harris Private Banking, we are also increasing our sales force in the Private Client Group.

We are making very good progress in referrals between our Private Client Group and our Personal & Commercial Client Group as we continue to put the customer at the centre of everything we do. OneHarris referral volumes have increased by over 50% from last year, while referral volumes from the longer-established Canadian cross-selling effort have improved by over 40% compared to fiscal 2005. More specifically, referral volumes in Western Canada increased by over 70% from last year.

These efforts are also producing improved sales force productivity. Total revenue in the Private Client Group is ahead of last year by 9.3% (excluding Harrisdirect). And revenue per FTE for the year to date is 13% better than 2005.

Under the leadership of Gilles Ouellette, we have built a very strong wealth management platform – which, in addition to our established full-service brokerage, top-ranked direct broker, and top-ranked private bank, also includes our fast-growing mutual fund business, where assets have grown more than 75% in the past three years.

We are pretty excited about the work we are doing to help our customers invest and plan for their retirement years. A recent study by BMO in partnership with Ipsos Reid shows that the traditional notion of retirement is outdated, with 87% of Canadian boomers telling us the word retirement should be retired. They are seeing their next phase as a time to regenerate, a time to regroup and do the things they have always wanted to do.

As our Regeneration marketing campaign shows, we understand the distinct views about retirement held by our boomer clients and we are moving quickly to provide the help they need. BMO Mutual Funds launched two new funds in the third quarter to provide investors with tax-efficient monthly cash distributions. BMO Term Investments launched the BMO Income Generator to provide monthly income during retirement. And we recently held the first meeting of our new advisory council, a multi-disciplinary group of respected, external experts who will help us stay out ahead of this important trend.

We will have more to say in the months ahead about our plans to target the mass affluent personal investing market and very aggressively grow all our personal investing and private client businesses.

Slide 8           Investing in Our Businesses: P&C Chicagoland Banking

We are also making very significant investments in our U.S. retail bank. A good example is the Harris Connect initiative to replace the current branch technology platform, which is slated for completion by the end of the fiscal year. This new platform allows our sales and service staff to take a lot more initiative in meeting our customers’ needs.

We passed a major milestone in August, completing the conversion of the Mercantile acquisition to the Harris technology platform. From now on, all existing Harris branches will be operating on the same advantaged platform, marking the end of a major undertaking that began two years ago with the consolidation of individual bank charters. And we are ready and able to absorb future acquisitions more quickly and cost-effectively.

In last year’s presentation I talked about our leading-edge banking model at Harris, which combines the best of two banking models to create a powerful, growth-generating bank with the efficient back office of a network bank and the customer-focused front office of a community bank. Essentially, we take costs out of the back office and, using a customer segmentation focus in our branches, take exceptional care of the right clients. Based on our experience to date – sales are up, retention is top tier, and productivity is improving – we believe this model will enable us to lower costs and grow revenue faster than our peers. It is a path we are continuing to pursue with great urgency.

In support of this effort, we are about 18 months into a program to develop the best (i.e., most effective) branch managers in the market – a strategy not easily replicated by our competitors. Branch managers at Harris will be better trained, better coached, and likely better compensated than other branch mangers in the market. In return, we expect revenue growth and customer satisfaction levels that are better than our competitors.

Slide 9           Continuing to Improve the Harris Customer Experience

And, most important of all, we are continuing to improve the client experience as a central part of our effort to improve performance. We are proud of the fact that Harris loyalty and customer service scores have gone up in quite a dramatic fashion in recent years as we have closed the gap on the small community banks and extended our lead relative to the big network players.

On Slide 9, you see a customer satisfaction metric we call the Net Promoter Score, which measures the likelihood that an existing customer would recommend our services. This is often recognized as the highest test of customer satisfaction. For retail customers, you can see that our performance exceeds, by a multiple of almost three, the experience delivered by the large network banks but we still trail the community banks. For business clients, we significantly outperform our network bank competitors and are at parity with community banks.

