BMO's 2022 audited annual consolidated financial statements and
accompanying Management Discussion and Analysis (MD&A) are
available online at www.bmo.com/investorrelations and at
www.sedar.com.
Financial Results Highlights
Fourth Quarter 2022 Compared with Fourth Quarter
2021:
- Net income of $4,483 million, compared
with $2,159 million; adjusted net
income1,3,4 of $2,136 million, compared with $2,226 million
- Reported earnings per share (EPS)2 of
$6.51, compared with $3.23; adjusted EPS1,2,3,4 of
$3.04, compared with $3.33
- Provision for credit losses (PCL) of $226 million,
compared with a recovery of the provision for credit losses of
$126 million
- Return on equity (ROE) of 27.6%, compared with 16.0%;
adjusted ROE1,3,4 of 12.9%, compared with
16.5%
- Common Equity Tier 1 Ratio5 of 16.7%,
compared with 13.7%
Fiscal 2022 Compared with Fiscal 2021:
- Net income of $13,537 million, compared with $7,754 million; adjusted net
income1,3,4 of $9,039 million, compared with $8,651 million
- Reported EPS2 of $19.99, compared with $11.58; adjusted EPS1,2,3,4 of
$13.23, compared with $12.96
- Provision for credit losses of $313 million, compared
with a provision of $20 million
- ROE of 22.9%, compared with 14.9%; adjusted
ROE1,3,4 of 15.2%, compared with 16.7%
TORONTO, Dec. 1, 2022 /PRNewswire/ -- For the fourth
quarter ended October 31, 2022, BMO
Financial Group (TSX: BMO) (NYSE: BMO) recorded net income
of $4,483 million or $6.51 per share on a
reported basis, and net income of $2,136 million or $3.04 per share on an adjusted basis.
"This year, we continued to execute on our strategy to
strengthen and grow each of our diversified businesses. Against the
backdrop of a rapidly changing macroeconomic environment, we
delivered on our commitments to positive operating leverage,
improved efficiency and achieved above-target return on equity. Our
strong performance was supported by targeted investments in
technology and talent which delivered award winning customer and
employee experiences. Very good revenue performance was driven by
robust, high-quality growth in loans and deposits and expanding net
interest margins, all underpinned by our leading risk management
approach," said Darryl White, Chief
Executive Officer, BMO Financial Group.
"Looking ahead to 2023, the economic environment remains
uncertain, with inflation and higher interest rates expected to
slow the economy in the near term. We have a proven track record of
sustained performance and remain well positioned to deliver in any
environment. We will continue to dynamically manage capital and
resources to grow our businesses and support our customers while
finalizing preparations for the natural next step in our North
American growth strategy, the approval, closing and integration of
Bank of the West.
"BMO has a long-standing, deep sense of purpose, and we are
leveraging our position as a leading financial services provider to
make progress for a thriving economy, sustainable future and an
inclusive society, while targeting continued top-tier returns for
our shareholders," concluded Mr. White.
Concurrent with the release of results, BMO announced a first
quarter 2023 dividend of $1.43 per
common share, an increase of $0.04
from the prior quarter, and an increase of $0.10 or 8% from the prior year. The quarterly
dividend of $1.43 per common share is
equivalent to an annual dividend of $5.72 per common share.
Caution
The foregoing sections contain forward-looking statements.
Please refer to the Caution Regarding Forward-Looking
Statements.
(1)
|
Results and measures in
this document are presented on a generally accepted accounting
principles (GAAP) basis. They are also presented on an adjusted
basis that excluded the impact of certain specified items from
reported results. Adjusted results and ratios are non-GAAP and are
detailed for all reported periods in the Non-GAAP and Other
Financial Measures section. For details on the composition of
non-GAAP amounts, measures and ratios, as well as supplementary
financial measures, refer to the Glossary of Financial
Terms.
|
(2)
|
All EPS measures in
this document refer to diluted EPS, unless specified otherwise. EPS
is calculated using net income after deducting total dividends on
preferred shares and distributions payable on other equity
instruments.
|
(3)
|
Reported net income
included revenue related to the announced acquisition of Bank of
the West, with revenue in Q4-2022 of $3,336 million ($4,541 million
pre-tax) resulting from the management of the impact of interest
rate changes between the announcement and closing on its fair value
and goodwill, as well as acquisition and integration costs of $143
million ($191 million pre-tax). Fiscal 2022 net income
included revenue of $5,667 million ($7,713 million pre-tax) and
expenses of $237 million ($316 million pre-tax). Refer to the
Non-GAAP and Other Financial Measures section for further
information on adjusting items.
|
(4)
|
Q4-2022 reported net
income included a legal provision of $846 million ($1,142 million
pre-tax) related to a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank, comprising interest expense of
$515 million pre-tax and non-interest expense of $627 million
pre-tax, including legal fees of $22 million. These amounts were
recorded in Corporate Services. For further information, refer to
the Provisions and Contingent Liabilities section in Note 24
of the audited annual consolidated financial statements in BMO's
2022 Annual Report.
|
(5)
|
The Common Equity Tier
1 (CET1) Ratio is disclosed in accordance with the Office of the
Superintendent of Financial Institutions' (OSFI's) Capital Adequacy
Requirements (CAR) Guideline.
|
Note: All ratios and
percentage changes in this document are based on unrounded
numbers.
|
Significant Events
During the first quarter of 2022, we completed the sale of our
EMEA Asset Management business to Ameriprise Financial, Inc.,
including the transfer of certain U.S. asset management clients,
and on April 30, 2021, we completed
the sale of our Private Banking business in Hong Kong and Singapore to J. Safra Sarasin Group.
Collectively, we refer to these transactions as "divestitures". The
divestitures reduced net revenue and expenses by
approximately 3% and 4%, respectively, on both a reported
and an adjusted basis, compared with the prior year.
On December 20, 2021, we announced
the signing of a definitive agreement with BNP Paribas to acquire
Bank of the West and its subsidiaries. Under the terms of the
agreement, we will pay a cash purchase price of US$16.3 billion, or US$13.4 billion net of an estimated
US$2.9 billion of excess capital
(at closing) at Bank of the West. The transaction, which is
expected to close by the end of the first calendar quarter
of 2023, is subject to customary closing conditions, including
regulatory approvals. We expect to fund the transaction primarily
with excess capital, reflecting our strong capital position,
including the added impact of the 20,843,750 common shares issued
for $3,106 million on
March 29, 2022, and anticipated capital generation.
On closing, the acquisition is expected to add approximately
US$92 billion of assets,
US$59 billion of loans and US$76 billion of deposits to
our consolidated balance sheet. These amounts are based on the
financial position and results of Bank of the West as at the period
ended September 30, 2022.
This acquisition aligns with our strategic, financial and
cultural objectives, and meaningfully accelerates our U.S. growth.
Building on the strength of our performance and our integrated
North American foundation, the acquisition will bring nearly 1.8
million customers to BMO and will further extend our banking
presence through an additional 503 branches and commercial and
wealth offices in key U.S. markets. After closing, our footprint
will expand to 32 states, including an immediate scaled entry
into the attractive California
market, where we expect to deliver a highly competitive offering to
new growth markets, combining the strength of our digital banking
platform and our strong banking team to generate good customer
growth.
A signature strength of Bank of the West is the deep
relationships formed between its customers, its employees, and the
communities they have served for over 100 years. As part of this
transaction, we do not plan to close Bank of the West branches, and
we are committed to retaining front-line Bank of the West branch
employees.
Leveraging our deep integration experience and proven track
record in U.S. expansion, we remain confident that we can achieve
annual pre-tax cost synergies of approximately US$670 million
(C$860 million) through operational efficiencies across our
combined businesses. Integration planning is underway and is being
overseen by a dedicated joint integration management office.
Under IFRS, the purchase price will be allocated to the
identifiable assets and liabilities of Bank of the West at closing,
on the basis of their relative fair values, with the difference
recorded as goodwill. The fair value/par value differences,
referred to as the fair value mark, will be amortized to income
over the estimated life of an underlying asset (liability).
Intangible assets identified, including the core deposit intangible
related to non-maturity deposits, will be amortized over their
estimated life. The fair value of fixed rate loans, securities and
deposits is largely dependent on interest rates. If interest rates
increase, the fair value of the acquired fixed rate assets (in
particular, loans and securities) will decrease, resulting in
higher goodwill. If interest rates decrease, the opposite would be
true. Conversely, the fair value of floating rate assets
(liabilities) and non-maturity deposits approximate par, providing
no natural fair value change offset. Changes in goodwill relative
to our original assumptions announced on
December 20, 2021 will impact capital ratios at closing,
because goodwill is treated as a deduction from capital under the
Office of the Superintendent of Financial Institutions (OSFI) Basel
III rules. In addition, given that the purchase price of the
acquisition is in U.S. dollars, any change in foreign exchange
translation between the Canadian dollar relative to the U.S. dollar
between the announcement and the closing of the acquisition will
result in a change to the Canadian dollar equivalent goodwill.
We are proactively managing exposure to capital from changes in
fair value of the assets and liabilities of Bank of the West at
closing. As part of our fair value management actions, we entered
into interest rate swaps that increase in value as interest rates
rise, resulting in mark-to-market gains recorded in trading
revenue. These swaps were largely offset from an interest rate risk
perspective through the purchase of a portfolio of matched-duration
U.S. treasuries and other balance sheet instruments that generate
net interest income. Together, these transactions aim to mitigate
the effects of any changes in goodwill arising from changes in
interest rates between the announcement and closing of the
acquisition, with the associated revenue (loss) treated as an
adjusting item. In addition, BMO entered into forward contracts,
which qualify as accounting hedges, to mitigate the effects of
changes in the Canadian dollar equivalent of the purchase price on
closing. Changes in the fair value of these forward contracts are
recorded in other comprehensive income (OCI) until closing of the
transaction.
The impact of the fair value management actions on our results
was treated as an adjusting item. The current quarter included
$4,541 million pre-tax
($3,336 million after-tax)
revenue related to the management of interest rate changes,
comprising $4,698 million of
mark-to-market gains on certain interest rate swaps as at
October 31, 2022, recorded in non-interest revenue, as
well as a loss of $157 million on a portfolio of primarily
U.S. treasuries and other balance sheet instruments recorded in net
interest income. Fiscal 2022 results included $7,713 million pre-tax ($5,667 million after-tax) revenue,
comprising $7,665 million
recorded in non-interest revenue and $48 million recorded in
net interest income.
The impact on our Common Equity Tier 1 Ratio related to these
fair value management actions was approximately 95 basis
points in the fourth quarter of 2022, and the cumulative
impact was approximately 150 basis points in fiscal 2022. In
addition, the changes in the fair value of the forward contracts
increased OCI by $706 million in the current quarter and
increased OCI by $638 million in the
current year.
This Significant Events section contains forward-looking
statements. Please refer to the Caution Regarding Forward-Looking
Statements.
Fourth Quarter 2022 Performance Review
The order in which the impact on net income is discussed in this
section follows the order of revenue, expenses and provision for
credit losses, regardless of their relative impact.
Adjusted results and ratios in this Fourth Quarter 2022
Performance Review section are on a non-GAAP basis and discussed in
the Non-GAAP and Other Financial Measures section.
Adjusted results in the current quarter excluded the impact of
the announced acquisition of Bank of the West, comprising revenue
of $3,336 million ($4,541 million pre-tax) related to the
management of the impact of interest rate changes between the
announcement and closing of the acquisition on its fair value and
goodwill, as well as acquisition and integration costs of
$143 million ($191 million
pre-tax). In addition, current quarter adjusted results excluded
the impact of a legal provision of $846
million ($1,142 million
pre-tax) related to a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank, comprising interest expense of
$515 million pre-tax and non-interest expense of
$627 million pre-tax, including legal fees of
$22 million. For further information, refer to Note 24 of
the audited annual consolidated financial statements in
BMO's 2022 Annual Report. Adjusted net income also excluded
the amortization of acquisition-related intangible assets and other
acquisition and integration costs in both the current and the prior
years.
Reported net income increased from the prior year, primarily due
to the impact of the above noted fair value management actions, and
adjusted net income decreased 4%, with higher net revenue
offset by higher expenses and a higher provision for credit losses.
Net income increased in U.S. P&C and decreased in BMO Capital
Markets, BMO Wealth Management, and Canadian P&C. On a reported
basis, Corporate Services recorded net income compared with a net
loss in the prior year, and on an adjusted basis, Corporate
Services results were relatively unchanged.
Canadian P&C
Reported and adjusted net income was $917
million, a decrease of $16
million or 2% from the prior year. Results were driven by
an 11% increase in revenue, primarily due to higher net
interest income reflecting strong balance growth and higher net
interest margins, more than offset by higher expenses and a higher
provision for credit losses compared with a recovery in the prior
year.
U.S. P&C
Reported net income was $660
million, an increase of $151
million or 30% from the prior year, and adjusted net income
was $662 million, an increase of $147
million or 29%. The impact of the stronger U.S. dollar
increased revenue and net income growth by 9%, and expense
growth by 8% on a reported basis.
On a U.S. dollar basis, reported net income was $488 million, an increase of $82 million or 21% from prior year, and adjusted
net income was $489 million, an increase of $79 million or 19%. Reported and adjusted results
were driven by an 18% increase in revenue, primarily due to higher
net interest income reflecting higher net interest margins and loan
balances, partially offset by higher expenses and a higher
provision for credit losses compared with a recovery in the
prior year.
BMO Wealth Management
Reported net income was $298 million, compared with
$345 million in the prior year, and
adjusted net income was $298 million,
a decrease of $51 million or 14% from the prior year. Wealth
and Asset Management (1) reported net income
was $221 million, a decrease of
$66 million or 24% from the prior year, primarily due to
higher underlying expenses from continued investments in the
business and divestitures. Insurance net income was
$77 million, an increase of $19 million from the prior
year, primarily due to benefits from changes in investments to
improve asset liability management.
BMO Capital Markets
Reported net income was $357
million, a decrease of $174
million or 33% from the prior year, and adjusted net income
was $363 million, a decrease of $173 million or 33%
. Reported and adjusted results were impacted by current market
conditions, resulting in lower Investment and Corporate Banking
revenue, partially offset by higher Global Markets revenue, higher
expenses, and a lower recovery of the provision for credit losses
compared with the prior year.
Corporate Services
Reported net income was $2,251
million, compared with a reported net loss of $159 million in the prior year, and adjusted net
loss was $104 million, compared with an adjusted net loss of
$107 million. Reported results
increased, primarily due to higher revenue reflecting the fair
value management actions, partially offset by the legal provision
noted above. Adjusted results were relatively unchanged from the
prior year.
Capital
BMO's Common Equity Tier 1 Ratio was 16.7% as at October 31, 2022, an increase from 15.8% at the
end of the third quarter of 2022, primarily driven by the
benefit from fair value management actions related to the announced
acquisition of Bank of the West, internal capital generation and
common shares issued from treasury under the shareholder dividend
reinvestment and share purchase plan, which were partially offset
by the legal provision noted above and higher risk-weighted
assets.
(1)
|
Wealth and Asset
Management was previously known as Traditional Wealth.
|
Credit Quality
Total provision for credit losses was $226 million,
compared with a recovery of the provision for credit losses of
$126 million in the prior year. The provision for credit
losses on impaired loans was $192
million, an increase of $108 million from the prior
year. The provision for credit losses on impaired loans as a
percentage of average net loans and acceptances ratio was 14
basis points, compared with 7 basis points in the prior year.
There was a $34 million provision for credit losses on
performing loans in the current quarter, compared with a
$210 million recovery in the prior year. The $34 million
provision for credit losses on performing loans in the current
quarter reflected a deteriorating economic outlook and balance
growth, largely offset by continued reduction in uncertainty as a
result of the improving pandemic environment and portfolio credit
improvement. The $210 million recovery of credit losses in the
prior year largely reflected an improving economic outlook and
portfolio credit improvement, partially offset by growth in loan
balances.
Refer to the Critical Accounting Estimates and Judgments section
of BMO's 2022 Annual Report and Note 4 of our audited annual
consolidated financial statements for further information on the
allowance for credit losses as at October 31, 2022.
Caution
The foregoing sections contain forward-looking statements.
Please refer to the Caution Regarding Forward-Looking
Statements.
Regulatory Filings
BMO's continuous disclosure materials, including interim
filings, annual Management's Discussion and Analysis and audited
annual consolidated financial statements, Annual Information Form
and Notice of Annual Meeting of Shareholders and Proxy Circular,
are available on our website at www.bmo.com/investorrelations, on
the Canadian Securities Administrators' website at www.sedar.com,
and on the EDGAR section of the U.S. Securities and Exchange
Commission's website at www.sec.gov. Information contained in or
otherwise accessible through our website (www.bmo.com), or any
third party websites mentioned herein, does not form part of this
document.
|
Bank of Montreal
uses a unified branding approach that links all of the
organization's member companies. Bank of Montreal, together with
its subsidiaries, is known as BMO Financial Group. In this
document, the names BMO and BMO Financial Group, as well as the
words "bank", "we" and "our", mean Bank of Montreal, together with
its subsidiaries.
|
|
Financial Review
Management's Discussion and Analysis (MD&A) commentary is as
at December 1, 2022. The material
that precedes this section comprises part of this MD&A. The
MD&A should be read in conjunction with the unaudited interim
consolidated financial statements for the period ended October 31, 2022, included in this document, as
well as the audited annual consolidated financial statements for
the year ended October 31, 2022, and
the MD&A for fiscal 2022, contained in BMO's 2022 Annual
Report.
BMO's 2022 Annual Report includes a comprehensive discussion of
its businesses, strategies and objectives, and can be accessed on
our website at www.bmo.com/investorrelations. Readers are also
encouraged to visit the site to view other quarterly financial
information.
Bank of Montreal's management,
under the supervision of the Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness, as at
October 31, 2022, of Bank of
Montreal's disclosure controls and
procedures (as defined in the rules of the U.S. Securities and
Exchange Commission and the Canadian Securities Administrators) and
has concluded that such disclosure controls and procedures are
effective.
There were no changes in our internal control over financial
reporting during the quarter ended October
31, 2022, which materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.
Because of inherent limitations, disclosure controls and
procedures and internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect
misstatements.
As in prior quarters, Bank of Montreal's Audit and Conduct Review Committee
reviewed this document and Bank of Montreal's Board of Directors approved the
document prior to its release.
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 in this document may
include, but are not limited to, statements with respect to our
objectives and priorities for fiscal 2023 and beyond, our
strategies or future actions, our targets and commitments
(including with respect to net zero emissions), expectations for
our financial condition, capital position or share price, the
regulatory environment in which we operate, the results of, or
outlook for, our operations or for the Canadian, U.S. and
international economies, the closing of our proposed acquisition of
Bank of the West, including plans for the combined operations of
BMO and Bank of the West and the financial, operational and capital
impacts of the transaction, and include statements made by our
management. Forward-looking statements are typically identified by
words such as "will", "would", "should", "believe", "expect",
"anticipate", "project", "intend", "estimate", "plan", "goal",
"commit", "target", "may", "might", "schedule", "forecast",
"outlook", "timeline", "suggest", "seek" and "could" or negative or
grammatical variations thereof.
By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties,
both general and specific in nature. 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 – many of which are beyond our
control and the effects of which can be difficult to predict –
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, including labour challenges; the severity, duration and
spread of the COVID-19 pandemic, and possibly other outbreaks of
disease or illness, and their impact on local, national or
international economies, as well as their heightening of certain
risks that may affect our future results; information, privacy and
cybersecurity, including the threat of data breaches, hacking,
identity theft and corporate espionage, as well as the possibility
of denial of service resulting from efforts targeted at causing
system failure and service disruption; benchmark interest rate
reforms; technological changes and technology resiliency; political
conditions, including changes relating to, or affecting, economic
or trade matters; climate change and other environmental and social
risk; the Canadian housing market and consumer leverage;
inflationary pressures; global supply-chain disruptions; changes in
monetary, fiscal, or economic policy; changes in laws, including
tax legislation and interpretation, or in supervisory expectations
or requirements, including capital, interest rate and liquidity
requirements and guidance, and the effect of such changes on
funding costs; weak, volatile or illiquid capital or credit
markets; the level of competition in the geographic and business
areas in which we operate; exposure to, and the resolution of,
significant litigation or regulatory matters, our ability to
successfully appeal adverse outcomes of such matters and the
timing, determination and recovery of amounts related to such
matters; the accuracy and completeness of the information we obtain
with respect to our customers and counterparties; failure of third
parties to comply with their obligations to us; our ability to
execute our strategic plans, complete proposed acquisitions or
dispositions and integrate acquisitions, including obtaining
regulatory approvals; critical accounting estimates and judgments,
and the effects of changes to accounting standards, rules and
interpretations on these estimates; operational and infrastructure
risks, including with respect to reliance on third parties; the
possibility that our proposed acquisitions, including our
acquisition of Bank of the West, do not close when expected, or at
all, because required regulatory approvals and other conditions to
closing are not received or satisfied on a timely basis, or at all,
or are received subject to adverse conditions or requirements; the
anticipated benefits from proposed acquisitions, including Bank of
the West, such as potential synergies and operational efficiencies,
are not realized; our ability to manage exposure to capital arising
from changes in fair value of assets and liabilities between
signing and closing; our ability to perform effective fair value
management actions and unforeseen consequences arising from such
actions; changes to our credit ratings; global capital markets
activities; the possible effects on our business of war or
terrorist activities; natural disasters and disruptions to public
infrastructure, such as transportation, communications, power or
water supply; and our ability to anticipate and effectively manage
risks arising from all of the foregoing factors.
We caution that the foregoing list is not exhaustive of all
possible factors. Other factors and risks could adversely affect
our results. For more information, please refer to the discussion
in the Risks That May Affect Future Results section, and the
sections related to credit and counterparty, market, insurance,
liquidity and funding, operational non-financial, legal and
regulatory, strategic, environmental and social, and reputation
risk, in the Enterprise-Wide Risk Management section of BMO's 2022
Annual Report, all of which outline certain key factors and risks
that may affect our future results. Investors and others should
carefully consider these factors and risks, as well as other
uncertainties and potential events, and the inherent uncertainty of
forward-looking statements. We do not undertake to update any
forward-looking statements, 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
shareholders and analysts in understanding our financial position
as at and for the periods ended on the dates presented, as well as
our strategic priorities and objectives, and may not be appropriate
for other purposes.
Material economic assumptions underlying the forward-looking
statements contained in this document include those set out in the
Economic Developments and Outlook section of BMO's 2022 Annual
Report, as well as in the Allowance for Credit Losses section of
BMO's 2022 Annual Report. Assumptions about the performance of the
Canadian and U.S. economies, as well as overall market conditions
and their combined effect on our business, are material factors we
consider when determining our strategic priorities, objectives and
expectations for our business. Assumptions about Bank of the West's
balance sheet, product mix and margins, and interest rate
sensitivity were material factors we considered in estimating the
fair value and goodwill and intangibles amounts at closing, and
assumptions about our integration plan, the efficiency and duration
of integration and the alignment of organizational responsibilities
were material factors we considered in estimating pre-tax cost
synergies.
