Financial Results Highlights
Fourth Quarter 2019 Compared With Fourth Quarter
2018:
- Net income4,5 of $
1,194 million, down 30%
, reflecting a restructuring charge in the current quarter
and a benefit from the remeasurement of an employee benefit
liability in the prior year; adjusted net income1 of
$ 1,607 million, up
5%
- EPS2 of $ 1.78
, down 31% ;
adjusted EPS1 of $
2.43 , up
5%
- Revenue, net of CCPB3,4, of $
5,752 million, up
5% ; revenue, net of adjusted CCPB1,
of $5,777 million, up
5%
- Provision for credit losses (PCL) of $
253 million compared with $
175 million in the prior year; includes PCL on
performing loans of $22
million
- ROE of 9.9%, compared with 16.1
% ; adjusted ROE1 of
13.5 %, compared with 14.5
%
- Common Equity Tier 1 Ratio of
11.4%
- Dividend increased $0.03
to $1.06, up 6% from the prior
year
Fiscal 2019 Compared With Fiscal 2018:
- Net income4,5 of $
5,758 million, up
6% ; adjusted net income1 of $
6,249 million, up
4%
- EPS2 of $ 8.66
, up 6% ;
adjusted EPS1 of $ 9.43
, up 5%
- Revenue, net of CCPB3,4, of $
22,774 million, up
6%
- PCL of $ 872 million
compared with $ 662 million in the prior
year; includes PCL on performing loans of $121 million
- ROE of 12.6% compared with 13.3%;
adjusted ROE1 of 13.7 %
compared with 14.6 %
TORONTO,
Dec. 3, 2019 /CNW/ - For
the fourth quarter ended October 31,
2019, BMO Financial Group (TSX:BMO) (NYSE:BMO) recorded net
income of $1,194 million or
$1.78 per share on a reported basis,
and net income of $1,607 million or
$2.43 per share on an adjusted
basis.
"BMO finished the year with very strong
performance, delivering $1.6 billion
in adjusted earnings and adjusted earnings per share of
$2.43 in the fourth quarter, up 5%
year-over-year, with pre-provision pre-tax earnings growth of 11%,
driven by positive operating leverage in all businesses and
particularly strong operating performance in Personal and
Commercial banking in both Canada
and the U.S.," said Darryl White,
Chief Executive Officer, BMO Financial Group.
"Our results for the year reflect the strength and quality
of our diversified businesses. Adjusted earnings per share were
$9.43, up 5% from last year. We
continued to make significant progress on our strategic priorities
and delivered annual earnings growth of 23% in our U.S. business.
With a clear bank-wide focus on disciplined expense management, we
continued to improve our overall efficiency ratio with 130 basis
points of improvement in the past two years and good momentum
throughout the year. We have a number of initiatives underway,
including today's announcement of a restructuring charge, that will
serve to accelerate our momentum and help us meet our efficiency
objectives over the long-term. In addition, we gained market share
in key areas, including commercial lending and retail deposits, in
Canada and the U.S. Our credit
performance remains good and we ended the year with a strong CET1
capital ratio of 11.4%."
"Looking ahead to 2020, we will continue to execute on our
clearly articulated strategic priorities and objectives. We remain
focused on building on the foundation of our integrated North
American platform to grow our customer base and broaden our
customer relationships. I am confident that we are well-positioned
to deliver sustainable and resilient profitability through an
evolving economic environment," concluded Mr. White.
Reported net income in the current quarter included a
restructuring charge of $357 million
after-tax ($484 million pre-tax),
related to severance and a small amount of real
estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives
focused on digitization, organizational redesign and simplification
of the way we do business. Reported net income also included a
$25 million pre-tax and after-tax
reinsurance adjustment for the net impact of major reinsurance
claims from Japanese typhoons that were incurred after our
announced decision to wind down our reinsurance
business.
Return on equity (ROE) was 9.9%, compared with
16.1% in the prior year and adjusted ROE
was 13.5%, compared with
14.5% in the prior year. Return on tangible
common equity (ROTCE) was 11.9%, compared
with 19.5% in the prior year and adjusted
ROTCE was 15.7%, compared with
17.3% in the prior year.
Concurrent with the release of results, BMO announced a
first quarter 2020 dividend of $1.06
per common share, up $0.03 per share
or 3% from the prior quarter and up $0.06 per share or 6% from the prior year. The
quarterly dividend of $1.06 per
common share is equivalent to an annual dividend of $4.24 per common share.
BMO's 2019 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.
(1)
|
Results and measures
in this document are presented on a GAAP basis. They are also
presented on an adjusted basis that excludes the impact of certain
items. Adjusted results and measures are non-GAAP and are detailed
for all reported periods in the Non-GAAP Measures section, where
such non-GAAP measures and their closest GAAP counterparts are
disclosed.
|
(2)
|
All Earnings per
Share (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 on
other equity instruments.
|
(3)
|
On a basis that nets
insurance claims, commissions and changes in policy benefit
liabilities (CCPB) against insurance revenue.
|
(4)
|
Q4-2019 reported net
income included a $357 million after-tax ($484 million pre-tax)
restructuring charge, related to severance and a small amount of
real estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives
focused on digitization, organizational redesign and simplification
of the way we do business. The current quarter reported net income
also included a $25 million (pre-tax and after-tax) net
impact of major reinsurance claims from Japanese typhoons that were
incurred after our announced decision to wind down our reinsurance
business. The restructuring charge was included
in non-interest expense in Corporate Services and the
reinsurance adjustment was included in CCPB in BMO Wealth
Management.
|
(5)
|
In fiscal 2018, we
recorded a $425 million (US$339 million) charge related to the
revaluation of our U.S. net deferred tax asset as a result of the
enactment of the U.S. Tax Cuts and Jobs Act in the
first quarter; a $192 million after-tax ($260 million pre-tax)
restructuring charge, primarily related to severance, in the second
quarter; and a benefit of $203 million after-tax ($277 million
pre-tax) from the remeasurement of an employee benefit liability,
as a result of an amendment to our other employee future benefits
plan for certain employees, in the fourth quarter. The second
quarter charge and fourth quarter benefit were included in
non-interest expense in Corporate Services. For more
information on the tax charge, refer to the Critical Accounting
Estimates – Income Taxes and Deferred Tax Assets section on page
119 of BMO's 2018 Annual Report.
|
|
Note: All ratios and
percentage changes in this document are based on unrounded
numbers.
|
Fourth Quarter Operating Segment
Overview
Canadian P&C
Reported net
income was $716 million, an increase
of $42 million or 6% and adjusted net
income was $716 million, an increase
of $41 million or 6% from the prior
year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Results reflect strong
revenue growth, partially offset by higher provisions for credit
losses and higher expenses.
During the quarter, we launched a new digital lending
solution, the first of its kind from a major Canadian financial
institution. Customers are now able to apply for a personal line of
credit by completing a short, user-friendly digital application and
receive a decision on their loan application in minutes. We also
became the first Canadian financial institution to offer retail
credit card customers the option to report a lost or stolen card
through online banking. These new digital services and innovations
reflect BMO's commitment to creating digital solutions that better
support our customers.
U.S. P&C
Reported net income
was $393 million, an increase of
$21 million or 6% and adjusted net
income was $404 million, an increase
of $21 million or 5% from the prior
year. Adjusted net income excludes the amortization of
acquisition-related intangible assets.
Reported net income was US$297
million, an increase of US$12
million or 4% and adjusted net income was US$305 million, an increase of US$11 million
or 4%, primarily due to higher revenue and
lower provisions for credit losses, partially offset by a
favourable U.S. tax item in the prior year and higher
expenses.
During the quarter, the Federal Deposit Insurance
Corporation released its annual deposit market share report. We
improved our market share ranking within our core footprint, which
includes Illinois, Kansas, Wisconsin, Missouri, Indiana and Minnesota, from fourth to third place and
maintained our strong ranking of second place in the Chicago and Milwaukee markets.
BMO Wealth Management
Reported net
income was $267 million, an increase
of $48 million or 22% and adjusted
net income was $301 million, an
increase of $72 million or 31% from the prior year. Adjusted
net income in the current quarter excludes the net impact of
major reinsurance claims and the amortization of
acquisition-related intangible assets in both the current and prior
year. Traditional Wealth reported net income was $237 million, an increase of $45 million or
24% and adjusted net income was $246
million, an increase of $44
million or 22%, due to the impact of a legal provision in
the prior year, higher deposit and loan revenue and higher
fee-based revenue. Insurance reported net income was $30 million, an increase of $3 million or 9%, and adjusted net income of
$55 million increased $28 million, primarily due to
benefits from changes in investments to improve asset liability
management.
For the second consecutive year, BMO Global Asset
Management was named the best manager in liability-driven
investment by Financial News.
BMO Capital Markets
Reported net
income was $269 million, compared
with $298 million and adjusted net
income was $280 million, compared
with $309 million in the prior year.
Adjusted net income excludes the amortization of
acquisition-related intangible assets and acquisition integration
costs. Higher revenue was more than offset by higher provisions for
credit losses and higher expenses.
On September 25, 2019, BMO
Capital Markets celebrated the 15th anniversary of the
Equity Through Education Trading Day, a BMO Capital Markets
initiative that donates all institutional equity trading
commissions earned that day across North
America and Europe to
charities helping underprivileged students through scholarships,
bursaries and other academic programs. This year, we raised
$1.6 million, bringing the total
amount raised since the introduction of the program in 2005 to more
than $21 million, and helping over
5,000 students. This is one of the many initiatives that continue
to highlight BMO's Purpose to Boldly Grow the Good in
business and life.
