RNS Number:3018B
Bank of Montreal
23 November 1999
Bank of Montreal News
Bank of Montreal Reports Year-end Results
TORONTO, November 23, 1999 - Bank of Montreal reported net income of $1.382
billion for the year ended October 31, 1999, up 2.4 per cent from $1.350
billion in 1998. Fully diluted earnings per share were $4.72 ($4.76 basic), up
1.3 per cent from $4.66 ($4.72 basic) a year ago. Return on equity was 14.1 per
cent, compared to 15.2 per cent for 1998.
In the fourth quarter of 1999, the bank recorded two one-time charges which
totaled $113 million after-tax. Before the one-time charges, net income for the
year was $1.495 billion, up 10.8 percent, fully diluted earnings per share were
$5.14 ($5.19 basic), up 10.3 percent, and return on equity was 15.4 per cent.
"1999 represents Bank of Montreal's tenth consecutive year of earnings growth,"
said Tony Comper, Chairman and Chief Executive Officer, Bank of Montreal. "It
was an extraordinary year in which we reorganized the bank into three
client-focused groups, introduced a new management team, and formally adopted a
value based management strategic framework.
"Our Personal and Commercial Client Group, and in particular Chicago-based
Harris Bank, made major contributions to the bank's solid performance with
growth of 16.9 per cent and 12.8 per cent respectively," he said. "The
Investment Banking Group was also a key performer with growth of 24.9 per cent."
Financial Highlights for the Year
Earnings growth in 1999 reflected business growth and improved capital market
conditions, offset in part by a return to a higher, more normal, level of
provision for credit losses and by one-time charges.
Business growth was driven by increased volumes with resulting growth in both
revenues and expenses. Volume growth was widespread across most lines of
business, including mortgage originations, commercial loans (including loans to
small business), and corporate lending. In addition, volume growth also occurred
in credit card operations and other fee related services, partly driven by
product and distribution initiatives. The impact of volume growth was partly
offset by narrower margins in the bank's retail and commercial businesses.
The fiscal year also saw a return to more normal capital market conditions,
following the unusual trading losses in the fourth quarter of 1998 ($155
million, or $90 million after-tax), which together with improved performance
resulted in higher revenues from the bank's trading portfolios. Both business
growth and improved market conditions contributed to higher earnings from the
bank's investment in Grupo Financiero Bancomer. The provision for credit losses
increased to more normal levels from 1998, which was unusually low as a result
of non-recurring benefits related to collection activity on commercial real
estate loans.
The two one-time charges announced by the bank in the fourth quarter of 1999
consisted of a restructuring charge of $81 million after-tax, reflecting costs
associated with ceasing activities that were not contributing to the bank's
shareholder value creation goals, and a write-down of $32 million after-tax, to
reflect permanent impairment in the distressed investment securities portfolio.
Financial Highlights for the Fourth Quarter
Net income for the fourth quarter was $258 million, up $24 million or 10.2 per
cent over 1998. Fully diluted earnings per share were $0.86 ($0.87 basic)
compared to $0.76 ($0.77 basic). Return on equity was 9.8 percent, compared to
9.4 percent.
Before the one-time charges described above, net income for the quarter was $371
million, up 58.8 per cent, fully diluted earnings per share were $1.28 ($1.30
basic) and return on equity was 14.7 per cent.
The increase in net income reflected improved capital market conditions and
business growth, offset by one-time charges in the fourth quarter. Business
growth was driven by increased volumes and wider margins in corporate lending,
increased trading revenues and an increased contribution from the bank's
investment in Partners First. Volume growth in the bank's retail and commercial
businesses was largely offset by narrower margins.
Net income for the current quarter was $140 million lower than the third quarter
of 1999. After excluding the effect of the two one-time charges recorded in the
current quarter, net income was $27 million lower. The reduction in net income
was largely the result of the sale of the bank's Global Custody business in the
third quarter, and in the fourth quarter, lower cash collections on impaired
loans and narrower margins in our retail and commercial businesses in Canada.
Financial Statement Highlights
Revenues for the Year
Total revenues for the year increased $658 million, or 9.0 per cent, relative to
a year ago, with growth in both net interest income and other income.
Net interest income, on a taxable equivalent basis, increased $265 million, or
6.4 per cent, on a year-over-year basis. Average assets were essentially flat
compared to last year, while the net interest margin rose twelve basis points to
1.95 per cent. The flat asset growth and increased margin both reflected
increased volumes in higher spread retail and commercial businesses, higher
volumes and spreads in corporate lending and decreased volumes in lower spread
securities.
In the bank's retail and commercial businesses, net interest income growth was
driven by volume growth, largely offset by a reduction in the net interest
margin. The reduction in margin was primarily the result of competitive forces,
a flatter yield curve in Canada, and in the U.S., the higher cost of additional
funding to support continued growth in new business.