In determining our expectations for economic growth, we
primarily consider historical economic data, past relationships
between economic and financial variables, changes in government
policies, and the risks to the domestic and global economy.
Financial Highlights
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Summary Income
Statement (1)
|
|
|
|
|
|
Net interest
income
|
3,767
|
4,197
|
3,756
|
15,885
|
14,310
|
Non-interest
revenue
|
6,803
|
1,902
|
2,817
|
17,825
|
12,876
|
Revenue
|
10,570
|
6,099
|
6,573
|
33,710
|
27,186
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
(369)
|
413
|
97
|
(683)
|
1,399
|
Revenue, net of
CCPB (2)
|
10,939
|
5,686
|
6,476
|
34,393
|
25,787
|
Provision for credit
losses on impaired loans
|
192
|
104
|
84
|
502
|
525
|
Provision for (recovery
of) credit losses on performing loans
|
34
|
32
|
(210)
|
(189)
|
(505)
|
Total provision for
(recovery of) credit losses
|
226
|
136
|
(126)
|
313
|
20
|
Non-interest
expense
|
4,776
|
3,859
|
3,803
|
16,194
|
15,509
|
Provision for income
taxes
|
1,454
|
326
|
640
|
4,349
|
2,504
|
Net income
|
4,483
|
1,365
|
2,159
|
13,537
|
7,754
|
Adjusted net
income
|
2,136
|
2,132
|
2,226
|
9,039
|
8,651
|
Common Share
Data ($, except as noted) (1)
|
|
|
|
|
|
Basic earnings per
share
|
6.52
|
1.96
|
3.24
|
20.04
|
11.60
|
Diluted earnings per
share
|
6.51
|
1.95
|
3.23
|
19.99
|
11.58
|
Adjusted diluted
earnings per share
|
3.04
|
3.09
|
3.33
|
13.23
|
12.96
|
Dividends declared per
share
|
1.39
|
1.39
|
1.06
|
5.44
|
4.24
|
Book value per
share
|
95.60
|
90.88
|
80.18
|
95.60
|
80.18
|
Closing share
price
|
125.49
|
127.66
|
134.37
|
125.49
|
134.37
|
Number of common shares
outstanding (in
millions)
|
|
|
|
|
|
End of
period
|
677.1
|
674.4
|
648.1
|
677.1
|
648.1
|
Average
basic
|
676.1
|
673.3
|
648.2
|
664.0
|
647.2
|
Average
diluted
|
677.5
|
674.8
|
650.1
|
665.7
|
648.7
|
Market
capitalization ($
billions)
|
85.0
|
86.1
|
87.1
|
85.0
|
87.1
|
Dividend
yield (%)
|
4.4
|
4.4
|
3.2
|
4.3
|
3.2
|
Dividend payout
ratio (%)
|
21.3
|
71.1
|
32.7
|
27.1
|
36.5
|
Adjusted dividend
payout ratio (%)
|
45.6
|
44.9
|
31.7
|
41.0
|
32.6
|
Financial Measures
and Ratios (%)
(1)
|
|
|
|
|
|
Return on
equity
|
27.6
|
8.8
|
16.0
|
22.9
|
14.9
|
Adjusted return on
equity
|
12.9
|
13.8
|
16.5
|
15.2
|
16.7
|
Return on tangible
common equity
|
30.1
|
9.6
|
18.0
|
25.1
|
17.0
|
Adjusted return on
tangible common equity
|
14.0
|
15.1
|
18.5
|
16.6
|
18.9
|
Efficiency
ratio
|
45.2
|
63.3
|
57.9
|
48.0
|
57.0
|
Efficiency ratio, net
of CCPB (2)
|
43.7
|
67.9
|
58.7
|
47.1
|
60.1
|
Adjusted efficiency
ratio, net of CCPB (2)
|
57.2
|
56.7
|
57.4
|
55.8
|
56.5
|
Operating
leverage
|
35.3
|
(24.2)
|
2.6
|
19.6
|
(1.5)
|
Operating leverage, net
of CCPB (2)
|
43.3
|
(18.4)
|
1.0
|
29.0
|
0.4
|
Adjusted operating
leverage, net of CCPB (2)
|
0.4
|
(1.9)
|
2.4
|
1.3
|
6.1
|
Net interest margin on
average earning assets
|
1.46
|
1.71
|
1.62
|
1.62
|
1.59
|
Effective tax
rate
|
24.5
|
19.3
|
22.9
|
24.3
|
24.4
|
Adjusted effective tax
rate
|
21.8
|
22.0
|
22.7
|
22.8
|
22.7
|
Total PCL-to-average
net loans and acceptances
|
0.16
|
0.10
|
(0.11)
|
0.06
|
-
|
PCL on impaired
loans-to-average net loans and acceptances
|
0.14
|
0.08
|
0.07
|
0.10
|
0.11
|
Liquidity coverage
ratio (LCR) (3)
|
135
|
129
|
125
|
135
|
125
|
Net stable funding
ratio (NSFR) (3)
|
114
|
114
|
118
|
114
|
118
|
Balance Sheet and
other information (as at, $ millions, except as
noted)
|
|
|
|
|
|
Assets
|
1,139,199
|
1,068,338
|
988,175
|
1,139,199
|
988,175
|
Average earning
assets
|
1,021,540
|
972,879
|
918,255
|
979,341
|
897,302
|
Gross loans and
acceptances
|
567,191
|
537,829
|
474,847
|
567,191
|
474,847
|
Net loans and
acceptances
|
564,574
|
535,417
|
472,283
|
564,574
|
472,283
|
Deposits
|
769,478
|
729,385
|
685,631
|
769,478
|
685,631
|
Common shareholders'
equity
|
64,730
|
61,286
|
51,965
|
64,730
|
51,965
|
Total risk weighted
assets (4)
|
363,997
|
351,711
|
325,433
|
363,997
|
325,433
|
Assets under
administration
|
744,442
|
711,508
|
634,713
|
744,442
|
634,713
|
Assets under
management
|
305,462
|
310,469
|
523,270
|
305,462
|
523,270
|
Capital
ratios (%) (4)
|
|
|
|
|
|
Common Equity Tier
1 Ratio
|
16.7
|
15.8
|
13.7
|
16.7
|
13.7
|
Tier 1 Capital
Ratio
|
18.4
|
17.3
|
15.4
|
18.4
|
15.4
|
Total Capital
Ratio
|
20.7
|
19.4
|
17.6
|
20.7
|
17.6
|
Leverage
Ratio
|
5.6
|
5.3
|
5.1
|
5.6
|
5.1
|
Foreign Exchange
Rates ($)
|
|
|
|
|
|
As at Canadian/U.S.
dollar
|
1.3625
|
1.2813
|
1.2376
|
1.3625
|
1.2376
|
Average Canadian/U.S.
dollar
|
1.3516
|
1.2774
|
1.2546
|
1.2918
|
1.2554
|
(1)
|
Adjusted results remove
certain items from reported results and are used to calculate our
adjusted measures as presented in the above table. Management
assesses performance on a reported basis and an adjusted basis, and
considers both to be useful. Revenue, net of CCPB, as well as
reported ratios calculated net of CCPB and adjusted results,
measures and ratios in this table are non-GAAP. For further
information, refer to the Non-GAAP and Other Financial Measures
section, and for details on the composition of non-GAAP amounts,
measures and ratios, as well as supplementary financial measures,
refer to the Glossary of Financial Terms.
|
(2)
|
We present revenue,
efficiency ratio and operating leverage on a basis that is net of
CCPB, which reduces the variability in insurance revenue from
changes in fair value that are largely offset by changes in the
fair value of policy benefit liabilities, the impact of which is
reflected in CCPB. For further information, refer to the Insurance
Claims, Commissions and Changes in Policy Benefits
section.
|
(3)
|
LCR and NSFR are
disclosed in accordance with the Office of the Superintendent of
Financial Institutions' (OSFI's) Liquidity Adequacy Requirements
(LAR) Guideline, as applicable.
|
(4)
|
Capital ratios and
risk-weighted assets are disclosed in accordance with OSFI's
Capital Adequacy Requirements (CAR) Guideline, as
applicable.
|
Non-GAAP and Other Financial Measures
Results and measures in this document are presented on a GAAP
basis. Unless otherwise indicated, all amounts are in Canadian
dollars and have been derived from our audited annual consolidated
financial statements prepared in accordance with International
Financial Reporting Standards (IFRS). References to GAAP mean IFRS.
We use a number of financial measures to assess our performance, as
well as the performance of our operating segments, including
amounts, measures and ratios that are presented on a non‑GAAP
basis, as described below. We believe that these non‑GAAP amounts,
measures and ratios, read together with our GAAP results, provide
readers with a better understanding of how management assesses
results.
Non-GAAP amounts, measures and ratios do not have standardized
meanings under GAAP. They are unlikely to be comparable to similar
measures presented by other companies and should not be viewed in
isolation from, or as a substitute for, GAAP results.
For further information regarding the composition
of non-GAAP and other financial measures, including
supplementary financial measures, refer to the Glossary of
Financial Terms.
Our non-GAAP measures broadly fall into the following
categories:
Adjusted measures and ratios
Management considers both reported and adjusted results and
measures to be useful in assessing underlying ongoing business
performance. Adjusted results and measures remove certain specified
items from revenue, non-interest expense and income taxes, as
detailed in the following table. Adjusted results and measures
presented in this document are non-GAAP. Presenting results on both
a reported basis and an adjusted basis permits readers to assess
the impact of certain items on results for the periods presented,
and to better assess results excluding those items that may not be
reflective of ongoing business performance. As such, the
presentation may facilitate readers' analysis of trends. Except as
otherwise noted, management's discussion of changes in reported
results in this document applies equally to changes in the
corresponding adjusted results.
Measures net of insurance claims, commissions and changes in
policy benefit liabilities (CCPB)
We also present reported and adjusted revenue on a basis that is
net of insurance claims, commissions and changes in policy benefit
liabilities (CCPB), and our efficiency ratio and operating leverage
are calculated on a similar basis, as reconciled in the Revenue
section. Measures and ratios presented on a basis net of CCPB are
non-GAAP. Insurance revenue can experience variability arising from
fluctuations in the fair value of insurance assets, caused by
movements in interest rates and equity markets. The investments
that support policy benefit liabilities are predominantly fixed
income assets recorded at fair value, with changes in fair value
recorded in insurance revenue in the Consolidated Statement of
Income. These fair value changes are largely offset by changes in
the fair value of policy benefit liabilities, the impact of which
is reflected in CCPB. The presentation and discussion of revenue,
efficiency ratios and operating leverage on a net basis reduces
this variability, which allows for a better assessment of operating
results. For more information refer to the Insurance Claims,
Commissions and Changes in Policy Benefit Liabilities section.
Presenting results on a taxable equivalent basis
(teb)
We analyze consolidated revenue on a reported basis. In
addition, we analyze revenue on a taxable equivalent basis (teb) at
the operating group level, consistent with our Canadian peer group.
Revenue and the provision for income taxes in BMO Capital Markets
and U.S. P&C are increased on tax-exempt securities to an
equivalent pre-tax basis. These adjustments are offset in Corporate
Services. Presenting results on a teb basis reflects how our
operating groups manage their business and is useful facilitating
comparisons of income between taxable and tax-exempt sources. The
effective tax rate is also analyzed on a teb basis for consistency
of approach, with the offset to operating segment adjustments
recorded in Corporate Services.
Tangible common equity and return on tangible common
equity
Tangible common equity is calculated as common shareholders'
equity less goodwill and acquisition-related intangible assets, net
of related deferred tax liabilities. Return on tangible common
equity is commonly used in the North American banking industry and
is meaningful because it measures the performance of businesses
consistently, whether they were acquired or developed
organically.
Non-GAAP and Other Financial Measures
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Reported
Results
|
|
|
|
|
|
Net interest
income
|
3,767
|
4,197
|
3,756
|
15,885
|
14,310
|
Non-interest
revenue
|
6,803
|
1,902
|
2,817
|
17,825
|
12,876
|
Revenue
|
10,570
|
6,099
|
6,573
|
33,710
|
27,186
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
369
|
(413)
|
(97)
|
683
|
(1,399)
|
Revenue, net of
CCPB
|
10,939
|
5,686
|
6,476
|
34,393
|
25,787
|
Provision for credit
losses
|
(226)
|
(136)
|
126
|
(313)
|
(20)
|
Non-interest
expense
|
(4,776)
|
(3,859)
|
(3,803)
|
(16,194)
|
(15,509)
|
Income before income
taxes
|
5,937
|
1,691
|
2,799
|
17,886
|
10,258
|
Provision for income
taxes
|
(1,454)
|
(326)
|
(640)
|
(4,349)
|
(2,504)
|
Net income
|
4,483
|
1,365
|
2,159
|
13,537
|
7,754
|
Diluted
EPS ($)
|
6.51
|
1.95
|
3.23
|
19.99
|
11.58
|
Adjusting Items
Impacting Revenue (Pre-tax)
|
|
|
|
|
|
Impact of
divestitures (1)
|
-
|
-
|
-
|
(21)
|
29
|
Management of fair
value changes on the purchase of Bank of the
West (2)
|
4,541
|
(945)
|
-
|
7,713
|
-
|
Legal
provision (3)
|
(515)
|
-
|
-
|
(515)
|
-
|
Impact of adjusting
items on revenue (pre-tax)
|
4,026
|
(945)
|
-
|
7,177
|
29
|
Adjusting Items
Impacting Non-Interest Expense (Pre-tax)
|
|
|
|
|
|
Acquisition and
integration costs (4)
|
(193)
|
(84)
|
(1)
|
(326)
|
(9)
|
Amortization of
acquisition-related intangible assets (5)
|
(8)
|
(7)
|
(20)
|
(31)
|
(88)
|
Impact of
divestitures (1)
|
6
|
(7)
|
(62)
|
(16)
|
(886)
|
Restructuring (costs)
reversals (6)
|
-
|
-
|
-
|
-
|
24
|
Legal
provision (3)
|
(627)
|
-
|
-
|
(627)
|
-
|
Impact of adjusting
items on non-interest expense (pre-tax)
|
(822)
|
(98)
|
(83)
|
(1,000)
|
(959)
|
Impact of adjusting
items on reported pre-tax income
|
3,204
|
(1,043)
|
(83)
|
6,177
|
(930)
|
Adjusting Items
Impacting Revenue (After tax)
|
|
|
|
|
|
Impact of
divestitures (1)
|
-
|
-
|
-
|
(23)
|
22
|
Management of fair
value changes on the purchase of Bank of the
West (2)
|
3,336
|
(694)
|
-
|
5,667
|
-
|
Legal
provision (3)
|
(382)
|
-
|
-
|
(382)
|
-
|
Impact of adjusting
items on revenue (after-tax)
|
2,954
|
(694)
|
-
|
5,262
|
22
|
Adjusting Items
Impacting Non-Interest Expense (After-tax)
|
|
|
|
|
|
Acquisition and
integration costs (4)
|
(145)
|
(62)
|
(1)
|
(245)
|
(7)
|
Amortization of
acquisition-related intangible assets (5)
|
(6)
|
(5)
|
(14)
|
(23)
|
(66)
|
Impact of
divestitures (1)
|
8
|
(6)
|
(52)
|
(32)
|
(864)
|
Restructuring (costs)
reversals (6)
|
-
|
-
|
-
|
-
|
18
|
Legal
provision (3)
|
(464)
|
-
|
-
|
(464)
|
-
|
Impact of adjusting
items on non-interest expense (after-tax)
|
(607)
|
(73)
|
(67)
|
(764)
|
(919)
|
Impact of adjusting
items on reported net income (after-tax)
|
2,347
|
(767)
|
(67)
|
4,498
|
(897)
|
Impact on diluted
EPS ($)
|
3.47
|
(1.14)
|
(0.10)
|
6.76
|
(1.38)
|
Adjusted
Results
|
|
|
|
|
|
Net interest
income
|
4,439
|
4,159
|
3,756
|
16,352
|
14,310
|
Non-interest
revenue
|
2,105
|
2,885
|
2,817
|
10,181
|
12,847
|
Revenue
|
6,544
|
7,044
|
6,573
|
26,533
|
27,157
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
369
|
(413)
|
(97)
|
683
|
(1,399)
|
Revenue, net of
CCPB
|
6,913
|
6,631
|
6,476
|
27,216
|
25,758
|
Provision for credit
losses
|
(226)
|
(136)
|
126
|
(313)
|
(20)
|
Non-interest
expense
|
(3,954)
|
(3,761)
|
(3,720)
|
(15,194)
|
(14,550)
|
Income before income
taxes
|
2,733
|
2,734
|
2,882
|
11,709
|
11,188
|
Provision for income
taxes
|
(597)
|
(602)
|
(656)
|
(2,670)
|
(2,537)
|
Net income
|
2,136
|
2,132
|
2,226
|
9,039
|
8,651
|
Diluted
EPS ($)
|
3.04
|
3.09
|
3.33
|
13.23
|
12.96
|
(1)
|
Reported net income
included the impact of divestitures related to the sale of our EMEA
Asset Management business and our Private Banking business in Hong
Kong and Singapore. Q4-2022 net income included an expense recovery
of $8 million ($6 million pre-tax). Q3-2022 included expenses
of $6 million ($7 million pre-tax). Q2-2022 included a gain of
$6 million ($8 million pre-tax) related to the transfer of certain
U.S. asset management clients recorded in revenue, and expenses of
$15 million ($18 million pre-tax), both related to the
sale of our EMEA Asset Management business. Q1-2022 included a
$29 million (pre-tax and after-tax) loss related to foreign
currency translation reclassified from accumulated other
comprehensive income to non-interest revenue, a $3 million
pre-tax net recovery of non-interest expense, including taxes of
$22 million on closing of the sale of our EMEA Asset
Management business. Q4-2021 included expenses of $52 million
($62 million pre-tax) related to both transactions. Q3-2021
included expenses of $18 million ($24 million pre-tax).
Q2-2021 included a $747 million (pre-tax and after-tax) write-down
of goodwill related to the sale of our EMEA Asset Management
business, a $22 million ($29 million pre-tax) gain on the
sale of our Private Banking business, and $47 million ($53 million
pre-tax) of divestiture-related costs for both transactions. The
gain on the sale was recorded in revenue with the goodwill
write-down and divestiture costs recorded in non-interest expense.
These amounts were recorded in Corporate Services.
|
(2)
|
Reported net income
included revenue (losses) related to the announced acquisition of
Bank of the West resulting from the management of the impact of
interest rate changes between the announcement and closing on its
fair value and goodwill: Q4-2022 included revenue of $3,336 million
($4,541 million pre-tax), comprising $4,698 million of pre-tax
mark-to-market gains on certain interest rate swaps recorded in
non-interest trading revenue, as well as a loss of $157 million
pre-tax on a portfolio of primarily U.S. treasury securities and
balance sheet instruments recorded in net interest income. Q3-2022
included a loss of $694 million ($945 million pre-tax),
comprising $983 million of pre-tax mark-to-market losses and $38
million of pre-tax interest income. Q2-2022 included revenue of
$2,612 million ($3,555 million pre-tax), comprising
$3,433 million of pre-tax mark-to-market gains and $122
million of pre-tax interest income. Q1-2022 included revenue of
$413 million ($562 million pre-tax), comprising $517 million
of pre-tax mark-to-market gains and $45 million of pre-tax interest
income. These amounts were recorded in Corporate Services. For
further information on this acquisition, refer to the Significant
Events section.
|
(3)
|
Q4-2022 reported net
income included a legal provision of $846 million ($1,142 million
pre-tax) related to a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank, comprising interest expense of
$515 million pre-tax and non-interest expense of $627 million
pre-tax, including legal fees of $22 million. These amounts were
recorded in Corporate Services. For further information, refer to
the Provisions and Contingent Liabilities section in Note 24
of the audited annual consolidated financial statements in BMO's
2022 Annual Report.
|
(4)
|
Reported net income
included acquisition and integration costs related to the announced
acquisition of Bank of the West recorded in non-interest expenses
in Corporate Services. Q4-2022 included $143 million
($191 million pre-tax), Q3-2022 included $61 million ($82
million pre-tax), Q2-2022 included $26 million ($35 million
pre-tax) and Q1-2022 included $7 million ($8 million pre-tax).
Reported net income included acquisition and integration costs
related to Clearpool in Q4-2022, Q3-2022, Q2-2022 and Q1-2022; and
acquisition and integration costs related to both KGS-Alpha and
Clearpool in Q4-2021, Q3-2021, Q2-2021 and Q1-2021, recorded in
non-interest expense in BMO Capital Markets. Acquisition and
integration costs were $2 million ($2 million pre-tax) in
Q4-2022, $1 million ($2 million pre-tax) in Q3-2022,
$2 million ($2 million pre-tax) in Q2-2022, and
$3 million ($4 million pre-tax) in Q1-2022. Q4-2021 was
$1 million ($1 million pre-tax), Q3-2021 was $2 million ($3 million
pre-tax), Q2-2021 was $2 million ($2 million pre-tax) and
Q1-2021 was $2 million ($3 million pre-tax).
|
(5)
|
Reported income
included amortization of acquisition-related intangible assets
recorded in non-interest expense in the related operating group and
was $6 million ($8 million pre-tax) in Q4-2022, $5 million ($7
million pre-tax) in Q3-2022, and was $6 million ($8 million
pre-tax) in both Q2-2022 and Q1-2022. Q4-2021 was $14 million ($20
million pre-tax), Q3-2021 was $15 million ($19 million pre-tax),
Q2-2021 was $18 million ($24 million pre-tax) and Q1-2021 was $19
million ($25 million pre-tax).
|
(6)
|
Q3-2021 reported net
income included a partial reversal of $18 million ($24 million
pre-tax) of restructuring charges related to severance recorded
in 2019, in non-interest expense in Corporate
Services.
|
Summary of Reported and Adjusted Results by Operating
Group
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
U.S.