Corporate Services
Reported
net loss was $451 million,
compared with a reported net income of $134
million in the prior year. Adjusted net loss was
$94 million, compared with an adjusted net loss of
$65 million in the prior year.
Adjusted results in the current quarter exclude a
restructuring charge of $357 million after-tax.
Adjusted results in the prior year exclude a $203 million after-tax benefit from the
remeasurement of an employee benefit liability and acquisition
integration costs. Adjusted results decreased, primarily due to
lower revenue excluding taxable equivalent basis (teb) adjustments,
partially offset by lower expenses.
Adjusted results in this Fourth Quarter Operating Segment
Overview section are non-GAAP amounts or non-GAAP measures. Please
refer to the Non-GAAP Measures section.
Capital
BMO's Common Equity Tier 1
(CET1) Ratio was 11.4% as at October 31,
2019. The CET1 Ratio was unchanged from the prior quarter as
retained earnings growth, which absorbed the restructuring charge,
was offset by higher risk-weighted assets from business
growth.
Provision for Credit Losses
Total
provision for credit losses was $253
million, an increase of $78
million from the prior year. The provision for credit losses
ratio was 23 basis points, compared with 18 basis points in the
prior year. The provision for credit losses on impaired loans of
$231 million increased
$54 million from $177 million in the prior year,
primarily due to higher provisions in BMO Capital Markets and our
P&C businesses. The provision for credit losses on impaired
loans ratio was 21 basis points, compared with 18 basis points in
the prior year. There was a $22 million provision for credit
losses on performing loans in the current quarter, compared with a
$2 million recovery of credit losses on performing loans in
the prior year. The year-over-year increase in the provision for
credit losses on performing loans was as a result of negative
migration in the current quarter, compared with positive migration
in the prior year, and higher provisions in the current quarter
from changes in scenario weights, partially offset by lower
provisions in the current quarter from changes in the economic
outlook.
Caution
The foregoing sections
contain forward-looking statements. Please refer to the Caution
Regarding Forward-Looking Statements.
Regulatory Filings
Our continuous
disclosure materials, including our interim filings, annual
Management's Discussion and Analysis and audited 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.
|
|
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. As such, in this
document, the names BMO and BMO Financial Group mean Bank of
Montreal, together with its subsidiaries.
|
|
Financial Review
Management's Discussion and Analysis (MD&A) commentary
is as at December 3, 2019. 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, 2019, included in
this document, as well as the audited consolidated financial
statements for the year ended October 31,
2019, and the MD&A for fiscal 2019, contained in our
2019 Annual Report.
BMO's 2019 Annual Report includes a comprehensive
discussion of our 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 CEO and CFO, has evaluated
the effectiveness, as at October 31,
2019, 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, 2019,
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.
Financial Highlights
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Summary Income
Statement
|
|
|
|
|
|
Net interest income
(1)
|
3,364
|
3,217
|
3,015
|
12,888
|
11,438
|
Non-interest revenue
(1)(2)
|
2,723
|
3,449
|
2,878
|
12,595
|
11,467
|
Revenue
(2)
|
6,087
|
6,666
|
5,893
|
25,483
|
22,905
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
335
|
887
|
390
|
2,709
|
1,352
|
Revenue, net of
CCPB
|
5,752
|
5,779
|
5,503
|
22,774
|
21,553
|
Provision for
(recovery of) credit losses on impaired loans
|
231
|
243
|
177
|
751
|
700
|
Provision for
(recovery of) credit losses on performing loans
|
22
|
63
|
(2)
|
121
|
(38)
|
Total provision for
credit losses
|
253
|
306
|
175
|
872
|
662
|
Non-interest expense
(2)
|
3,987
|
3,491
|
3,193
|
14,630
|
13,477
|
Provision for income
taxes (3)
|
318
|
425
|
438
|
1,514
|
1,961
|
Net income
attributable to equity holders of the bank
|
1,194
|
1,557
|
1,697
|
5,758
|
5,453
|
Adjusted net
income
|
1,607
|
1,582
|
1,531
|
6,249
|
5,982
|
Common Share
Data ($, except as noted)
|
|
|
|
|
|
Earnings per
share
|
1.78
|
2.34
|
2.58
|
8.66
|
8.17
|
Adjusted earnings per
share
|
2.43
|
2.38
|
2.32
|
9.43
|
8.99
|
Earnings per share
growth (%)
|
(30.7)
|
1.0
|
42.4
|
6.0
|
3.3
|
Adjusted earnings per
share growth (%)
|
4.8
|
0.8
|
19.7
|
4.9
|
10.3
|
Dividends declared
per share
|
1.03
|
1.03
|
0.96
|
4.06
|
3.78
|
Book value per
share
|
71.54
|
70.88
|
64.73
|
71.54
|
64.73
|
Closing share
price
|
97.50
|
98.80
|
98.43
|
97.50
|
98.43
|
Number of common
shares outstanding (in millions)
|
|
|
|
|
|
End of
period
|
639.2
|
639.0
|
639.3
|
639.2
|
639.3
|
Average
diluted
|
640.4
|
640.4
|
641.8
|
640.4
|
644.9
|
Total market value of
common shares ($ billions)
|
62.3
|
63.1
|
62.9
|
62.3
|
62.9
|
Dividend yield
(%)
|
4.2
|
4.2
|
3.9
|
4.2
|
3.8
|
Dividend payout ratio
(%)
|
57.6
|
43.9
|
37.2
|
46.8
|
46.1
|
Adjusted dividend
payout ratio (%)
|
42.3
|
43.2
|
41.3
|
43.0
|
41.9
|
Financial Measures
and Ratios (%)
|
|
|
|
|
|
Return on
equity
|
9.9
|
13.2
|
16.1
|
12.6
|
13.3
|
Adjusted return on
equity
|
13.5
|
13.5
|
14.5
|
13.7
|
14.6
|
Return on tangible
common equity
|
11.9
|
15.8
|
19.5
|
15.1
|
16.2
|
Adjusted return on
tangible common equity
|
15.7
|
15.8
|
17.3
|
16.1
|
17.5
|
Net income
growth
|
(29.6)
|
1.3
|
38.6
|
5.6
|
2.1
|
Adjusted net income
growth
|
5.0
|
1.1
|
17.1
|
4.5
|
8.8
|
Revenue
growth
|
3.3
|
15.1
|
5.0
|
11.3
|
3.6
|
Revenue growth, net
of CCPB
|
4.5
|
4.6
|
9.1
|
5.7
|
4.8
|
Non-interest expense
growth
|
24.9
|
3.9
|
(4.4)
|
8.6
|
2.2
|
Adjusted non-interest
expense growth
|
1.2
|
4.1
|
6.2
|
5.0
|
3.5
|
Efficiency ratio, net
of CCPB
|
69.3
|
60.4
|
58.0
|
64.2
|
62.5
|
Adjusted efficiency
ratio, net of CCPB
|
60.0
|
59.9
|
62.2
|
61.4
|
61.9
|
Operating leverage,
net of CCPB
|
(20.4)
|
0.7
|
13.5
|
(2.9)
|
2.6
|
Adjusted operating
leverage, net of CCPB
|
3.8
|
0.5
|
2.9
|
0.8
|
1.3
|
Net interest margin
on average earning assets
|
1.71
|
1.67
|
1.68
|
1.70
|
1.67
|
Effective tax rate
(3)
|
21.0
|
21.5
|
20.6
|
20.8
|
26.5
|
Adjusted effective
tax rate
|
22.0
|
21.5
|
19.7
|
21.1
|
20.7
|
Total PCL-to-average
net loans and acceptances (annualized)
|
0.23
|
0.28
|
0.18
|
0.20
|
0.17
|
PCL on impaired
loans-to-average net loans and acceptances (annualized)
|
0.21
|
0.22
|
0.18
|
0.17
|
0.18
|
Balance Sheet
(as at, $ millions, except as noted)
|
|
|
|
|
|
Assets
|
852,195
|
839,180
|
773,293
|
852,195
|
773,293
|
Gross loans and
acceptances
|
451,537
|
444,390
|
404,215
|
451,537
|
404,215
|
Net loans and
acceptances
|
449,687
|
442,588
|
402,576
|
449,687
|
402,576
|
Deposits
|
568,143
|
553,383
|
520,928
|
568,143
|
520,928
|
Common shareholders'
equity
|
45,728
|
45,295
|
41,381
|
45,728
|
41,381
|
Cash and
securities-to-total assets ratio (%)
|
28.9
|
28.3
|
29.9
|
28.9
|
29.9
|
Capital Ratios
(%)
|
|
|
|
|
|
CET1 Ratio
|
11.4
|
11.4
|
11.3
|
11.4
|
11.3
|
Tier 1 Capital
Ratio
|
13.0
|
13.0
|
12.9
|
13.0
|
12.9
|
Total Capital
Ratio
|
15.2
|
15.3
|
15.2
|
15.2
|
15.2
|
Leverage
Ratio
|
4.3
|
4.3
|
4.2
|
4.3
|
4.2
|
Foreign Exchange
Rates ($)
|
|
|
|
|
|
As at Canadian/U.S.
dollar
|
1.3165
|
1.3198
|
1.3169
|
1.3165
|
1.3169
|
Average Canadian/U.S.
dollar
|
1.3240
|
1.3270
|
1.3047
|
1.3290
|
1.2878
|
(1)
|
Effective Q1-2019,
certain dividend income in our Global Markets business has been
reclassified from non-interest revenue to net interest income.
