RNS No 4830k
BANK OF MONTREAL
24th February 1998
BANK OF MONTREAL REPORTS FIRST QUARTER RESULTS
WINNIPEG, February 24, 1998 - Bank of Montreal reported net income of $361
million for the quarter ended January 31, 1998, up 12.0 per cent from $322
million in 1997. Fully diluted earnings per share were $1.27 ($1.29 basic), up
9.5 per cent from $1.16 ($1.17 basic) last year. Return on equity was 17.3 per
cent, compared to 17.7 per cent in the first quarter of 1997.
Earnings per share growth of 9.5 per cent resulted from net income growth of
12.0 per cent, partially offset by the effect of increased preferred share
dividends. Net income growth was sustained despite a decline in investment
banking and was driven by the continuation of three factors: diversified
revenue growth, good expense management and low loan losses.
Financial Highlights
Volumes Drive Continued Revenue Growth
Revenue growth was 7.3 per cent driven by business volume growth, partially
offset by narrowing margins. Retail and commercial volumes in Canada were
strong as average residential mortgages increased $5.0 billion, card and other
personal loans grew by $1.6 billion, while loans to commercial enterprises,
including small and medium-sized businesses, were up $1.1 billion. U.S. retail
and commercial loan volumes grew by $2.5 billion at Chicago-based Harris Bank.
Volume growth in the corporate markets occurred in both the Treasury and
Investment and Corporate Banking lines of business. The overall decline in
margins was largely the result of mix and the impact of interest rate changes
during the quarter.
Expense Management
Expense growth of 8.7 per cent was comprised of revenue driven compensation (1.8
per cent), continued investments in strategic initiatives such as mbanx and
telebanking, and business expansion activities primarily in investment banking
(5.9 per cent), the foreign exchange rate impact on U.S.-based expenses (1.4 per
cent), and on-going business volume growth offset by productivity improvements
(-0.4 per cent).
Asset Quality Remains Strong
Reservations on impaired loans exceeded the gross balances of such loans by $498
million at the end of the first quarter, an improvement of $643 million from the
end of the first quarter 1997 and an improvement of $140 million from October
31, 1997.
The bank's current forecast annual provision for credit losses is $180 million,
versus $275 million in 1997. The difference is largely due to the previously
announced securitization of credit card loans and the sale of Harris Bank's U.S.
credit card portfolio to Partners First, an entity in which the bank has an
equity position.
Capital Management
The bank experienced high asset growth in the first quarter of 1998. This
growth was widespread across most lines of business. The bank's Tier 1 capital
ratio was 6.38 per cent at January 31, 1998, compared to 6.80 per cent at
October 31, 1997. With the issuance of $400 million of preferred shares in
February 1998, the Tier 1 capital ratio would have been 6.67 per cent on a pro
forma basis for the quarter ending January 31, 1998.
Income from Outside Canada
Earnings from outside Canada were $153 million compared to $151 million during
the first quarter of 1997. The contribution of Grupo Financiero Bancomer to net
income was $22 million in the first quarter of 1998, compared to $15 million in
the first quarter of 1997. The contribution of Harris Bank to net income was
$64 million in the first quarter of 1998, compared to $55 million in the first
quarter of 1997.