Segment (1)
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
(US $ in
millions)
|
Q4-2022
|
|
|
|
|
|
|
|
|
Reported net income
(loss)
|
917
|
660
|
1,577
|
298
|
357
|
2,251
|
4,483
|
2,306
|
Acquisition and
integration costs
|
-
|
-
|
-
|
-
|
2
|
143
|
145
|
106
|
Amortization of
acquisition-related intangible assets
|
-
|
2
|
2
|
-
|
4
|
-
|
6
|
4
|
Impact of
divestitures
|
-
|
-
|
-
|
-
|
-
|
(8)
|
(8)
|
(3)
|
Management of fair
value changes on the purchase of
|
|
|
|
|
|
|
|
|
Bank of the West
|
-
|
-
|
-
|
-
|
-
|
(3,336)
|
(3,336)
|
(2,470)
|
Legal
provision
|
-
|
-
|
-
|
-
|
-
|
846
|
846
|
621
|
Adjusted net income
(loss)
|
917
|
662
|
1,579
|
298
|
363
|
(104)
|
2,136
|
564
|
Q3-2022
|
|
|
|
|
|
|
|
|
Reported net income
(loss)
|
965
|
568
|
1,533
|
324
|
262
|
(754)
|
1,365
|
(28)
|
Acquisition and
integration costs
|
-
|
-
|
-
|
-
|
1
|
61
|
62
|
49
|
Amortization of
acquisition-related intangible assets
|
-
|
1
|
1
|
1
|
3
|
-
|
5
|
5
|
Impact of
divestitures
|
-
|
-
|
-
|
-
|
-
|
6
|
6
|
-
|
Management of fair
value changes on the purchase of
|
|
|
|
|
|
|
|
|
Bank of the West
|
-
|
-
|
-
|
-
|
-
|
694
|
694
|
545
|
Adjusted net income
(loss)
|
965
|
569
|
1,534
|
325
|
266
|
7
|
2,132
|
571
|
Q4-2021
|
|
|
|
|
|
|
|
|
Reported net income
(loss)
|
933
|
509
|
1,442
|
345
|
531
|
(159)
|
2,159
|
618
|
Acquisition and
integration costs
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
2
|
Amortization of
acquisition-related intangible assets
|
-
|
6
|
6
|
4
|
4
|
-
|
14
|
9
|
Impact of
divestitures
|
-
|
-
|
-
|
-
|
-
|
52
|
52
|
4
|
Adjusted net income
(loss)
|
933
|
515
|
1,448
|
349
|
536
|
(107)
|
2,226
|
633
|
Fiscal
2022
|
|
|
|
|
|
|
|
|
Reported net income
(loss)
|
3,826
|
2,497
|
6,323
|
1,251
|
1,772
|
4,191
|
13,537
|
6,079
|
Acquisition and
integration costs
|
-
|
-
|
-
|
-
|
8
|
237
|
245
|
185
|
Amortization of
acquisition-related intangible assets
|
1
|
5
|
6
|
3
|
14
|
-
|
23
|
17
|
Impact of
divestitures
|
-
|
-
|
-
|
-
|
-
|
55
|
55
|
(45)
|
Management of fair
value changes on the purchase of
|
|
|
|
|
|
|
|
|
Bank of the West
|
-
|
-
|
-
|
-
|
-
|
(5,667)
|
(5,667)
|
(4,312)
|
Legal
provision
|
-
|
-
|
-
|
-
|
-
|
846
|
846
|
621
|
Adjusted net income
(loss)
|
3,827
|
2,502
|
6,329
|
1,254
|
1,794
|
(338)
|
9,039
|
2,545
|
Fiscal
2021
|
|
|
|
|
|
|
|
|
Reported net income
(loss)
|
3,288
|
2,176
|
5,464
|
1,382
|
2,120
|
(1,212)
|
7,754
|
2,593
|
Acquisition and
integration costs
|
-
|
-
|
-
|
-
|
7
|
-
|
7
|
6
|
Amortization of
acquisition-related intangible assets
|
1
|
24
|
25
|
24
|
17
|
-
|
66
|
37
|
Impact of
divestitures
|
-
|
-
|
-
|
-
|
-
|
842
|
842
|
27
|
Restructuring costs
(reversals)
|
-
|
-
|
-
|
-
|
-
|
(18)
|
(18)
|
(13)
|
Adjusted net income
(loss)
|
3,289
|
2,200
|
5,489
|
1,406
|
2,144
|
(388)
|
8,651
|
2,650
|
(1)
|
U.S. segment
reported and adjusted results comprise net income recorded in U.S.
P&C and our U.S. operations in BMO Wealth Management, BMO
Capital Markets and Corporate Services.
|
Refer to footnotes (1)
to (6) in the Non-GAAP and Other Financial Measures table for
details on adjusting items.
|
Certain comparative
figures have been reclassified to conform with the current year's
presentation.
|
Net Revenue, Efficiency and Operating Leverage
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Reported
|
|
|
|
|
|
Revenue
|
10,570
|
6,099
|
6,573
|
33,710
|
27,186
|
CCPB
|
(369)
|
413
|
97
|
(683)
|
1,399
|
Revenue, net of
CCPB
|
10,939
|
5,686
|
6,476
|
34,393
|
25,787
|
Non-interest
expense
|
4,776
|
3,859
|
3,803
|
16,194
|
15,509
|
Efficiency
ratio (%)
|
45.2
|
63.3
|
57.9
|
48.0
|
57.0
|
Efficiency ratio, net
of CCPB (%)
|
43.7
|
67.9
|
58.7
|
47.1
|
60.1
|
Revenue
growth (%)
|
60.9
|
(19.4)
|
9.8
|
24.0
|
7.9
|
Revenue growth, net of
CCPB (%)
|
68.9
|
(13.6)
|
8.2
|
33.4
|
9.8
|
Non-interest expense
growth (%)
|
25.6
|
4.8
|
7.2
|
4.4
|
9.4
|
Operating
Leverage (%)
|
35.3
|
(24.2)
|
2.6
|
19.6
|
(1.5)
|
Operating Leverage, net
of CCPB (%)
|
43.3
|
(18.4)
|
1.0
|
29.0
|
0.4
|
Adjusted (1)
|
|
|
|
|
|
Revenue
|
6,544
|
7,044
|
6,573
|
26,533
|
27,157
|
Impact of adjusting
items on revenue
|
(4,026)
|
945
|
-
|
(7,177)
|
(29)
|
CCPB
|
(369)
|
413
|
97
|
(683)
|
1,399
|
Revenue, net of
CCPB
|
6,913
|
6,631
|
6,476
|
27,216
|
25,758
|
Impact of adjusting
items on non-interest expense
|
(822)
|
(98)
|
(83)
|
(1,000)
|
(959)
|
Non-interest
expense
|
3,954
|
3,761
|
3,720
|
15,194
|
14,550
|
Efficiency
ratio (%)
|
60.4
|
53.4
|
56.6
|
57.3
|
53.6
|
Efficiency ratio, net
of CCPB (%)
|
57.2
|
56.7
|
57.4
|
55.8
|
56.5
|
Revenue growth, net of
CCPB (%)
|
6.7
|
0.8
|
8.2
|
5.7
|
9.7
|
Non-interest expense
growth (%)
|
6.3
|
2.7
|
5.8
|
4.4
|
3.6
|
Operating Leverage, net
of CCPB (%)
|
0.4
|
(1.9)
|
2.4
|
1.3
|
6.1
|
(1)
|
Refer to footnotes (1)
to (6) in the Non-GAAP and Other Financial Measures table for
details on adjusting items.
|
Return on Equity and Return on Tangible Common Equity
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Reported net
income
|
4,483
|
1,365
|
2,159
|
13,537
|
7,754
|
Dividends on preferred
shares and distributions on other equity instruments
|
(77)
|
(47)
|
(59)
|
(231)
|
(244)
|
Net income available to
common shareholders (A)
|
4,406
|
1,318
|
2,100
|
13,306
|
7,510
|
After-tax amortization
of acquisition-related intangible assets
|
6
|
5
|
14
|
23
|
66
|
Net income available to
common shareholders after adjusting for amortization of
|
|
|
|
|
|
acquisition-related intangible
assets (B)
|
4,412
|
1,323
|
2,114
|
13,329
|
7,576
|
After-tax impact of
other adjusting items (1)
|
(2,353)
|
762
|
53
|
(4,521)
|
831
|
Adjusted net income
available to common shareholders (C)
|
2,059
|
2,085
|
2,167
|
8,808
|
8,407
|
Average common
shareholders' equity (D)
|
63,343
|
59,707
|
52,113
|
58,078
|
50,451
|
Return on
equity (%) (= A/D)
(3)
|
27.6
|
8.8
|
16.0
|
22.9
|
14.9
|
Adjusted return on
equity (%) (= C/D)
(3)
|
12.9
|
13.8
|
16.5
|
15.2
|
16.7
|
Average tangible common
equity (E) (2)
|
58,224
|
54,846
|
46,580
|
53,148
|
44,505
|
Return on tangible
common equity (%) (= B/E)
(3)
|
30.1
|
9.6
|
18.0
|
25.1
|
17.0
|
Adjusted return on
tangible common equity (%) (=
C/E) (3)
|
14.0
|
15.1
|
18.5
|
16.6
|
18.9
|
(1)
|
Refer to footnotes (1)
to (6) in the Non-GAAP and Other Financial Measures table for
details on adjusting items.
|
(2)
|
Average tangible common
equity is average common shareholders' equity (D above) adjusted
for goodwill of $5,247 million in Q4-2022, $4,981 million in
Q3-2022, and $5,455 million in Q4-2021; $5,051 million in
fiscal 2022 and $5,836 million in fiscal 2021.
Acquisition-related intangible assets of $124 million in Q4-2022,
$126 million in Q3-2022, and $349 million in Q4-2021;
$130 million in fiscal 2022 and $381 million in
fiscal 2021. Net of related deferred tax liabilities of $252
million in Q4-2022, $246 million in Q3-2022, and $271 million in
Q4-2021; $251 million in fiscal 2022 and $271 million in
fiscal 2021.
|
(3)
|
Quarterly calculations
are on an annualized basis.
|
Capital is allocated to the operating segments based on the
amount of regulatory capital required to support business
activities. Unallocated capital is reported in Corporate Services.
Capital allocation methodologies are reviewed annually.
Return on Equity by Operating Segment
|
Q4-2022
|
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
Reported
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
906
|
650
|
1,556
|
296
|
346
|
2,208
|
4,406
|
Total average common
equity
|
12,231
|
14,381
|
26,612
|
5,400
|
12,190
|
19,141
|
63,343
|
Return on equity
(%)
|
29.4
|
17.9
|
23.2
|
21.7
|
11.3
|
na
|
27.6
|
Adjusted (1)
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
906
|
652
|
1,558
|
296
|
352
|
(147)
|
2,059
|
Total average common
equity
|
12,231
|
14,381
|
26,612
|
5,400
|
12,190
|
19,141
|
63,343
|
Return on
equity (%)
|
29.4
|
18.0
|
23.2
|
21.8
|
11.4
|
na
|
12.9
|
|
Q3-2022
|
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
Reported
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
955
|
561
|
1,516
|
322
|
252
|
(772)
|
1,318
|
Total average common
equity
|
11,842
|
13,460
|
25,302
|
5,257
|
11,786
|
17,362
|
59,707
|
Return on
equity (%)
|
32.0
|
16.5
|
23.8
|
24.3
|
8.5
|
na
|
8.8
|
Adjusted (1)
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
955
|
562
|
1,517
|
323
|
256
|
(11)
|
2,085
|
Total average common
equity
|
11,842
|
13,460
|
25,302
|
5,257
|
11,786
|
17,362
|
59,707
|
Return on
equity (%)
|
32.0
|
16.6
|
23.8
|
24.4
|
8.7
|
na
|
13.8
|
|
Q4-2021
|
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
Reported
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
922
|
499
|
1,421
|
343
|
522
|
(186)
|
2,100
|
Total average common
equity
|
11,162
|
13,391
|
24,553
|
5,640
|
10,782
|
11,138
|
52,113
|
Return on
equity (%)
|
32.8
|
14.8
|
23.0
|
24.2
|
19.2
|
na
|
16.0
|
Adjusted (1)
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
922
|
505
|
1,427
|
347
|
527
|
(134)
|
2,167
|
Total average common
equity
|
11,162
|
13,391
|
24,553
|
5,640
|
10,782
|
11,138
|
52,113
|
Return on
equity (%)
|
32.8
|
15.0
|
23.1
|
24.5
|
19.4
|
na
|
16.5
|
|
Fiscal
2022
|
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
Reported
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
3,783
|
2,461
|
6,244
|
1,243
|
1,732
|
4,087
|
13,306
|
Total average common
equity
|
11,798
|
13,815
|
25,613
|
5,282
|
11,602
|
15,581
|
58,078
|
Return on
equity (%)
|
32.1
|
17.8
|
24.4
|
23.5
|
14.9
|
na
|
22.9
|
Adjusted (1)
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
3,784
|
2,466
|
6,250
|
1,246
|
1,754
|
(442)
|
8,808
|
Total average common
equity
|
11,798
|
13,815
|
25,613
|
5,282
|
11,602
|
15,581
|
58,078
|
Return on
equity (%)
|
32.1
|
17.8
|
24.4
|
23.6
|
15.1
|
na
|
15.2
|
|
Fiscal
2021
|
|
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
|
(Canadian $ in
millions, except as noted)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
|
Reported
|
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
3,246
|
2,136
|
5,382
|
1,374
|
2,081
|
(1,327)
|
7,510
|
|
Total average common
equity
|
11,147
|
13,522
|
24,669
|
5,899
|
10,913
|
8,970
|
50,451
|
|
Return on
equity (%)
|
29.1
|
15.8
|
21.8
|
23.3
|
19.1
|
na
|
14.9
|
|
Adjusted (1)
|
|
|
|
|
|
|
|
|
Net income available to
common shareholders
|
3,247
|
2,160
|
5,407
|
1,398
|
2,105
|
(503)
|
8,407
|
|
Total average common
equity
|
11,147
|
13,522
|
24,669
|
5,899
|
10,913
|
8,970
|
50,451
|
|
Return on
equity (%)
|
29.1
|
16.0
|
21.9
|
23.7
|
19.3
|
na
|
16.7
|
|
(1) Refer
to footnotes (1) to (6) in the Non-GAAP and Other Financial
Measures table for details on adjusting items.
|
Certain comparative
figures have been reclassified to conform with the current year's
presentation.
|
na - not
applicable
|
Foreign Exchange
The Canadian dollar equivalents of BMO's U.S. segment results
that are denominated in U.S. dollars increased relative to the
third quarter of 2022 and increased relative to the fourth
quarter of 2021, due to changes in the Canadian/U.S. dollar
exchange rate. The table below indicates the relevant average
Canadian/U.S. dollar exchange rates and the impact of changes in
those rates on BMO's U.S. segment results. References in this
document to the impact of the U.S. dollar do not include U.S.
dollar-denominated amounts recorded outside of BMO's U.S.
segment.
Economically, our U.S. dollar income stream was not hedged
against the risk of changes in foreign exchange rates
during 2022 and 2021. Changes in exchange rates will
affect future results measured in Canadian dollars, and the impact
on those results is a function of the periods in which revenue,
expenses, provisions for (recoveries of) credit losses and income
taxes arise.
Refer to the Enterprise-Wide Capital Management section of BMO's
2022 Annual Report for a discussion of the impact that changes in
foreign exchange rates can have on BMO's capital position.
Effects of Changes in Exchange Rates on BMO's U.S. Segment
Reported and Adjusted Results
|
Q4-2022
|
(Canadian $ in
millions, except as noted)
|
vs.
Q4-2021
|
vs.
Q3-2022
|
Canadian/U.S. dollar
exchange rate (average)
|
|
|
Current
period
|
1.3516
|
1.3516
|
Prior
period
|
1.2546
|
1.2774
|
Effects on U.S.
segment reported results
|
|
|
Increased (Decreased)
net interest income
|
114
|
98
|
Increased (Decreased)
non-interest revenue
|
61
|
(17)
|
Increased (Decreased)
total revenue
|
175
|
81
|
Decreased (Increased)
provision for credit losses
|
6
|
(4)
|
Decreased (Increased)
non-interest expense
|
(103)
|
(83)
|
Decreased (Increased)
provision for income taxes
|
(18)
|
4
|
Increased (Decreased)
net income
|
60
|
(2)
|
Impact on earnings per
share ($)
|
0.09
|
-
|
Effects on U.S.
segment adjusted results
|
|
|
Increased (Decreased)
net interest income
|
114
|
96
|
Increased (Decreased)
non-interest revenue
|
61
|
40
|
Increased (Decreased)
total revenue
|
175
|
136
|
Decreased (Increased)
provision for credit losses
|
6
|
(4)
|
Decreased (Increased)
non-interest expense
|
(101)
|
(78)
|
Decreased (Increased)
provision for income taxes
|
(19)
|
(12)
|
Increased (Decreased)
net income
|
61
|
42
|
Impact on adjusted
earnings per share ($)
|
0.09
|
0.06
|
Adjusted results in
this table are non-GAAP amounts or non‑GAAP measures. Please refer
to the Non‑GAAP and Other Financial Measures section.
|
Net Income
Q4 2022 vs. Q4 2021
Reported net income was $4,483
million, an increase of $2,324
million from the prior year, and adjusted net income was
$2,136 million, a decrease of
$90 million or 4% from the prior year. Adjusted results
in the current quarter excluded the impact of the announced
acquisition of Bank of the West, comprising revenue of $3,336 million ($4,541 million pre-tax) related to the management
of the impact of interest rate changes between the announcement and
closing on its fair value and goodwill. In addition, the current
quarter adjusted results excluded the impact of a legal provision
of $846 million ($1,142 million
pre-tax) related to a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank, including legal fees of
$22 million. Adjusted results in both periods excluded the
impact of divestitures, the amortization of acquisition-related
intangibles assets, and acquisition and integration costs. Reported
EPS was $6.51, an increase of
$3.28 from the prior year, and
adjusted EPS was $3.04, a decrease of
$0.29 from the prior year. The public
share offering completed on March 29,
2022, reduced reported EPS by $0.18 and adjusted EPS by $0.07.
The increase in reported results reflected higher revenue from
fair value management actions, partially offset by the legal
provision noted above. Adjusted results decreased as higher net
revenue was more than offset by a higher provision for credit
losses compared with a recovery in the prior year, and higher
expenses. Net income increased in U.S. P&C, driven by higher
net interest income, and decreased in BMO Capital
Markets reflecting the impact of lower levels of client
activity given market conditions, in BMO Wealth Management, in part
due to divestitures, and in Canadian P&C with higher revenue
more than offset by higher provisions for credit losses and higher
expenses. On a reported basis, Corporate Services recorded net
income compared with a net loss in the prior year, due to the
impact of fair value management actions and acquisition and
integration costs, as well as the impact of the legal provision
noted above, and was relatively unchanged on an adjusted basis.
Q4 2022 vs. Q3 2022
Reported net income was $4,483
million, an increase of $3,118
million from the prior quarter, and adjusted net income was
$2,136 million, relatively
unchanged from the prior quarter. Reported EPS increased
$4.56 from the prior quarter, and
adjusted EPS decreased $0.05, largely
due to an increase in dividends on preferred shares and
distributions payable on other equity instruments.
The increase in reported results reflected higher revenue
related to fair value management actions, partially offset by the
legal provision and higher acquisition and integration costs noted
above. Adjusted results were relatively unchanged, as higher net
revenue was offset by higher expenses and a higher provision
for credit losses. Net income increased in BMO Capital Markets and
U.S. P&C, and decreased in Canadian P&C and BMO Wealth
Management. On a reported basis, Corporate Services recorded net
income compared with a net loss in the prior quarter, and on an
adjusted basis, Corporate Services recorded a net loss compared
with net income in the prior quarter.
For further information on non-GAAP amounts, measures and ratios
in this Net Income section, refer to the Non-GAAP and Other
Financial Measures section.
Revenue
Q4 2022 vs. Q4 2021
Reported revenue was $10,570
million, compared with $6,573
million in the prior year. Reported revenue, net of CCPB,
was $10,939 million, an increase
of $4,463 million from the prior
year, and adjusted revenue, net of CCPB was $6,913 million, an increase of $437 million or 7%. Adjusted net revenue in
the current quarter excluded revenue of $4,541 million from the impact of fair value
management actions related to the announced acquisition of Bank of
the West, as well as interest expense of $515 million related to a legal provision. The
impact of the stronger U.S. dollar increased revenue growth by 4%
and 3% on a reported and adjusted basis, respectively.
Revenue increased in our P&C businesses, primarily due to
higher net interest income reflecting strong loan growth and higher
net interest margins, partially offset by lower non-interest
revenue. Revenue decreased in BMO Wealth Management, as higher net
interest income and growth in net new client assets, were more than
offset by divestitures and weaker global markets. Revenue decreased
in BMO Capital Markets, as higher Global Markets revenue was more
than offset by lower Investment and Corporate Banking revenue. On a
reported basis, revenue in Corporate Services increased from the
prior year, due to the adjusting items noted above, and decreased
on an adjusted basis.
Reported net interest income was $3,767
million, relatively unchanged from the prior year, and
adjusted net interest income was $4,439 million, an increase of
$683 million or 18%. Adjusted results excluded interest
expense of $515 million related to
the legal provision and a loss of $157 million related to fair
value management actions. Net interest income increased in the
P&C businesses and BMO Wealth Management and decreased in BMO
Capital Markets, due to strong balance growth and higher net
interest margins reflecting the impact of the higher interest rate
environment and lower trading-related net interest income, which
decreased $188 million and was largely offset in trading
non-interest revenue.
Average earning assets were $1,021.5
billion, an increase of $103.3
billion or 11%, primarily due to loan growth, higher
securities balances and the impact of the stronger U.S. dollar,
partially offset by lower short-term cash balances.
BMO's overall reported net interest margin of 1.46% decreased 16
basis points from the prior year, primarily due to the impact of
the adjusting items noted above and the impact of lower
trading-related activities, partially offset by higher margins in
the P&C businesses. Adjusted net interest margin excluding
trading-related net interest income and earning assets
of 1.86% increased 20 basis points, primarily due to
higher net interest margins in our P&C businesses.
Reported non-interest revenue, net of CCPB, was $7,172 million, an increase of $4,452 million from the prior year, and adjusted
non‑interest revenue, net of CCPB, was $2,474 million, a decrease of $246 million or 9% from the prior year, primarily
due to lower net securities gains, other than trading, and
lower underwriting and advisory revenue reflecting the impact of
current market conditions, as well as the impact of divestitures,
partially offset by higher trading revenue.
Gross insurance loss was $218
million, compared with revenue of $223 million in the prior year, primarily due to
changes in the fair value of investments and lower annuity
sales. Insurance revenue can experience variability arising from
fluctuations in the fair value of insurance assets caused by
movements in interest rates and equity markets. The investments
that support policy benefit liabilities are predominantly fixed
income and equity assets recorded at fair value, with changes in
fair value recorded in insurance revenue in the Consolidated
Statement of Income. The impact of these fair value changes was
largely offset by changes in policy benefit liabilities, which are
discussed in the Insurance Claims, Commissions and Changes in
Policy Benefit Liabilities section.
Q4 2022 vs. Q3 2022
Reported revenue was $10,570
million, compared with $6,099
million in the prior quarter, and reported revenue, net of
CCPB, was $10,939 million, an
increase of $5,253 million from the
prior quarter. The increase was primarily driven by a gain on fair
value management actions in the current quarter, compared with a
loss in the prior quarter. Adjusted revenue, net of CCPB, increased
$282 million or 4%. The impact of the
stronger U.S. dollar increased revenue growth by 3% and 2% on a
reported and adjusted basis, respectively.
Revenue increased in our P&C businesses due to higher net
interest income, partially offset by lower non-interest revenue,
and in BMO Capital Markets, with higher revenue in both Investment
and Corporate Banking and Global Markets. Net revenue was
relatively unchanged in BMO Wealth Management. On a reported basis,
revenue in Corporate Services increased from the prior quarter due
to the adjusting items noted above, and decreased on an adjusted
basis.
Reported net interest income decreased $430 million from the prior quarter, primarily
due to the impact of the adjusting items noted above, and adjusted
net interest income increased $280
million or 7%, with increases across all operating
groups.