Results for prior periods and related ratios have been reclassified
to conform with the current period's presentation.
|
(2)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, loyalty rewards and cash promotion costs on
cards previously recorded in non-interest expense are presented as
a reduction in non-interest revenue. In addition, certain
out-of-pocket expenses reimbursed to BMO from customers have been
reclassified from a reduction in non-interest expense to
non-interest revenue.
|
(3)
|
Q1-2018 reported net
income included a $425 million charge due to the revaluation of our
U.S. net deferred tax asset as a result of the enactment of the
U.S. Tax Cuts and Jobs Act. For more information, refer to
the Critical Accounting Estimates – Income Taxes and Deferred Tax
Assets section on page 119 of BMO's 2018 Annual Report.
|
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation.
|
|
Adjusted results are
non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP
Measures section.
|
Non-GAAP 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 financial statements prepared in accordance with
International Financial Reporting Standards (IFRS). References to
GAAP mean IFRS. They are also presented on an adjusted basis
that excludes the impact of certain items, as set out in the table
below. Results and measures that exclude the impact of
Canadian/U.S. dollar exchange rate movements on our U.S. segment
are non-GAAP measures. Please refer to the Foreign Exchange section
for a discussion of the effects of changes in exchange rates on our
results. Management assesses performance on a reported basis
and on an adjusted basis, and considers both to be useful in
assessing underlying ongoing business performance. Presenting
results on both bases provides readers with a better
understanding of how management assesses results. It also permits
readers to assess the impact of certain specified items on
results for the periods presented, and to better assess results
excluding those items that may not be reflective of ongoing
results. 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. Adjusted results and measures are non-GAAP
and as such 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.
Non-GAAP Measures
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Reported
Results
|
|
|
|
|
|
Revenue
|
6,087
|
6,666
|
5,893
|
25,483
|
22,905
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
(335)
|
(887)
|
(390)
|
(2,709)
|
(1,352)
|
Revenue, net of
CCPB
|
5,752
|
5,779
|
5,503
|
22,774
|
21,553
|
Total provision for
credit losses
|
(253)
|
(306)
|
(175)
|
(872)
|
(662)
|
Non-interest
expense
|
(3,987)
|
(3,491)
|
(3,193)
|
(14,630)
|
(13,477)
|
Income before income
taxes
|
1,512
|
1,982
|
2,135
|
7,272
|
7,414
|
Provision for income
taxes
|
(318)
|
(425)
|
(438)
|
(1,514)
|
(1,961)
|
Net income
|
1,194
|
1,557
|
1,697
|
5,758
|
5,453
|
EPS ($)
|
1.78
|
2.34
|
2.58
|
8.66
|
8.17
|
Adjusting Items
(Pre-tax) (1)
|
|
|
|
|
|
Acquisition
integration costs (2)
|
(2)
|
(3)
|
(18)
|
(13)
|
(34)
|
Amortization of
acquisition-related intangible assets (3)
|
(38)
|
(29)
|
(31)
|
(128)
|
(116)
|
Restructuring costs
(4)
|
(484)
|
-
|
-
|
(484)
|
(260)
|
Reinsurance
adjustment (5)
|
(25)
|
-
|
-
|
(25)
|
-
|
Benefit from the
remeasurement of an employee benefit liability (6)
|
-
|
-
|
277
|
-
|
277
|
Adjusting items
included in reported pre-tax income
|
(549)
|
(32)
|
228
|
(650)
|
(133)
|
Adjusting Items
(After tax)(1)
|
|
|
|
|
|
Acquisition
integration costs (2)
|
(2)
|
(2)
|
(13)
|
(10)
|
(25)
|
Amortization of
acquisition-related intangible assets (3)
|
(29)
|
(23)
|
(24)
|
(99)
|
(90)
|
Restructuring costs
(4)
|
(357)
|
-
|
-
|
(357)
|
(192)
|
Reinsurance
adjustment (5)
|
(25)
|
-
|
-
|
(25)
|
-
|
Benefit from the
remeasurement of an employee benefit liability (6)
|
-
|
-
|
203
|
-
|
203
|
U.S. net deferred tax
asset revaluation (7)
|
-
|
-
|
-
|
-
|
(425)
|
Adjusting items
included in reported net income after tax
|
(413)
|
(25)
|
166
|
(491)
|
(529)
|
Impact on EPS
($)
|
(0.65)
|
(0.04)
|
0.26
|
(0.77)
|
(0.82)
|
Adjusted
Results
|
|
|
|
|
|
Revenue
|
6,087
|
6,666
|
5,893
|
25,483
|
22,905
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
(310)
|
(887)
|
(390)
|
(2,684)
|
(1,352)
|
Revenue, net of
CCPB
|
5,777
|
5,779
|
5,503
|
22,799
|
21,553
|
Total provision for
credit losses
|
(253)
|
(306)
|
(175)
|
(872)
|
(662)
|
Non-interest
expense
|
(3,463)
|
(3,459)
|
(3,421)
|
(14,005)
|
(13,344)
|
Income before income
taxes
|
2,061
|
2,014
|
1,907
|
7,922
|
7,547
|
Provision for income
taxes
|
(454)
|
(432)
|
(376)
|
(1,673)
|
(1,565)
|
Net income
|
1,607
|
1,582
|
1,531
|
6,249
|
5,982
|
EPS ($)
|
2.43
|
2.38
|
2.32
|
9.43
|
8.99
|
(1)
|
Adjusting items are
generally included in Corporate Services, with the exception of the
amortization of acquisition-related intangible assets and certain
acquisition integration costs, which are charged
to the operating groups, and the reinsurance adjustment,
which is included in BMO Wealth Management.
|
(2)
|
Acquisition
integration costs related to the acquired BMO Transportation
Finance business are charged to Corporate Services, since the
acquisition impacts both Canadian and U.S. P&C businesses.
KGS–Alpha acquisition integration costs are reported in BMO Capital
Markets. Acquisition integration costs are recorded in non-interest
expense.
|
(3)
|
These amounts were
charged to the non-interest expense of the operating groups.
Before-tax and after-tax amounts for each operating group are
provided in the Review of Operating Group's Performance
section.
|
(4)
|
Q4-2019 reported net
income included a restructuring charge of $357 million after-tax
($484 million pre-tax), related to severance and a small amount of
real estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives
focused on digitization, organizational redesign and simplification
of the way we do business. The restructuring charge in 2018
was also a result of a similar bank-wide program.
Restructuring costs are included in non-interest expense in
Corporate Services.
|
(5)
|
Q4-2019 reported net
income included a reinsurance adjustment of $25 million (pre-tax
and after-tax) in claims, commissions and changes in policy benefit
liabilities for the net impact of major reinsurance claims from
Japanese typhoons that were incurred after our announced decision
to wind down our reinsurance business. This reinsurance
adjustment is included in BMO Wealth Management.
|
(6)
|
Q4-2018 reported net
income included a benefit of $203 million after-tax ($277 million
pre-tax) from the remeasurement of an employee benefit liability,
as a result of an amendment to our other employee future benefits
plan for certain employees. This amount was included in
non-interest expense in Corporate Services.
|
(7)
|
Q1-2018 reported net
income included a $425 million (US$339 million) charge related to
the revaluation of our U.S. net deferred tax asset as a result of
the enactment of the U.S. Tax Cuts and Jobs Act.
For more information, refer to the Critical Accounting
Estimates – Income Taxes and Deferred Tax Assets section on page
119 of BMO's 2018 Annual Report.
|
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation.
|
|
Adjusted results and
measures in this table are non-GAAP amounts or non-GAAP
measures.
|
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 2020 and
beyond, our strategies or future actions, our targets, expectations
for our financial condition or share price, the regulatory
environment in which we operate and the results of or outlook for
our operations or for the Canadian, U.S. and international
economies, and include statements of our management.
Forward-looking statements are typically identified by words such
as "will", "would", "should", "believe", "expect", "anticipate",
"project", "intend", "estimate", "plan", "goal", "target", "may"
and "could".
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; the Canadian housing market; weak, volatile or
illiquid capital and/or credit markets; interest rate and currency
value fluctuations; changes in monetary, fiscal, or economic policy
and tax legislation and interpretation; the level of competition in
the geographic and business areas in which we operate; changes in
laws or in supervisory expectations or requirements, including
capital, interest rate and liquidity requirements and guidance, and
the effect of such changes on funding costs; judicial or regulatory
proceedings; 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 and to complete and integrate
acquisitions, including obtaining regulatory approvals; critical
accounting estimates and the effect of changes to accounting
standards, rules and interpretations on these estimates;
operational and infrastructure risks, including with respect to
reliance on third parties; changes to our credit ratings; political
conditions, including changes relating to or affecting economic or
trade matters; global capital markets activities; the possible
effects on our business of war or terrorist activities; outbreaks
of disease or illness that affect local, national or international
economies; natural disasters and disruptions to public
infrastructure, such as transportation, communications, power or
water supply; technological changes; information, privacy and cyber
security, 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; 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, legal and regulatory, business,
strategic, environmental and social, and reputation risk, in the
Enterprise-Wide Risk Management section that begins on page
68 of BMO's 2019 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 our shareholders 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 are set out
in the Economic Developments and Outlook section on
page 18 of BMO's 2019 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. In determining our expectations
for economic growth, both broadly and in the financial
services sector, we primarily consider historical economic data
provided by governments, historical relationships
between economic and financial variables, and the risks to
the domestic and global economy.
Foreign Exchange
The Canadian
dollar equivalents of BMO's U.S. results that are denominated in
U.S. dollars decreased relative to the third quarter of 2019 and
increased relative to the fourth quarter of 2018 due to changes in
the U.S. dollar. The table below indicates the relevant average
Canadian/U.S. dollar exchange rates and the impact of changes in
those rates on our 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 BMO's
U.S. segment.