Bank of Montreal, Canada's first bank, is a highly diversified financial
services institution with average assets of $224 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, Winnipeg (204) 989-2273 Bob Wells, (204) 989-2273
Rick Kuwayti, Toronto (416) 927-2740 Cathy Cranston, (204) 989-2273
Ronald Monet, Montreal (514) 877-1101
Internet: http://www.bmo.com
Bank of Montreal
Financial Highlights
(Canadian $ in millions
except as noted) For the three months ended
Jan 31, Oct 31, Jan 31, Change from
1998 1997 1997 Jan 31, 1997
Net Income Statement
Net Interest Income (TEB) (a) $ 1,054 $ 1,091 $ 1,009 4.4 %
Other Income 777 771 697 11.5
Total revenue (TEB) (a) 1,831 1,862 1,706 7.3
Provision for credit losses 45 69 69 (34.5)
Non-interest expense 1,174 1,269 1,080 8.7
Provision for income taxes (TEB) (a) 247 220 229 7.8
Non-controlling interest in
subsidiary 4 7 6 (30.3)
Net income 361 297 322 12.0
Taxable equivalent adjustment 29 28 25 16.4
Per Common Share ($)
Net income - basic $ 1.29 $ 1.05 $ 1.17 $ 0.12
- fully diluted 1.27 1.04 1.16 0.11
Dividends declared 0.44 0.44 0.40 0.04
Book value per share 30.34 29.18 26.71 3.63
Market value per share 67.10 60.85 46.60 20.50
Total market value of common
shares ($ billions) 17.6 15.9 12.1 5.5
As at
Jan 31, Oct 31, Jan 31, Change from
1998 1997 1997 Jan 31, 1997
Balance Sheet Summary
Assets $ 218,635 $ 207,838 $ 186,872 17.6 %
Loans 125,134 114,918 105,026 19.1
Deposits 151,857 144,212 125,992 20.5
Capital funds 13,242 12,734 11,679 13.4
Common equity 7,939 7,629 6,948 14.3
Net impaired loans and acceptances (498) (358) 145 (100.0)
Average Balances
Loans 124,365 116,844 103,803 19.8
Assets 223,998 204,819 182,220 22.9
Jan 31, Oct 31, Jan 31,
1998 1997 1997
Three Twelve Three
months months months
Primary Financial Measures (%) (b)
Five-year return on common
shareholders' investment 30.2 26.1 21.0
Return on common shareholders'
equity 17.3 17.1 17.7
EPS growth - fully diluted 9.5 11.9 11.5
Revenue growth 7.3 15.1 10.8
Expense-to-revenue ratio 64.1 64.4 63.3
Provision for credit losses as
a % of average loans and
acceptances 0.14 0.23 0.25
Gross impaired loans and acceptances
as a % of equity and allowance for
credit losses 6.26 7.65 13.33
Tier 1 capital ratio (c) 6.67 6.80 6.58
Cash and securities-to-total assets 33.6 35.6 33.4
Credit rating AA- AA- AA-
Other Financial Ratios (% except
as noted) (b)
Return on common shareholders'
investment 13.5 55.0 19.1
Dividend yield 2.9 3.9 3.9
Cash earnings per share basic ($) 1.36 4.97 1.24
Cash return on common shareholders'
equity 20.0 20.0 20.9
Return on average assets 0.64 0.66 0.70
Net interest income to average
assets 1.87 2.13 2.20
Other income as a % of total revenue 42.4 41.6 40.8
Expense growth 8.7 16.8 15.8
Tier 1 capital ratio - U.S. basis
(c) (d) 6.74 6.35 6.12
Total capital ratio (c) 9.35 9.66 9.07
Equity-to-assets ratio 4.3 4.4 4.3
(a) Reported on a taxable equivalent basis (TEB).
(b) For the period ended or as at, as appropriate.
(c) The January 31, 1998 total capital ratio and tier 1 capital ratios reflect
the inclusion of $400 million February 26, 1998 issue of Class B preferred
shares. Excluding this issue, the total capital ratio is 9.05%, the tier 1
capital ratio is 6.38% and the tier 1 capital ratio - U.S. basis is 6.45% as at
January 31, 1998.
(d) The January 31, 1998 tier 1 capital ratio - U.S. basis also reflects the
inclusion of US $250 million preferred shares issued by a subsidiary on February
11, 1998. Excluding this issue and the issue in note (c) above, the tier 1
capital ratio - U.S. basis is 6.18% as at January 31, 1998.