Average earning assets increased $48.7
billion or 5%, primarily due to loan growth, the impact of
the stronger U.S. dollar and the impact of higher low-yielding
assets in BMO Capital Markets and Corporate Services.
BMO's overall reported net interest margin decreased 25 basis
points, primarily due to the impact of the adjusting items noted
above and the impact of higher low-yielding assets in BMO Capital
Markets and Corporate Services, partially offset by a higher net
interest margin in U.S. P&C. Adjusted net interest margin,
excluding trading-related net interest income and earning assets,
increased 3 basis points.
Reported non-interest revenue, net of CCPB, increased
$5,683 million from the prior
quarter, primarily due to higher trading revenue related to fair
value management actions, and adjusted non-interest revenue, net of
CCPB, was relatively unchanged from the prior quarter, with lower
securities gains, other than trading largely offset by higher
trading revenue.
Gross insurance revenue decreased $760 million from the
prior quarter, primarily due to changes in the fair value of
investments and lower annuity sales. The decrease in insurance
revenue was largely offset by changes in CCPB, as discussed in the
Insurance Claims, Commissions and Changes in Policy Benefit
Liabilities section.
For further information on non-GAAP amounts, measures and
ratios, and results presented on a net revenue basis in this
Revenue section, refer to the Non-GAAP and Other Financial Measures
section.
Change in Net Interest Income, Average Earning Assets and Net
Interest Margin (1)
(Canadian $ in
millions, except as noted)
|
Net interest income (teb) (2)
|
|
Average earning assets (3)
|
|
Net interest margin (in basis
points)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Canadian P&C
|
1,961
|
1,938
|
1,712
|
|
292,124
|
282,781
|
258,074
|
|
266
|
272
|
263
|
U.S. P&C
|
1,462
|
1,278
|
1,074
|
|
149,721
|
137,169
|
123,154
|
|
388
|
370
|
346
|
Personal and Commercial
Banking (P&C)
|
3,423
|
3,216
|
2,786
|
|
441,845
|
419,950
|
381,228
|
|
307
|
304
|
290
|
All other operating
groups and Corporate Services (4)
|
344
|
981
|
970
|
|
579,695
|
552,929
|
537,027
|
|
na
|
na
|
na
|
Total
reported
|
3,767
|
4,197
|
3,756
|
|
1,021,540
|
972,879
|
918,255
|
|
146
|
171
|
162
|
Total
adjusted
|
4,439
|
4,159
|
3,756
|
|
1,021,540
|
972,879
|
918,255
|
|
172
|
170
|
162
|
Trading net interest
income and earning assets
|
351
|
350
|
539
|
|
150,715
|
148,990
|
149,620
|
|
na
|
na
|
na
|
Total reported
excluding trading net interest income
and
earning assets
|
3,416
|
3,847
|
3,217
|
|
870,825
|
823,889
|
768,635
|
|
156
|
185
|
166
|
Total adjusted
excluding trading net interest income
and
earning assets
|
4,088
|
3,809
|
3,217
|
|
870,825
|
823,889
|
768,635
|
|
186
|
183
|
166
|
U.S.
P&C (US$ in
millions)
|
1,082
|
1,001
|
856
|
|
110,753
|
107,372
|
98,169
|
|
388
|
370
|
346
|
(1)
|
Adjusted results and
ratios in this table are on a non-GAAP basis and are discussed in
the Non-GAAP and Other Financial Measures section.
|
(2)
|
Operating group revenue
is presented on a taxable equivalent basis (teb) in net interest
income and is non-GAAP. For further information, refer to the
Non-GAAP and Other Financial Measures and How BMO Reports Operating
Group Results sections.
|
(3)
|
Average earning assets
represents the daily average balance of deposits with central
banks, deposits with other banks, securities borrowed or purchased
under resale agreements, securities, and loans, over a one-year
period.
|
(4)
|
For further information
on net interest income for these other operating groups and
Corporate Services, refer to the Review of Operating Groups'
Performance section.
|
na – not
applicable
|
Total Provision for Credit Losses
Q4 2022 vs. Q4 2021
Total provision for credit losses was $226 million, compared with a recovery of the
provision for credit losses of $126
million in the prior year. The total provision for credit
losses as a percentage of average net loans and acceptances ratio
was 16 basis points, compared with a recovery of 11 basis
points in the prior year. The provision for credit losses on
impaired loans was $192 million, an
increase of $108 million from the
prior year. The provision for credit losses on impaired loans as a
percentage of average net loans and acceptances ratio was 14
basis points, compared with 7 basis points in the prior year. There
was a $34 million provision for
credit losses on performing loans in the current quarter, compared
with a $210 million recovery in the
prior year. The $34 million provision
for credit losses on performing loans in the current quarter
reflected a deteriorating economic outlook and balance growth,
largely offset by continued reduction in uncertainty as a result of
the improving the pandemic environment and portfolio credit
improvement. The $210 million
recovery of credit losses in the prior year largely reflected an
improving economic outlook and portfolio credit improvement,
partially offset by growth in loan balances.
Q4 2022 vs. Q3 2022
Total provision for credit losses was $226 million, an increase of $90 million from the prior quarter. The total
provision for credit losses as a percentage of average net loans
and acceptances ratio was 16 basis points, compared with 10 basis
points in prior quarter. The provision for credit losses on
impaired loans increased $88 million
from the prior quarter, primarily due to higher provisions in both
of our P&C businesses and BMO Capital Markets. The provision
for credit losses on impaired loans as a percentage of average net
loans and acceptances ratio was 14 basis points, compared
with 8 basis points in the prior quarter. There was a
$34 million provision for credit
losses on performing loans in the current quarter, compared with a
$32 million provision in the prior quarter.
Provision for Credit Losses by Operating Group
|
|
|
|
BMO
Wealth
|
BMO
Capital
|
Corporate
|
|
(Canadian $ in
millions)
|
Canadian
P&C
|
U.S.
P&C
|
Total
P&C
|
Management
|
Markets
|
Services
|
Total
Bank
|
Q4-2022
|
|
|
|
|
|
|
|
Provision for (recovery
of) credit losses on impaired loans
|
142
|
47
|
189
|
-
|
5
|
(2)
|
192
|
Provision for (recovery
of) credit losses on performing loans
|
32
|
15
|
47
|
3
|
(23)
|
7
|
34
|
Total provision for
(recovery of) credit losses
|
174
|
62
|
236
|
3
|
(18)
|
5
|
226
|
Q3-2022
|
|
|
|
|
|
|
|
Provision for (recovery
of) credit losses on impaired loans
|
104
|
22
|
126
|
2
|
(22)
|
(2)
|
104
|
Provision for (recovery
of) credit losses on performing loans
|
(15)
|
46
|
31
|
(12)
|
15
|
(2)
|
32
|
Total provision for
(recovery of) credit losses
|
89
|
68
|
157
|
(10)
|
(7)
|
(4)
|
136
|
Q4-2021
|
|
|
|
|
|
|
|
Provision for (recovery
of) credit losses on impaired loans
|
89
|
5
|
94
|
1
|
(9)
|
(2)
|
84
|
Provision for (recovery
of) credit losses on performing loans
|
(94)
|
(33)
|
(127)
|
(6)
|
(79)
|
2
|
(210)
|
Total provision for
(recovery of) credit losses
|
(5)
|
(28)
|
(33)
|
(5)
|
(88)
|
-
|
(126)
|
Fiscal
2022
|
|
|
|
|
|
|
|
Provision for (recovery
of) credit losses on impaired loans
|
432
|
107
|
539
|
2
|
(32)
|
(7)
|
502
|
Provision for (recovery
of) credit losses on performing loans
|
(91)
|
(90)
|
(181)
|
(4)
|
(11)
|
7
|
(189)
|
Total provision for
(recovery of) credit losses
|
341
|
17
|
358
|
(2)
|
(43)
|
-
|
313
|
Fiscal
2021
|
|
|
|
|
|
|
|
Provision for (recovery
of) credit losses on impaired loans
|
493
|
22
|
515
|
4
|
11
|
(5)
|
525
|
Provision for (recovery
of) credit losses on performing loans
|
(116)
|
(166)
|
(282)
|
(16)
|
(205)
|
(2)
|
(505)
|
Total provision for
(recovery of) credit losses
|
377
|
(144)
|
233
|
(12)
|
(194)
|
(7)
|
20
|
Provision for Credit Losses Performance Ratios
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Total PCL-to-average
net loans and acceptances (annualized) (%)
|
0.16
|
0.10
|
(0.11)
|
0.06
|
-
|
PCL on impaired
loans-to-average net loans and acceptances
(annualized) (%)
|
0.14
|
0.08
|
0.07
|
0.10
|
0.11
|
Impaired Loans
Total gross impaired loans (GIL) were $1,991 million, compared with $2,169 million in the prior year, with the
largest decreases in impaired loans attributable to the oil and
gas, and retail trade industries. GIL increased $37 million from $1,954
million in the prior quarter.
Factors contributing to the change in GIL are outlined in the
table below. Loans classified as impaired during the quarter
totalled $499 million, compared with $295 million in the prior year and $341 million in the prior quarter.
Changes in Gross Impaired Loans
(GIL) (1) and Acceptances
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
GIL, beginning of
period
|
1,954
|
2,123
|
2,430
|
2,169
|
3,638
|
Classified as impaired
during the period
|
499
|
341
|
295
|
1,635
|
1,775
|
Transferred to not
impaired during the period
|
(231)
|
(162)
|
(153)
|
(659)
|
(821)
|
Net
repayments
|
(152)
|
(220)
|
(269)
|
(819)
|
(1,618)
|
Amounts
written-off
|
(118)
|
(93)
|
(106)
|
(363)
|
(584)
|
Recoveries of loans and
advances previously written-off
|
-
|
-
|
-
|
-
|
-
|
Disposals of
loans
|
(9)
|
(34)
|
(18)
|
(54)
|
(79)
|
Foreign exchange and
other movements
|
48
|
(1)
|
(10)
|
82
|
(142)
|
GIL, end of
period
|
1,991
|
1,954
|
2,169
|
1,991
|
2,169
|
GIL to gross loans and
acceptances (%)
|
0.35
|
0.36
|
0.46
|
0.35
|
0.46
|
(1)
|
GIL excluded purchased
credit impaired loans.
|
Insurance Claims, Commissions and Changes in Policy Benefit
Liabilities
Insurance claims, commissions and changes in policy benefit
liabilities (CCPB) were negative $369
million, compared with $97
million in the prior year. Results decreased, largely due to
changes in the fair value of policy benefit liabilities. CCPB
decreased $782 million from the prior quarter, due to changes
in the fair value of policy benefit liabilities and the impact of
lower annuity sales. These changes were largely offset in insurance
revenue.
Non-Interest Expense
Q4 2022 vs. Q4 2021
Reported non‑interest expense was $4,776 million, an increase of $973 million from the prior year, and adjusted
non‑interest expense was $3,954 million, an increase of $234 million or 6%. Adjusted non-interest expense
excluded the impact of the legal provision in the current quarter
and the impact of divestitures, amortization of acquisition-related
intangible assets, and acquisition and integration costs in both
periods. The increase in reported expenses reflected the impact of
the legal provision, as well as higher acquisition and integration
costs related to the announced acquisition of Bank of the West.
Reported and adjusted expenses increased due to higher
employee-related costs, including higher salaries,
performance-based compensation and sales force expansion, and
higher computer and equipment costs, partially offset by
divestitures. The impact of the stronger U.S. dollar increased
expenses by approximately 4% on a reported basis and 3% on an
adjusted basis.
The reported gross efficiency ratio was 45.2%, compared with
57.9% in the prior year. On a net revenue
basis (1), the reported efficiency ratio
was 43.7%, compared with 58.7% in the prior year, and the
adjusted efficiency ratio was 57.2%, compared with 57.4% in
the prior year.
Reported gross operating leverage was positive 35.3%. On a net
revenue basis, reported operating leverage was positive 43.3%
and adjusted operating leverage was positive 0.4%.
Q4 2022 vs. Q3 2022
Reported non-interest expense increased $917 million or 24% from the prior quarter,
and adjusted non-interest expense increased $193 million
or 5%. The increase in reported expenses included the impact
of the legal provision, as well as higher acquisition and
integration costs related to the announced acquisition of Bank of
the West in the current quarter. Reported and adjusted expenses
increased, due to higher employee-related costs, higher computer
and equipment costs, and higher professional fees. The impact of
the stronger U.S. dollar increased expenses by
approximately 3% on an reported basis and 2% on an adjusted
basis.
The reported gross efficiency ratio was 45.2%, compared with
63.3% in the prior quarter. On a net revenue basis, the reported
efficiency ratio was 43.7%, compared with 67.9% in the prior
quarter, and the adjusted efficiency ratio was 57.2%, compared with
56.7%.
For further information on non-GAAP amounts, measures and ratios
in this Non-Interest Expense section, refer to the Non-GAAP and
Other Financial Measures section.
(1)
|
This ratio is
calculated using net revenue and non-interest expense. For further
discussion of Revenue, refer to the Revenue section.
|
Provision for Income Taxes
The provision for income taxes was $1,454
million, an increase of $814
million from the fourth quarter of 2021, and an increase of
$1,128 million from the third
quarter of 2022. The effective tax rate for the current quarter was
24.5%, compared with 22.9% in the fourth quarter of 2021
and 19.3% in the third quarter of 2022.
The adjusted provision for income taxes was $597 million, a decrease of $59 million from the fourth quarter of 2021, and
a decrease of $5 million from the third quarter of 2022. The
adjusted effective tax rate was 21.8% in the current quarter,
compared with 22.7% in the fourth quarter of 2021
and 22.0% in the third quarter of 2022. The change in the
reported effective tax rate in the current quarter relative to the
third quarter of 2022 and the fourth quarter of 2021 was
primarily due to the impact of higher pre-tax income in the current
quarter. The change in the adjusted effective tax rate in the
current quarter relative to the fourth quarter of 2021 was
primarily due to earnings mix, including the impact of lower
pre-tax income in the current quarter.
For further information on non-GAAP amounts, measures and ratios
in this Provision for Income Taxes section, refer to the Non-GAAP
and Other Financial Measures section.
Capital Management
BMO continues to manage its capital within the framework
described in the Enterprise-Wide Capital Management section of
BMO's 2022 Annual Report.
Fourth Quarter 2022 Regulatory Capital Review
BMO's Common Equity Tier 1 (CET1) Ratio was 16.7% as at
October 31, 2022, an increase from
15.8% at the end of the third quarter of 2022, primarily
driven by the benefit from fair value management actions related to
the announced acquisition of Bank of the West, internal capital
generation and common shares issued from treasury under the
shareholder dividend reinvestment and share purchase plan (DRIP),
which were partially offset by the impact of a legal provision
related to a lawsuit associated with a predecessor bank, M&I
Marshall and Ilsley Bank, and higher risk-weighted assets (RWA).
Refer to the Significant Events section for further information on
the fair value management actions.
CET1 Capital was $60.9 billion as
at October 31, 2022, an increase from
$55.5 billion as at July 31, 2022, primarily from the benefit of the
fair value management actions, the impact of foreign exchange
movements, internal capital generation and common shares issued
under the DRIP, partially offset by the legal provision.
The bank is subject to a capital floor as prescribed in the
Capital Adequacy Requirements (CAR) Guideline of the Office of the
Superintendent of Financial Institutions (OSFI). In calculating
regulatory capital ratios, there is a requirement to increase total
RWA when the capital floor amount calculated under the standardized
approach is higher than a similar calculation using the more
risk-sensitive advanced approach rules. The capital floor
adjustment reflected in our RWA as at October 31, 2022 was $12.6
billion, compared with $2.5
billion as at July 31,
2022.
RWA were $364.0 billion as at
October 31, 2022, an increase from
$351.7 billion as at July 31, 2022. RWA were higher, primarily due to
the impact of foreign exchange movements. Increased asset size,
driven by lending growth, was largely offset by risk transfer
transactions.
The bank's Tier 1 Capital Ratio was 18.4% as at October 31, 2022, an increase from 17.3% as at
July 31, 2022, primarily due to the
factors impacting the CET1 Capital Ratio and the $1.0 billion Limited Recourse Capital Notes
issuance. The bank's Total Capital Ratio was 20.7% as at
October 31, 2022, an increase from 19.4% as at July 31, 2022, primarily due to factors impacting
the Tier 1 Capital Ratio and the $750 million subordinated
note issuance.
The impact of foreign exchange movements on capital ratios was
largely offset. BMO's investments in foreign operations are
primarily denominated in U.S. dollars, and the foreign exchange
impact of U.S.-dollar-denominated RWA and capital deductions may
result in variability in the bank's capital ratios. We may manage
the impact of foreign exchange movements on our capital ratios,
both based on the current balance sheet and in anticipation of
impacts from the announced acquisition of Bank of the West, and did
so during the current quarter. Any such activities could also
impact our book value and return on equity.
Our Leverage Ratio was 5.6% as at October
31, 2022, an increase from 5.3% at the end of the third
quarter of 2022, due to higher Tier 1 Capital, partially
offset by higher leverage exposures mainly from the impact of
foreign exchange movements and lending growth.
The bank's risk-based Total Loss Absorbing Capacity (TLAC) Ratio
and TLAC Leverage Ratio were 33.1% and 10.1%, respectively, as at
October 31, 2022, compared with 32.0% and 9.8%,
respectively, as at July 31,
2022.
Regulatory Capital Developments
Refer to the Enterprise-Wide Capital Management section of BMO's
2022 Annual Report for a more detailed discussion of regulatory
developments.
Regulatory Capital and TLAC
Regulatory capital requirements for BMO are determined in
accordance with OSFI's CAR Guideline, which is based on the capital
standards developed by the Basel Committee on Banking Supervision.
TLAC requirements are determined in accordance with OSFI's TLAC
Guideline. For more information see the Enterprise-Wide Capital
Management section of BMO's 2022 Annual Report.
OSFI's capital and TLAC requirements are summarized in the
following table.
(% of risk-weighted
assets or leverage exposures)
|
Minimum capital
requirements
|
Total Pillar 1
Capital
Buffer (1)
|
Domestic
Stability
Buffer (2)
|
Minimum OSFI
capital
requirements including
capital buffers
|
BMO Capital and
Leverage Ratios as at
October 31, 2022
|
Common Equity Tier 1
Ratio
|
4.5 %
|
3.5 %
|
2.5 %
|
10.5 %
|
16.7 %
|
Tier 1 Capital
Ratio
|
6.0 %
|
3.5 %
|
2.5 %
|
12.0 %
|
18.4 %
|
Total Capital
Ratio
|
8.0 %
|
3.5 %
|
2.5 %
|
14.0 %
|
20.7 %
|
TLAC Ratio
|
21.5 %
|
na
|
2.5 %
|
24.0 %
|
33.1 %
|
Leverage
Ratio
|
3.0 %
|
na
|
na
|
3.0 %
|
5.6 %
|
TLAC Leverage
Ratio
|
6.75 %
|
na
|
na
|
6.75 %
|
10.1 %
|
(1)
|
The minimum 4.5% CET1
Ratio requirement is augmented by the 3.5% Total Pillar 1 Capital
Buffers, which can absorb losses during periods of stress. The
Pillar 1 Capital Buffers include a 2.5% Capital Conservation
Buffer, a 1.0% Common Equity Surcharge for domestic systemically
important banks (D-SIBs) and a Countercyclical Buffer, as
prescribed by OSFI (immaterial for the fourth quarter
of 2022). If a bank's capital ratios fall within the range of
this combined buffer, restrictions on discretionary distributions
of earnings (such as dividends, share repurchases and discretionary
compensation) would ensue, with the degree of such restrictions
varying according to the position of the bank's ratios within the
buffer range.
|
(2)
|
OSFI requires all
D-SIBs to hold a Domestic Stability Buffer (DSB) against Pillar 2
risks associated with systemic vulnerabilities. The DSB can range
from 0% to 2.5% of total RWA and is currently set at 2.5% as
at October 31, 2022. Breaches of the DSB do not result in
a bank being subject to automatic constraints on capital
distributions.
|
na – not
applicable
|
Regulatory Capital and TLAC
Position (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Gross common
equity (1)
|
64,730
|
61,286
|
51,965
|
Regulatory adjustments
applied to common equity
|
(3,839)
|
(5,822)
|
(7,474)
|
Common Equity Tier 1
capital (CET1)
|
60,891
|
55,464
|
44,491
|
Additional Tier 1
eligible capital (2)
|
6,308
|
5,308
|
5,558
|
Regulatory adjustments
applied to Tier 1
|
(78)
|
(88)
|
(83)
|
Additional Tier 1
capital (AT1)
|
6,230
|
5,220
|
5,475
|
Tier 1 capital (T1 =
CET1 + AT1)
|
67,121
|
60,684
|
49,966
|
Tier 2 eligible
capital (3)
|
8,238
|
7,499
|
7,286
|
Regulatory adjustments
applied to Tier 2
|
(50)
|
(50)
|
(51)
|
Tier 2 capital
(T2)
|
8,188
|
7,449
|
7,235
|
Total capital (TC =
T1 + T2)
|
75,309
|
68,133
|
57,201
|
Other TLAC
Instruments (4)
|
45,554
|
44,568
|
33,238
|
Adjustments applied to
Other TLAC
|
(200)
|
(167)
|
(86)
|
Other TLAC available
after adjustments
|
45,354
|
44,401
|
33,152
|
TLAC
|
120,663
|
112,534
|
90,353
|
Risk-weighted
Assets (5)
|
363,997
|
351,711
|
325,433
|
Leverage Ratio
Exposures
|
1,189,990
|
1,144,101
|
976,690
|
Capital
ratios (%)
|
|
|
|
CET1 Ratio
|
16.7
|
15.8
|
13.7
|
Tier 1 Capital
Ratio
|
18.4
|
17.3
|
15.4
|
Total Capital
Ratio
|
20.7
|
19.4
|
17.6
|
TLAC Ratio
|
33.1
|
32.0
|
27.8
|
Leverage
Ratio
|
5.6
|
5.3
|
5.1
|
TLAC Leverage
Ratio
|
10.1
|
9.8
|
9.3
|
(1)
|
Gross Common Equity
included issued qualifying common shares, retained earnings,
accumulated other comprehensive income and eligible common share
capital issued by subsidiaries.
|
(2)
|
Additional Tier 1
Eligible Capital included directly and indirectly issued qualifying
Additional Tier 1 instruments.
|
(3)
|
Tier 2 Eligible Capital
included subordinated debentures and may include portion of
expected credit loss provisions.
|
(4)
|
Other TLAC includes
senior unsecured debt subject to the Canadian Bail-In
Regime.
|
(5)
|
For institutions using
advanced approach for credit risk, there is a capital floor as
prescribed in OSFI's CAR Guideline.
|
Other Capital Developments
During the quarter, 2.8 million common shares were issued
through the DRIP and the exercise of stock options.
On October 27, 2022, we issued
$750 million 6.534% Subordinated
Notes (Non-Viability Contingent Capital (NVCC)) through our
Canadian Medium-Term Note Program.
On September 13, 2022, we issued
$1,000 million 7.325% Limited
Recourse Capital Notes, Series 3 (NVCC).