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 and provisions
for (recoveries of) credit losses arise.
Economically, our U.S. dollar income stream was unhedged
to changes in foreign exchange rates during the current and prior
year. We regularly determine whether to enter into hedging
transactions in order to mitigate the impact of foreign exchange
rate movements on net income.
Refer to the Enterprise-Wide Capital Management section on
page 59 of the 2019 Annual Report for a discussion of the impact
that changes in foreign exchange rates can have on our capital
position. Changes in foreign exchange rates will also affect
accumulated other comprehensive income, primarily as a result of
the translation of our investment in foreign operations.
This Foreign Exchange section contains forward-looking
statements. Please refer to the Caution Regarding Forward-Looking
Statements.
Effects of Changes in Exchange Rates on BMO's U.S.
Segment Reported and Adjusted Results
|
Q4-2019
|
(Canadian $ in
millions, except as noted)
|
vs.
Q4-2018
|
vs.
Q3-2019
|
Canadian/U.S. dollar
exchange rate (average)
|
|
|
Current
period
|
1.3240
|
1.3240
|
Prior
period
|
1.3047
|
1.3270
|
Effects on U.S.
segment reported results
|
|
|
Increased (decreased)
net interest income
|
17
|
(3)
|
Increased (decreased)
non-interest revenue
|
11
|
(2)
|
Increased (decreased)
revenues
|
28
|
(5)
|
Decreased (increased)
provision for credit losses
|
(1)
|
-
|
Decreased (increased)
expenses
|
(20)
|
3
|
Decreased (increased)
income taxes
|
(1)
|
1
|
Increased (decreased)
reported net income
|
6
|
(1)
|
Impact on earnings
per share ($)
|
0.01
|
-
|
Effects on U.S.
segment adjusted results
|
|
|
Increased (decreased)
net interest income
|
17
|
(3)
|
Increased (decreased)
non-interest revenue
|
11
|
(2)
|
Increased (decreased)
revenues
|
28
|
(5)
|
Decreased (increased)
provision for credit losses
|
(1)
|
-
|
Decreased (increased)
expenses
|
(20)
|
3
|
Decreased (increased)
income taxes
|
(1)
|
1
|
Increased (decreased)
adjusted net income
|
6
|
(1)
|
Impact on adjusted
earnings per share ($)
|
0.01
|
-
|
Adjusted results in
this section are non-GAAP amounts or non-GAAP measures. Please
refer to the Non-GAAP Measures section.
|
Net Income
Q4 2019 vs. Q4 2018
Reported net
income was $1,194 million, compared with
$1,697 million in the prior year, and
adjusted net income was $1,607 million,
an increase of $76 million
or 5% from the prior year. Adjusted net
income excludes a $357 million
restructuring charge, related to severance and a small amount of
real estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives
focused on digitization, organizational redesign and simplification
of the way we do business, as well as a $25 million reinsurance adjustment for the net
impact of major reinsurance claims from Japanese typhoons that were
incurred after our announced decision to wind down our reinsurance
business in the current quarter, the amortization of
acquisition-related intangible assets and acquisition integration
costs in both periods, and a $203
million benefit from the remeasurement of an employee
benefit liability in the prior year. Reported EPS of
$1.78 decreased $0.80 or 31% and
adjusted EPS of $2.43 increased
$0.11 or 5%
from the prior year.
Results reflect good performance in our P&C businesses
and higher net income in BMO Wealth Management, partially offset by
a decrease in BMO Capital Markets and a higher net loss
in Corporate Services. Prior year results included a favourable tax
item in our U.S. segment.
Q4 2019 vs. Q3 2019
Reported net
income decreased $363 million or
23% from the prior quarter and adjusted net
income increased $25 million or
2%. Adjusted net income excludes the
restructuring charge and reinsurance adjustment in the current
quarter, and the amortization of acquisition-related intangible
assets and acquisition integration costs in both the current and
prior quarter. Reported EPS decreased $0.56 or 24% and
adjusted EPS increased
$0.05 or 2%
from the prior quarter.
Results reflect higher net income in our P&C
businesses, with particularly strong performance in Canadian
P&C, and in BMO Wealth Management, partially
offset by a higher net loss in Corporate Services and
a decrease in BMO Capital Markets.
Adjusted results in this Net Income section are non-GAAP amounts
or non-GAAP measures. Please refer to the Non-GAAP Measures
Section.
Revenue (1)(2)
Q4 2019 vs. Q4 2018
Revenue was
$6,087 million, an
increase of
$194 million or
3% from the prior year and revenue, net of
insurance claims, commissions and changes in policy benefit
liabilities (CCPB), was $5,752 million,
an increase of
$249 million or
5%.
Results reflect good performance in our P&C businesses
and increases in BMO Wealth Management and BMO Capital Markets,
partially offset by a decrease in Corporate
Services.
Net interest income was $3,364
million, an increase of $349
million or 12%, or 11% excluding the impact of the stronger
U.S. dollar. On an excluding trading basis, net interest income was
$2,979 million, an increase of
$210 million or 8%, or 7% excluding
the impact of the stronger U.S. dollar, largely due to higher loan
and deposit balances across all operating groups, partially offset
by lower loan margins.
Average earning assets were $778.4
billion, an increase of $66.7
billion or 9%, or $62.7
billion or 9% excluding the impact of the stronger U.S.
dollar, due to loan growth, higher securities and higher
securities borrowed or purchased under resale agreements. BMO's
overall net interest margin increased 3 basis points,
primarily due to higher net interest income from trading activities
and a higher margin in Canadian P&C, partially offset by a
higher volume of assets in BMO Capital Markets and Corporate
Services, which have a lower spread than the bank, as well as a
lower margin in U.S. P&C. On an excluding trading basis,
net interest margin decreased 5 basis points, primarily due to a
higher volume of assets in BMO Capital Markets and Corporate
Services, which have a lower spread than the bank, and a lower
margin in U.S. P&C, partially offset by a higher margin in
Canadian P&C.
Non-interest revenue, net of CCPB, was $2,388 million, a decrease of $100 million or 4%, and also 4% excluding the
impact of the stronger U.S. dollar, due to lower trading
non-interest revenue, partially offset by higher lending and
deposit revenue. Non-interest revenue, net of adjusted CCPB, was
$2,413 million, a decrease of
$75 million or 3%, and also 3%
excluding the impact of the stronger U.S. dollar. On an
excluding trading basis, net of adjusted CCPB, non-interest revenue
was $2,434 million, an increase of
$77 million or 3%, and also 3%
excluding the impact of the stronger U.S. dollar.
Gross insurance revenue decreased $50 million from the prior year, due to lower
annuity sales, offset by relatively unchanged long-term interest
rates in the current quarter, compared with increases in long-term
interest rates that decreased the fair value of investments in the
prior year and stronger equity markets in the current quarter.
These changes relate to annuity sales and fair value investments,
which are largely offset by changes in policy benefit liabilities,
which is reflected in CCPB, as discussed in the Insurance Claims,
Commissions and Changes in Policy Benefit Liabilities. We generally
focus on analyzing revenue, net of CCPB, given the extent
to which insurance revenue can vary and that this variability
is largely offset in CCPB.
Q4 2019 vs. Q3 2019
Revenue
decreased $579 million
or 9% from the prior quarter. Revenue net
of CCPB was relatively unchanged from the prior quarter.
Higher revenue in Canadian P&C and BMO Wealth
Management were offset by lower revenue in BMO Capital Markets,
while U.S. P&C revenue was relatively unchanged and
Corporate Services revenue decreased from the prior
quarter.
Net interest income increased $147
million or 5% from the prior quarter. On an excluding
trading basis, net interest income of $2,979
million was relatively unchanged from the prior
quarter, with higher deposit and loan volumes across all operating
groups, offset by lower deposit spreads in U.S. P&C,
due to rate decreases by the Federal Reserve, and lower net
interest income in Corporate Services.
Average earning assets were $778.4
billion, an increase of $15.1
billion or 2%, primarily due to loan growth and increased
cash resources. BMO's overall net interest margin increased 4 basis
points, primarily due to a higher net interest income from trading
activities and a higher margin in Canadian P&C, partially
offset by higher assets in Corporate Services, which have a lower
spread than the bank, and a lower margin in U.S. P&C. On an
excluding trading basis, net interest margin decreased 6 basis
points, primarily due to a higher volume of assets in
Corporate Services and BMO Capital Markets, which have a lower
spread than the bank, and a lower margin in U.S. P&C,
partially offset by a higher margin in Canadian P&C.
Non-interest revenue, net of CCPB,
decreased $174 million or 7%,
primarily due to lower trading non-interest revenue and
underwriting and advisory fee revenue. Non-interest revenue, net of
adjusted CCPB, decreased $149 million
or 6%. On an excluding trading basis, net of adjusted CCPB,
non-interest revenue decreased $13
million or 1%.
Gross insurance revenue decreased $554 million from the prior quarter, primarily
due to relatively unchanged long-term interest rates in the current
quarter, compared with decreases in long-term interest rates that
increased the fair value of investments in the prior quarter and
lower annuity sales. The decrease in insurance revenue was largely
offset by lower CCPB, as discussed in the Insurance Claims,
Commissions and Changes in Policy Benefit Liabilities.
Net interest income and non-interest revenue are detailed
in the unaudited interim consolidated financial
statements.
Adjusted results in this Revenue section are non-GAAP amounts or
non-GAAP measures. Please refer to the Non-GAAP Measures
Section.
(1)
|
Effective Q1-2019,
certain dividend income in our Global Markets business has been
reclassified from non-interest revenue to net interest income.