In Canada, the bank's residential mortgages rose $3.0 billion, or 8.6 per cent,
from a year ago. Credit card and other personal loans were up $644 million, or
4.0 per cent, and loans to commercial enterprises, including small and
medium-sized businesses, were up $1.0 billion, or 6.2 per cent. At Harris Bank,
average loan growth of $1.5 billion, or 7.9 per cent, drove up U.S. retail and
mid-market banking results.
Net interest income was also positively impacted by an increase of $90 million
in contribution from the bank's investment in Grupo Financiero Bancomer.
Within the bank's institutional businesses, net interest income was up over
last year, principally due to increased volumes and spreads in the corporate
lending portfolio and improved spreads in securities portfolios.
The bank's securitization of assets resulted in a shift in the reporting of
revenue on such assets from net interest income to other income. Net interest
income for the year fell by $234 million, while other income was up $198
million as a result of securitization. The net revenue impact was $36 million.
Other income grew by $393 million, or 12.6 per cent, relative to last year,
driven by improved performance and the return to more normal capital market
conditions, which resulted in higher revenues from the bank's trading
portfolios. Other income growth benefited from volume growth in fee-related
services and the impact of asset securitization activities mentioned above,
partially offset by lower net securities gains, including the one-time charge
to reflect the distressed securities portfolio impairment ($55 million) and
lower fees from primary capital market activities.
During the year, Nesbitt Burns changed its year-end as part of its integration
with the bank's institutional businesses. This resulted in the inclusion of an
additional month of revenue ($89 million) and expenses ($72 million) with a
positive net income impact of $8 million.
Revenues for the Fourth Quarter
Total revenue for the fourth quarter was $392 million, or 24.2 per cent higher
than the same quarter last year, driven largely by improved capital market
conditions relative to the fourth quarter of 1998, business growth and the
inclusion of an additional month of revenue from Nesbitt Burns. Business growth
was driven by increased volumes and wider margins in corporate lending,
increased trading volumes and an increased contribution from the bank's
investment in Partners First. Volume growth in the bank's retail and commercial
businesses was offset by narrower margins. Revenue growth was partly offset by
the one-time charge taken in the current quarter to reflect the distressed
investment securities portfolio impairment.
Compared to the third quarter of 1999, revenues were down by $17 million, or 0.9
per cent. Revenue growth from increased volumes in retail and commercial
businesses combined with the inclusion of an additional month of revenues from
Nesbitt Burns was more than offset by narrower spreads in retail and commercial
businesses, lower revenues from institutional businesses and the one-time charge
taken in the current quarter.
Expenses for the Year
Total expenses for the year increased $503 million, or 10.5 per cent, relative
to a year ago. Before the one-time restructuring charge, the additional month of
expenses related to Nesbitt Burns, and a lower foreign exchange rate impact on
U.S.-based expenses, expense growth was $274 million, or 5.8 per cent, relative
to last year. This expense growth was a result of growth in ongoing business
operations (3.5 per cent), continued spending on strategic initiatives (1.2
percent), and higher revenue-driven compensation (1.1 percent).
Expenses for the Fourth Quarter
Expenses in the fourth quarter increased $281 million, or 23.0 per cent,
relative to the prior year. Before the one-time charge, the additional month of
operations at Nesbitt Burns, and a lower foreign exchange rate impact on
U.S.-based expenses, expenses grew $82 million, or 6.6 per cent, from the same
quarter last year. Expense growth resulted from on-going business operations
(1.9 per cent), higher revenue-driven compensation (4.6 per cent) and continued
spending on strategic initiatives (0.1 per cent).
Expenses in the fourth quarter increased $217 million, or 16.9 per cent,
relative to the third quarter of 1999. Before the one-time charge and the
additional month of operations, expenses were higher than the third quarter of
1999 by $4 million, or 0.3 per cent.
Asset Quality
The provision for credit losses for the year was $320 million, compared to $130
million in 1998, which was unusually low as a result of non-recurring benefits
related to collection activity on commercial real estate loans. The current year
provision included an $85 million addition to the general allowance in the
fourth quarter. The general allowance, which has increased to $970 million at
year-end, is not allocated to any specific sector of the loan portfolio and
qualifies for inclusion in Tier 2 Capital.
Gross impaired loans at the end of the year decreased $18 million over last
quarter. The allowance for credit losses, which includes the general allowance,
continues to exceed gross impaired loans. At year-end, the allowance exceeded
gross impaired loans by $256 million, compared to $342 million at the end of
1998 and $203 million at the end of last quarter.