We also offer a breadth of services that the community banks can’t match. We are embarked on a series of initiatives aimed at assuring the delivery of a top tier sales and service experience for all three of the ways a client can interact with us – in person, on the phone and electronically.

With our advantaged platform, our on-the-ground experience and track record, and all the investments and initiatives now under way, we have already shown that we can compete effectively in a very competitive marketplace. Our model is producing good growth and is a strong foundation upon which we can and will expand under the leadership of our new Harris CEO, Ellen Costello.

Slide 10      Acquisition and Expansion Strategy

Harris’ goal is to become the leading personal and commercial bank in the U.S. Midwest with a network of 350 to 400 branches. And we want to accelerate progress toward this goal through a combination of aggressive organic growth, de novo branch expansion, and acquisitions.

Our acquisitions team is putting a lot of effort into finding the right U.S. acquisitions. As I said earlier, we have the capital available if and when a potential transaction moves from the back to the front burner. But I want to emphasize that, frustrating as it can be at times, we will maintain our discipline of moving forward only when there is a good fit strategically, culturally and financially. Otherwise we have, and will, take a pass. That said, we continue to be optimistic about the opportunities available.

Slide 11      Investing in Our Businesses: BMO Capital Markets

During our busy third quarter, we proudly unveiled BMO Capital Markets, the new name that unites our investment banking functions in both Canada and the United States under the leadership of Yvan Bourdeau. Together with the recent appointment of Tom Milroy and Eric Tripp as Co-Presidents of BMO Capital Markets, the common brand signifies our commitment to provide a full range of investment banking capabilities to clients in North America and other key international markets.

In Canada, the focus is on the cost-effective growth of our superb, diversified franchise as we extend our expertise to our other markets. For example, we built a successful presence in the Fund and Equity Linked Note market for retail investors in Canada, adding five new Asset Manager partners to our Structured Product Deposit Note Program and then recently expanded into the U.S. and Europe to capture the opportunities in those markets.

We are also making good progress in refining our sector focus in the United States to match product and service capabilities to high-growth opportunities. We now operate in 10 sectors where we have very substantial and longstanding expertise and strong existing relationships. As the number of recent senior hirings in the U.S. suggests, we believe we can accelerate growth by offering a full range of capabilities to our target sectors.

Slide 12      Long-Term Investments in China

I’d now like to change my perspective from the near- and mid-term to the long term, and take a minute or two to talk about China. At BMO, we are constantly surveying the global financial services landscape and investing prudently to explore new opportunities to extend our existing strengths or build new strengths.

With an eye on changing global realities, we are making small but significant strategic investments in China as its financial services market gets ready for explosive growth.

We are well positioned on a number of fronts. We offer a wide range of products and services, including Foreign Exchange, Trade Finance, and Corporate Lending and Risk mitigation, to our North American client base in China. We provide immigration banking advisory services to help Chinese emigrants establish banking and investing relationships with us in Canada. And, through our investment in Fullgoal Investment Management Co., we manufacture and distribute mutual funds for the Chinese domestic market.

We also reached some important milestones in recent months. In June, BMO was the only Canadian firm involved in the Bank of China’s IPO in Hong Kong, serving as co-lead manager and an underwriter. At the end of July, BMO became the first Canadian bank to be given the green light by Chinese authorities to provide banking services in Beijing in local currency in addition to foreign currency. And last month, we took the next vital step toward our objective of becoming a most trusted advisor to Chinese business leaders, announcing the opening of a BMO Capital Markets Representative Office in Beijing. This is in addition to our existing branches and offices in Beijing, Guangzhou, Hong Kong and Shanghai.

Our modest investments in China do not yet make a significant contribution to our bottom line and, quite frankly, they are unlikely to have a material impact on returns for a number of years to come. Nonetheless, we believe we are exceptionally well positioned to take advantage of China’s enormous growth. And, as global markets evolve, we will continue to invest prudently to position BMO for lasting success. Our shareholders deserve no less.

