RNS No 9160q
BANK OF MONTREAL
25th November 1997
Bank of Montreal Reports Year-end Results
TORONTO, November 25, 1997 Bank of Montreal net income for the
quarter ending October 31, 1997, was $297 million, after a
special charge of $75 million (before tax), compared to $291
million for the same quarter last year. Fully diluted earnings
per share were $1.04 and $1.20 excluding the special charge.
For the year ending October 31, 1997, net income was $1.305
billion, up 11.7 per cent from $1.168 billion in 1996. Fully
diluted earnings per share were $4.62 ($4.69 basic), up from
$4.13 ($4.21 basic) last year. Return on equity increased to
17.1 per cent from 17.0 per cent last year. Excluding the
special charge, fully diluted earnings would be $4.78 for the
year.
Earnings growth in 1997 was driven by strong business volume
growth, cash collections on impaired loans and earnings on bonds
and equities of lesser-developed countries, concurrently offset
by the special charge mentioned above and increases in expenses
to fund investments for future revenue growth. Also included in
1997 earnings was $200 million to increase the level of the
general allowance.
"The bank's financial objective is to strike a proper balance
between short-term and long-term earnings," said Matthew W.
Barrett, Chairman and Chief Executive Officer, Bank of Montreal.
"Long-term investments are funded with offsetting improvements in
our existing businesses or by discontinuing activities with low
or no potential for strong shareholder wealth creation.
"So far, we have managed to strike this balance well. We have
made more than $2 billion of new strategic investments over the
last several years without interrupting our stream of record
earnings and return on equity. As these investments mature, we
expect them to contribute strongly to the earnings momentum we
have created.
"Another important ingredient of our strategy that augers well
for sustained, consistent earnings growth is the focus we place
on diversification: diversified geographic markets, diversified
lines-of-business and diversified customer segments," added Mr.
Barrett.
Diversified Income
The bank's strong performance results from the benefit of being
diversified as economic conditions change. Net income by
geography was:
Canada $543 million
U.S. $535 million
Mexico $84 million
Other countries $143 million
In addition to geographic diversification, the bank continues to
diversify by business segment. Net income for the year from
these segments were:
Personal and Commercial Financial Services $539 million
Harris Regional Banking $186 million
Electronic Financial Services $181 million
Investment and Corporate Banking $150 million
Global Treasury Group $403 million
Corporate Areas $(154) million
Retail and Commercial Segment Contributes 74.2 per cent of Income
The total retail and commercial segment, which includes those
operating groups primarily focused on this market - Personal and
Commercial Financial Services, Harris Regional Banking,
Electronic Financial Services and the Private Client Division and
Asset Management Services components of Investment and Corporate
Banking - accounted for 74.2 per cent of the bank's total income.
Shareholder Value Improves
During the year, the value of Bank of Montreal shares increased
50.1 per cent from $40.55 per share to $60.85. The bank's market
capitalization grew by $5.4 billion during the year. Dividends
paid were up from $1.41 per share to $1.60. Over the last eight
years of consecutive record earnings, the bank's shares have
averaged an annualized return on investment of 25.5 per cent.
Over the same time period, market capitalization has grown from
$3.8 billion to $15.9 billion. Dividends paid out for the same
period totaled $2.5 billion for a total return to shareholders of
$14.6 billion.
Net Interest Income Growth
Net interest income increased 12.8 per cent for the year and 13.0
per cent for the quarter over the fourth quarter last year as a
result of strong business growth, increased cash collections and
gains from the sale of bonds of lesser-developed countries.
Volume Growth in Loans to Individuals and Small Businesses
The Canadian and U.S. retail segments enjoyed strong asset growth
driven by the North American economy, which has continued to
expand. Residential mortgages increased in 1997 by $4.3 billion
to a record $32.4 billion. In Canada, the asset growth was
offset by narrowing margins.
Deposits gathered from Canadian individuals and commercial
customers totaled $57.2 billion in 1997. All of these funds were
directed to finance risk taking in the Canadian economy. Loans
to individuals and small and medium-sized businesses totaled
$57.9 billion.
"These outstanding results reflect both our performance as a
financial institution with a North American strategy, and the
performance of the continental economy," said Mr. Barrett. "The
earnings consistency was achieved, in part, through our strategic
commitment to earn, grow and invest all at the same time.
"The last 12 months have seen interest rates at their lowest
level in 40 years, continued low inflation, strong economic
growth with job creation and record-setting stock prices. This
favorable economic climate has led to strong growth in our
mortgage business, investment banking and foreign operations."