Results for prior periods and related ratios have been reclassified
to conform to the current period's presentation.
|
(2)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, loyalty rewards and cash promotion costs on
cards previously recorded in non-interest expense are presented as
a reduction in non-interest revenue. In addition, certain
out-of-pocket expenses reimbursed to BMO from customers have been
reclassified from a reduction in non-interest expense to
non-interest revenue.
|
Provision for Credit Losses
Q4 2019 vs. Q4 2018
Total provision
for credit losses was $253 million, an
increase of $78 million from the prior
year. The provision for credit losses ratio was 23 basis points,
compared with 18 basis points in the prior year. The provision for
credit losses on impaired loans of $231
million increased $54 million
from $177 million in the prior year,
primarily due to higher provisions in BMO Capital Markets and our
P&C businesses. The provision for credit losses on impaired
loans ratio was 21 basis points, compared with 18 basis points in
the prior year. There was a $22
million provision for credit losses on performing loans in
the current quarter, compared with a $2
million recovery of credit losses on performing loans in the
prior year. The $22 million provision
for credit losses on performing loans in the current quarter was
due to portfolio growth, negative migration and scenario weight
change, partially offset by changes in economic outlook. The
year-over-year increase in the provision for credit losses on
performing loans was as a result of negative migration in the
current quarter, compared with positive migration in the prior
year, and higher provisions in the current quarter from changes in
scenario weights, partially offset by lower provisions in the
current quarter from changes in the economic outlook.
Q4 2019 vs. Q3 2019
Total provision
for credit losses decreased $53 million
from the prior quarter. The provision for credit losses ratio was
23 basis points, compared with 28 basis points in the prior
quarter. The provision for credit losses on impaired loans
decreased $12 million to $231 million, due to lower impaired loan
provisions in Canadian P&C, partially offset by higher loan
losses in BMO Capital Markets and U.S. P&C. The provision for
credit losses on impaired loans ratio was 21 basis points, compared
with 22 basis points in the prior quarter. There was a $22 million provision for credit losses on
performing loans in the current quarter, compared with a
$63 million provision for credit
losses on performing loans in the prior quarter. The majority of
the quarter-over-quarter decrease was due to a more favourable
impact on credit losses on performing loans in the current quarter,
resulting from changes in economic outlook, as well as a smaller
impact from both balance growth and negative migration.
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
|
Q4-2019
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on impaired loans
|
134
|
66
|
200
|
1
|
32
|
(2)
|
231
|
Provision for
(recovery of) credit losses on performing loans
|
11
|
4
|
15
|
(1)
|
8
|
-
|
22
|
Total provision
for (recovery of) credit losses
|
145
|
70
|
215
|
-
|
40
|
(2)
|
253
|
Q3-2019
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on impaired loans
|
174
|
61
|
235
|
-
|
7
|
1
|
243
|
Provision for
(recovery of) credit losses on performing loans
|
30
|
37
|
67
|
(2)
|
3
|
(5)
|
63
|
Total provision for
(recovery of) credit losses
|
204
|
98
|
302
|
(2)
|
10
|
(4)
|
306
|
Q4-2018
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on impaired loans
|
118
|
61
|
179
|
2
|
(3)
|
(1)
|
177
|
Provision for
(recovery of) credit losses on performing loans
|
(15)
|
18
|
3
|
1
|
(4)
|
(2)
|
(2)
|
Total provision for
(recovery of) credit losses
|
103
|
79
|
182
|
3
|
(7)
|
(3)
|
175
|
Fiscal
2019
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on impaired
loans
|
544
|
160
|
704
|
2
|
52
|
(7)
|
751
|
Provision for
(recovery of) credit losses on performing loans
|
63
|
37
|
100
|
(2)
|
28
|
(5)
|
121
|
Total provision for
(recovery of) credit losses
|
607
|
197
|
804
|
-
|
80
|
(12)
|
872
|
Fiscal
2018
|
|
|
|
|
|
|
|
Provision for
(recovery of) credit losses on impaired loans
|
466
|
258
|
724
|
6
|
(17)
|
(13)
|
700
|
Provision for
(recovery of) credit losses on performing loans
|
3
|
(38)
|
(35)
|
-
|
(1)
|
(2)
|
(38)
|
Total provision for
(recovery of) credit losses
|
469
|
220
|
689
|
6
|
(18)
|
(15)
|
662
|
Provision for Credit Losses Performance
Ratios
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Total PCL-to-average
net loans and acceptances (annualized) (%)
|
0.23
|
0.28
|
0.18
|
0.20
|
0.17
|
PCL on impaired
loans-to-average net loans and acceptances (annualized)
(%)
|
0.21
|
0.22
|
0.18
|
0.17
|
0.18
|
Impaired Loans
Total gross impaired loans (GIL) were $2,629 million at the end of the current quarter,
up from $1,936 million in the prior year,
with the largest increase in impaired loans in oil and gas. GIL
increased $197 million from $2,432 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 $799 million, up from
$443 million in the prior year, and
up from $679 million in the prior
quarter.
Changes in Gross Impaired Loans (GIL)
(1) and
Acceptances
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
GIL, beginning of
period
|
2,432
|
2,335
|
2,076
|
1,936
|
2,220
|
Classified as
impaired during the period
|
799
|
679
|
443
|
2,686
|
2,078
|
Transferred to not
impaired during the period
|
(220)
|
(132)
|
(188)
|
(604)
|
(708)
|
Net
repayments
|
(219)
|
(232)
|
(214)
|
(800)
|
(1,051)
|
Amounts
written-off
|
(159)
|
(138)
|
(194)
|
(528)
|
(618)
|
Recoveries of loans
and advances previously written-off
|
-
|
-
|
-
|
-
|
-
|
Disposals of
loans
|
-
|
(57)
|
(5)
|
(57)
|
(11)
|
Foreign exchange and
other movements
|
(4)
|
(23)
|
18
|
(4)
|
26
|
GIL, end of
period
|
2,629
|
2,432
|
1,936
|
2,629
|
1,936
|
GIL to gross loans
and acceptances (%)
|
0.58
|
0.55
|
0.48
|
0.58
|
0.48
|
(1)
|
GIL excludes
purchased credit impaired loans.
|
Insurance Claims, Commissions and Changes in Policy
Benefit Liabilities
Reported insurance claims,
commissions and changes in policy benefit liabilities (CCPB) were
$335 million in the current quarter,
a decrease of $55 million from $390
million in the prior year, and adjusted CCPB, which excludes
a $25 million net impact of major
reinsurance claims from Japanese typhoons that were incurred after
our announced decision to wind down our reinsurance business, was
$310 million, a decrease of
$80 million from the prior year.
Adjusted CCPB decreased, due to the impact of lower
annuity sales, offset by relatively unchanged long-term interest
rates in the current year, compared with increases in long-term
interest rates that decreased the fair value of policy benefit
liabilities in the prior year and the impact of stronger
equity markets in the current year. CCPB decreased $552 million from $887
million in the prior quarter, and adjusted CCPB decreased
$577 million from the prior quarter, due to relatively
unchanged long-term interest rates in the current quarter, compared
with decreases in long-term interest rates that increased the
fair value of policy benefit liabilities in the prior quarter, and
the impact of lower annuity sales. The changes related to the fair
value of policy benefit liabilities and annuity sales were largely
offset in revenue.
Adjusted results in this CCPB section are non-GAAP amounts or
non-GAAP measures. Please refer to the Non-GAAP Measures
Section.
Non-Interest Expense
Reported
non-interest expense of $3,987
million increased
$794 million or
25% from the prior year. Adjusted non-interest
expense of $3,463 million
increased $42 million
or 1%, and also 1%, excluding the impact
of the stronger U.S. dollar, from the prior year.
Adjusted non-interest expense excludes the restructuring
charge in the current quarter, the amortization of
acquisition-related intangible assets and acquisition integration
costs in both periods, as well as the benefit from the
remeasurement of an employee benefit liability in the prior
year. The increase largely reflected higher technology
and employee-related costs, including the impact of the acquisition
of KGS-Alpha, partially offset by lower premises
costs.
Reported non-interest expense
increased $496 million
from the prior quarter and adjusted non-interest expense, which
excludes the restructuring charge in the current
quarter, the amortization of acquisition-related intangible assets
and acquisition integration costs in both periods, was
relatively unchanged.
Reported operating leverage on a net revenue basis was
negative 20.4%, compared with positive 13.5% in the prior year.
Adjusted operating leverage on a net revenue basis was
positive 3.8%, compared with positive 2.9% in the prior
year.
The reported efficiency ratio was 65.5%, compared
with 54.2% in the prior year and was
69.3% on a net revenue basis, compared with
58.0% in the prior year. The adjusted
efficiency ratio was 56.9%, compared with
58.1% in the prior year and
60.0% on a net revenue basis, compared
with 62.2% in the prior year.
Non-interest expense is detailed in the condensed
consolidated financial statements.
Adjusted results in this Non-Interest Expense section are
non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP
Measures Section.
Income Taxes
The provision for
income taxes was $318 million, a
decrease of $120 million from the
fourth quarter of 2018 and a decrease of $107 million from the third quarter of 2019. The
effective tax rate for the current quarter was 21.0%, compared with
20.6% in the fourth quarter of 2018, and 21.5% in the third quarter
of 2019.
The adjusted provision for income taxes was $454 million, an increase of $78 million
from the fourth quarter of 2018, and an increase of $22 million from the third quarter of 2019.
The adjusted effective tax rate was 22.0% in the current
quarter, compared with 19.7% in the fourth quarter of 2018 and
21.5% in the third quarter of 2019. The higher reported and
adjusted effective tax rate in the current quarter relative to the
fourth quarter of 2018 was primarily due to a favourable U.S. tax
item in the prior year.