Capital Management
The bank's Tier 1 Capital Ratio was 7.72 per cent and the Total Capital Ratio
was 10.77 per cent at October 31, 1999. This compares with 7.87 per cent and
10.84 per cent, respectively, at July 31, 1999, and 7.26 per cent and 10.38 per
cent, at October 31, 1998. The increase from a year ago was the result of higher
capital levels and a $2.8 billion reduction in risk-weighted assets.
Harris Bank
Harris Bank earnings reported in the bank's results above were $318 million for
1999, up 12.8 per cent (11.4 per cent in U.S.$/U.S. GAAP) from 1998. Earnings
growth in 1999 reflected business volume growth across most lines of business.
Earnings reported in the bank's fourth quarter were $83 million, up 12.6 per
cent from a year ago and 3.3 per cent from the third quarter. Earnings growth
for the quarter was driven by strong revenue growth in mid market, private and
community banking, and strong asset quality. Harris Bank results are induced as
part of the Personal and Commercial Client Group and the Private Client Group.
Bank of Montreal, Canada's first bank, is a highly diversified financial
services institution. The bank operates in 32 lines of business within its group
of companies, including Nesbitt Burns, one of Canada's largest full-service
investment firms and Chicago-based Harris Bank, a major U.S. mid-west financial
institution. Bank of Montreal has an equity position in, and a strategic
alliance with, Grupo Financiero Bancomer, a leading Mexican financial
institution.
Media Relations Contacts:
Rick Kuwayti, Toronto (416) 927-2740
Ronald Monet, Montreal (514) 877-1101
Internet: http://www.bmo.com
Investor Relations Contacts:
Bob Wells, (416) 867-4009
Cathy Cranston, (416) 867-6656
Susan Payne, (416) 867-3367
Operating Group Review
Personal and Commercial Client Group
The Personal and Commercial Client Group (P&C) provides financial services,
including electronic financial services, to households and commercial
businesses, including small businesses, in Canada, the U.S. and Mexico.
Net income for 1999 was $1.106 billion, an increase of $161 million, or 16.9
per cent, from the previous year. Business growth was driven by increased
volumes, partially offset by growth in expenses. Revenues increased $336
million, or 7.0 per cent, due to volume growth across most lines of business,
partially offset by narrower margins. Revenue growth also benefited from
improved market conditions and business growth in Mexico, which resulted in a
$90 million increase in contribution from the bank's investment in Grupo
Financiero Bancomer. Revenues for the group included a $27 million gain from
the sale of the bank's global custody business, reported in the third quarter
of 1999. Expenses increased $135 million, or 4.5 per cent, over last year due
to costs associated with increased business volumes and spending on strategic
initiatives including the development of alternate delivery channels.
In Canada, the P&C Group implemented strategies aimed at creating a distinctive
high quality experience every time the group deals with clients, regardless of
how, when and where they choose to contact the bank. The bank opened 33
in-store branches and launched mbanx Direct, the integration of mbanx and Bank
of Montreal's electronic banking channels (telephone, Internet and ABM).
Products tailored to customers' needs were introduced, including the Variable
Rate Guaranteed Investment Certificate (GIC), which is tied to and varies with
the bank's Prime Rate; the Air Miles GIC, enabling customers to earn Air Miles;
an Investment Option mortgage, allowing incremental cash-back if invested in a
Retirement Investment Certificate (RIC); and an 18-year open mortgage, which
fixes the rate for 18 years and allows early pay-down without penalties. The
bank also entered into an alliance with Newcourt Credit Group to form
FinanciaLinx, providing automobile dealers across Canada with a new e-business
product that offers a unique on-line auto-leasing alternative. Other e-business
initiatives included Veev, with partners Bell Mobility and 724 Solutions, which
introduced wireless banking capability through digital PCS cellular phones or
3Com Palm Pilots; and the development of the Electronic Post Office, a joint
venture between the bank's Internet subsidiary, Cebra, and Canada Post.
Harris Regional Banking had another strong year. Chicagoland community banking
provided retail and small business customers with a broad array of products
across multiple channels, including an enhanced on-line banking offering. The
Hispanic Banking initiative was expanded to take advantage of opportunities in
this rapidly growing market, including the opening of three new branches,
bringing the total number of Hispanic-focused branches in the Chicagoland area
to eleven. Harris mid-market corporate banking has increased its loan
syndication fees with Bank of Montreal and investment banking fee generation
with Nesbitt Burns. The asset-based lending group enjoyed substantial success in
the U.S. market and is beginning to expand its distribution to the Canadian
market.
Net income for the fourth quarter of 1999 was $275 million, an increase of $29
million, or 11.7 per cent, over the comparable period last year. The increase
was a result of volume growth across most lines of business and an increase in
the contribution from the bank's investment in Grupo Financiero Bancomer.
Compared to the third quarter of 1999, net income for the fourth quarter of
1999 was $10 million, or 3.6 per cent, lower due to the inclusion in the third
quarter of the gain on the sale of the Global Custody business, offset by a
lower fourth quarter provision for credit losses and an increase in expenses.