On August 25, 2022, we redeemed
all our outstanding 16 million Non-Cumulative 5-Year Rate Reset
Class B Preferred Shares, Series 42 (NVCC) for an aggregate
total of $400 million.
On July 27, 2022, we completed the
domestic public offering of $500
million Non-Cumulative 5-Year Fixed Rate Reset Class B
Preferred Shares, Series 50 (NVCC).
On June 1, 2022, we redeemed all
our outstanding $850 million
subordinated debentures, Series I Medium-Term Notes Second Tranche
(NVCC) at par, together with accrued and unpaid interest to, but
excluding the date fixed for redemption.
On May 25, 2022, we redeemed all
our outstanding 20 million Non-Cumulative 5-Year Rate Reset Class B
Preferred Shares, Series 40 (NVCC) for an aggregate total of
$500 million.
On March 29, 2022, we completed a
public offering of 20,843,750 common shares for $3,106 million to finance a portion of the
purchase price for the announced acquisition of Bank of the
West.
On March 15, 2022, we issued
$750 million 5.625% Limited Recourse
Capital Notes, Series 2 (NVCC).
On February 25, 2022, we redeemed
all our outstanding 24 million Non-Cumulative 5-Year Rate Reset
Class B Preferred Shares, Series 38 (NVCC) for an aggregate
total of $600 million.
On January 10, 2022, we completed
our U.S. public offering of US$1.25
billion of 3.088% Subordinated Notes (NVCC), due
in 2037, through our U.S. Medium-Term Note Program.
On December 3, 2021, we announced
our intention, subject to the approval of OSFI and the Toronto
Stock Exchange, to purchase for cancellation up to 22.5
million of our common shares under a normal course issuer bid.
Together with the announcement of the acquisition of Bank of the
West, we noted that we would not proceed with establishing a normal
course issuer bid and do not expect to repurchase shares prior to
the closing of the acquisition.
Under Canada's Bank
Recapitalization (Bail-In) Regime, eligible senior debt issued on,
or after September 23, 2018, is
subject to statutory conversion requirements. Canada Deposit
Insurance Corporation has the power to trigger the conversion of
bail-in debt into common shares. This statutory conversion
supplements NVCC instruments, which must be converted in full,
prior to the conversion of bail-in debt.
If an NVCC trigger event were to occur, our NVCC instruments
would be converted into BMO common shares pursuant to automatic
conversion formulas, with a conversion price based on the greater
of: (i) a floor price of $5.00; and
(ii) the current market price of our common shares at the time of
the trigger event (calculated using a 10-day weighted average).
Based on a floor price of $5.00,
these NVCC capital instruments would be converted into
approximately 3.9 billion BMO common shares, assuming no accrued
interest and no declared and unpaid dividends.
Dividends
On December 1, 2022, BMO announced
that the Board of Directors had declared a quarterly dividend on
common shares of $1.43 per share, an
increase of $0.04 from the prior
quarter, and an increase of $0.10
or 8% from the prior year. The dividend is payable on
February 28, 2023 to shareholders of record on
January 30, 2023. Common shareholders may elect to have
their cash dividends reinvested in common shares of BMO, in
accordance with the DRIP.
On January 10, 2022, we announced
the offering of a 2% discount on the common shares issued from
treasury under the dividend reinvestment feature of the DRIP.
Commencing with the common share dividend declared for the first
quarter of 2022, and subsequently until further notice, common
shares under the DRIP will be issued by the bank from treasury with
a 2% discount, calculated in accordance with the terms of the DRIP.
The discount will not apply to common shares purchased under the
"Optional Cash Payment" feature of the DRIP.
For the purposes of the Income Tax Act (Canada) and any similar provincial
and territorial legislation, BMO designates all dividends paid or
deemed to be paid on both its common and preferred shares as
"eligible dividends", unless indicated otherwise.
Caution
This Capital Management section contains forward-looking
statements. Please refer to the Caution Regarding Forward-Looking
Statements.
Review of Operating Groups' Performance
How BMO Reports Operating Group Results
BMO reports financial results for its three operating groups,
one of which comprises two operating segments, all of which are
supported by Corporate Units and Technology and Operations within
Corporate Services. Operating segment results include
treasury-related allocations in revenue, non-interest expense
allocations from Corporate Units and Technology and Operations
(T&O) and allocated capital.
BMO employs funds transfer pricing and liquidity transfer
pricing between treasury and the operating segments in order to
assign the appropriate cost and credit to funds for the appropriate
pricing of loans and deposits, and to help assess the profitability
performance of each line of business. These practices also capture
the cost of holding supplemental liquid assets to meet contingent
liquidity requirements, as well as facilitating the management of
interest rate risk and liquidity risk within our risk appetite
framework and regulatory requirements. We review our transfer
pricing methodologies at least annually, to align with our interest
rate, liquidity and funding risk management practices.
The costs of Corporate Units and T&O services are largely
allocated to the four operating segments, with any remaining
amounts retained in Corporate Services. Expenses directly incurred
to support a specific operating segment are generally allocated to
that operating segment. Other expenses that are not directly
attributable to a specific operating segment are allocated across
the operating segments, reasonably reflective of the level of
support provided to each operating segment. We review these expense
allocation methodologies periodically.
Capital is allocated to the operating segments based on the
amount of regulatory capital required to support business
activities. Unallocated capital is reported in Corporate Services.
We review our capital allocation methodologies annually.
Periodically, certain lines of business and units within our
organizational structure are realigned to support our strategic
priorities. Effective the first quarter of 2022, loans, deposits
and revenue in our business banking line of business have been
reclassified from Commercial Banking to Personal and Business
Banking within Canadian P&C, to align with our organizational
structure. In addition, certain expense allocations have been
updated to better align with current experience. Prior periods have
been reclassified to conform with the current period's
presentation.
We analyze revenue at the consolidated level based on GAAP
revenue as reported in the audited annual consolidated financial
statements, rather than on a taxable equivalent basis (teb), which
is consistent with our Canadian banking peer group. Like many
banks, BMO analyzes revenue on a teb basis at the operating segment
level. Revenue and the provision for income taxes are increased on
tax-exempt securities to an equivalent pre-tax basis in order to
facilitate comparisons of income between taxable and tax-exempt
sources. The offset to the segment teb adjustments is reflected in
Corporate Services revenue and provision for income taxes.
Personal and Commercial Banking
(P&C) (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest income
(teb) (2)
|
3,423
|
3,216
|
2,786
|
12,486
|
10,829
|
Non-interest
revenue
|
877
|
889
|
900
|
3,684
|
3,468
|
Total revenue
(teb)
|
4,300
|
4,105
|
3,686
|
16,170
|
14,297
|
Provision for credit
losses on impaired loans
|
189
|
126
|
94
|
539
|
515
|
Provision for (recovery
of) credit losses on performing loans
|
47
|
31
|
(127)
|
(181)
|
(282)
|
Total provision for
(recovery of) credit losses
|
236
|
157
|
(33)
|
358
|
233
|
Non-interest
expense
|
1,965
|
1,906
|
1,796
|
7,392
|
6,781
|
Income before income
taxes
|
2,099
|
2,042
|
1,923
|
8,420
|
7,283
|
Provision for income
taxes (teb)
|
522
|
509
|
481
|
2,097
|
1,819
|
Reported net
income
|
1,577
|
1,533
|
1,442
|
6,323
|
5,464
|
Amortization of
acquisition-related intangible assets (3)
|
2
|
1
|
6
|
6
|
25
|
Adjusted net
income
|
1,579
|
1,534
|
1,448
|
6,329
|
5,489
|
(1)
|
Adjusted results and
teb amounts in this table are on a non-GAAP basis and are discussed
in the Non-GAAP and Other Financial Measures section.
|
(2)
|
Taxable equivalent
basis amounts of $7 million in Q4-2022, $6 million in both Q3-2022
and Q4-2021; $25 million in fiscal 2022
and $24 million in fiscal 2021 are recorded in net
interest income.
|
(3)
|
Amortization of
acquisition-related intangible assets pre-tax amounts for Total
P&C of $2 million in Q4-2022, $1 million in Q3-2022, and $9
million in Q4-2021; $7 million in fiscal 2022
and $35 million in fiscal 2021 are recorded in
non‑interest expense.
|
The Personal and Commercial Banking (P&C) operating group
represents the sum of our two retail and commercial operating
segments, Canadian Personal and Commercial Banking (Canadian
P&C) and U.S. Personal and Commercial Banking (U.S. P&C).
The P&C banking business reported net income was $1,577 million, an increase of $135 million or 9% from the prior year. These
operating segments are reviewed separately in the sections that
follow.
For further information on non-GAAP amounts, measures, and
ratios in this Review of Operating Groups' Performance section,
refer to the
Non-GAAP and Other Financial Measures section.
Canadian Personal and Commercial Banking (Canadian
P&C) (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest
income
|
1,961
|
1,938
|
1,712
|
7,449
|
6,561
|
Non-interest
revenue
|
586
|
591
|
592
|
2,419
|
2,225
|
Total
revenue
|
2,547
|
2,529
|
2,304
|
9,868
|
8,786
|
Provision for credit
losses on impaired loans
|
142
|
104
|
89
|
432
|
493
|
Provision for (recovery
of) credit losses on performing loans
|
32
|
(15)
|
(94)
|
(91)
|
(116)
|
Total provision for
(recovery of) credit losses
|
174
|
89
|
(5)
|
341
|
377
|
Non-interest
expense
|
1,131
|
1,134
|
1,049
|
4,349
|
3,968
|
Income before income
taxes
|
1,242
|
1,306
|
1,260
|
5,178
|
4,441
|
Provision for income
taxes
|
325
|
341
|
327
|
1,352
|
1,153
|
Reported net
income
|
917
|
965
|
933
|
3,826
|
3,288
|
Amortization of
acquisition-related intangible assets (2)
|
-
|
-
|
-
|
1
|
1
|
Adjusted net
income
|
917
|
965
|
933
|
3,827
|
3,289
|
Adjusted non-interest
expense
|
1,131
|
1,134
|
1,049
|
4,348
|
3,966
|
Personal and Business
Banking revenue
|
1,800
|
1,770
|
1,617
|
6,904
|
6,168
|
Commercial Banking
revenue
|
747
|
759
|
687
|
2,964
|
2,618
|
Net income
growth (%)
|
(1.8)
|
16.6
|
44.7
|
16.4
|
62.8
|
Revenue
growth (%)
|
10.5
|
12.9
|
13.4
|
12.3
|
9.4
|
Non-interest expense
growth (%)
|
7.8
|
10.3
|
8.1
|
9.6
|
1.7
|
Adjusted non-interest
expense growth (%)
|
7.8
|
10.3
|
8.1
|
9.6
|
1.7
|
Return on
equity (%) (3)
|
29.4
|
32.0
|
32.8
|
32.1
|
29.1
|
Adjusted return on
equity (%) (3)
|
29.4
|
32.0
|
32.8
|
32.1
|
29.1
|
Operating
leverage (%)
|
2.7
|
2.6
|
5.3
|
2.7
|
7.7
|
Adjusted operating
leverage (%)
|
2.7
|
2.6
|
5.3
|
2.7
|
7.7
|
Efficiency
ratio (%)
|
44.4
|
44.8
|
45.5
|
44.1
|
45.2
|
Net interest margin on
average earning assets (%)
|
2.66
|
2.72
|
2.63
|
2.68
|
2.64
|
Average earning
assets
|
292,124
|
282,781
|
258,074
|
278,022
|
248,215
|
Average gross loans and
acceptances
|
304,159
|
295,167
|
271,108
|
290,324
|
261,869
|
Average
deposits
|
253,143
|
246,832
|
232,359
|
243,541
|
225,555
|
(1)
|
Adjusted results and
ratios in this table are on a non-GAAP basis and are discussed in
the Non-GAAP and Other Financial Measures section.
|
(2)
|
Amortization of
acquisition-related intangible assets pre-tax amount of $nil in
Q4-2022, Q3-2022, and Q4-2021; $1 million in fiscal 2022 and
$2 million in fiscal 2021 are recorded in non‑interest
expense.
|
(3)
|
Return on equity is
based on allocated capital. For further information, refer to
the Non-GAAP and Other Financial Measures section.
|
Q4 2022 vs. Q4 2021
Canadian P&C reported net income was $917 million, a decrease of $16 million or 2% from the prior year.
Total revenue was $2,547 million,
an increase of $243 million or 11%
from the prior year. Net interest income increased
$249 million or 15%, due to higher loan and deposit
balances and higher net interest margins. Non-interest revenue was
relatively unchanged as higher deposit fee and card-related revenue
were offset by lower gains on investments in our commercial
business. Net interest margin of 2.66% increased 3 basis
points from the prior year, primarily driven by higher deposit
margins reflecting the impact of the higher rate environment,
partially offset by lower loan margins and loans growing faster
than deposits.
Personal and Business Banking revenue increased $183 million or 11%, due to higher net interest
income and higher non-interest revenue. Commercial Banking revenue
increased $60 million or 9%, due to
higher net interest income, partially offset by lower non-interest
revenue.
Total provision for credit losses was $174 million, compared with a recovery of
$5 million in the prior year. The
provision for credit losses on impaired loans was $142 million, an increase of $53 million, due to higher provisions in both
Personal and Business Banking and Commercial Banking. There was a
$32 million provision for credit
losses on performing loans in the current quarter, compared with a
recovery of $94 million in the prior year.
Non-interest expense was $1,131
million, an increase of $82
million or 8% from the prior year, reflecting investments in
the business, including expanded sales force and technology costs,
as well as higher salaries.
Average gross loans and acceptances increased $33.1 billion or 12% from the prior year to
$304.2 billion. Personal and Business
Banking loan balances increased 9%, Commercial Banking loan
balances increased 18% and credit card balances increased 19%.
Average deposits increased $20.8 billion or 9% to $253.1 billion. Personal and Business
Banking deposits increased 9%, primarily due to strong growth in
term deposits. Commercial Banking deposits increased 8%.
Q4 2022 vs. Q3 2022
Reported net income decreased $48
million or 5% from the prior quarter.
Total revenue increased $18
million or 1%. Net interest income increased $23 million or 1%, primarily due to higher
balances, partially offset by lower net interest margins.
Non-interest revenue was relatively unchanged as higher
card-related revenue and deposit fee revenue were offset by lower
gains on investments in our commercial business. Net interest
margin of 2.66% decreased 6 basis points from the prior quarter,
primarily due to lower loan margins and loans growing faster than
deposits, partially offset by higher deposit margins.
Personal and Business Banking revenue increased $30 million or 2%, due to higher net interest
income and non-interest income, and Commercial Banking revenue
decreased $12 million or 2%,
primarily due to lower non-interest revenue.
Total provision for credit losses increased $85 million from the prior quarter. The provision
for credit losses on impaired loans increased $38 million, due
to higher provisions in both Personal and Business Banking and
Commercial Banking. There was a $32
million provision for credit losses on performing loans in
the current quarter, compared with a recovery of $15 million in the prior quarter.
Non-interest expense was relatively unchanged from the prior
quarter.
Average gross loans and acceptances increased $9.0 billion or 3% from the prior quarter.
Personal and Business Banking and Commercial Banking loan balances
both increased 3%, while credit card balances increased 5%. Average
deposits increased $6.3 billion or 3%
from the prior quarter. Personal and Business Banking deposits
increased 3%, as strong growth in term deposits was partially
offset by lower chequing and savings account deposits. Commercial
Banking deposits increased 1%.
U.S. Personal and Commercial Banking (U.S.
P&C) (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest income
(teb) (2)
|
1,462
|
1,278
|
1,074
|
5,037
|
4,268
|
Non-interest
revenue
|
291
|
298
|
308
|
1,265
|
1,243
|
Total revenue
(teb)
|
1,753
|
1,576
|
1,382
|
6,302
|
5,511
|
Provision for credit
losses on impaired loans
|
47
|
22
|
5
|
107
|
22
|
Provision for (recovery
of) credit losses on performing loans
|
15
|
46
|
(33)
|
(90)
|
(166)
|
Total provision for
(recovery of) credit losses
|
62
|
68
|
(28)
|
17
|
(144)
|
Non-interest
expense
|
834
|
772
|
747
|
3,043
|
2,813
|
Income before income
taxes
|
857
|
736
|
663
|
3,242
|
2,842
|
Provision for income
taxes (teb)
|
197
|
168
|
154
|
745
|
666
|
Reported net
income
|
660
|
568
|
509
|
2,497
|
2,176
|
Amortization of
acquisition-related intangible assets (3)
|
2
|
1
|
6
|
5
|
24
|
Adjusted net
income
|
662
|
569
|
515
|
2,502
|
2,200
|
Adjusted non-interest
expense
|
832
|
771
|
738
|
3,037
|
2,780
|
Net income
growth (%)
|
29.8
|
3.2
|
52.8
|
14.8
|
65.8
|
Adjusted net income
growth (%)
|
28.5
|
2.3
|
50.2
|
13.7
|
62.7
|
Revenue
growth (%)
|
26.9
|
16.5
|
3.7
|
14.4
|
(0.4)
|
Non-interest expense
growth (%)
|
11.7
|
11.5
|
1.8
|
8.2
|
(7.1)
|
Adjusted non-interest
expense growth (%)
|
12.7
|
12.5
|
2.4
|
9.2
|
(6.6)
|
Average earning
assets
|
149,721
|
137,169
|
123,154
|
138,094
|
122,166
|
Average gross loans and
acceptances
|
144,110
|
131,878
|
117,008
|
132,240
|
116,039
|
Average net loans and
acceptances
|
143,179
|
131,070
|
116,092
|
131,394
|
115,025
|
Average
deposits
|
148,849
|
142,865
|
142,770
|
145,633
|
139,197
|
|
|
|
|
|
|
(US$ equivalent in
millions)
|
|
|
|
|
|
Net interest income
(teb) (4)
|
1,082
|
1,001
|
856
|
3,893
|
3,400
|
Non-interest
revenue
|
215
|
233
|
245
|
981
|
990
|
Total revenue
(teb)
|
1,297
|
1,234
|
1,101
|
4,874
|
4,390
|
Provision for credit
losses on impaired loans
|
35
|
17
|
2
|
82
|
15
|
Provision for (recovery
of) credit losses on performing loans
|
11
|
36
|
(26)
|
(71)
|
(132)
|
Total provision for
(recovery of) credit losses
|
46
|
53
|
(24)
|
11
|
(117)
|
Non-interest
expense
|
617
|
604
|
596
|
2,353
|
2,242
|
Income before income
taxes
|
634
|
577
|
529
|
2,510
|
2,265
|
Provision for income
taxes (teb)
|
146
|
132
|
123
|
577
|
531
|
Reported net
income
|
488
|
445
|
406
|
1,933
|
1,734
|
Amortization of
acquisition-related intangible assets (5)
|
1
|
1
|
4
|
4
|
19
|
Adjusted net
income
|
489
|
446
|
410
|
1,937
|
1,753
|
Adjusted non-interest
expense
|
616
|
603
|
590
|
2,348
|
2,216
|
Key Performance
Metrics and Drivers (US$ basis)
|
|
|
|
|
|
Personal and Business
Banking revenue
|
402
|
363
|
324
|
1,420
|
1,313
|
Commercial Banking
revenue
|
895
|
871
|
777
|
3,454
|
3,077
|
Net income
growth (%)
|
20.5
|
(0.2)
|
60.8
|
11.5
|
77.5
|
Adjusted net income
growth (%)
|
19.3
|
(1.1)
|
58.2
|
10.5
|
74.2
|
Revenue
growth (%)
|
17.8
|
12.4
|
9.3
|
11.0
|
6.7
|
Non-interest expense
growth (%)
|
3.5
|
7.4
|
7.3
|
5.0
|
(0.4)
|
Adjusted non-interest
expense growth (%)
|
4.4
|
8.5
|
8.0
|
6.0
|
0.1
|
Return on
equity (%) (6)
|
17.9
|
16.5
|
14.8
|
17.8
|
15.8
|
Adjusted return on
equity (%) (6)
|
18.0
|
16.6
|
15.0
|
17.8
|
16.0
|
Operating leverage
(teb) (%)
|
14.3
|
5.0
|
2.0
|
6.0
|
7.1
|
Adjusted operating
leverage (teb) (%)
|
13.4
|
3.9
|
1.3
|
5.0
|
6.6
|
Efficiency ratio
(teb) (%)
|
47.6
|
49.0
|
54.1
|
48.3
|
51.1
|
Adjusted efficiency
ratio (teb) (%)
|
47.5
|
48.9
|
53.5
|
48.2
|
50.5
|
Net interest margin on
average earning assets (teb) (%)
|
3.88
|
3.70
|
3.46
|
3.64
|
3.49
|
Average earning
assets
|
110,753
|
107,372
|
98,169
|
106,829
|
97,321
|
Average gross loans and
acceptances
|
106,603
|
103,231
|
93,270
|
102,290
|
92,439
|
Average
deposits
|
110,138
|
111,836
|
113,806
|
112,780
|
110,910
|
(1)
|
Adjusted results and
ratios and teb amounts in this table are on a non-GAAP basis and
are discussed in the Non-GAAP and Other Financial Measures
section.
|
(2)
|
Taxable equivalent
basis amounts of $7 million in Q4-2022, $6 million in both Q3-2022
and Q4-2021; $25 million in fiscal 2022 and $24 million in fiscal
2021 are recorded in net interest income.
|
(3)
|
Amortization of
acquisition-related intangible assets pre-tax amounts of $2 million
in Q4-2022, $1 million in Q3-2022, and $9 million Q4-2021; $6
million in fiscal 2022 and $33 million in fiscal 2021 are
recorded in non-interest expense.
|
(4)
|
Taxable equivalent
basis amounts of US$6 million in Q4-2022, US$5 million in both
Q3-2022 and Q4-2021; US$20 million in both fiscal 2022 and
fiscal 2021 are recorded in net interest income.
|
(5)
|
Amortization of
acquisition-related intangible assets pre-tax amounts of US$1
million in both Q4-2022 and Q3-2022, and US$6 million in Q4-2021;
US$5 million for fiscal 2022 and US$26 million for
fiscal 2021 are recorded in non-interest expense.
|
(6)
|
Return on equity is
based on allocated capital. For further information, refer to the
Non-GAAP and Other Financial Measures section.
|
Q4 2022 vs. Q4 2021
U.S. P&C reported net income was $660
million, an increase of $151
million or 30% from the prior year. The impact of the
stronger U.S. dollar increased revenue and net income growth by 9%,
and expense growth by 8%. All amounts in the remainder of this
section are presented on a U.S. dollar basis.
Reported net income was $488
million, an increase of $82
million or 21% from the prior year.
Total revenue was $1,297 million,
an increase of $196 million or 18%
from the prior year. Net interest income increased
$226 million or 26%, primarily due to higher net interest
margins and loan balances, partially offset by lower Paycheck
Protection Program (PPP) (1) revenue.
Non-interest revenue decreased $30
million or 12%, primarily due to lower deposit fee and
operating lease revenue. Net interest margin of 3.88%
increased 42 basis points, primarily due to higher deposit
margins reflecting the impact of the higher rate environment,
partially offset by loans growing faster than deposits and lower
loan margins.