Bank of Montreal
Consolidated statement of income
(Unaudited)
(Canadian $ in millions except number of common shares)
For the three months ended
January 31, October 31, January 31,
1998 1997 1997
Interest, Dividend and Fee Income
Loans $ 2,311 $ 2,110 $ 1,878
Securities 576 581 524
Deposits with banks 452 378 277
3,339 3,069 2,679
Interest Expense
Deposits 1,715 1,377 1,194
Subordinated debt 75 72 72
Other liabilities 624 557 429
2,314 2,006 1,695
Net Interest Income 1,025 1,063 984
Provision for credit losses 45 69 69
Net Interest Income After Provision for
Credit Losses 980 994 915
Other Income
Deposit and payment service charges 132 129 125
Lending fees 53 69 46
Capital market fees 233 238 221
Card services 77 89 65
Investment management and custodial fees 93 58 65
Mutual fund revenues 45 44 32
Trading revenues 63 66 61
Other fees and commissions 81 78 82
777 771 697
Net Interest and Other Income 1,757 1,765 1,612
Non-Interest Expense
Salaries and employee beneits 653 676 595
Premises and equipment 223 287 203
Communications 67 65 60
Other expenses 212 223 204
1,155 1,251 1,062
Goodwill and other valuation intangibles 19 18 18
Total non-interest exponse 1,174 1,269 1,080
Income Before Provision for Income Taxes 583 496 532
Provision for income taxes 218 192 204
Income Before Non-Controlling Interest in
Subsidiary 365 304 328
Non-controlling interest 4 7 6
Net Income $ 361 $ 297 $ 322
Dividends Declared - preferred shares $ 23 $ 23 $ 17
- common shares $ 116 $ 115 $ 104
Average Number of Common Shares
Outstanding 261,540,842 260,915,889 260,049,747
Average Assets $ 223,996 $ 204,819 $ 182,220
BANK OF MONTREAL
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Canadian $ in millions As at
Jan 31, Oct 31, Jan 31,
1998 1997 1997
Cash resources $31,972 $32,245 #24,032
Securities 41,520 41,789 38,081
73,492 74,034 62,113
Loans
Residential mortgages 36,769 35,555 31,055
Consumer instalment and other
personal loans 14,940 14,682 13,181
Credit card loans 2,012 1,912 3,858
Loans to businesses and governments 50,927 45,397 40,382
Securities purchased under resale
agreements 21,651 18,517 17,624
126,299 116,063 106,100
Allowance for credit losses (1,165) (1,145) (1,074)
125,134 114,918 105,026
Customers' liability under acceptances 5,825 5,594 4,141
Other assets 14,084 13,292 14,592
Total Assets $ 218,535 $ 207,838 $ 185,872
Deposits
Banks $ 35,004 $ 31,272 $ 26,618
Business and governments 56,995 54,901 41,661
Individuals 59,858 58,039 57,713
151,857 144,212 125,992
Acceptances 5,825 5,594 4,141
Securities sold but not yet purchased 8,883 10,304 12,920
Securities sold under repurchase
agreements 25,871 21,389 16,695
Other liabilities 12,857 13,605 14,445
53,436 50,892 48,201
Subordinated debt 4,017 3,831 3,872
Shareholders' equity
Share capital
Preferred shares 1,286 1,274 859
Common shares 3,024 3,019 2,994
Retained earnings 4,915 4,610 3,954
9,225 8,903 7,807
Total Liabilities and Shareholders'
Equity $218,535 $207,838 $185,872
Note:
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 CHANGES IN FINANCIAL POSITION
(Unaudited)
(Canadian $ in millions) For the three months ended
Jan 31, 1998 Jan 31, 1997
Cash Flows From Operating Activities
Net income $ 361 $ 322
Adjustments to determine net cash flows 2,600 (198)
2,961 124
Cash Flows From Financing Activities
Deposits 7,645 6,730
Other liabilities 1,719 333
Debt and share capital 203 565
Dividends paid (139) (121)
9,428 7,507
Cash Flows Used in Investing Activities
Investment securities 2,287 1,003
Loans 10,261 6,682
Premises and equipment - net purchases 114 101
Other assets (448) 1,218
12,214 9,004
Net Increase (Decrease) in Cash and
Cash Equivalents 175 (1,373)
Cash and Cash Equivalents at Beginning
of Period 2,651 3,346
Cash and Cash Equivalents at End
of Period $ 2,826 $ 1,973
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Canadian $ in millions) For the three months ended
Jan 31, 1998 Jan 31, 1997
Balance at Beginning of Period $ 8,903 $ 7,586
Net income 361 322
Dividends - Preferred shares (23) (17)
- Common shares (116) (104)
Common share issues 5 5
Translation adjustment on preferred shares
issued in a foreign currency 12 2
Unrealized gain on translation of net
investment in foreign operations,
net of hedging activities and applicable
income tax 83 13
Balance at End of Period $ 9,225 $ 7,807
END
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