RNS NUMBER 9886H
BANK OF MONTREAL
26th May 1998
FOR IMMEDIATE RELEASE
Bank of Montreal Reports Second Quarter Results
TORONTO, May 26,1998 - Bank of Montreal reported net income of $377 million for
the quarter ended April 30, 1998, up from $314 million in 1997. Fully diluted
earnings per share were $1.32 ($1.34 basic), up 18.9 per cent from $1.11 ($1.13
basic) last year. Return on equity was 18.0 per cent, compared to 17.2 per cent
in the second quarter of 1997.
Earnings per share growth of 18.9 per cent resulted from net income growth of
20.0 per cent, partially offset by the effect of increased preferred share
dividends. Net income growth, reflecting strength in the North American
economy, was broad-based and driven by the continuation of three factors:
diversified revenue growth, expense management and strong asset quality.
Net income for the first six months of the year was $738 million, up 16.0 per
cent from $636 million in 1997, while fully diluted earnings per share were
$2.59 ($2.63 basic), up 14.1 per cent from $2.27 ($2.30 basic) one year ago.
Return on equity for the first six months in 1998 was 17.7 per cent, compared
to 17.4 per cent for the first six months of 1997.
Financial Highlights
Diversified Revenue Growth
Revenues for the second quarter were $1.9 billion, up 10.1 per cent from the
second quarter of 1997. Major contributors to the increase were business volume
growth, particularly in the retail segments, partially offset by narrowing
margins. Revenues this quarter include a $35 million gain on the disposition of
a collateralized mortgage obligation portfolio. Revenues in the second quarter
of 1997 included $25 million of collections on impaired loans and $44 million of
revenues from lesser-developed countries.
In Canada, average residential mortgages increased $4.8 billion from a year ago
to $34.4 billion. Card and other personal loans were up $1.6 billion. while
loans to commercial enterprises, including small and medium-sized businesses,
were up $1.9 billion. U.S. retail banking results were driven by an average
loan growth of $1.6 billion, primarily in personal and commercial lending at
Chicago-based Harris Bank. The year- over-year decline in total bank margins
reflects the increasingly competitive marketplace and lower revenues from
impaired loans and lesser-developed countries. Relative to first quarter 1998,
margins have improved slightly.
Expense Growth 8 Per Cent
Expense growth of 8.0 per cent was comprised of continued investment in
strategic initiatives such as mbanx and telephone banking (2.0 per cent), the
foreign exchange rate impact on U.S.-based expenses (0.7 per cent), and expenses
related to on-going business volume growth, including investments in fixed
income and global financial products, partially offset by productivity
improvements (5.3 per cent).
Asset Quality Remains Strong
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 Canadian 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. Loan losses associated with these two portfolios are
reflected as a reduction in revenue in 1998.
The allowance for credit losses exceeded the gross amount of impaired loans by
$467 million at the end of the second quarter, versus $3 million at the end of
the second quarter of 1997.
Improved Capital Ratios
Average assets for the quarter were $222 billion, down $2.0 billion from the
first quarter of 1998. The bank's Tier 1 capital ratio was 6.97 per cent at
April 30, 1998, compared to 6.38 per cent at January 31, 1998. Including the
issuance of $250 million of preferred shares in May 1998, the Tier 1 capital
ratio would have been 7.16 per cent on a pro forma basis for the quarter
ending April 30, 1998.
Income from Outside Canada
Earnings from outside Canada were $196 million compared to $165 million during
the second quarter of 1997. The contribution of Grupo Financiero Bancomer to
net income was $22 million in the second quarter of 1998, compared to $13
million in the second quarter of 1997. The contribution of Harris Bank to net
income was $70 million in the second quarter of 1998, compared to $59 million in
the second quarter of 1997.