Personal and Business Banking revenue increased $78 million or 24%, and Commercial Banking
revenue increased $118 million
or 15%, both due to higher net interest income, partially
offset by lower non-interest revenue.
Total provision for credit losses was $46
million, compared with a recovery of $24 million in the prior year. The provision for
credit losses on impaired loans was $35
million, an increase of $33
million, primarily due to higher Commercial Banking
provisions. There was a $11 million provision for credit
losses on performing loans in the current quarter, compared with a
recovery of $26 million in the prior
year.
Non-interest expense was $617
million, an increase of $21
million or 4% from the prior year, primarily reflecting
higher technology and employee-related costs.
Average gross loans and acceptances increased $13.3 billion or 14% from the prior year to
$106.6 billion. The reduction in PPP
loans reduced loan growth by 2%. Commercial Banking loan balances
increased 17%, while Personal and Business Banking loan balances
increased 2%. Average deposits decreased $3.7 million or 3% from prior year to
$110.1 million. Commercial Banking
deposits decreased 6% and Personal and Business Banking deposits
were relatively unchanged.
Q4 2022 vs. Q3 2022
Reported net income increased $92
million or 16% from the prior quarter. The impact of the
stronger U.S. dollar increased revenue, expense, and net income
growth by 6%. All amounts in the remainder of this section are on a
U.S. dollar basis.
Reported net income increased $43
million or 10% from the prior quarter.
Total revenue increased $63
million or 5% from the prior quarter. Net interest income
increased $81 million or 8%,
primarily due to higher net interest margins and higher loan
balances, partially offset by lower deposit balances.
Non-interest revenue decreased $18
million or 8% from the prior quarter, primarily due to
lower deposit fee revenue. Net interest margin of 3.88%
increased 18 basis points from the prior quarter, driven by higher
deposit margins reflecting the impact of the higher rate
environment, partially offset by lower loan margins and loans
growing faster than deposits.
Personal and Business Banking revenue increased $39 million or 11%, and Commercial Banking
increased $24 million or 3%, both due
to higher net interest income, partially offset by lower
non-interest revenue.
Total provision for credit losses decreased $7 million from the prior quarter. The provision
for credit losses on impaired loans increased $18 million,
largely due to higher Commercial Banking provisions. There was
a $11 million provision for credit
losses on performing loans in the current quarter, compared with
$36 million in the prior quarter.
Non-interest expense increased $13
million or 2% from the prior quarter, primarily due to
higher technology and employee-related costs.
Average gross loans and acceptances increased $3.4 billion or 3% from the prior quarter.
Commercial Banking loan balances increased 4% and
Personal and Business Banking loan balances increased 2%. Average
deposits decreased $1.7 billion or 2%
from prior quarter. Commercial Banking deposits decreased 2%
and Personal and Business Banking deposits decreased 1%.
(1)
|
The U.S. Small Business
Administration Paycheck Protection Program (PPP) is a government
relief program implemented in fiscal 2020 to support businesses
that faced financial hardship caused by the COVID-19
pandemic.
|
BMO Wealth Management (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest
income
|
324
|
314
|
259
|
1,188
|
982
|
Non-interest
revenue
|
606
|
1,391
|
1,276
|
3,336
|
6,071
|
Total
revenue
|
930
|
1,705
|
1,535
|
4,524
|
7,053
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
(369)
|
413
|
97
|
(683)
|
1,399
|
Revenue, net of
CCPB
|
1,299
|
1,292
|
1,438
|
5,207
|
5,654
|
Provision for credit
losses on impaired loans
|
-
|
2
|
1
|
2
|
4
|
Provision for (recovery
of) credit losses on performing loans
|
3
|
(12)
|
(6)
|
(4)
|
(16)
|
Total provision for
(recovery of) credit losses
|
3
|
(10)
|
(5)
|
(2)
|
(12)
|
Non-interest
expense
|
901
|
881
|
990
|
3,564
|
3,843
|
Income before income
taxes
|
395
|
421
|
453
|
1,645
|
1,823
|
Provision for income
taxes
|
97
|
97
|
108
|
394
|
441
|
Reported net
income
|
298
|
324
|
345
|
1,251
|
1,382
|
Amortization of
acquisition-related intangible assets (2)
|
-
|
1
|
4
|
3
|
24
|
Adjusted net
income
|
298
|
325
|
349
|
1,254
|
1,406
|
Adjusted non-interest
expense
|
900
|
880
|
984
|
3,559
|
3,812
|
Wealth and Asset
Management reported net income (3)
|
221
|
263
|
287
|
992
|
1,109
|
Wealth and Asset
Management adjusted net income (3)
|
221
|
264
|
291
|
995
|
1,133
|
Insurance reported net
income
|
77
|
61
|
58
|
259
|
273
|
Insurance adjusted net
income
|
77
|
61
|
58
|
259
|
273
|
Net income growth
(%)
|
(13.7)
|
(14.4)
|
16.5
|
(9.5)
|
37.9
|
Adjusted net income
growth (%)
|
(14.5)
|
(15.1)
|
14.7
|
(10.7)
|
35.7
|
Revenue
growth (%)
|
(39.3)
|
(29.7)
|
17.2
|
(35.8)
|
5.1
|
Revenue growth, net of
CCPB (%)
|
(9.7)
|
(10.4)
|
9.8
|
(7.9)
|
13.1
|
Adjusted
CCPB
|
(369)
|
413
|
97
|
(683)
|
1,399
|
Non-interest expense
growth (%)
|
(8.9)
|
(6.6)
|
8.2
|
(7.2)
|
5.3
|
Adjusted non-interest
expense growth (%)
|
(8.6)
|
(6.2)
|
8.9
|
(6.6)
|
5.8
|
Return on
equity (%) (4)
|
21.7
|
24.3
|
24.2
|
23.5
|
23.3
|
Adjusted return on
equity (%) (4)
|
21.8
|
24.4
|
24.5
|
23.6
|
23.7
|
Operating leverage, net
of CCPB (%)
|
(0.8)
|
(3.8)
|
1.6
|
(0.7)
|
7.8
|
Adjusted operating
leverage, net of CCPB (%)
|
(1.1)
|
(4.2)
|
0.9
|
(1.3)
|
7.3
|
Reported efficiency
ratio (%)
|
96.8
|
51.7
|
64.5
|
78.8
|
54.5
|
Reported efficiency
ratio, net of CCPB (%)
|
69.3
|
68.3
|
68.8
|
68.4
|
68.0
|
Adjusted efficiency
ratio (%)
|
96.6
|
51.6
|
64.1
|
78.7
|
54.1
|
Adjusted efficiency
ratio, net of CCPB (%)
|
69.2
|
68.2
|
68.4
|
68.4
|
67.4
|
Assets under
management
|
305,462
|
310,469
|
523,270
|
305,462
|
523,270
|
Assets under
administration (5)
|
424,191
|
419,901
|
427,446
|
424,191
|
427,446
|
Average
assets
|
51,915
|
50,774
|
49,629
|
50,488
|
48,232
|
Average gross loans and
acceptances
|
36,036
|
34,842
|
30,351
|
34,007
|
28,920
|
Average
deposits
|
56,428
|
55,456
|
53,300
|
55,919
|
51,030
|
U.S. Business Select
Financial Data (US$ in millions)
|
|
|
|
|
|
Total
revenue
|
145
|
142
|
162
|
576
|
625
|
Non-interest
expense
|
116
|
112
|
120
|
458
|
481
|
Reported net
income
|
20
|
28
|
32
|
91
|
111
|
Adjusted non-interest
expense
|
115
|
111
|
118
|
454
|
474
|
Adjusted net
income
|
21
|
29
|
34
|
94
|
116
|
Average gross loans and
acceptances
|
6,423
|
6,197
|
5,152
|
5,937
|
4,892
|
Average
deposits
|
7,119
|
7,265
|
7,537
|
7,528
|
7,321
|
(1)
|
Revenue measures, net
of CCPB, adjusted results and ratios in this table are on a
non-GAAP basis and are discussed in the Non-GAAP and Other
Financial Measures section.
|
(2)
|
Amortization of
acquisition-related intangible assets pre-tax amounts of $1 million
in Q4-2022 and Q3-2022, and $6 million in Q4-2021; $5 million
in fiscal 2022 and $31 million in fiscal 2021 are
recorded in non‑interest expense.
|
(3)
|
Wealth and Asset
Management was previously known as Traditional Wealth.
|
(4)
|
Return on equity is
based on allocated capital. For further information, refer to the
Non-GAAP and Other Financial Measures section.
|
(5)
|
Certain assets under
management that are also administered by the bank are included in
assets under administration.
|
Q4 2022 vs. Q4 2021
BMO Wealth Management reported net income was $298 million, compared with $345 million in the prior year. Wealth and Asset
Management reported net income was $221
million, a decrease of $66
million or 24% from the prior year and Insurance net income
was $77 million, an increase of
$19 million or 36%. Divestitures reduced growth in
reported net income by 4% and in assets under management by
39%.
Total revenue was $930 million,
compared with $1,535 million in the
prior year. Revenue, net of CCPB, was $1,299 million, a decrease of
$139 million or 10%. Revenue in Wealth and Asset Management
was $1,164 million, a decrease of
$168 million or 12%, as
divestitures and the impact of weaker global markets were
partially offset by higher net interest income from higher
margins and strong loan and deposit growth, as well as the
impact of higher net new client assets. Insurance revenue, net of
CCPB, was $135 million, an increase
of $29 million or 25% from the prior
year, primarily due to benefits from changes in investments to
improve asset liability management.
Non-interest expense was $901
million, a decrease of $89
million or 9%, as continued investments in the business,
including sales force expansion and higher technology
costs, were more than offset by divestitures.
Assets under management of $305.5
billion decreased $217.8
billion or 42%, and assets under administration of
$424.2 billion decreased
$3.3 billion or 1% from the
prior year, primarily due to divestitures and weaker global
markets, partially offset by favourable foreign exchange rate
movements and higher underlying net new client assets. Average
gross loans increased 19% and average deposits increased 6%.
Q4 2022 vs. Q3 2022
Reported net income decreased $26
million or 8% from the prior quarter. Wealth and Asset
Management reported net income decreased $42 million
or 16% and Insurance net income increased $16 million or 29%.
Total revenue was $930 million,
compared with $1,705 million in the
prior quarter. Revenue, net of CCPB, increased $7 million
or 1% from the prior quarter. Wealth and Asset Management
revenue decreased $18 million or 1%,
as the impact of weaker global markets was partially offset by
higher net interest income from higher margins. Insurance revenue,
net of CCPB, increased $25 million or
22%, primarily due to the impact of favourable market movements in
the current quarter relative to unfavourable movements in the prior
quarter.
Non-interest expense increased $20
million or 2%, primarily due to continued investments in the
business, including sales force expansion, and higher technology
costs.
Assets under management decreased $5.0
billion or 2% and assets under administration increased
$4.3 billion or 1%, reflecting the
impact of weaker global markets and favourable foreign exchange
rate movements. Average gross loans and deposits increased 3%
and 2% respectively.
BMO Capital Markets (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest income
(teb) (2)
|
778
|
750
|
873
|
3,197
|
3,115
|
Non-interest
revenue
|
627
|
514
|
557
|
2,975
|
3,011
|
Total revenue
(teb)
|
1,405
|
1,264
|
1,430
|
6,172
|
6,126
|
Provision for (recovery
of) credit losses on impaired loans
|
5
|
(22)
|
(9)
|
(32)
|
11
|
Provision for (recovery
of) credit losses on performing loans
|
(23)
|
15
|
(79)
|
(11)
|
(205)
|
Total provision for
(recovery of) credit losses
|
(18)
|
(7)
|
(88)
|
(43)
|
(194)
|
Non-interest
expense
|
965
|
920
|
809
|
3,855
|
3,462
|
Income (loss) before
income taxes
|
458
|
351
|
709
|
2,360
|
2,858
|
Provision for (recovery
of) income taxes (teb)
|
101
|
89
|
178
|
588
|
738
|
Reported net
income
|
357
|
262
|
531
|
1,772
|
2,120
|
Acquisition and
integration costs (3)
|
2
|
1
|
1
|
8
|
7
|
Amortization of
acquisition-related intangible assets (4)
|
4
|
3
|
4
|
14
|
17
|
Adjusted net
income
|
363
|
266
|
536
|
1,794
|
2,144
|
Adjusted non-interest
expense
|
958
|
913
|
803
|
3,826
|
3,431
|
Global Markets
revenue
|
851
|
813
|
774
|
3,763
|
3,605
|
Investment and
Corporate Banking revenue
|
554
|
451
|
656
|
2,409
|
2,521
|
Net income
growth (%)
|
(32.9)
|
(52.6)
|
39.6
|
(16.5)
|
94.1
|
Adjusted net income
growth (%)
|
(32.6)
|
(52.2)
|
38.2
|
(16.4)
|
91.3
|
Revenue
growth (%)
|
(1.8)
|
(20.1)
|
3.8
|
0.7
|
15.0
|
Non-interest expense
growth (%)
|
19.3
|
(0.5)
|
1.3
|
11.3
|
7.3
|
Adjusted non-interest
expense growth (%)
|
19.5
|
(0.5)
|
1.7
|
11.5
|
7.5
|
Return on
equity (%) (5)
|
11.3
|
8.5
|
19.2
|
14.9
|
19.1
|
Adjusted return on
equity (%) (5)
|
11.4
|
8.7
|
19.4
|
15.1
|
19.3
|
Operating leverage
(teb) (%)
|
(21.1)
|
(19.6)
|
2.5
|
(10.6)
|
7.7
|
Adjusted operating
leverage (teb) (%)
|
(21.3)
|
(19.6)
|
2.1
|
(10.8)
|
7.5
|
Efficiency ratio
(teb) (%)
|
68.8
|
72.7
|
56.6
|
62.5
|
56.5
|
Adjusted efficiency
ratio (teb) (%)
|
68.3
|
72.2
|
56.1
|
62.0
|
56.0
|
Average
assets
|
423,522
|
398,282
|
376,714
|
404,728
|
372,475
|
Average gross loans and
acceptances
|
71,541
|
64,264
|
58,845
|
63,254
|
59,385
|
U.S. Business Select
Financial Data (US$ in millions)
|
|
|
|
|
|
Total revenue
(teb)
|
419
|
381
|
550
|
2,010
|
2,373
|
Non-interest
expense
|
400
|
341
|
310
|
1,471
|
1,317
|
Reported net
income
|
11
|
24
|
205
|
415
|
836
|
Adjusted non-interest
expense
|
395
|
336
|
304
|
1,450
|
1,292
|
Adjusted net
income
|
14
|
28
|
210
|
431
|
855
|
Average
assets
|
138,841
|
142,751
|
137,739
|
141,506
|
127,619
|
Average gross loans and
acceptances
|
26,661
|
25,627
|
25,419
|
25,118
|
25,480
|
(1)
|
Adjusted results and
ratios and teb amounts in this table are on a non-GAAP basis and
are discussed in the Non-GAAP and Other Financial
Measures.
|
(2)
|
Taxable equivalent
basis amounts of $61 million in both Q4-2022 and Q3-2022, and $72
million in Q4-2021; $245 million in fiscal 2022 and $291 million in
fiscal 2021 are recorded in net interest income.
|
(3)
|
Clearpool acquisition
pre-tax integration costs of $2 million in both Q4-2022 and
Q3-2022, and $10 million in fiscal 2022, and KGS-Alpha and
Clearpool acquisition pre-tax integration costs of $1 million
in Q4-2021 and $9 million in fiscal 2021 are recorded in
non-interest expense.
|
(4)
|
Amortization of
acquisition-related intangible assets pre-tax amounts of $5 million
in each of Q4-2022, Q3-2022, and Q4-2021; $19 million in fiscal
2022 and $22 million in fiscal 2021 are recorded in
non-interest expense.
|
(5)
|
Return on equity is
based on allocated capital. For further information, refer to the
Non-GAAP and Other Financial Measures section.
|
Q4 2022 vs. Q4 2021
BMO Capital Markets reported net income was $357 million, a decrease of $174 million or 33% from the prior year.
Total revenue was $1,405 million,
a decrease of $25 million or 2% from
the prior year. Global Markets revenue increased $77 million
or 10%, due to higher foreign exchange, commodities and other
trading revenue, and the impact of the stronger U.S. dollar,
partially offset by lower equities trading revenue, lower net
securities gains and lower new debt and equity issuances.
Investment and Corporate Banking revenue decreased
$102 million or 16%, primarily due to lower underwriting and
advisory revenue reflecting the impact of lower levels of client
activity in the current market conditions and lower net securities
gains, partially offset by higher corporate banking revenue and the
impact of the stronger U.S. dollar.
Total recovery of the provision for credit losses was
$18 million, compared with a recovery
of $88 million in the prior year. The
provision for credit losses on impaired loans was $5 million, compared with a recovery of
$9 million in the prior year. There
was a $23 million recovery of the
provision for credit losses on performing loans in the current
quarter, compared with a recovery of $79
million in the prior year.
Non-interest expense was $965
million, an increase of $156
million or 19% from the prior year, primarily due to
continued investments in the business, higher employee-related
costs and the impact of the stronger U.S. dollar.
Average gross loans and acceptances increased $12.7 billion or 22% from the prior year to
$71.5 billion, due to higher lending
activity across loan portfolios and the impact of the stronger U.S.
dollar, partially offset by the impact of the deconsolidation of
our customer securitization vehicle in the United States and the wind-down of our
non-Canadian energy portfolio.
Q4 2022 vs. Q3 2022
Reported net income increased $95
million or 36% from the prior quarter.
Total revenue increased $141
million or 11% from the prior quarter. Global Markets
revenue increased $38 million
or 4%, due to higher interest rate trading revenue and other
trading revenue, as well as the impact of the stronger U.S. dollar,
partially offset by lower equities trading revenue and lower net
securities gains. Investment and Corporate Banking revenue
increased $103 million or 23%, driven
by lower markdowns on loan underwriting commitments, higher
corporate banking-related revenue, as well as higher underwriting
and advisory revenue, partially offset by lower net securities
gains.
Total recovery of the provision for credit losses was
$18 million, compared with a recovery
of $7 million in the prior quarter.
The provision for credit losses on impaired loans was $5 million, compared with a recovery of
$22 million in the prior quarter.
There was a $23 million recovery of
the provision for credit losses on performing loans in the current
quarter, compared with a provision of $15
million in the prior quarter.
Non-interest expense increased $45
million or 5% from the prior quarter, driven by higher
employee-related costs, net of severance costs in the prior
quarter, and the impact of the stronger U.S. dollar.
Average gross loans and acceptances increased $7.3 billion or 11% from the prior quarter, due
to higher lending activity across our loan portfolios and the
impact of the stronger U.S. dollar.
Corporate Services (1)
(Canadian $ in
millions, except as noted)
|
Q4-2022
|
Q3-2022
|
Q4-2021
|
Fiscal
2022
|
Fiscal
2021
|
Net interest income
before group teb offset
|
(690)
|
(16)
|
(84)
|
(716)
|
(301)
|
Group teb
offset
|
(68)
|
(67)
|
(78)
|
(270)
|
(315)
|
Net interest income
(teb)
|
(758)
|
(83)
|
(162)
|
(986)
|
(616)
|
Non-interest
revenue
|
4,693
|
(892)
|
84
|
7,830
|
326
|
Total revenue
(teb)
|
3,935
|
(975)
|
(78)
|
6,844
|
(290)
|
Provision for (recovery
of) credit losses on impaired loans
|
(2)
|
(2)
|
(2)
|
(7)
|
(5)
|
Provision for (recovery
of) credit losses on performing loans
|
7
|
(2)
|
2
|
7
|
(2)
|
Total provision for
(recovery of) credit losses
|
5
|
(4)
|
-
|
-
|
(7)
|
Non-interest
expense
|
945
|
152
|
208
|
1,383
|
1,423
|
Income (loss) before
income taxes
|
2,985
|
(1,123)
|
(286)
|
5,461
|
(1,706)
|
Provision for (recovery
of) income taxes (teb)
|
734
|
(369)
|
(127)
|
1,270
|
(494)
|
Reported net income
(loss)
|
2,251
|
(754)
|
(159)
|
4,191
|
(1,212)
|
Acquisition and
integration costs (2)
|
143
|
61
|
-
|
237
|
-
|
Impact of
divestitures (3)
|
(8)
|
6
|
52
|
55
|
842
|
Management of fair
value changes on the purchase of Bank of the
West (4)
|
(3,336)
|
694
|
-
|
(5,667)
|
-
|
Restructuring costs
(reversals) (5)
|
-
|
-
|
-
|
-
|
(18)
|
Legal
provision (6)
|
846
|
-
|
-
|
846
|
-
|
Adjusted net income
(loss)
|
(104)
|
7
|
(107)
|
(338)
|
(388)
|
Adjusted total revenue
(teb)
|
(91)
|
(30)
|
(78)
|
(333)
|
(319)
|
Adjusted non-interest
expense
|
133
|
63
|
146
|
424
|
561
|
U.S. Business Select
Financial Data (US$ in millions)
|
|
|
|
|
|
Total
revenue
|
3,018
|
(666)
|
(4)
|
5,604
|
(26)
|
Total provision for
(recovery of) credit losses
|
-
|
(2)
|
-
|
(4)
|
(6)
|
Non-interest
expense
|
598
|
60
|
38
|
686
|
148
|
Provision for (recovery
of) income taxes (teb)
|
633
|
(199)
|
(17)
|
1,282
|
(80)
|
Reported net income
(loss)
|
1,787
|
(525)
|
(25)
|
3,640
|
(88)
|
Adjusted total
revenue
|
34
|
76
|
(4)
|
106
|
(26)
|
Adjusted non-interest
expense
|
1
|
(4)
|
33
|
44
|
130
|
Adjusted net income
(loss)
|
40
|
68
|
(21)
|
83
|
(74)
|
(1)
|
Adjusted results and
ratios, and teb amounts in this table are on a non-GAAP basis and
are discussed in the Non-GAAP and Other Financial Measures
section.
|
(2)
|
Reported net income
included acquisition and integration costs related to the announced
acquisition of Bank of the West of $143 million ($191 million
pre-tax) in Q4-2022, $61 million ($82 million pre-tax) in
Q3-2022, and $237 million ($316 million pre-tax) in fiscal 2022,
all recorded in non-interest expense.
|
(3)
|
Reported net income
included the impact of divestitures related to the sale of our EMEA
Asset Management business and our Private Banking business in Hong
Kong and Singapore. Q4-2022 included a recovery of non-interest
expense of $8 million ($6 million pre-tax), Q3-2022 included
expenses of $6 million ($7 million pre-tax), both related to the
sale of our EMEA Asset Management business, and Q4-2021 included
expenses of $52 million ($62 million pre-tax) related to both
transactions, recorded in non-interest expense. Fiscal 2022
included a gain of $6 million ($8 million pre‑tax) related to the
transfer of certain U.S. asset management clients, a $29 million
pre-tax and after-tax loss related to foreign currency translation
reclassified from accumulated other comprehensive income, both
recorded in non-interest revenue, expenses of $32 million ($16
million pre-tax), including taxes of $22 million on closing of the
sale of our EMEA Asset Management business, recorded in
non-interest expense. Fiscal 2021 included a $779 million
pre‑tax and after‑tax write‑down of goodwill related to the sale of
our EMEA Asset Management business recorded in non‑interest
expense, a $22 million ($29 million pre‑tax) net gain on
the sale of our Private Banking business in Hong Kong and Singapore
recorded in non‑interest revenue, and $85 million ($107 million
pre‑tax) of divestiture‑related costs for both transactions
recorded in non‑interest expense.
|
(4)
|
Reported net income
included revenue (losses) related to the announced acquisition of
Bank of the West resulting from the management of the impact of
interest rate changes between the announcement and closing of the
acquisition on its fair value and goodwill. Q4-2022 included
revenue of $3,336 million ($4,541 million pre-tax), comprising
$4,698 million of pre-tax mark-to-market gains on certain interest
rate swaps recorded in non-interest trading revenue, as well as a
loss of $157 million pre-tax on a portfolio of primarily U.S.
treasury securities and balance sheet instruments recorded in net
interest income. Q3-2022 included a loss of $694 million
($945 million pre-tax), comprising $983 million of pre-tax
mark-to-market losses and $38 million pre-tax interest income.