Adjusted results in this Income Taxes section are non-GAAP
amounts or non-GAAP measures. Please refer to the Non-GAAP Measures
section.
Capital Management
BMO manages its
capital within the capital management framework described in the
Enterprise-Wide Capital Management section of BMO's 2019 Annual
Report.
Fourth Quarter 2019 Regulatory Capital
Review
BMO's Common Equity Tier 1 (CET1) Ratio
was 11.4% as at October 31,
2019.
The CET1 Ratio was consistent with
the prior quarter as retained earnings growth, which absorbed
the restructuring charge, was offset by higher Risk-Weighted Assets
(RWA).
CET1 Capital was $36.1
billion as at October 31,
2019, an increase from
$35.7 billion as at July 31, 2019, driven by retained
earnings growth and a lower deduction for deferred tax assets,
partially offset by the net impact from higher pension and other
post-employment benefit obligations due to lower discount
rates. CET1 capital increased from $32.7 billion as at October 31, 2018, due to retained earnings
growth, and to a lesser degree, a lower deduction for deferred tax
assets and higher unrealized gains from securities fair valued
through accumulated other comprehensive income, partially offset by
an increase in the deduction for shortfall of provisions to
expected losses and the net impact from higher pension and other
post-employment benefit obligations due to lower discount
rates.
RWA was $317.0 billion as at
October 31, 2019, up from
$313.0 billion as at July 31, 2019 and $289.2
billion as at October 31,
2018, mostly from business growth.
The Tier 1 Capital Ratio was 13.0% as at October 31, 2019, compared with
13.0% as at July 31,
2019, and 12.9% as at October 31,
2018. The Total Capital Ratio was 15.2% as at October 31, 2019, compared with 15.3% as at
July 31, 2019, and 15.2% as at
October 31, 2018. The Tier 1 and Total Capital ratios were
relatively unchanged from prior periods, as higher capital,
primarily from retained earnings growth, was offset by higher
RWA.
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. BMO may manage
the impact of foreign exchange movements on its capital ratios and
did so during the fourth quarter. Any such activities could also
impact our book value and return on equity.
BMO's Leverage Ratio was 4.3% as at October 31, 2019, compared with 4.3% as at
July 31, 2019, and 4.2% as at
October 31, 2018, as higher Tier 1
Capital, mainly from retained earnings growth, was generally offset
by higher leverage exposures from business growth.
Regulatory Capital
Regulatory
capital requirements for BMO are determined in accordance with
guidelines issued by the Office of the Superintendent Financial
Institutions Canada (OSFI), which is based on the capital standards
developed by the Basel Committee on Banking Supervision (BCBS). For
more information, refer to the Enterprise-Wide Capital Management
section of BMO's 2019 Annual Report.
OSFI's capital requirements are summarized in the
following table.
(% of risk-weighted
assets)
|
Minimum capital
requirements
|
Total Pillar 1
Capital Buffer (1)
|
Domestic
Stability
Buffer (2)
|
OSFI capital
requirements
including capital
buffers
|
BMO Capital and
Leverage Ratios
as at October 31,
2019
|
Common Equity Tier 1
Ratio
|
4.5%
|
3.5%
|
2.0%
|
10.0%
|
11.4%
|
Tier 1 Capital
Ratio
|
6.0%
|
3.5%
|
2.0%
|
11.5%
|
13.0%
|
Total Capital
Ratio
|
8.0%
|
3.5%
|
2.0%
|
13.5%
|
15.2%
|
Leverage Ratio
(3)
|
3.0%
|
na
|
na
|
3.0%
|
4.3%
|
(1)
|
The minimum
risk-based capital ratios set out in OSFI's Capital Adequacy
Requirements (CAR) Guideline are augmented by 3.5% in 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 Tier 1 Surcharge for
domestic systematically important banks (D-SIBs) and a
Countercyclical Buffer as prescribed by OSFI (immaterial for the
fourth quarter of 2019). 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 maintain 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 set at 2.0% effective October
31, 2019. Breaches of the DSB will not result in a bank being
subject to automatic constraints on capital
distributions.
|
(3)
|
Minimum leverage
ratio requirement as set out in OSFI's Leverage Requirements
Guideline.
|
|
na – not
applicable
|
Regulatory Capital Position
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Gross common equity
(1)
|
45,728
|
45,295
|
41,387
|
Regulatory adjustments
applied to common equity
|
(9,657)
|
(9,632)
|
(8,666)
|
Common Equity Tier
1 Capital (CET1)
|
36,071
|
35,663
|
32,721
|
Additional Tier 1
eligible capital (2)
|
5,348
|
5,348
|
4,790
|
Regulatory adjustments
applied to Tier 1
|
(218)
|
(217)
|
(291)
|
Additional Tier 1
Capital (AT1)
|
5,130
|
5,131
|
4,499
|
Tier 1 Capital (T1
= CET1 + AT1)
|
41,201
|
40,794
|
37,220
|
Tier 2 eligible
capital (3)
|
7,189
|
7,070
|
7,017
|
Regulatory adjustments
applied to Tier 2
|
(50)
|
(75)
|
(121)
|
Tier 2 Capital
(T2)
|
7,139
|
6,995
|
6,896
|
Total Capital (TC
= T1 + T2)
|
48,340
|
47,789
|
44,116
|
Risk-Weighted
Assets and Leverage Ratio Exposures (4)(5)
|
|
|
|
CET1 Capital
Risk-Weighted Assets
|
317,029
|
313,003
|
289,237
|
Tier 1 Capital
Risk-Weighted Assets
|
317,029
|
313,003
|
289,420
|
Total Capital
Risk-Weighted Assets
|
317,029
|
313,003
|
289,604
|
Leverage Ratio
Exposures
|
956,493
|
943,275
|
876,106
|
Capital Ratios
(%)
|
|
|
|
CET1 Ratio
|
11.4
|
11.4
|
11.3
|
Tier 1 Capital
Ratio
|
13.0
|
13.0
|
12.9
|
Total Capital
Ratio
|
15.2
|
15.3
|
15.2
|
Leverage
Ratio
|
4.3
|
4.3
|
4.2
|
(1)
|
Gross common equity
includes issued qualifying common shares, retained earnings,
accumulated other comprehensive income and eligible common share
capital issued by subsidiaries.
|
(2)
|
Additional Tier 1
eligible capital includes directly and indirectly issued qualifying
Additional Tier 1 instruments.
|
(3)
|
Tier 2 eligible
capital includes subordinated debentures and may include certain
loan loss allowances.
|
(4)
|
For institutions
using advanced approaches for credit risk or operational risk,
there is a capital floor as prescribed in OSFI's CAR
Guideline.
|
(5)
|
The Credit Valuation
Adjustment (CVA) was fully phased in starting Q1-2019. The
applicable scalars for CET1, Tier 1 Capital and Total Capital were
80%, 83% and 86%, respectively, in fiscal 2018.
|
Capital Developments
We expect a
combined impact of approximately 15 to 20 basis points on our CET1
Ratio in the first quarter of fiscal 2020, from the adoption of
IFRS 16, Leases, and the expiry of transitional arrangements
for standardized approach for counterparty credit risk and the
revised securitization framework. For information on these and
other regulatory developments, refer to the Enterprise-Wide Capital
Management section of BMO's 2019 Annual Report.
During the quarter, 196,539 common shares were issued
through the exercise of stock options.
On November 14, 2019, we
announced the conversion results of our Non-Cumulative 5-Year Rate
Reset Class B Preferred Shares, Series 31 (Preferred Shares
Series 31). During the conversion period, which ran from
October 28, 2019 to November 12, 2019, 69,570
Preferred Shares Series 31 were tendered for conversion into
Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series
32 (Preferred Shares Series 32), which is less than the minimum
1,000,000 required to give effect to the conversion, as described
in the Preferred Shares Series 31 prospectus supplement dated July
23, 2014. As a result, no Preferred Shares Series 32 shares
were issued and holders of Preferred Shares Series 31 retained
their shares. The dividend rate for the Preferred Shares Series 31
is 3.851% for the five-year period commencing on November 25, 2019, and ending on November 24, 2024.
On September 19, 2019, we
redeemed all of our outstanding $1,000
million subordinate debentures, Series H Medium-Term Notes
First Tranche at a redemption price of 100 percent of the principal
amount plus unpaid accrued interest to, but excluding, the
redemption date.
On September 16, 2019, we
issued $1,000 million subordinated
notes, Series J Medium-Term Notes First Tranche through our
Canadian Medium-Term Note Program.
On August 14, 2019, we
announced the conversion results of our Non-Cumulative 5-Year Rate
Reset Class B Preferred Shares, Series 29 (Preferred Shares
Series 29). During the conversion period, which ran from
July 26, 2019 to August 12, 2019, 223,098 Preferred Shares Series
29 were tendered for conversion into Non-Cumulative 5-Year
Rate Reset Class B Preferred Shares Series 30 (Preferred Shares
Series 30), which is less than the minimum 1,000,000
required to give effect to the conversion, as described in the
Preferred Shares Series 29 prospectus supplement dated
May 30, 2014. As a result, no Preferred Shares Series 30
shares were issued and holders of Preferred Shares Series 29
retained their shares. The dividend rate for the Preferred
Shares Series 29 is 3.624% for the five-year period commencing on
August 25, 2019, and ending on
August 24, 2024.