Diversified Non-Interest Revenue Growth
Non-interest revenue increased 18.5 per cent for the year, and
19.7 per cent in the quarter over the fourth quarter last year.
Investment and Corporate Banking and Global Treasury Group
benefited from buoyant capital markets.
Expense Growth Reflects Revenue-Driven Compensation
and Investments for the Future
Non-interest expenses increased 16.8 per cent for the year and
17.9 per cent for the quarter. Revenue-driven expenses and costs
related to strategic investments for future growth represented
approximately 5.3 per cent and 4.9 per cent respectively. Also,
a $75 million charge in the fourth quarter for accelerated
depreciation related to technology changes and for costs to
improve the efficiency of the bank's credit process was recorded.
The remainder of the increase (5.3 per cent) represented expenses
associated with ongoing business expansion, including costs
associated with preparations for Year 2000 technology related
issues.
Continued Strong Asset Quality
Provision for credit losses was $275 million, up $50 million from
last year. However, only $75 million of losses related to
specific accounts. The remainder of $200 million was used to
increase the level of the general allowance which, together with
a reclassification of $100 million of Harris' allowance, raised
the bank's total general allowance to $775 million.
Tax and Government Levies Payments of $1.23 Billion
The bank paid $1.23 billion in taxes and government levies.
Payments to employees totaled $2.41 billion. The bank purchased
$1.73 billion from suppliers of goods and services.
U.S. Comparability
Due to different accounting treatments for business acquisitions
in the United States and Canada, there is increasing use of cash-
basis reporting to provide a more consistent method for comparing
bank results. On a cash basis, which excludes goodwill from both
income and equity when comparing return on equity, the 1997
return on equity would be 20.0 per cent compared to 19.8 per cent
last year, with cash-basis earnings per share of $4.97 compared
to $4.44 last year.
One of the 10 Largest Banks in North America
Bank of Montreal, Canada's first bank, is a highly diversified
financial services institution that ranks as one of the 10
largest banks in North America with average assets of $205
billion. The bank's group of companies include Nesbitt Burns,
one of Canada's largest full-service investment firms, Chicago-
based Harris Bank, a major U.S. mid-west financial institution
and mbanx, the first North American-wide virtual banking unit.
Bank of Montreal has an equity position in and an alliance with
Grupo Financiero Bancomer, the leading Mexican financial
institution.
Media Relations Contacts: Investor Relations Contacts:
Joe Barbera, Toronto (416) 927-2740 Bob Wells, (416) 867-4009
Ronald Monet, Montreal (514) 877-1101 Cathy Cranston, (416) 867-6656
Internet: http://www.bmo.com
BANK OF MONTREAL
FINANCIAL HIGHLIGHTS
(Canadian $ in millions
except as noted) For the 3 months ended For the 12 months ended
Oct July Oct Change Oct Oct Change
31, 31, 31, from 31, 31, from
1997 1997 1996 Oct 1997 1996 Oct
31,1996 31,1996
Net Income Statement
Net interest income (TEB) $ $ $ $ $
(a) 1,091 1,054 965 13.0 % 4,186 3,711 12.8 %
Other income 771 811 645 19.7 2,981 2,516 18.5
Total revenue (TEB) (a) 1,862 1,865 1,610 15.7 7,167 6,227 15.1
Provision for credit 69 68 44 57.2 275 225 22.2
losses
Non-interest expense 1,269 1,147 1,077 17.9 4,613 3,949 16.8
Provision for income 220 272 193 14.1 949 865 9.7
taxes (TEB) (a)
Non-controlling interest 7 6 5 24.4 25 20 24.0
in subsidiary
Net income 297 372 291 2.3 1,305 1,168 11.7
Taxable equivalent 28 28 31 (10.2) 109 108 0.2
adjustment
Per Common Share ($) $ $ $ $ $ $ $
Net income - basic 1.05 1.34 1.06 (0.01) 4.69 4.21 0.48
- fully
diluted 1.04 1.31 1.04 0.00 4.62 4.13 0.49
Dividends declared 0.44 0.40 0.40 0.04 1.64 1.48 0.16
Book value per share 29.18 28.54 25.89 3.29 29.18 25.89 3.29