Private Client Group
Bank of Montreal's Private Client Group brings together all of the bank's wealth
management capabilities in six lines of business: retail investment products,
direct and full service investing, Canadian and U.S. private banking and
institutional asset management. The bank's full range of wealth management
products and services are offered through: First Canadian Funds, Harris Insight
Funds, Jones Heward Funds, Nesbitt Burns, InvestorLine, Harris Investors Direct,
Harris Private Bank, The Trust Company of Bank of Montreal and Jones Heward.
Net income in the Private Client Group was $92 million for 1999, down from 1998
by $17 million or 15.2 per cent. During the year, Nesbitt Burns changed its
year-end, which resulted in the inclusion of one extra month of results in 1999
compared to 1998. The inclusion of the additional month of results accounts for
an additional $56 million in revenues and $53 million in expenses. Excluding
the impact of the extra month, revenues were down by $18 million, or 1.6 per
cent, year-over-year, while expenses increased by $4 million, or 0.5 per cent.
Revenues, excluding the extra month, declined as a result of reduced commission
revenue from full-service investing, as clients moved to relatively lower
commission-generating products in response to market volatility, and a decline
in trading returns and management fees in the retail managed futures
certificate of deposit program. These declines were partially offset by higher
commission revenues from direct investing, where market volatility generated
incremental trading activity, as well as increased U.S. private bank volumes,
and continued growth in retail investment products.
Expenses, excluding the extra month, increased due to costs incurred to support
business growth across the Private Client Group, particularly retail investment
products and direct investing, offset by decreased revenue-driven compensation
associated with the retail managed futures program and full-service investing.
The alignment of the Private Client Group wealth management businesses that
began earlier this year was completed in the fourth quarter of 1999. The
group's focus in 1999 was on developing a deep understanding of its
clients'growing demands for expertise and flexibility, and on building the
foundation for strategies that will realize the inherent value in the bank's
wealth management businesses.
During 1999, the Private Client Group enhanced client offerings and expanded its
distribution capability in response to the demands of its clients for anywhere,
anyhow, anytime access and technology-supported service. The Private Client
Group entered into an agreement to acquire Chicago-based direct brokerage firm
Burke, Christensen & Lewis Securities. When combined with Harris Investors
Direct, the new company will expand its direct investing reach in the U.S. The
group's Harris Private Bank business model was expanded through the Chicago
banking network, as well as in Florida and Arizona. In Canada, InvestorLine
direct investing enhanced its electronic trading systems, and Nesbitt Burns
full-service investing launched Gateway, a service that allows clients to view
their accounts via the Intenet and track model portfolios.
The First Canadian Funds Call Centre was ranked first quartile overall for
customer communications and service in the DALBAR, Inc. survey of 23 mutual fund
companies evaluated for the year ended September 30, 1999. The Private Client
Group continued to focus on creating and sustaining personal relationships with
its clients founded in expertise and trust and is well-positioned to realize the
benefits of the alignment of its businesses.
Net income for the fourth quarter of 1999 was $20 million, a decrease of $12
million from the comparable period last year. The majority of this decrease was
attributed to lower revenues from the retail managed futures program, as
described above, partially offset by increased commission revenue related to
direct investing.
Compared to the third quarter of 1999, net income for the fourth quarter of 1999
declined by $6 million due to lower revenues in the retail managed futures
program and non-recurring expenses in direct and full-service investing.
Investment Banking Group
The Investment Banking Group services the corporate and investment banking and
investment advisory needs of larger corporate and institutional clients.
Net income in the Investment Banking Group was $426 million for the year, an
increase of $85 million, or 24.9 per cent, from the prior year. As mentioned
above, Nesbitt Burns changed its year-end, resulting in the inclusion of one
additional month of results in 1999 compared to 1998. The inclusion of the extra
month accounts for an additional $37 million in revenues and $20 million in
expenses, with a positive net income impact of $9 million. Excluding the impact
of the extra month, revenues were up by $264 million, or 18.0 per cent,
year-over-year, while expenses increased by $67 million, or 7.4 per cent.
Revenue growth, excluding the extra month, was a result of improved performance
and a return to more normal capital market conditions compared to the fourth
quarter of 1998, which resulted in higher trading revenues. Revenues were
impacted by growth in corporate lending volumes and spreads, partially offset by
the effects of lower primary market activities in new issues and mergers and
acquisitions and lower net gains on securities. The provision for credit losses
increased $87 million, from a recovery of $16 million in 1998, to an expense of
$71 million in 1999, representing a return to more normal levels following
non-recurring benefits related to collection activity on commercial real estate
loans last year. Expense growth, excluding the extra month, was driven largely
by revenue-based compensation costs.