Dividends
On December 3, 2019, BMO announced that the Board of
Directors had declared a quarterly dividend on common shares of
$1.06 per share, up $0.03 per share or 3% from the prior quarter and
up $0.06 per share or 6% from the
prior year. The dividend is payable on February 26, 2020, to shareholders of record
on February 3, 2020. Common
shareholders may elect to have their cash dividends reinvested in
common shares of BMO, in accordance with the Shareholder
Dividend Reinvestment and Share Purchase Plan.
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
The following sections review the
financial results of each of our operating groups and operating
segments for the fourth quarter of 2019.
Periodically, certain business lines and units within the
business lines are transferred between client and corporate support
groups to more closely align BMO's organizational structure with
its strategic priorities. In addition, allocations of revenue,
provisions for credit losses and expenses are updated
to better align with current experience. Results for prior
periods are reclassified to conform with the current period's
presentation.
Effective the first quarter of 2019, certain dividend
income in our Global Markets business has been reclassified from
non-interest revenue to net interest income. Results for prior
periods and related ratios have been reclassified to conform with
the current period's presentation.
The bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15), effective the first quarter of 2019, and
we elected to retrospectively present prior periods as if IFRS 15
had always been applied. As a result, loyalty rewards and cash
promotion costs on cards previously recorded in non-interest
expense are presented as a reduction in non-interest revenue. In
addition, when customers reimburse us for certain out-of-pocket
expenses incurred on their behalf, we record the reimbursement in
revenue. Previously, these reimbursements were recorded as a
reduction in the related expense.
BMO analyzes revenue at the consolidated level based on
GAAP revenue as reported in the consolidated financial statements
rather than on a taxable equivalent basis (teb), which is
consistent with our Canadian peer group. Like many banks, we
analyze revenue on a teb basis at the operating group level.
Revenue and the provision for income taxes are increased on
tax-exempt securities to an equivalent before-tax basis to
facilitate comparisons of income between taxable and tax-exempt
sources. The offset to the group teb adjustments is reflected in
Corporate Services revenue and provision for income
taxes.
Personal and Commercial Banking
(P&C)
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest income
(teb)
|
2,597
|
2,565
|
2,431
|
10,096
|
9,384
|
Non-interest revenue
(1)
|
847
|
848
|
801
|
3,290
|
3,165
|
Total revenue (teb)
(1)
|
3,444
|
3,413
|
3,232
|
13,386
|
12,549
|
Provision for
(recovery of) credit losses on impaired loans
|
200
|
235
|
179
|
704
|
724
|
Provision for
(recovery of) credit losses on performing loans
|
15
|
67
|
3
|
100
|
(35)
|
Total provision for
credit losses
|
215
|
302
|
182
|
804
|
689
|
Non-interest expense
(1)
|
1,763
|
1,774
|
1,707
|
6,993
|
6,678
|
Income before income
taxes
|
1,466
|
1,337
|
1,343
|
5,589
|
5,182
|
Provision for income
taxes (teb)
|
357
|
321
|
297
|
1,352
|
1,239
|
Reported net
income
|
1,109
|
1,016
|
1,046
|
4,237
|
3,943
|
Amortization of
acquisition-related intangible assets (2)
|
11
|
12
|
12
|
45
|
47
|
Adjusted net
income
|
1,120
|
1,028
|
1,058
|
4,282
|
3,990
|
Net income growth
(%)
|
6.0
|
1.1
|
17.6
|
7.5
|
12.1
|
Adjusted net income
growth (%)
|
5.9
|
1.1
|
17.3
|
7.3
|
11.9
|
Revenue growth
(%)
|
6.5
|
6.4
|
7.5
|
6.7
|
5.5
|
Non-interest expense
growth (%)
|
3.3
|
4.1
|
6.2
|
4.7
|
3.9
|
Adjusted non-interest
expense growth (%)
|
3.4
|
4.2
|
6.3
|
4.8
|
4.0
|
Return on equity
(%)
|
17.8
|
16.4
|
19.0
|
17.5
|
18.5
|
Adjusted return on
equity (%)
|
18.0
|
16.6
|
19.2
|
17.7
|
18.8
|
Operating leverage
(teb) (%)
|
3.2
|
2.3
|
1.3
|
2.0
|
1.6
|
Adjusted operating
leverage (teb) (%)
|
3.1
|
2.2
|
1.2
|
1.9
|
1.5
|
Efficiency ratio
(teb) (%)
|
51.2
|
52.0
|
52.8
|
52.2
|
53.2
|
Adjusted efficiency
ratio (teb) (%)
|
50.8
|
51.5
|
52.3
|
51.8
|
52.7
|
Net interest margin
on average earning assets (teb) (%)
|
2.92
|
2.94
|
2.98
|
2.95
|
2.97
|
Average earning
assets
|
352,731
|
346,301
|
324,014
|
342,153
|
316,359
|
Average gross loans
and acceptances
|
362,865
|
355,478
|
330,502
|
350,762
|
321,537
|
Average net loans and
acceptances
|
361,186
|
353,873
|
328,923
|
349,157
|
320,019
|
Average
deposits
|
293,977
|
283,924
|
258,602
|
281,858
|
250,221
|
(1)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, loyalty rewards and cash promotion costs on
cards previously recorded in non-interest expense are presented as
a reduction in non-interest revenue.
|
(2)
|
Total P&C before
tax amounts of $15 million in both Q4-2019 and Q3-2019, $16 million
in Q4-2018; $59 million for fiscal 2019 and $61 million for fiscal
2018 are included in non-interest expense.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
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 of $1,109 million and adjusted
net income of $1,120 million both
increased 6% from the prior year, or 5% excluding the impact of the
stronger U.S. dollar. Adjusted net income excludes the
amortization of acquisition-related intangible assets. These
operating segments are reviewed separately in the sections that
follow.
Adjusted results in this P&C section are non-GAAP amounts or
non-GAAP measures. Please refer to the Non-GAAP Measures
section.
Canadian Personal and Commercial Banking (Canadian
P&C)
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest
income
|
1,540
|
1,498
|
1,421
|
5,878
|
5,541
|
Non-interest revenue
(1)
|
543
|
550
|
522
|
2,128
|
2,069
|
Total revenue
(1)
|
2,083
|
2,048
|
1,943
|
8,006
|
7,610
|
Provision for
(recovery of) credit losses on impaired loans
|
134
|
174
|
118
|
544
|
466
|
Provision for
(recovery of) credit losses on performing loans
|
11
|
30
|
(15)
|
63
|
3
|
Total provision for
credit losses
|
145
|
204
|
103
|
607
|
469
|
Non-interest expense
(1)
|
971
|
970
|
931
|
3,854
|
3,710
|
Income before income
taxes
|
967
|
874
|
909
|
3,545
|
3,431
|
Provision for income
taxes
|
251
|
226
|
235
|
919
|
882
|
Reported net
income
|
716
|
648
|
674
|
2,626
|
2,549
|
Amortization of
acquisition-related intangible assets (2)
|
-
|
1
|
1
|
2
|
2
|
Adjusted net
income
|
716
|
649
|
675
|
2,628
|
2,551
|
Personal
revenue
|
1,294
|
1,273
|
1,244
|
4,998
|
4,921
|
Commercial
revenue
|
789
|
775
|
699
|
3,008
|
2,689
|
Net income growth
(%)
|
6.3
|
1.1
|
8.9
|
3.0
|
2.0
|
Revenue growth
(%)
|
7.1
|
5.9
|
4.8
|
5.2
|
3.7
|
Non-interest expense
growth (%)
|
4.4
|
4.0
|
4.1
|
3.9
|
5.0
|
Adjusted non-interest
expense growth (%)
|
4.4
|
4.0
|
4.1
|
3.9
|
5.0
|
Return on equity
(%)
|
28.6
|
26.3
|
31.2
|
27.3
|
30.5
|
Adjusted return on
equity (%)
|
28.6
|
26.3
|
31.2
|
27.3
|
30.6
|
Operating leverage
(%)
|
2.7
|
1.9
|
0.7
|
1.3
|
(1.3)
|
Adjusted operating
leverage (%)
|
2.7
|
1.9
|
0.7
|
1.3
|
(1.3)
|
Efficiency ratio
(%)
|
46.7
|
47.3
|
47.9
|
48.1
|
48.7
|
Net interest margin
on average earning assets (%)
|
2.69
|
2.65
|
2.62
|
2.64
|
2.60
|
Average earning
assets
|
227,377
|
224,073
|
215,290
|
222,513
|
212,965
|
Average gross loans
and acceptances
|
243,648
|
239,310
|
226,953
|
237,142
|
223,536
|
Average net loans and
acceptances
|
242,710
|
238,434
|
226,070
|
236,253
|
222,673
|
Average
deposits
|
183,975
|
177,093
|
162,480
|
175,125
|
159,483
|
(1)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, loyalty rewards and cash promotion costs on
cards previously recorded in non-interest expense are presented as
a reduction in non-interest revenue.
|
(2)
|
Before tax amounts of
$nil in Q4-2019, $1 million in both Q3-2019 and Q4-2018; $2 million
in both fiscal 2019 and fiscal 2018 are included in non-interest
expense.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
Q4 2019 vs. Q4 2018
Canadian
P&C reported net income was $716
million, an increase of $42
million and adjusted net income was $716 million, an increase of $41 million or 6% from the prior year. Adjusted
net income excludes the amortization of acquisition-related
intangible assets. Results reflect strong revenue growth, partially
offset by higher provisions for credit losses and higher
expenses.
Revenue was $2,083 million,
an increase of $140 million or 7%
from the prior year, due to higher balances across all products,
higher margins and increased non-interest revenue. Net interest
margin of 2.69% increased 7 basis points due to higher long-term
rates, a favourable product mix and the benefit of a widening Prime
rate to the Banker's Acceptances (BA) rate.