Market value per share 60.85 57.45 40.55 20.30 60.85 40.55 20.30
Total market value of
common shares ($ 15.9 15.0 10.5 5.4 15.9 10.5 5.4
billions)
As at
Oct July Oct Change
31, 31, 31, from
1997 1997 1996 Oct 31,
1996
Balance Sheet Summary
Assets (b) $ 207,838 $198,209 $169,832 22.4 %
Loans 114,918 112,068 98,413 16.8
Deposits 144,212 136,485 119,262 20.9
Capital funds 12,734 12,057 10,900 16.8
Common equity 7,829 7,432 6,729 13.4
Net impaired loans and (358) (254) 364 (198.3)
acceptances
Average Balances
Loans 116,844 118,806 99,373 17.6
Assets (b) 204,819 203,366 166,141 23.3
Oct July Oct
31, 31, 31,
1997 1997 1996
Twelve Nine Twelve
months months months
Primary Financial
Measures (%)(c)
Five-year return on 26.1 24.3 22.2
common shareholders'
investment
Return on common 17.1 18.0 17.0
shareholders' equity
EPS growth - fully 11.9 15.9 22.2
diluted
Revenue growth 15.1 14.9 9.9
Expense-to-revenue ratio 64.4 63.0 63.4
Provision for credit
losses as a % of average
loans and acceptances 0.23 0.24 0.23
Gross impaired loans and
acceptances as a % of
equity and allowance
for credit losses 7.65 8.86 16.71
Tier 1 capital ratio 6.80 6.96 6.71
Cash and securities-to-
total assets 35.6 34.1 35.6
Credit rating AA- AA- AA-
Other Financial Ratios (%
except as noted) (c)
Return on common 55.0 46.3 42.4
shareholders' investment
Dividend yield 3.9 4.0 4.7
Cash earnings per share -
basic ($) 4.97 3.85 4.44
Cash return on common 20.0 21.1 19.8
shareholders' equity
Return on average assets 0.66 0.69 0.74
Net interest income to 2.13 2.13 2.34
average assets (b)
Other income as a % of
total revenue 41.6 41.7 40.4
Expense growth 16.8 16.4 8.3
Tier 1 capital ratio -
U.S. basis 6.35 6.51 6.26
Total capital ratio (d) 9.66 9.34 9.11
Equity-to-assets ratio 4.4 4.5 4.6
(a) Reported on a taxable equivalent basis (TEB).
(b) Reporting of unrealized gains and losses on interest rate and
foreign exchange contracts held for trading related activities is on a
gross rather than a net basis, adopted in 1997. Prior periods have not been
restated to give effect to this change.
(c) For the period ended or as at, as appropriate.
(d) As at July 31, 1997 and October 31, 1996, the capital ratios reflect
the inclusion of $450 million Series A Medium Term Notes issued on August
25, 1997 and $300 million Series 23 debentures issued on November 1, 1996,
respectively. Excluding these issues, the total capital ratio as at July
31, 1997 and October 31, 1996 would be 8.96% and 8.83%, respectively.
Bank of Montreal Year-End Report 1997
BANK OF MONTREAL
CONSOLIDATED STATEMENT OF INCOME
(Canadian $ in millions For the three months ended For the twelve
except number of common months ended
shares)
October July October October October
31,1997 31,1997 31,1996 31,1997 31,1996
Interest, Dividend and Fee Income
$ $ $ $ $
Loans 2,110 2,108 1,804 8,058 7,376
Securities 581 522 545 2,144 2,124
Deposits with banks 378 360 248 1,332 984
3,069 2,990 2,597 11,534 10,484
Interest Expense
Deposits 1,377 1,376 1,181 5,208 5,134
Subordinated debt 72 74 68 293 246
Other liabilities 557 514 414 1,956 1,501
2,006 1,964 1,663 7,457 6,881
Net Interest Income 1,063 1,026 934 4,077 3,603
Provision for credit losses 69 68 44 275 225
Net Interest Income After 994 958 890 3,802 3,378
Provision for Credit Losses
Other Income
Deposit and payment service 129 130 124 508 473
charges
Lending fees 69 62 51 240 194
Capital market fees 238 220 191 919 760
Card services 89 69 65 283 234
Investment management and 58 116 46 299 221
custodial fees
Mutual fund revenues 44 43 29 155 87
Trading revenues 66 99 74 276 277
Other fees and commissions 78 72 65 301 270
771 811 645 2,981 2,516
Net Interest and Other 1,765 1,769 1,535 6,783 5,894
Income
Non-Interest Expense
Salaries and employee 676 637 574 2,535 2,210
benefits
Premises and equipment 287 216 189 916 727
Communications 65 60 57 246 219
Other expenses 223 215 239 842 739
1,251 1,128 1,059 4,539 3,895
Goodwill and other valuation 18 19 18 74 54
intangibles