In 1999, the bank maintained and built upon existing strengths and leading
market positions in institutional equities, underwriting, research and mergers
and acquisitions. At the same time, the bank integrated and aligned its
investment and corporate banking and capital markets businesses to be more
client and market-focused, providing high-value investment and risk management
solutions. The bank leveraged its integrated approach to participate in the
largest-ever Canadian privatization deal, the $4 billion privatization of
Ontario's Highway 407 (the world's first automated toll road).
Net income for the fourth quarter of 1999 was $132 million, compared to a loss
in the fourth quarter of 1998 of $13 million. Business growth and a return to
more normal capital market conditions, in comparison to the fourth quarter of
1998, were partially offset by increases in the provision for credit losses.
Compared to the third quarter of 1999, net income for the fourth quarter of 1999
was up $16 million, or 14.6 per cent, as a positive adjustment to the provision
for credit losses and a reduced level of expenses were partly offset by
a-decline in revenues.
Year 2000 Disclosure
The Year 2000 issue is pervasive, as almost all date-sensitive systems will be
affected to some degree by the rollover of the two-digit year from 99 to 00.
Bank of Montreal has been working since 1994 to prepare its date-sensitive
systems and equipment to meet the Year 2000 challenge. The process for Year 2000
compliance involved four major steps:
* inventory: The bank conducted an enterprise-wide inventory of all date-
sensitive systems and equipment and performed an initial assessment of time
and effort required.
* Assessment/Plan: The bank performed an impact assessment plan by evaluating
remediation options, prioritizing work and developing compliance plans.
* Implementation: The implementation step included verification, conversion and
replacement or retirement of the asset. If an asset was not retired, it was
tested and its Year 2000 compliance was verified.
* Integration: Integration testing consisted of confirming that the business
functions work accurately and without disruption under Year 2000 specific
dates, with all applications functioning correctly with interfaces and
infrastructure.
Bank of Montreal has completed Year 2000 compliance for all critical assets and
business operations as well as for virtually all non-critical systems. The bank
has successfully tested its systems' interfaces with those of its key suppliers
and clients in a Year 2000 compliant test environment.
A priority during 1999 has been Contingency Planning and Transition Management.
The bank has modified its business contingency plans to incorporate Year 2000
risks. A Transition Management Team, with representatives from across the
organization, was created to manage the transition at an enterprise level.
Simulations in individual banking groups and across the organization continue to
take place to test the efficacy of the bank's contingency plans.
In addition, Bank of Montreal is continuing with two corporate programs to
ensure the Year 2000 compliance status of its systems. Clean Management is a
maintenance and monitoring initiative practiced by all employees to ensure that
the bank's Year 2000 compliant systems and equipment are not compromised by any
subsequent change. The bank's Freeze Program, effective April 30, 1999, for
applications and June 30, 1999, for infrastructure, has halted major system
implementations. All requests for new implementations are reviewed and granted
exception status only if the implementation can be made without compromising the
bank's Year 2000 compliance.
Bank of Montreal has worked with other major banks and third parties to ensure
that interconnected systems within the financial sector work together in a Year
2000 environment. The bank has participated with other major banks in Canada in
industry-wide tests with organizations such as the Interac Association, CIRRUS,
the Canadian Payments Association, and the Canadian Depository for Securities
(CDS).
Bank of Montreal has performed Year 2000 readiness assessments of major third
parties with which its deals, including customers, counterparties, payments
systems and vendors. A Credit Working Group has been managing Year 2000 risks
across the Lines of Business and is assessing the overall risks of major
borrowers in targeted market segments which include Canadian commercial
accounts, Harris clients, corporate accounts and financial institutions. This
process included ongoing reviews of the impact of Year 2000 issues on
borrowers. Based on the bank's current evaluation of the information it has
received to date, it is not expected that the year 2000 issue will have a
material impact on the quality of the banks loan portfolio. Bank of Montreal
believes its total allowance for credit losses is adequate to cover currently
foreseeable losses, including any potential impact associated with the Year
2000 issue.
Bank of Montreal has communicated with customers that the financial records of
their accounts will be protected and that their securities and money will be
safely held in their accounts. As part of the bank's contingency preparations,
it has worked with Bank of Canada and expects that it will meet increased
demands for cash during the Year 2000 transition.
In total, Bank of Montreal expects the cost of solving the Year 2000 issue to
be approximately $340 million. As of October 31, 1999, the bank has incurred
$327 million of which $92 million was capitalized.
Bank of Montreal's objective is that its business operations run accurately and
without disruption before, during and after the calendar changes to the
Year,2000. However, due to the general uncertainty inherent in the Year 2000
issue, resulting in part from the uncertainty of the Year 2000 readiness of
other parties, the bank is unable to determine at this time whether the Year
2000 issue will have a material and adverse impact on the bank's results of
operations, liquidity and financial condition.