Fiscal 2022 included revenue of $5,667 million ($7,713 million
pre-tax), comprising $7,665 million of pre-tax mark-to-market gains
and $48 million of pre-tax interest income. For further information
on this acquisition, refer to the Significant Events
section.
|
(5)
|
Fiscal 2021 reported
net income included a partial reversal of $18 million ($24 million
pre-tax) of restructuring charges related to severance in 2019, in
non-interest expense.
|
(6)
|
Q4-2022 reported net
income included a legal provision of $846 million ($1,142 million
pre-tax) related to a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank, comprising interest expense of
$515 million pre-tax and non-interest expense of $627 million
pre-tax, including legal fees of $22 million. For further details,
refer to the Provisions and Contingent Liabilities section in
Note 24 of the audited annual consolidated financial
statements in BMO's 2022 Annual Report.
|
Adjusted results
exclude the impact of the items described in footnotes (2) to
(6).
|
Corporate Services consists of Corporate Units and Technology
and Operations (T&O). Corporate Units provide enterprise-wide
expertise, governance and support in a variety of areas, including
strategic planning, risk management, treasury, finance, legal and
regulatory compliance, including sustainability, human resources,
communications, marketing, real estate, and procurement. T&O
develops, monitors, manages and maintains governance of information
technology, including data and analytics, and also provides cyber
security and operations services.
The costs of Corporate Units and T&O services are largely
allocated to the four operating segments (Canadian P&C, U.S.
P&C, BMO Wealth Management and BMO Capital Markets), with any
remaining amounts retained in Corporate Services results. As such,
Corporate Services results largely reflect the impact of residual
treasury-related activities, the elimination of taxable equivalent
adjustments, and residual unallocated expenses.
Q4 2022 vs. Q4 2021
Corporate Services reported net income was $2,251 million, compared with a reported net loss
of $159 million in the prior year.
Results in the current quarter included the impact of the announced
acquisition of Bank of the West, including a gain related to the
management of the impact of interest rate changes between the
announcement and the closing of the acquisition on its fair value
and goodwill, and related acquisition and integration costs. In
addition, reported results included the impact of a legal provision
related to a lawsuit associated with a predecessor bank, M&I
Marshall and Ilsley Bank.
Adjusted net loss of $104 million
excluded the above factors and was relatively unchanged from the
prior year.
Q4 2022 vs. Q3 2022
Reported net income was $2,251
million, compared with a reported net loss of $754 million in the prior quarter. Results
increased primarily due to higher revenue related to the fair value
management actions, partially offset by the impact of the legal
provision. Adjusted net loss was $104 million, compared with
an adjusted net income of $7 million
in the prior quarter. Adjusted results decreased, primarily due to
lower revenue, including lower securities gains, and higher
expenses.
Risk Management
BMO's risk management policies and processes to identify,
measure, manage, monitor, mitigate and report its credit and
counterparty, market, insurance, liquidity and funding,
operational, including technology and cyber-related risks, legal
and regulatory, strategic, environmental and social, and reputation
risks are outlined in the Enterprise-Wide Risk Management section
of BMO's 2022 Annual Report.
Glossary of Financial Terms
Adjusted Earnings and Measures
- Adjusted Revenue – calculated as revenue excluding
the impact of certain non-recurring items, and adjusted net revenue
is adjusted revenue, net of CCPB, as set out in the Non-GAAP and
Other Financial Measures section.
- Adjusted Non-Interest Expense – calculated as
non-interest expense excluding the impact of certain non-recurring
items, as set out in the Non-GAAP and Other Financial Measures
section.
- Adjusted Net Income – calculated as net income
excluding the impact of certain non-recurring items, as set out in
the Non-GAAP and Other Financial Measures section.
Management considers both reported and adjusted results to be
useful in assessing underlying ongoing business performance.
Adjusted Effective Tax Rate is calculated as
adjusted provision for income taxes divided by adjusted income
before provision for income taxes.
Allowance for Credit Losses represents an amount
deemed appropriate by management to absorb credit-related losses on
loans and acceptances and other credit instruments, in accordance
with applicable accounting standards. Allowance on Performing Loans
is maintained to cover impairment in the existing portfolio for
loans that have not yet been individually identified as impaired.
Allowance on Impaired Loans is maintained to reduce the carrying
value of individually identified impaired loans to the expected
recoverable amount.
Assets under Administration and Assets under
Management refers to assets administered or managed by a
financial institution that are beneficially owned by clients and
therefore not reported on the balance sheet of the administering or
managing financial institution.
Asset-Backed Commercial Paper (ABCP) is a short-term
investment. The commercial paper is backed by assets such as trade
receivables, and is generally used for short-term financing
needs.
Average annual total shareholder return
(TSR) represents the average annual total return earned on
an investment in BMO common shares made at the beginning of a fixed
period. The return includes the change in share price and assumes
dividends received were reinvested in additional common shares.
Average Earning Assets represents the daily average
balance of deposits at central banks, deposits with other banks,
securities borrowed or purchased under resale agreements,
securities, and loans over a one-year period.
Average Net Loans and Acceptances is the daily or
monthly average balance of loans and customers' liability under
acceptances, net of the allowance for credit losses, over a
one-year period.
Bail-In Debt is senior unsecured debt subject to the
Canadian Bail-In Regime. Bail-in debt includes senior unsecured
debt issued directly by the bank on or after September 23, 2018, which has an original term
greater than 400 days and is marketable, subject to certain
exceptions. Some or all of this debt may be statutorily converted
into common shares of the bank under the Bail-In Regime if the bank
enters resolution.
Bankers' Acceptances (BAs) are bills of exchange or
negotiable instruments drawn by a borrower for payment at
maturity and accepted by a bank. BAs constitute a guarantee of
payment by the bank and can be traded in the money market. The bank
earns a "stamping fee" for providing this guarantee.
Basis Point is one one-hundredth of a percentage
point.
Common Equity Tier 1 (CET1) Capital comprises common
shareholders' equity net of deductions for goodwill, intangible
assets, pension assets, certain deferred tax assets and other
items, which may include a portion of expected credit loss
provisions.
Common Equity Tier 1 (CET1) Ratio is calculated as
CET1 Capital, which comprises common shareholders' equity, net of
deductions for goodwill, intangible assets, pension assets, certain
deferred tax assets and other items, which may include a portion of
expected credit loss provisions, divided by risk-weighted assets.
The CET1 Ratio is calculated in accordance with OSFI's Capital
Adequacy Requirements (CAR) Guideline.
Common Shareholders' Equity is the most permanent
form of capital. For regulatory capital purposes, common
shareholders' equity comprises common shareholders' equity, net of
capital deductions.
Credit and Counterparty Risk is the potential for
credit loss due to the failure of an obligor (i.e., a borrower,
endorser, guarantor or counterparty) to repay a loan or honour
another predetermined financial obligation.
Derivatives are contracts, requiring no initial or
little investment, with a value that is
derived from movements in underlying interest
or foreign exchange rates, equity or commodity prices or other
indices. Derivatives are used to transfer, modify or reduce current
or expected risks from changes in rates and prices.
Dividend Payout Ratio represents common share
dividends as a percentage of net income available to common
shareholders. It is computed by dividing dividends per share by
basic earnings per share. Adjusted dividend payout ratio is
calculated in the same manner, using adjusted net income.
Earnings per Share (EPS) is calculated by dividing
net income, after deducting preferred share dividends and
distributions on other equity instruments, by the average number of
common shares outstanding. Adjusted EPS is calculated in the same
manner, using adjusted net income. Diluted EPS, which is BMO's
basis for measuring performance, adjusts for possible conversions
of financial instruments into common shares if those conversions
would reduce EPS, and is more fully explained in Note 23 of the
consolidated financial statements.
Earnings Sensitivity is a measure of the impact of
potential changes in interest rates on the projected 12-month
pre-tax net income of a portfolio of assets, liabilities and
off-balance sheet positions in response to prescribed parallel
interest rate movements, with interest rates floored at zero.
Economic Capital is an expression of the
enterprise's capital demand requirement relative to its view of the
economic risks in its underlying business activities. It represents
management's estimation of the likely magnitude of economic losses
that could occur should severely adverse situations arise. Economic
capital is calculated for various types of risk, including credit,
market (trading and non-trading), operational non-financial,
business and insurance, based on a one-year time horizon using a
defined confidence level.
Economic Value Sensitivity is a measure of the
impact of potential changes in interest rates on the market value
of a portfolio of assets, liabilities and off-balance sheet
positions in response to prescribed parallel interest rate
movements, with interest rates floored at zero.
Efficiency Ratio (or Expense-to-Revenue
Ratio) is a measure of productivity. It is calculated as
non-interest expense divided by total revenue, on a taxable
equivalent basis in the operating groups),expressed as a
percentage.
Efficiency Ratio, net of CCPB, is calculated as
non-interest expense divided by total revenue, net of insurance
claims, commissions and changes in policy benefit liabilities
(CCPB).The adjusted efficiency ratio, net of CCPB, is calculated in
the same manner, utilizing adjusted revenue, net of CCPB, and
adjusted non-interest expense.
Environmental and Social Risk is the potential for
loss or harm, directly or indirectly, resulting from environmental
or social factors that impact BMO or its customers,and BMO's impact
on the environment.
Fair Value is the amount of consideration that would
be agreed upon in an arm's-length transaction between
knowledgeable, willing parties who are under no compulsion to act
in an orderly market transaction.
Forwards and Futures are contractual agreements to
either buy or sell a specified amount of a currency, commodity,
interest-rate-sensitive financial instrument or security at a
specified price and date in the future. Forwards are customized
contracts transacted in the over-the-counter market. Futures are
transacted in standardized amounts on regulated exchanges and are
subject to daily cash margin requirements.
Gross impaired loans and acceptances (GIL) are
calculated as the credit impaired balance of loans and customers'
liability under acceptances, excluding purchased credit impaired
loans.
Hedging is a risk management technique used to
neutralize, manage or offset interest rate, foreign currency,
equity, commodity or credit risk exposures arising from normal
banking activities.
Impaired Loans are loans for which there is no
longer reasonable assurance of the timely collection of principal
or interest.
Incremental Risk Charge (IRC) complements the VaR
and SVaR metrics and represents an estimate of the default and
migration risks of non-securitization products held in the trading
book with exposure to interest rate risk, measured over a one-year
horizon at a 99.9% confidence level.
Insurance Risk is the potential for loss as a result
of actual experience differing from that assumed when an insurance
product was designed and priced, and comprises claims risk,
policyholder behaviour risk and expense risk.
Insurance Revenue, net of CCPB, is insurance
revenue, net of insurance claims, commissions and changes in policy
benefit liabilities (CCPB).
Legal and Regulatory Risk is the potential for loss or harm
resulting from a failure to comply with laws or satisfy contractual
obligations or regulatory requirements. This includes the risk of
failure to: comply with the law (in letter or in spirit) or
maintain standards of care; implement legal or regulatory
requirements; enforce or comply with contractual terms; assert
non-contractual rights; effectively manage disputes; or act in a
manner so as to maintain our reputation.
Leverage Exposures (LE) consist of on-balance sheet
items and specified off-balance sheet items, net of specified
adjustments.
Leverage Ratio reflects Tier 1 Capital divided by
LE.
Liquidity and Funding Risk is the potential for loss
if we are unable to meet our financial commitments in a timely
manner at reasonable prices as they become due. Financial
commitments include liabilities to depositors and suppliers, as
well as lending, investment and pledging commitments.
Liquidity Coverage Ratio (LCR) is a Basel III
regulatory metric calculated as the ratio of high-quality liquid
assets to total net stressed cash outflows over a thirty-day period
under a stress scenario prescribed by OSFI.
Market Risk is the potential for adverse changes in
the value of our assets and liabilities resulting from changes in
market variables such as interest rates, foreign exchange rates,
equity and commodity prices and their implied volatilities, and
credit spreads, and includes the risk of credit migration and
default in our trading book.
Mark-to-Market represents the valuation of financial
instruments at fair value (as defined above) as of the balance
sheet date.
Model Risk is the potential for adverse consequences
resulting from decisions that are based on incorrect or misused
model results. These adverse consequences can include financial
loss, poor business decision-making and damage to reputation.
Net Interest Income comprises earnings on assets, such as
loans and securities, including interest and certain dividend
income, less interest expense paid on liabilities, such as
deposits. Net interest income, excluding trading, is presented on a
basis that excludes trading-related interest income.
Net Interest Margin is the ratio of net interest
income to average earning assets, expressed as a percentage or in
basis points. Net interest margin, excluding trading, is computed
in the same manner, excluding trading-related interest income and
earning assets.
Net Non-Interest Revenue is non-interest revenue,
net of insurance claims, commissions and changes in policy benefit
liabilities (CCPB).
Net Promoter Score (NPS) is the percentage of
surveyed customers who would recommend BMO to a friend or
colleague. Data is gathered in a survey that uses a 0–10 point
scale. "Detractors" are defined as those who provide a rating of
0–6, "Passives" are defined as those who provide a rating of 7 or
8, and "Promoters" are defined as those who provide a rating of 9
or 10. The NPS score is calculated by subtracting the percentage of
"Detractors" from the percentage of "Promoters".
Notional Amount refers to the principal amount used
to calculate interest and other payments under derivative
contracts. The principal amount does not change hands under the
terms of a derivative contract, except in the case of
cross-currency swaps.
Off-Balance Sheet Financial Instruments consist of a
variety of financial arrangements offered to clients, which include
credit derivatives, written put options, backstop liquidity
facilities, standby letters of credit, performance guarantees,
credit enhancements, commitments to extend credit, securities
lending, documentary and commercial letters of credit, and other
indemnifications.
Office of the Superintendent of Financial Institutions
(OSFI) Canada is the government agency responsible
for regulating banks, insurance companies, trust companies, loan
companies and pension plans in Canada.
Operating Leverage is the difference between revenue
and non- interest expense growth rates. Adjusted operating leverage
is the difference between adjusted revenue and adjusted
non-interest expense growth rates.
Operating Leverage, net of CCPB, is the difference
between revenue, net of CCPB (net revenue), and non-interest
expense growth rates. Adjusted net operating leverage is the
difference between adjusted revenue, net of CCPB, and adjusted
non-interest expense growth rates. The bank evaluates performance
using adjusted revenue, net of CCPB.
Operational Non-Financial Risk (ONFR) encompasses a
wide range of non-financial risks, including those related to
business change, customer trust, reputation and data that can
result in financial loss. These losses can stem from inadequate or
failed internal processes or systems, human error or misconduct,
and external events that may directly or indirectly impact the fair
value of assets we fold in our credit or investment portfolios.
Examples of these risks include cyber and cloud security risk,
technology risk, fraud risk, business continuity risk and human
resources risk, but exclude legal and regulatory risk, credit risk,
market risk, liquidity risk and other types of financial risk.
Options are contractual agreements that convey to
the purchaser the right but not the obligation to either buy or
sell a specified amount of a currency, commodity,
interest-rate-sensitive financial instrument or security at a fixed
future date or at any time within a fixed future period.
Pre-Provision, Pre-Tax Earnings (PPPT) is calculated
as income before the provision for income taxes and provision
for/(recovery of) for credit losses. We use PPPT on both a reported
and adjusted basis to assess our ability to generate sustained
earnings growth excluding credit losses, which are impacted by the
cyclical nature of a credit cycle.
Provision for Credit Losses (PCL) is a charge to
income that represents an amount deemed adequate by management to
fully provide for impairment in a portfolio of loans and
acceptances and other credit instruments, given the composition of
the portfolio, the probability of default, the economic environment
and the allowance for credit losses already established. PCL can
comprise both a provision for credit losses on impaired loans and a
provision for credit losses on performing loans. For more
information, refer to the Credit and Counterparty Risk - Provision
for Credit Losses and Critical Accounting Estimates and
Judgments– Allowance for Credit Losses sections and
Note 4 of the consolidated financial statements.
Reputation Risk is the potential for loss or harm to
the BMO brand. It can arise even if other risks are managed
effectively.
Return on Equity or Return on Common Shareholders' Equity
(ROE) is calculated as net income, less preferred
dividends and distributions on other equity instruments, as a
percentage of average common shareholders' equity. Common
shareholders' equity comprises common share capital, contributed
surplus, accumulated other comprehensive income (loss) and retained
earnings. Adjusted ROE is calculated using adjusted net income
rather than net income.
Return on Tangible Common Equity (ROTCE) is
calculated as net income available to common shareholders, adjusted
for the amortization of acquisition-related intangible assets, as a
percentage of average tangible common equity. Adjusted ROTCE is
calculated using adjusted net income rather than net income.
Risk-Weighted Assets (RWA) are defined as on-balance
sheet and off-balance sheet exposures that are risk-weighted based
on guidelines established by OSFI. The measure is used for capital
management and regulatory reporting purposes.
Securities Borrowed or Purchased under Resale
Agreements are low-cost, low-risk instruments, often
supported by the pledge of cash collateral, which arise from
transactions that involve the borrowing or purchasing of
securities.
Securities Lent or Sold under Repurchase
Agreements are low-cost, low-risk liabilities, often
supported by cash collateral, which arise from transactions that
involve the lending or selling of securities.
Securitization is the practice of selling pools of
contractual debts, such as residential mortgages, auto loans and
credit card debt obligations, to third parties or trusts, which
then typically issue a series of asset-backed securities to
investors to fund the purchase of the contractual debts.
Strategic Risk arises from the possibility that the
bank could experience financial loss or other types of harm due to
changes in the external business environment and failure to respond
effectively to these changes as a result of inaction, inappropriate
strategies or poor implementation of strategies. Strategic risk
also includes business risk, which arises from the specific
business activities of the enterprise, and the effects these could
have on its earnings.
Stressed Value at Risk (SVaR) measures the maximum
loss likely to be experienced in the trading and underwriting
portfolios, measured at a 99% confidence level over a one-day
holding period, with model inputs calibrated to historical data
from a period of significant financial stress. SVaR is calculated
for specific classes of risk in BMO's trading and underwriting
activities related to interest rates, foreign exchange rates,
credit spreads, equity and commodity prices and their implied
volatilities.
Structured Entities (SEs) include entities for which
voting or similar rights are not the dominant factor in determining
control of the entity. BMO is required to consolidate a SE if it
controls the entity by having power over the entity, exposure to
variable returns as a result of its involvement and the ability to
exercise power to affect the amount of those returns.
Structural (Non-Trading) Market Risk comprises
interest rate risk arising from banking activities (loans and
deposits) and foreign exchange risk arising from foreign currency
operations and exposures.
Swaps are contractual agreements between two parties
to exchange a series of cash flows. The various swap agreements
that BMO enters into are as follows:
- Commodity swaps – counterparties generally
exchange fixed-rate and floating rate payments based on a notional
value of a single commodity.
- Credit default swaps – one counter party pays the
other a fee in exchange for an agreement by the other counterparty
to make a payment if a credit event occurs, such as bankruptcy or
failure to pay.
- Cross-currency interest rate swaps – fixed rate and
floating-rate interest payments and principal amounts are exchanged
in different currencies. Cross-currency swaps – fixed-rate interest
payments and principal amounts are exchanged in different
currencies.
- Equity swaps – counterparties exchange the return
on an equity security or a group of equity securities for a return
based on a fixed or floating interest rate or the return on another
equity security or group of equity securities.
- Interest rate swaps – counterparties generally
exchange fixed-rate and floating rate interest payments based on a
notional value in a single currency.
- Total return swaps – one counterparty agrees to pay
or receive from the other cash amounts based on changes in the
value of a reference asset or group of assets, including any
returns such as interest earned on these assets, in exchange for
amounts that are based on prevailing market funding rates.
Tangible Common Equity is calculated as common
shareholders' equity, less goodwill and acquisition-related
intangible assets, net of related deferred tax liabilities.
Taxable Equivalent Basis (teb): Operating group
revenue is presented on a taxable equivalent basis (teb). Revenue
and the provision for income taxes are increased on tax-exempt
securities to an equivalent pre-tax basis to facilitate comparisons
of income between taxable and tax-exempt sources. The effective tax
rate is also analyzed on a teb basis for consistency of approach,
with the offset to operating segment adjustments recorded in
Corporate Services.
Tier 1 Capital comprises CET1 Capital
and Additional Tier 1 (AT1) Capital. AT1 Capital
consists of preferred shares and other AT1 Capital instruments,
less regulatory deductions.
Tier 1 Capital Ratio reflects Tier 1 Capital divided
by risk-weighted assets.
Tier 2 Capital comprises subordinated debentures and
may include certain credit loss provisions, less regulatory
deductions.
Total Capital includes Tier 1 and Tier 2
Capital.
Total Capital Ratio reflects Total Capital divided
by risk-weighted assets.
Total Loss Absorbing Capacity (TLAC) comprises Total
Capital and senior unsecured debt subject to the Canadian Bail-In
Regime, less regulatory deductions. The largest Canadian banks are
required to meet the minimum TLAC Ratio and TLAC Leverage Ratio
effective November 1, 2021, as calculated under OSFI's
TLAC Guideline.
Total Loss Absorbing Capacity (TLAC) Ratio reflects
TLAC divided by risk-weighted assets.
Total Loss Absorbing Capacity (TLAC) Leverage
Ratio reflects TLAC divided by leverage exposures.
Total Shareholder Return: The annual total
shareholder return (TSR) represents the average annual total return
earned on an investment in BMO common shares made at the beginning
of the respective period. The return includes the change in share
price and assumes dividends received were reinvested in additional
common shares.
Trading and Underwriting Market Risk is associated
with buying and selling financial products in the course of meeting
customer requirements, including market-making and related
financing activities, and assisting clients to raise funds by way
of securities issuance.
Trading-Related Revenue includes net interest income
and non-interest revenue earned from on-balance sheet and
off-balance sheet positions undertaken for trading purposes. The
management of these positions typically includes marking them to
market on daily basis. Trading-related revenue also includes income
(expense) and gains (losses) from both on-balance sheet instruments
and interest rate, foreign exchange (including spot positions),
equity, commodity and credit contracts.