Bank of Montreal, Canada's first bank, is a highly diversified financial
services institution with average assets of $222 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:llwww.bmo.com
BANK OF MONTREAL
FINANCIAL HIGHLIGHTS
(Canadian $ in millions except as noted)
For the three months ended For the six months ended
Apr 30 Jan 31 Apr 30 Change Apr 30 Apr 30 Change from
1998 1998 1997 from 1998 1997 Apr 30 1997
Apr 30
1997
Net Income Statement
Net interest
income (TEB)(a) $1,035 1,054 1,032 0.3% 2,089 2,041 2.3%
Other income 875 777 702 24.6 1,652 1,399 18.1%
Total revenue(TEB)(a)1,910 1,831 1,734 10.1 3,741 3,440 8.7%
Provision for Credit
losses 45 45 69 (34.5) 90 138 (34.5)
Non-interest expense 1,207 1,174 1,117 8.0 2,381 2,197 8.4
Provision for
Income taxes (TEB)(a) 273 247 228 19.5 520 457 13.6
Non-controlling interest
in subsidiaries 8 1 6 33.7 12 12 (0.2)
Net income 377 361 314 20.0 738 636 16.0
Taxable equivalent
adjustment 31 29 28 8.2 60 53 12.6
%
Per common share ($)
Net Income-basic 1.34 1.29 1.13 0.21 $ 2.63 2.30 0.33
-fully diluted 1.32 1.27 1.11 0.21 2.59 2.27 0.32
Dividends declared 0.44 0.11 0.40 0.04 0.88 0.80 0.08
Book value per share 31.01 30.34 27.66 3.35 31.01 27.66 3.35
Market value per
share 78.00 67.10 50.70 27.30 78.00 6O.70 27.30
Total market value of common
shares ($ billions) 20.5 17.6 13.2 7.3 20.5 13.2 7.3
As at
Apr 30 Jan 31 Apr 30 Change from
1998 1998 1997 Apr 30, 1997
Balance Sheet Summary
Assets $ 212,885 218,535 $200,423 6.2 %
Loans 124,540 125,134 115,345 8.0
Deposits 148,480 151,867 136,942 8.4
Capital funds 14,318 13,242 12,396 15.5
Common equity 8,139 7,939 7,202 13.0
Net impaired loan
and acceptances (467) (498) (3) (100.0+)
Loans 126,615 124,365 113,090 11.1
Assets 221,975 223,898 196,470 13.0
Apr 30 Oct 31 Apr 30
1998 1997 1997
six Twelve Six months
months months
Primary Financial Measures (%)(b)
Five year return on common
shareholders' investment
3O.6 26.1 23.7
Return on common
shareholders'equity 17.7 17.1 17.1
EPS growth -
fully diluted 14.1 11.9 12.4
Revenue growth 8.7 15.1 11.9
Expense-to-growth
ratio 63.7 64.4 63.9
Provision for credit lesses
as a % of average loans
and acceptances 0.14 0.23 0.24
Gross impaired loans and acceptences as a %
of equity and allowance for credit
losses 6.11 7.65 11.46
Tier 1 capital
ratio (c) 7.16 6.80 6.71
Cash and securities-
to-total assets 32.9 35.6 32.9
Credit rating AA- AA- AA-
Other Financial Ratios (% except as noted)(b)
Return on common shareholders'
investment 31.3 55.0 29.3
Dividend yield 2.9 3.9 4.0
Price-to-earnings ratio
(times) 16.6 13.0 11.4
Market-to-book value
(times) 2.52 2.09 1.83
Cash earnings per share -
basic (b) 2.76 4.97 2.44
Cash return on common shareholders'
equity 20.3 20.0 20.6
Return on average
assets 0.67 0.66 0.68
Net interest income to
average assets 1.89 2.13 2.18
Other income as a %
of total revenue 44.2 41.6 40.7
Expense growth 8.4 16.8 15.9
Tier 1 capital ratio -
U.S. basis (c) 7.13 6.35 6.24
Total Capital
ratio (c) 10.10 9.66 9.05
Equity-to-assets
ratio 4.9 4.4 4.3
(a) Reported on a taxable equivalent basic (TEB).
(b) For the Period ended or as at, as appropriate.
(c) The April 30, 1998 total capital ratio and tier 1 capital ratios reflect
the inclusion of $26O million May 15, 1998 issue of Class B preferred
shares. Excluding this Issue, the total capital ratio is 9.91 %, the tier 1
capital ratio is 6.97% and the tier 1 capital ratio - U.S. basis is
6.94% as at April 30, 1998.