Bank of Montreal
Financial Highlights
(Canadian $ in millions
except as notified)
For the three months ended
October 31, July 31, April 30, January 31,
1999 1999 1999 1999
Net Income Statement
Net Interest Income (TEB) (a) $1,124 $ 1,092 $ 1,112 $ 1,089
Other income 884 933 849 845
Total Revenue (TEB) (a) 2,008 2,025 1,961 1,934
Provision for credit losses 80 80 80 80
Non-interest expense 1,501 1,284 1,271 1,232
Provision for income
taxes(TEB)(a) 153 247 231 243
Non-controlling interest in
Subsidiaries 4 5 5 7
Net income before goodwill 270 409 374 372
Amortization of goodwill, net
Of applicable income tax 12 11 10 10
Net income (c) 258 398 364 362
Taxable equivalent of adjustment 33 34 35 36
Per Common Share ($)
Net income before goodwill
Basic $ 0.91 $ 1.42 $ 1.30 $ 1.29
Fully diluted 0.90 1.41 1.29 1.28
Net income
Basic (c) 0.87 1.38 1.26 1.25
Fully diluted (c) 0.86 1.37 1.25 1.24
Dividends declared 0.47 0.47 0.47 0.47
Book value per share 34.87 34.91 33.53 33.09
Market value per share 56.65 54.90 60.80 66.75
Total market value of common
Shares 15.1 14.6 16.2 17.7
($ billions)
For the twelve months ended
Change Change
From from
Oct 31 Oct 31 Oct 31 Oct 31 Oct 31
1998 1998 1999 1998 1998
Net Income Statement
Net Interest Income
(TEB) (a) 984 14.2% $ 4,417 $ 4,152 6.4%
Other income 632 39.8 3,511 3,118 12.6
Total Revenue (TEB) (a) 1,616 24.2 7,928 7,270 9.0
Provision for credit
losses (5) 100+ 320 130 100+
Non-interest expense 1,220 23.0 5,288 4,785 10.5
Provision for income
taxes(TEB)(a) 155 (1.4) 874 938 (6.9)
Non-controlling interest in
Subsidiaries 4 13.0 21 25 (16.7)
Net income before goodwill 242 10.9 1,425 1,392 2.3
Amortization of goodwill, net
Of applicable income tax 8 35.6 43 42 1.8
Net income (c) 234 10.2 1,382 1,360 2.4
Taxable equivalent of
adjustment 36 (9.7) 138 128 7.3
Per Common Share ($)
Net income before goodwill
Basic $ 0.80 $ 0.11 $4.92 4.88 $0.04
Fully diluted 0.79 $ 0.11 $4.88 4.81 0.07
Net income
Basic (c) 0.77 0.10 4.76 4.72 0.04
Fully diluted (c) 0.76 0.10 4.72 4.66 0.06
Dividends declared 0.44 0.03 1.88 1.76 0.12
Book value per share 32.71 2.16 34.87 32.71 2.16
Market value per share 63.10 (6.45) 56.65 63.10 (6.45)
Total market value of
Common Shares 16.7 (1.6) 15.1 16.7 (1.6)
($ billions)
As at
Oct 31, July 31 April 30 January 31 Oct 31 Change from
1999 1999 1999 1999 1998 Oct 31 1998
Balance Sheet
Summary
Assets $230,615 $225,218 219,653 $224,919 222,590 3.6%
Loans 138,001 136,263 132,984 134,481 129,691 6.4
Deposits 156,874 150,424 146,965 148,577 143,983 9.0
Capital Funds 15,693 15,914 15,479 15,413 15,399 1.9
Common equity 9,313 9,291 8,916 8,785 8,650 7.7
Net impaired loans
And acceptances (256) (203) (212) (319) (342) 25.3
Average Balances
Loans 134,362 136,965 134,806 136,226 136,248 (1.4)
Assets 225,321 226,541 224,762 230,169 237,643 (5.2)
October 31, July 31 October 31
1999 1999 1998
Twelve Months Nine Months Twelve Months
Primary Financial Measures(%)(b)
5 year total shareholder return 22.0 22.6 23.3
Net economic profit ($ millions) 401 409 464
Earnings per share growth 1.3 (1.0) 0.9
Return on equity 14.1 15.6 15.2
Revenue growth 9.0 4.7 1.4
Expense-to-revenue ratio 66.7 64.0 65.8
Provision for credit losses as
a % of average loans and
acceptances 0.22 0.22 0.09
Gross impaired loans and acceptances
As a % of equity and allowance for
Credit losses 8.53 8.56 6.66
Liquidity ratio 29.2 28.6 28.4
Tier 1 capital ratio 7.72 7.87 7.26
Credit rating AA- AA- AA-
Other financial ratios (% except
As noted) (b)
Total Shareholder return (7.4) (10.3) 6.4
Dividend yield 2.9 2.9 2.9
Price-to-earnings ratio (times) 11.9 11.8 13.4
Market-to-book value (times) 1.62 1.57 1.93
Cash earnings per share - basic ($) 5.01 4.08 4.98
Cash return on common shareholders'
Equity 16.9 17.5 17.5
Return on average assets 0.61 0.66 0.69
Net interest margin 1.95 1.94 1.83
Other income as a % of total
Revenue 44.3 44.4 42.9
Expense growth 10.5 6.2 4.8
Tier 1 Capital ratio - US basis 7.42 7.56 6.95
Total Capital ratio 10.77 10.84 10.38
Equity-to-assets ratio 4.9 5.1 5.0
(a) reported on a taxable equivalent basis
(b) For the period ended or as at, as apppropriate
(c) Refer to note on page 2.