Value-at-Risk (VaR) measures the maximum loss likely
to be experienced in the trading and underwriting portfolios,
measured at a 99% confidence level over a one-day holding period.
VaR is calculated for specific classes of risk in BMO's trading and
underwriting activities related to interest rates, foreign exchange
rates, credit spreads, equity and commodity prices and their
implied volatilities.
Condensed Consolidated Financial Statements
Consolidated Statement of Income
(Unaudited) (Canadian $
in millions, except as noted)
|
|
For the three months
ended
|
|
For the twelve months
ended
|
|
|
October
31,
|
|
July 31,
|
|
October 31,
|
|
October
31,
|
|
October 31,
|
|
|
2022
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Interest, Dividend
and Fee Income
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
6,875
|
$
|
5,311
|
$
|
3,933
|
$
|
20,464
|
$
|
15,727
|
Securities
|
|
1,766
|
|
1,505
|
|
1,042
|
|
5,590
|
|
3,963
|
Deposits with
banks
|
|
483
|
|
228
|
|
53
|
|
843
|
|
197
|
|
|
9,124
|
|
7,044
|
|
5,028
|
|
26,897
|
|
19,887
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
3,409
|
|
1,743
|
|
737
|
|
6,711
|
|
3,220
|
Subordinated
debt
|
|
74
|
|
57
|
|
42
|
|
227
|
|
195
|
Other
liabilities
|
|
1,874
|
|
1,047
|
|
493
|
|
4,074
|
|
2,162
|
|
|
5,357
|
|
2,847
|
|
1,272
|
|
11,012
|
|
5,577
|
Net Interest
Income
|
|
3,767
|
|
4,197
|
|
3,756
|
|
15,885
|
|
14,310
|
Non-Interest
Revenue
|
|
|
|
|
|
|
|
|
|
|
Securities commissions
and fees
|
|
257
|
|
262
|
|
258
|
|
1,082
|
|
1,107
|
Deposit and payment
service charges
|
|
319
|
|
338
|
|
313
|
|
1,318
|
|
1,243
|
Trading
revenues
|
|
4,797
|
|
(975)
|
|
(98)
|
|
8,250
|
|
296
|
Lending fees
|
|
370
|
|
351
|
|
344
|
|
1,440
|
|
1,391
|
Card fees
|
|
143
|
|
131
|
|
126
|
|
548
|
|
442
|
Investment management
and custodial fees
|
|
431
|
|
432
|
|
522
|
|
1,770
|
|
1,982
|
Mutual fund
revenues
|
|
309
|
|
315
|
|
419
|
|
1,312
|
|
1,595
|
Underwriting and
advisory fees
|
|
231
|
|
220
|
|
348
|
|
1,193
|
|
1,421
|
Securities gains, other
than trading
|
|
(28)
|
|
85
|
|
180
|
|
281
|
|
591
|
Foreign exchange gains,
other than trading
|
|
53
|
|
47
|
|
39
|
|
181
|
|
167
|
Insurance
revenue
|
|
(218)
|
|
542
|
|
223
|
|
(157)
|
|
1,941
|
Share of profit (loss)
in associates and joint ventures
|
|
59
|
|
99
|
|
65
|
|
274
|
|
248
|
Other
|
|
80
|
|
55
|
|
78
|
|
333
|
|
452
|
|
|
6,803
|
|
1,902
|
|
2,817
|
|
17,825
|
|
12,876
|
Total
Revenue
|
|
10,570
|
|
6,099
|
|
6,573
|
|
33,710
|
|
27,186
|
Provision for Credit
Losses
|
|
226
|
|
136
|
|
(126)
|
|
313
|
|
20
|
Insurance Claims,
Commissions and Changes in Policy Benefit
Liabilities
|
|
(369)
|
|
413
|
|
97
|
|
(683)
|
|
1,399
|
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
Employee
compensation
|
|
2,274
|
|
2,135
|
|
2,059
|
|
8,795
|
|
8,322
|
Premises and
equipment
|
|
1,039
|
|
918
|
|
900
|
|
3,635
|
|
3,396
|
Amortization of
intangible assets
|
|
156
|
|
151
|
|
163
|
|
604
|
|
634
|
Advertising and
business development
|
|
161
|
|
135
|
|
133
|
|
517
|
|
397
|
Communications
|
|
72
|
|
67
|
|
65
|
|
278
|
|
264
|
Professional
fees
|
|
271
|
|
182
|
|
184
|
|
788
|
|
607
|
Other
|
|
803
|
|
271
|
|
299
|
|
1,577
|
|
1,889
|
|
|
4,776
|
|
3,859
|
|
3,803
|
|
16,194
|
|
15,509
|
Income Before
Provision for Income Taxes
|
|
5,937
|
|
1,691
|
|
2,799
|
|
17,886
|
|
10,258
|
Provision for income
taxes
|
|
1,454
|
|
326
|
|
640
|
|
4,349
|
|
2,504
|
Net
Income
|
$
|
4,483
|
$
|
1,365
|
$
|
2,159
|
$
|
13,537
|
$
|
7,754
|
Earnings Per Common
Share (Canadian $)
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
6.52
|
$
|
1.96
|
$
|
3.24
|
$
|
20.04
|
$
|
11.60
|
Diluted
|
|
6.51
|
|
1.95
|
|
3.23
|
|
19.99
|
|
11.58
|
Dividends per common
share
|
|
1.39
|
|
1.39
|
|
1.06
|
|
5.44
|
|
4.24
|
Consolidated Consolidated Financial Statements
Consolidated Statement of Comprehensive Income
(Unaudited) (Canadian $
in millions)
|
|
For the three months
ended
|
|
For the twelve months
ended
|
|
|
October
31,
|
|
July 31,
|
|
October 31,
|
|
October
31,
|
|
October 31,
|
|
|
2022
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net
Income
|
$
|
4,483
|
$
|
1,365
|
$
|
2,159
|
$
|
13,537
|
$
|
7,754
|
Other Comprehensive
Income (Loss), net of taxes
|
|
|
|
|
|
|
|
|
|
|
Items that may
subsequently be reclassified to net income
|
|
|
|
|
|
|
|
|
|
|
Net change in
unrealized gains (losses) on fair value through OCI debt
securities
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) on
fair value through OCI debt securities arising during the period
(1)
|
|
(218)
|
|
(2)
|
|
(151)
|
|
(520)
|
|
(161)
|
Reclassification to
earnings of (gains) losses during the period (2)
|
|
19
|
|
(8)
|
|
(10)
|
|
(11)
|
|
(43)
|
|
|
(199)
|
|
(10)
|
|
(161)
|
|
(531)
|
|
(204)
|
Net change in
unrealized gains (losses) on cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on
derivatives designated as cash flow hedges arising during the
period (3)
|
|
(2,634)
|
|
546
|
|
(988)
|
|
(4,999)
|
|
(1,380)
|
Reclassification to
earnings of (gains) losses on derivatives designated as
|
|
|
|
|
|
|
|
|
|
|
cash flow hedges
during the period (4)
|
|
14
|
|
(80)
|
|
(135)
|
|
(315)
|
|
(414)
|
|
|
(2,620)
|
|
466
|
|
(1,123)
|
|
(5,314)
|
|
(1,794)
|
Net gains (losses) on
translation of net foreign operations
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on translation of net foreign operations
|
|
2,149
|
|
(77)
|
|
(293)
|
|
3,202
|
|
(2,207)
|
Unrealized gains
(losses) on hedges of net foreign operations (5)
|
|
(115)
|
|
(25)
|
|
98
|
|
(332)
|
|
496
|
Reclassification to
earnings of net losses related to divestitures (6)
|
|
–
|
|
–
|
|
–
|
|
29
|
|
–
|
|
|
2,034
|
|
(102)
|
|
(195)
|
|
2,899
|
|
(1,711)
|
Items that will not be
reclassified to net income
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on fair value through OCI equity securities arising during
the period (7)
|
|
–
|
|
(1)
|
|
13
|
|
1
|
|
20
|
Gains (losses) on
remeasurement of pension and other employee future benefit plans
(8)
|
|
148
|
|
(95)
|
|
158
|
|
659
|
|
923
|
Gains (losses) on
remeasurement of own credit risk on financial liabilities
designated at fair value (9)
|
|
263
|
|
415
|
|
24
|
|
1,282
|
|
(196)
|
|
|
411
|
|
319
|
|
195
|
|
1,942
|
|
747
|
Other Comprehensive
Income (Loss), net of taxes
|
|
(374)
|
|
673
|
|
(1,284)
|
|
(1,004)
|
|
(2,962)
|
Total Comprehensive
Income
|
$
|
4,109
|
$
|
2,038
|
$
|
875
|
$
|
12,533
|
$
|
4,792
|
(1)
|
Net of income tax
recovery of $76 million, $nil million, $54 million for the three
months ended, and $182 million, $58 million for the twelve months
ended, respectively.
|
(2)
|
Net of income tax
provision (recovery) of $(6) million, $3 million, $3 million for
the three months ended, and $5 million, $14 million for the twelve
months ended, respectively.
|
(3)
|
Net of income tax
(provision) recovery of $952 million, $(208) million, $357 million
for the three months ended, and $1,794 million, $504 million for
the twelve months ended, respectively.
|
(4)
|
Net of income tax
provision (recovery) of $(5) million, $29 million, $49 million for
the three months ended, and $114 million, $149 million for the
twelve months ended, respectively.
|
(5)
|
Net of income tax
(provision) recovery of $41 million, $12 million, $(35) million for
the three months ended, and $124 million, $(180) million for the
twelve months ended, respectively.
|
(6)
|
Net of income tax
(provision) of $nil million, na, na for the three months ended, and
$nil million, na for the twelve months ended,
respectively.
|
(7)
|
Net of income tax
(provision) recovery of $(1) million, $1 million, $(4) million for
the three months ended, and $(1) million, $(6) million for the
twelve months ended, respectively.
|
(8)
|
Net of income tax
(provision) recovery of $(54) million, $35 million, $(58) million
for the three months ended, and $(239) million, and $(341) million
for the twelve months ended, respectively.
|
(9)
|
Net of income tax
(provision) recovery of $(95) million, $(152) million, and $(9)
million, for the three months ended, and $(465) million, and $70
million for the twelve months ended, respectively.
|
Condensed Consolidated Financial Statements
Consolidated Balance Sheet
(Unaudited) (Canadian $
in millions)
|
|
|
|
As at
|
|
|
|
|
October
31,
|
|
July 31,
|
|
October 31,
|
|
|
2022
|
|
2022
|
|
2021
|
Assets
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
$
|
87,466
|
$
|
69,586
|
$
|
93,261
|
Interest Bearing
Deposits with Banks
|
|
5,734
|
|
7,317
|
|
8,303
|
Securities
|
|
|
|
|
|
|
Trading
|
|
108,177
|
|
110,144
|
|
104,411
|
Fair value through
profit or loss
|
|
13,641
|
|
14,036
|
|
14,210
|
Fair value through
other comprehensive income
|
|
43,561
|
|
39,273
|
|
63,123
|
Debt securities at
amortized cost
|
|
106,590
|
|
100,906
|
|
49,970
|
Investments in
associates and joint ventures
|
|
1,293
|
|
1,255
|
|
1,135
|
|
|
273,262
|
|
265,614
|
|
232,849
|
Securities Borrowed
or Purchased Under Resale Agreements
|
|
113,194
|
|
108,391
|
|
107,382
|
Loans
|
|
|
|
|
|
|
Residential
mortgages
|
|
148,880
|
|
144,076
|
|
135,750
|
Consumer instalment and
other personal
|
|
86,103
|
|
84,337
|
|
77,164
|
Credit cards
|
|
9,663
|
|
9,132
|
|
8,103
|
Business and
government
|
|
309,310
|
|
287,669
|
|
239,809
|
|
|
553,956
|
|
525,214
|
|
460,826
|
Allowance for credit
losses
|
|
(2,617)
|
|
(2,412)
|
|
(2,564)
|
|
|
551,339
|
|
522,802
|
|
458,262
|
Other
Assets
|
|
|
|
|
|
|
Derivative
instruments
|
|
48,160
|
|
39,717
|
|
36,713
|
Customers' liability
under acceptances
|
|
13,235
|
|
12,615
|
|
14,021
|
Premises and
equipment
|
|
4,841
|
|
4,604
|
|
4,454
|
Goodwill
|
|
5,285
|
|
4,995
|
|
5,378
|
Intangible
assets
|
|
2,193
|
|
2,130
|
|
2,266
|
Current tax
assets
|
|
1,421
|
|
1,545
|
|
1,588
|
Deferred tax
assets
|
|
1,175
|
|
794
|
|
1,287
|
Other
|
|
31,894
|
|
28,228
|
|
22,411
|
|
|
108,204
|
|
94,628
|
|
88,118
|
Total
Assets
|
$
|
1,139,199
|
$
|
1,068,338
|
$
|
988,175
|
Liabilities and
Equity
|
|
|
|
|
|
|
Deposits
|
$
|
769,478
|
$
|
729,385
|
$
|
685,631
|
Other
Liabilities
|
|
|
|
|
|
|
Derivative
instruments
|
|
59,956
|
|
43,643
|
|
30,815
|
Acceptances
|
|
13,235
|
|
12,615
|
|
14,021
|
Securities sold but not
yet purchased
|
|
40,979
|
|
41,187
|
|
32,073
|
Securities lent or sold
under repurchase agreements
|
|
103,963
|
|
100,646
|
|
97,556
|
Securitization and
structured entities' liabilities
|
|
27,068
|
|
25,020
|
|
25,486
|
Current tax
liabilities
|
|
425
|
|
232
|
|
221
|
Deferred tax
liabilities
|
|
102
|
|
81
|
|
192
|
Other
|
|
44,805
|
|
41,092
|
|
37,764
|
|
|
290,533
|
|
264,516
|
|
238,128
|
Subordinated
Debt
|
|
8,150
|
|
7,443
|
|
6,893
|
Total
Liabilities
|
$
|
1,068,161
|
$
|
1,001,344
|
$
|
930,652
|
Equity
|
|
|
|
|
|
|
Preferred shares and
other equity instruments
|
|
6,308
|
|
5,708
|
|
5,558
|
Common
shares
|
|
17,744
|
|
17,392
|
|
13,599
|
Contributed
surplus
|
|
317
|
|
315
|
|
313
|
Retained
earnings
|
|
45,117
|
|
41,653
|
|
35,497
|
Accumulated other
comprehensive income
|
|
1,552
|
|
1,926
|
|
2,556
|
Total
Equity
|
|
71,038
|
|
66,994
|
|
57,523
|
Total Liabilities
and Equity
|
$
|
1,139,199
|
$
|
1,068,338
|
$
|
988,175
|
Condensed Consolidated Financial Statements
Consolidated Statement of Changes in Equity
(Unaudited) (Canadian $
in millions)
|
|
For the three months
ended
|
|
For the twelve months
ended
|
|
|
October
31,
|
|
October 31,
|
|
October
31,
|
|
October 31,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Preferred Shares and
Other Equity Instruments
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
$
|
5,708
|
$
|
5,848
|
$
|
5,558
|
$
|
6,598
|
Issued during the
period
|
|
1,000
|
|
–
|
|
2,250
|
|
–
|
Redeemed during the
period
|
|
(400)
|
|
(290)
|
|
(1,500)
|
|
(1,040)
|
Balance at End of
Period
|
|
6,308
|
|
5,558
|
|
6,308
|
|
5,558
|
Common
Shares
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
17,392
|
|
13,609
|
|
13,599
|
|
13,430
|
Issued under the
Shareholder Dividend Reinvestment and Share Purchase
Plan
|
|
352
|
|
–
|
|
999
|
|
–
|
Issued under the Stock
Option Plan
|
|
2
|
|
23
|
|
57
|
|
122
|
Treasury shares
sold/purchased
|
|
(2)
|
|
(33)
|
|
(17)
|
|
47
|
Issued to finance a
portion of the announced acquisition (1)
|
|
–
|
|
–
|
|
3,106
|
|
–
|
Balance at End of
Period
|
|
17,744
|
|
13,599
|
|
17,744
|
|
13,599
|
Contributed
Surplus
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
315
|
|
310
|
|
313
|
|
302
|
Stock option expense,
net of options exercised
|
|
1
|
|
3
|
|
3
|
|
10
|
Other
|
|
1
|
|
–
|
|
–
|
|
1
|
Balance at End of
Period
|
|
317
|
|
313
|
|
317
|
|
313
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
41,653
|
|
34,089
|
|
35,497
|
|
30,745
|
Net income
|
|
4,483
|
|
2,159
|
|
13,537
|
|
7,754
|
Dividends on preferred
shares and distributions payable on other equity
instruments
|
|
(77)
|
|
(59)
|
|
(231)
|
|
(244)
|
Dividends on common
shares
|
|
(940)
|
|
(688)
|
|
(3,634)
|
|
(2,746)
|
Equity issue expense
and premium paid on redemption of preferred shares
|
|
(2)
|
|
–
|
|
(52)
|
|
(6)
|
Net discount on sale of
treasury shares
|
|
–
|
|
(4)
|
|
–
|
|
(6)
|
Balance at End of
Period
|
|
45,117
|
|
35,497
|
|
45,117
|
|
35,497
|
Accumulated Other
Comprehensive Income (Loss) on Fair Value through OCI Securities,
net of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
(160)
|
|
319
|
|
171
|
|
355
|
Unrealized (losses) on
fair value through OCI debt securities arising during the
period
|
|
(218)
|
|
(151)
|
|
(520)
|
|
(161)
|
Unrealized gains on
fair value through OCI equity securities arising during the
period
|
|
–
|
|
13
|
|
1
|
|
20
|
Reclassification to
earnings of (gains) during the period
|
|
19
|
|
(10)
|
|
(11)
|
|
(43)
|
Balance at End of
Period
|
|
(359)
|
|
171
|
|
(359)
|
|
171
|
Accumulated Other
Comprehensive Income (Loss) on Cash Flow Hedges, net of
taxes
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
(2,509)
|
|
1,308
|
|
185
|
|
1,979
|
Gains (losses) on
derivatives designated as cash flow hedges arising during the
period
|
|
(2,634)
|
|
(988)
|
|
(4,999)
|
|
(1,380)
|
Reclassification to
earnings of (gains) on derivatives designated as cash flow hedges
during the period
|
|
14
|
|
(135)
|
|
(315)
|
|
(414)
|
Balance at End of
Period
|
|
(5,129)
|
|
185
|
|
(5,129)
|
|
185
|
Accumulated Other
Comprehensive Income on Translation of Net Foreign Operations, net
of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
3,134
|
|
2,464
|
|
2,269
|
|
3,980
|
Unrealized gains
(losses) on translation of net foreign operations
|
|
2,149
|
|
(293)
|
|
3,202
|
|
(2,207)
|
Unrealized gains
(losses) on hedges of net foreign operations
|
|
(115)
|
|
98
|
|
(332)
|
|
496
|
Reclassification to
earnings of net losses related to divestitures
|
|
–
|
|
–
|
|
29
|
|
–
|
Balance at End of
Period
|
|
5,168
|
|
2,269
|
|
5,168
|
|
2,269
|
Accumulated Other
Comprehensive Income (Loss) on Pension and Other
Employee
|
|
|
|
|
|
|
|
|
Future Benefit
Plans, net of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
796
|
|
127
|
|
285
|
|
(638)
|
Gains (losses) on
remeasurement of pension and other employee future benefit
plans
|
|
148
|
|
158
|
|
659
|
|
923
|
Balance at End of
Period
|
|
944
|
|
285
|
|
944
|
|
285
|
Accumulated Other
Comprehensive (Loss) on Own Credit Risk on Financial Liabilities
Designated at
|
|
|
|
|
|
|
|
|
Fair Value, net of
taxes
|
|
|
|
|
|
|
|
|
Balance at beginning of
period
|
|
665
|
|
(378)
|
|
(354)
|
|
(158)
|
Gains (losses) on
remeasurement of own credit risk on financial liabilities
designated at fair value
|
|
263
|
|
24
|
|
1,282
|
|
(196)
|
Balance at End of
Period
|
|
928
|
|
(354)
|
|
928
|
|
(354)
|
Total Accumulated
Other Comprehensive Income
|
|
1,552
|
|
2,556
|
|
1,552
|
|
2,556
|
Total
Equity
|
$
|
71,038
|
$
|
57,523
|
$
|
71,038
|
$
|
57,523
|
(1)
|
On December 20, 2021,
we announced a definitive agreement with BNP Paribas to acquire
Bank of the West and its subsidiaries.
|
INVESTOR AND MEDIA INFORMATION
Investor Presentation Materials
Interested parties are invited to visit BMO's website at
www.bmo.com/investorrelations to review the 2022 Annual
MD&A and audited annual consolidated financial statements,
quarterly presentation materials and supplementary financial and
regulatory information package.
Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly
conference call on Thursday, December 1,
2022, at 8.30 a.m. (ET). The
call may be accessed by telephone at 416-406-0743 (from within
Toronto) or 1-800-898-3989
(toll-free outside Toronto),
entering Passcode: 3582724#. A replay of the conference call can be
accessed until December 31, 2022, by
calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside
Toronto) and entering Passcode:
5031862#.
A live webcast of the call can be accessed on our website at
www.bmo.com/investorrelations. A replay can also be accessed on the
website.
Shareholder Dividend
Reinvestment and Share Purchase
Plan
(DRIP)
Average market price as
defined under DRIP
August 2022:
$128.51
September 2022:
$122.33
October 2022:
$125.62
For dividend
information, change in shareholder address
or to advise of
duplicate mailings, please contact
Computershare Trust
Company of Canada
100 University Avenue,
8th Floor
Toronto, Ontario M5J
2Y1
Telephone:
1-800-340-5021 (Canada and the United States)
Telephone: (514)
982-7800 (international)
Fax: 1-888-453-0330
(Canada and the United States)
Fax: (416) 263-9394
(international)
E-mail:
service@computershare.com
|
For other
shareholder information, please contact
Bank of
Montreal
Shareholder
Services
Corporate Secretary's
Department
One First Canadian
Place, 21st Floor
Toronto, Ontario M5X
1A1
Telephone: (416)
867-6785
E-mail:
corp.secretary@bmo.com
For further
information on this document, please contact
Bank of
Montreal
Investor Relations
Department
P.O. Box 1, One First
Canadian Place, 10th Floor
Toronto, Ontario M5X
1A1
To review financial
results and regulatory filings and disclosures online, please visit
BMO's website at www.bmo.com/investorrelations.
|
BMO's 2022 Annual
MD&A, audited consolidated financial statements, annual
information form and annual report on Form 40-F (filed with the
U.S. Securities and Exchange Commission) are available online
at www.bmo.com/investorrelations and at www.sedar.com. Printed
copies of the bank's complete 2022 audited consolidated financial
statements are available free of charge upon request at
416-867-6785 or corp.secretary@bmo.com.
|
Annual Meeting
2023
The next Annual Meeting
of Shareholders will be held on Tuesday, April 18, 2023.
|
® Registered trademark of Bank of Montreal
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