Bank of Montreal Second Quarter Report 1998
Page 1
BANK OF MONTREAL
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
(Canadian $ in millions except number of common shares)
For the three months ended For the six months ended
Apr 30 Jan 31 Apr 30 Apr 30 Apr 30
1998 1998 1997 1998 1997
Interest, Dividend and Fee Income
Loans $ 2,409 2,311 1,962 4,720 3,840
Securities 638 576 517 1,214 1,041
Deposits with banks 423 452 317 875 594
3,470 3,339 2,796 6,809 5,475
Interest Expenses
Deposits 1,788 1,715 1,261 3,503 2,455
Subordinated debt 77 75 75 162 147
Other liabilities 601 524 456 1,125 885
2,466 2,314 1,792 4,780 3,487
Net interest
income 1,004 1,025 1,004 2,029 1,988
Provision for
credit losses 45 45 69 90 138
Net interest income After Provision
for Credit Losses 959 980 935 1,939 1,860
Other income
Deposit and Payment
service charges 137 132 124 269 249
Landing fees 79 53 63 132 109
Capital market fees 226 233 240 459 461
Card services 84 77 60 161 125
Investment management and
custodial fees 104 93 60 197 125
Mutual fund revenues 50 45 36 95 68
Trading revenues 70 63 50 133 111
Other fees and
commissions 125 81 69 206 151
875 777 702 1,652 1,399
Net interest and
Other Income 1,834 1,757 1,637 3,591 3,249
Non-interest Expense
Salaries and employee
benefits 647 653 627 1,300 1,222
Premises
and equipment 233 223 210 458 413
Communications 67 67 61 134 121
Other expenses 242 212 200 454 404
1,189 1,155 1,098 2,344 2,160
Goodwill and other valuation
intangibles 18 19 19 37 37
Total non-interest
expenses 1,207 1,174 1,117 2,381 2,197
Income before Provision for
Income Taxes 627 583 520 1,210 1,052
Provision for income
taxes 242 218 200 480 404
Income Before Non-controlling Interest
in subsidiaries 385 365 320 750 648
Non-controlling
interest 8 4 6 12 12
Net income $ 377 361 314 738 636
Dividends Declared
- preferred shares $ 27 23 20 50 37
- common shares $ 115 116 104 231 208
Average Number of Common Shares
Outstanding 261,963,798 261,540,842 260,253,447 261,748,815 260,149,909
Average Assets $ 221,975 223,998 196.470 223,003 189,227
BANK OF MONTREAL
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(Canadian $ in millions)
As at
April 30. 1998 Jan.31,1998 April 30, 1997
Cash resources $ 26,599 $ 31,972 $ 28,996
Socurities 43,604 41,520 36,985
70,103 73.492 65,981
Loans
Residential mortgages 37,883 36,769 32,291
Consumer instalment and other
personal loans 15,504 14,940 13,964
Credit card loans 562 2,012 3,836
Loans to businesses and governments 51,962 50,927 45,116
Securities purchased under resale
agreements 19,806 21,651 21,282
125,717 126,299 116,479
Allowance for credit losses (1,177) (1,165) (1,134)
124,540 125,134 115,345
Customers' liability under
acceptances 5,652 5,825 4,717
Other assets 12,590 14,084 14,380
Total Assets $ 212,885 $ 218,535 $ 200,423
Deposits
Banks $ 32,896 $ 35,004 $ 29,389
Businesses and governments 57,356 56,995 49,877
Individuals 58,228 59,858 57,676
148,480 151,857 136,942
Acceptances 5,652 5,825 4,717
Securities sold but not yet purchased 13,591 8,883 11,483
Securities sold under repurchase
agreements 18,270 25,871 20,353
Other liabilities 12,574 12,857 14,532
50,087 53,436 51,085
Subordinated debt 4,499 4,017 3,923
Shareholders' equity
Share capital
Preferred shares 1,680 1,286 1,271
Common shares 3,046 3,024 2,999
Retained earnings 5,093 4,915 4,203
9,819 9,225 8,473
Total Liabilities and Shareholders'
Equity $ 212,885 $ 218,535 $ 200,423
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.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
(Unaudited)
(Canadian $ in millions)
For the six months ended
April 30. 1998 April 30. 1997
Cash Flows From Operating Activities
Net income 738 636
Adjustments to determine net cash flows (222) 1,648
516 2,284
Cash Flows From Financing Activities
Deposits 4,268 17,680
Other liabilities 151 3,248
Debt and share capital 1,101 1,033
Dividends paid (281) (245)
5,239 21,716
Cash Flows Used In lnvesting Activities
Investment securities 1,498 2,035
Loans 9,712 16,932
Premises and equipment - net purchases 191 224
Other assests (5,305) 5,855
6,096 25,046
Net (Decrease) in Cash and Cash Equivalents (341) (1,046)
Cash and Cash Equivalents at Beginning of
Period 2,651 3,346
Cash and Cash Equivalents at End of Period $ 2,310 $ 2,300
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(Canadian $ in millions)
For the six months ended
April 30, 1998 April 30, 1997
Balance at Beginning of Period $ 8,903 $ 7,586
Net Income 738 636
Dividends - Preferred shares (50) (37)
- Common shares (231) (208)
Preferred share issues 400 400
Common share issues 27 10
Translation adjustment on preferred shares
issued in a foreign currency 6 14
Unrealized gain on translation of net investment
in foreign operations. net of hedging activities
and applicable income tax 31 78
Share Issue expense, net of applicable Income tax (5) (6)
Balance at End of Period $ 9,819 $ 8,473
END
IR ANUNKWWKVUAR
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