BANK OF MONTREAL
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Canadian $ in millions except number of common shares)
For the three months ended
October 31, July 31, April 30, January 31,
1999 1999 1999 1999
Interest, Dividend and Fee
Income
Loans $2,364 $2,405 $2,321 $2,566
Securities 632 569 611 637
Deposits with banks 274 258 260 277
3,270 3,232 3,192 3,480
Interest Expense
Deposits 1,571 1,545 1,482 1,730
Subordinated debt 85 85 83 86
Other liabilities 523 544 550 611
2,179 2,174 2,115 2,427
Net interest income 1,091 1,058 1,077 1,053
Provision for credit losses 80 80 80 80
Net interest income After
Provision for Credit Losses 1,011 978 997 973
Other income
Deposit and payment service 165 155 150 146
charges
Lending fees 91 89 71 78
Capital market fees 285 207 185 184
Card services 55 56 46 48
Investment management and 103 111 101 104
custodial fees
Mutual fund revenues 60 52 46 49
Trading revenues 52 86 92 65
Securitization revenues 84 69 68 75
Other fees and commissions 9 108 90 96
884 933 849 845
Net interest and other income 1,895 1,911 1,846 1,818
Non-interest Expense
Salaries and employee benefits 749 705 668 668
Premises and equipment 295 280 274 274
Communications 72 62 68 66
Other expenses 239 232 226 218
1,355 1,279 1,266 1,226
Amortization of intangible assets 5 5 5 6
1,360 1,284 1,271 1,232
Restructuring charge 141 - - -
Total non-interest expense 1,501 1,284 1,271 1,232
Income Before Provision for Income
Taxes, Non-Controlling interest in
Subsidiaries and Goodwill 394 627 575 586
Income taxes 120 213 196 207
274 414 379 379
Non-controlling interest 4 5 5 7
Net income Before Goodwill 270 409 374 372
Amortization of goodwill, not of
applicable income tax 12 11 10 10
Net Income $258 $398 $364 $362
Dividends Declared
- preferred shares $27 $30 $30 $30
- common shares $125 $125 $125 $125
Average Number of Common
Shares Outstanding 266,761,950 266,031,542 265,695,473 264,952,530
Average Assets $225,321 $226,541 $224,762 $230,169
For the twelve months ended
October 31, October 31, October 31,
1998 1999 1998
Interest, Dividend and Fee
Income
Loans $2,597 $9,658 $10,015
Securities 715 2,449 2,595
Deposits with banks 303 1,069 1,511
3,615 13,174 14,121
Interest Expense
Deposits 1,881 6,328 7,254
Subordinated debt 88 339 331
Other liabilities 698 2,228 2,512
2,667 8,895 10,097
Net interest income 948 4,279 4,024
Provision for credit losses (5) 320 130
Net interest income After
Provision for Credit Losses 953 3,959 3,894
Other income
Deposit and payment service 145 616 558
charges
Lending fees 63 329 290
Capital market fees 216 841 869
Card services 50 205 196
Investment management and
custodial fees 95 419 407
Mutual fund revenues 50 207 199
Trading revenues (176) 295 40
Securitization revenues 82 296 158
Other fees and commissions 107 303 401
632 3,511 3,118
Net interest and other income 1,585 7,470 7,012
Non-interest Expense
Salaries and employee benefits 625 2,820 2,574
Premises and equipment 270 1,123 972
Communications 68 268 266
Other expenses 252 915 949
1,215 5,126 4,761
Amortization of intangible assets 5 21 24
1,220 5,147 4,785
Restructuring charge - 141 -
Total non-interest expense 1,220 5,288 4,786
Income Before Provision for Income
Taxes, Non-Controlling interest in
Subsidiaries and Goodwill 365 2,182 2,227
Income taxes 119 736 810
246 1,446 1,417
Non-controlling interest 4 21 25
Net income Before Goodwill 242 1,425 1,392
Amortization of goodwill, net of
applicable income tax 8 43 42
Net Income $234 1,382 $1,350
Dividends Declared
- preferred shares $31 $117 $112
- common shares $117 $500 $463
Average Number of Common
Shares Outstanding 263,778,217 265,861,729 262,510,741
Average Assets $237,643 $226,714 $227,450
Note: On July 16, 1999, the CICA Emerging Issues Committee issued for
prospective application an Abstract setting out requirements for the accounting
for corporate transaction costs, including proposed mergers. Had the
requirements of the Abstract been retroactively applied to the costs of the
proposed merger with Royal Bank which were charged to retained earnings, net
income would have been reduced by $25 million to $337 million for the quarter
ended January 31, 1999 and $1,357 for the year ended October 31, 1999. Earnings
per share would have been reduced by $0.09 per share to $1.16 basic and $1.15
fully diluted for the quarter ended January 31, 1999 and $4.67 basic and $4.63
fully diluted for the year ended October 31,1999.