Slide 13      Leadership in Credit Risk Management

Our investments in China, as in North America, will benefit from BMO’s deeply ingrained expertise in credit risk management.

I talked in detail about our credit leadership at last year’s conference, when we were all anticipating that the bottom of the credit cycle was nearing its end – and yet here we are one year later with losses still at historically low levels.

I won’t go through all the points I made last year but simply note that our revised target of a $250-million provision for credit losses for 2006 translates into14 basis points of average net loans and acceptances, well below our industry-leading, 15-year average of 38 basis points. And, looking at indicators such as impaired loan formations, we are not yet seeing signs of an imminent increase in losses.

Current economic forecasts and fiscal policy do not suggest a deep economic decline in Canada or the U.S. (barring some unexpected event). When the credit cycle does turn, as it inevitably must, the availability of hedging tools and the deeper secondary market should have an overall moderating effect. And when the inevitable happens, investors will seek out BMO as a safe haven.

But until then, it is worth remembering that our expertise in credit risk management enables us to be consistent in our risk underwriting throughout the credit cycle. This is very much appreciated by all customers, especially our commercial clients, and gives us a rock-solid base from which to build our business.

Slide 14      BMO Is a High-Return, Low-Risk Bank

I also want to refer investors to the Boston Consulting Group global ranking of financial institutions throughout the world on the basis of Risk-adjusted Relative Total Shareholder Returns, meaning TSR adjusted for local market conditions. For the five-year period from 2000 to 2004, BMO ranks as the second-best large cap universal bank in the world. For the period from 2001 to 2005, BMO ranks seventh in the world, fifth in North America and third in Canada. While other Canadian banks also place well – an indication of the strong management of Canadian banks generally – BMO is unquestionably a world leader in balancing risk and returns.

However, we can do much better. We are working hard to identify creative new risk/reward opportunities that enable us to deliver higher returns while maintaining a strong risk profile. And early results are promising.

At Harris, for example, we improved the relative yield of our consumer lending portfolio by seven basis points in 2005; and the total opportunity may be three to four times larger. This initiative will help us sustain our very strong portfolio and revenue growth in the U.S. while maintaining prudent levels of risk.

We are pursuing additional risk/reward opportunities in a number of other businesses.

Slide 15      Aggressive Pursuit of North American Vision

Both the BMO Board and the leadership team are very serious about achieving our vision to become the top-performing financial services provider in North America.

As we assess the global financial services industry – and, as I mentioned, make manageable investments in locations such as China to position ourselves for changing global realties – we continue to believe our North American strategy to grow our core Canadian businesses and accelerate our expansion in the United States is the best strategic path for BMO for the foreseeable future. We’ll be making small course corrections from time to time, as one would expect, but we believe our strategy plays to BMO’s singular strengths and continues to provide very significant opportunities for growth.

Slide 16      Strong Track Record for Growth

Which brings me back to today’s theme of sustainable high returns. I am asked with some regularity whether BMO can continue to deliver growth momentum.

My answer is unequivocal: yes, we can. BMO has delivered a strong showing in total returns to shareholders over the past 20 years, delivering an average annual TSR of 16.4% as of the end of the third quarter. We also have a good track record for increasing sustainable earnings per share.

Looking ahead, we believe we have a realistic shot at achieving our vision of top performance.

Both Bill Downe and I talked during the third-quarter conference call about the leadership changes we have been putting in place over the past several months to position BMO for higher growth in an increasingly global marketplace.

We have also talked previously about the intensive internal work we are doing to create a substantially improved work environment that is highly customer focused and performance driven.

All of this work continues at an aggressive pace, and you’ll be hearing more about our progress as we continue to position BMO for strong and sustainable growth.

Slide 17      Q & A

With that, I’ll conclude my prepared remarks and thank you for your attention. I’d be pleased to address any questions.

Slide 18      Investor Relations Contact Information