Total non-interest expense 1,269 1,147 1,077 4,613 3,949
Income Before Provision for 496 622 458 2,170 1,945
Income Taxes
Provision for income taxes 192 244 162 840 757
Income Before Non- 304 378 296 1,330 1,188
Controlling Interest in
Subsidiary
Non-controlling interest 7 6 5 25 20
Net Income $ 297 $ 372 $ 291 $ 1,305 $ 1,168
Dividends Declared
- preferred shares $ 23 $ 23 $ 17 $ 83 $ 69
- common shares $ 115 $ 104 $ 104 $ 427 $ 386
Average Number of
Common 260,915,889 260,414,763 259,394,517 260,409,736 261,232,729
Shares Outstanding
Average Assets $ 204,819 $ 203,366 $ 166,141 $ 196,721 $ 158,316
BANK OF MONTREAL
CONDENSED CONSOLIDATED BALANCE SHEET
(Canadian $ in millions) As at
October 31, July 31, October
1997 1997 31, 1996
Cash resources $ 32,245 $ 28,262 $ 24,187
Securities 41,789 39,410 36,609
74,034 67,662 60,796
Loans
Residential mortgages 35,555 33,839 30,086
Consumer instalment and other 14,682 14,243 12,812
personal loans
Credit card loans 1,912 2,480 3,842
Loans to businesses and governments 45,397 44,535 38,625
Securities purchased under resale 18,517 18,119 14,081
agreements
116,063 113,216 99,446
Allowance for credit losses (1,145) (1,148) (1,033)
114,918 112,068 98,413
Customers' liability under acceptances 5,594 5,117 4,397
Other assets 13,292 13,362 6,226
Total Assets $ 207,838 $ 198,209 $ 169,832
Deposits
Banks $ 31,272 $ 31,194 $ 24,740
Businesses and governments 54,901 47,588 37,474
Individuals 58,039 57,703 57,048
144,212 136,485 119,262
Acceptances 5,594 5,117 4,397
Securities sold but not yet purchased 10,304 13,178 13,716
Securities sold under repurchase 21,389 19,236 15,523
agreements
Other liabilities 13,605 12,136 6,034
50,892 49,667 39,670
Subordinated debt 3,831 3,359 3,314
Shareholders' equity
Share capital
Preferred shares 1,274 1,266 857
Common shares 3,019 3,001 2,989
Retained earnings 4,610 4,431 3,740
8,903 8,698 7,586
Total Liabilities and Shareholders'
Equity $ 207,838 $ 198,209 $ 169,832
Notes:
(1) 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.
(2) Reporting of unrealized gains and losses on interest rate and
foreign exchange contracts held for trading related activities is on a
gross rather than a net basis, adopted in 1997. Prior periods have
not been restated to give effect to this change.
BANK OF MONTREAL
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(Canadian $ in millions) For the twelve months ended
October October
31, 1997 31, 1996
Cash Flows From Operating Activities
Net income $ 1,305 $ 1,168
Adjustments for non-cash items (3,041) (5,972)
(1,736) (4,804)
Cash Flows From Financing Activities
Deposits 24,950 9,657
Other liabilities 3,024 7,605
Debt and share capital 964 600
Dividends paid (510) (455)
28,428 17,407
Cash Flows Used in Investing Activities
Investment securities 1,315 (2,698)
Loans 16,780 10,196
Premises and equipment - net purchases 539 401
Other assets 8,753 2,846
Acquisition of an interest in an
associated corporation - 423
27,387 11,168
Net Increase (Decrease) in Cash and Cash (695) 1,435
Equivalents
Cash and Cash Equivalents at Beginning of
Period 3,346 1,911
Cash and Cash Equivalents at End of Period $ 2,651 $ 3,346
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Canadian $ in millions) For the twelve months ended
October October
31, 1997 31, 1996
Balance at Beginning of Period $ 7,586 $ 7,032
Net income 1,305 1,168
Dividends - Preferred shares (83) (69)
- Common shares (427) (386)
Preferred share issue 400 -
Common share issues 30 22
Common share stock options granted on acquisition
of an interest in an associated corporation - 22
Common shares purchased for cancellation - (162)
Translation adjustment on preferred shares 17 (1)
issued in a foreign currency
Unrealized gain (loss) on translation of net
investment in foreign operations, net of
hedging activities and applicable income tax 81 (40)
Share issue expense, net of applicable income
tax (6) -
Balance at End of Period $ 8,903 $ 7,586
END
QRRFEUSAMUWUFEF
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