Bank of Montreal
Condensed Consolidated Balance Sheet
(Unaudited) (Canadian $ in millions) As at
Oct 31, 99 July 31, 99 Oct 31, 98
Cash resources $ 24,036 $ 25,776 $ 19,730
Securities 43,273 38,557 43,465
67,309 64,333 63,195
Loans
Residential mortgages 38,189 37,280 35,847
Consumer instalment
And other personal loans 16,912 16,554 16,095
Credit Card loans 1,160 1,026 797
Loans to businesses and
Governments 57,998 60,292 50,598
Securities purchased under
Resale agreements 25,090 22,424 27,520
139,349 137,576 130,857
Allowance for credit
Losses (1,348) (1,313) (1,166)
138,001 136,263 129,691
Customers' liability under
Acceptances 6,753 6,583 6,944
Other assets 18,552 18,039 22,760
Total Assets $230,615 $225,218 $ 222,590
Deposits
Banks $ 30,398 $ 29,407 $ 26,256
Business and governments 65,459 60,051 58,064
Individuals 61,017 60,966 59,663
156,874 150,424 143,983
Acceptances 6,753 6,583 6,944
Securities sold but not
Yet purchased 10,450 10,942 7,843
Securities sold under
Repurchase agreements 24,177 25,527 29,758
Other liabilities 16,668 15,828 18,663
58,048 58,880 63,208
Subordinated debt 4,712 4,746 4,791
Shareholder's equity
Share capital
Preferred shares 1,668 1,877 1,958
Common shares 3,190 3,162 3,095
Retained earnings 6,123 6,129 5,555
10,981 11,168 10,608
Total Liabilities and
Shareholders' Equity $ 230,615 $ 225,218 $222,590
Notes: These consolidated financial statements have been prepared in
Accordance with Canadian generally accepted accounting principles,
including the accounting requirements of the Superintendent of
Financial Institutions Canada.
Bank of Montreal
Condensed Consolidated Statement of Cash Flow
Unaudited (Canadian $ in millions) For the twelve months ended
October 31,1999 October 31,1998
Cash flows from Operating Activities
Net income $ 1,382 $ 1,350
Adjustments to determine net cash flows 2,954 1,735
4,336 3,085
Cash Flows From Financing Activities
Deposits 12,891 (229)
Other liabilities (1,692) 4,742
Debt and share capital (212) 1,581
Dividends paid (617) (575)
10,370 5,519
Cash Flows Used in Investing Activities
Investment Securities 1,799 5,647
Loans 8,272 14,901
Premises and equipment - net purchases 329 571
Interest bearing deposits with banks 4,849 (12,826)
15,249 8,293
Net Increases (Decrease) in Cash and Cash
Equivalents (543) 311
Cash and Cash Equivalents at Beginning of Period 2,962 2,651
Cash and Cash Equivalents at End of Period 2,419 2,962
Condensed Consolidated Statement of Changes in Shareholders' equity
Unaudited (Canadian $ in millions) For the twelve months ended
October 31,1999 October 31,1998
Balance at Beginning of Period $ 10,608 $ 8,903
Net income 1,382 1,350
Dividends - Preferred shares (117) (112)
- Common shares (500) (463)
Preferred share issues (redemptions) (272) 650
Common share issues 95 76
Translation adjustment on preferred shares
In a foreign currency (18) 34
Unrealized gain (loss) on translation of net
Investment in foreign operations
Net of hedging activities and applicable income
Taxes (172) 178
Costs of proposed merger, net of applicable income
Taxes (a) (25) -
Share Issue expense, net of applicable income taxes - (8)
Balance at End of Period $10,981 $ 10,608
(A) Refer to note on page 2.
END
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