Personal revenue increased $50
million or 4%, due to higher balances across all products
and higher margins, partially offset by lower non-interest revenue.
Commercial revenue increased $90
million or 13%, due to higher balances across products,
higher non-interest revenue and higher margins.
Total provision for credit losses was $145 million, an increase of $42 million from the prior year. The provision
for credit losses on impaired loans increased $16 million, due to higher consumer and
commercial provisions. There was an $11
million provision for credit losses on performing loans in
the current quarter compared with a $15
million recovery of credit losses on performing loans in the
prior year.
Non-interest expense was $971
million, an increase of $40
million or 4%, primarily due to investment in the business,
including technology and sales force investments.
Average gross loans and acceptances of $243.6 billion increased $16.7 billion or 7% from the prior year. Total
personal lending balances (excluding retail cards) increased 3%,
including 5% growth in proprietary mortgages and amortizing home
equity line of credit loans. Commercial loan balances (excluding
corporate cards) increased 16%. Average deposits of $184.0 billion increased $21.5 billion or 13%. Personal deposit balances
increased 14% and commercial deposit balances increased
12%.
Q4 2019 vs. Q3 2019
Reported net
income increased $68 million and
adjusted net income increased $67
million or 10% from the prior quarter.
Revenue increased $35
million or 2%, due to higher balances across all products
and higher margins, partially offset by lower non-interest revenue.
Net interest margin of 2.69% increased 4 basis points, due to a
favourable product mix and the benefit of higher long-term
rates.
Personal revenue increased $21
million or 2%, due to higher balances across all products,
higher margins and increased non-interest revenue. Commercial
revenue increased $14 million or 2%,
due to higher margins and higher balances across all products,
partially offset by lower non-interest revenue.
Total provision for credit losses decreased $59 million. The provision for credit losses on
impaired loans decreased $40 million
with lower consumer and commercial provisions in the current
quarter. There was a $11 million
provision for credit losses on performing loans in the current
quarter, compared with a $30 million
provision for credit losses on performing loans in the prior
quarter.
Non-interest expense increased $1
million.
Average gross loans and acceptances increased $4.3 billion or 2% and average deposits increased
$6.9 billion or 4%.
Adjusted results in this Canadian P&C section are non-GAAP
amounts or non-GAAP measures. Please refer to the Non-GAAP Measures
section.
U.S. Personal and Commercial Banking (U.S.
P&C)
(US$ in millions,
except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest income
(teb)
|
798
|
804
|
774
|
3,174
|
2,983
|
Non-interest revenue
(1)
|
230
|
225
|
214
|
875
|
851
|
Total revenue (teb)
(1)
|
1,028
|
1,029
|
988
|
4,049
|
3,834
|
Provision for
(recovery of) credit losses on impaired loans
|
51
|
45
|
46
|
121
|
201
|
Provision for
(recovery of) credit losses on performing loans
|
3
|
28
|
14
|
28
|
(31)
|
Total provision for
credit losses
|
54
|
73
|
60
|
149
|
170
|
Non-interest expense
(1)
|
598
|
606
|
594
|
2,362
|
2,303
|
Income before income
taxes
|
376
|
350
|
334
|
1,538
|
1,361
|
Provision for income
taxes (teb)
|
79
|
73
|
49
|
326
|
279
|
Reported net
income
|
297
|
277
|
285
|
1,212
|
1,082
|
Amortization of
acquisition-related intangible assets (2)
|
8
|
8
|
9
|
32
|
35
|
Adjusted net
income
|
305
|
285
|
294
|
1,244
|
1,117
|
Personal
revenue
|
337
|
348
|
327
|
1,362
|
1,257
|
Commercial
revenue
|
691
|
681
|
661
|
2,687
|
2,577
|
Net income growth
(%)
|
4.1
|
(0.6)
|
32.9
|
12.0
|
38.7
|
Adjusted net income
growth (%)
|
3.8
|
(0.8)
|
31.5
|
11.4
|
36.9
|
Revenue growth
(%)
|
4.1
|
5.3
|
8.1
|
5.6
|
9.9
|
Non-interest expense
growth (%)
|
0.6
|
2.3
|
5.4
|
2.6
|
4.1
|
Adjusted non-interest
expense growth (%)
|
0.7
|
2.5
|
5.6
|
2.7
|
4.3
|
Return on equity
(%)
|
10.5
|
9.8
|
11.1
|
11.0
|
10.8
|
Adjusted return on
equity (%)
|
10.8
|
10.1
|
11.5
|
11.3
|
11.1
|
Operating leverage
(teb) (%)
|
3.5
|
3.0
|
2.7
|
3.0
|
5.8
|
Adjusted operating
leverage (teb) (%)
|
3.4
|
2.8
|
2.5
|
2.9
|
5.6
|
Efficiency ratio
(teb) (%)
|
58.1
|
59.0
|
60.2
|
58.3
|
60.1
|
Adjusted efficiency
ratio (teb) (%)
|
57.1
|
57.9
|
59.0
|
57.3
|
58.9
|
Net interest margin
on average earning assets (teb) (%)
|
3.35
|
3.46
|
3.69
|
3.53
|
3.72
|
Average earning
assets
|
94,682
|
92,116
|
83,336
|
90,035
|
80,255
|
Average gross loans
and acceptances
|
90,047
|
87,549
|
79,369
|
85,505
|
76,067
|
Average net loans and
acceptances
|
89,488
|
87,000
|
78,835
|
84,966
|
75,558
|
Average
deposits
|
83,085
|
80,520
|
73,668
|
80,316
|
70,431
|
|
|
|
|
|
|
(Canadian $
equivalent in millions)
|
|
|
|
|
|
Net interest income
(teb)
|
1,057
|
1,067
|
1,010
|
4,218
|
3,843
|
Non-interest revenue
(1)
|
304
|
298
|
279
|
1,162
|
1,096
|
Total revenue (teb)
(1)
|
1,361
|
1,365
|
1,289
|
5,380
|
4,939
|
Provision for credit
losses on impaired loans
|
66
|
61
|
61
|
160
|
258
|
Provision for
(recovery of) credit losses on performing loans
|
4
|
37
|
18
|
37
|
(38)
|
Total provision for
credit losses
|
70
|
98
|
79
|
197
|
220
|
Non-interest expense
(1)
|
792
|
804
|
776
|
3,139
|
2,968
|
Income before income
taxes
|
499
|
463
|
434
|
2,044
|
1,751
|
Provision for income
taxes (teb)
|
106
|
95
|
62
|
433
|
357
|
Reported net
income
|
393
|
368
|
372
|
1,611
|
1,394
|
Adjusted net
income
|
404
|
379
|
383
|
1,654
|
1,439
|
Net income growth
(%)
|
5.6
|
1.2
|
37.4
|
15.6
|
36.9
|
Adjusted net income
growth (%)
|
5.2
|
1.0
|
35.9
|
15.0
|
35.1
|
Revenue growth
(%)
|
5.6
|
7.2
|
11.8
|
8.9
|
8.4
|
Non-interest expense
growth (%)
|
2.1
|
4.2
|
9.0
|
5.8
|
2.7
|
Adjusted non-interest
expense growth (%)
|
2.2
|
4.3
|
9.2
|
5.9
|
2.9
|
Average earning
assets
|
125,354
|
122,228
|
108,724
|
119,640
|
103,394
|
Average gross loans
and acceptances
|
119,217
|
116,168
|
103,549
|
113,620
|
98,001
|
Average net loans and
acceptances
|
118,476
|
115,439
|
102,853
|
112,904
|
97,346
|
Average
deposits
|
110,002
|
106,831
|
96,122
|
106,733
|
90,738
|
(1)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, loyalty rewards and cash promotion costs on
cards previously recorded in non-interest expense are presented as
a reduction in non-interest revenue.
|
(2)
|
Before tax amounts of
US$11 million in each of Q4-2019, Q3-2019 and Q4-2018; US$43
million for fiscal 2019 and US$45 million for fiscal 2018 are
included in non-interest expense.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
Q4 2019 vs. Q4 2018
U.S. P&C
reported net income was $393
million, an increase of $21
million or 6% and adjusted net income was $404 million, an increase of $21 million or 5% from the prior
year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. All amounts in the remainder
of this section are on a U.S. dollar basis.
Reported net income was $297
million, an increase of $12
million or 4% and adjusted net income was $305 million, an increase of $11 million or 4%, primarily due to higher
revenue and lower provisions for credit
losses, partially offset by a favourable U.S. tax item in the prior
year and higher expenses.
Revenue was $1,028 million,
an increase of $40 million or 4% from
the prior year, with higher loan and deposit balances, partially
offset by a lower net interest margin. Net interest margin of 3.35%
decreased 34 basis points, due to loan margin compression, changes
in deposit product mix, lower deposit product margins, the impact
of loans growing faster than deposits and lower interest
recoveries.
Personal revenue increased $10
million or 3%, due to higher loan revenue. Commercial
revenue increased $30 million or 5%, primarily due to higher
loan balances and deposit revenue, partially offset by
loan margin compression.
Total provision for credit losses was $54 million, a decrease of $6 million from the prior year. The provision for
credit losses on impaired loans increased $5
million, due to higher consumer provisions. There was a
$3 million provision for credit
losses on performing loans in the current quarter, compared with a
$14 million provision for credit
losses on performing loans in the prior year.
Non-interest expense was $598
million and adjusted non-interest expense was $587 million, both reflecting an increase of
$4 million or 1% from the prior year,
as higher technology and employee-related
costs, were largely offset by lower
premises costs.
Average gross loans and acceptances of $90.0 billion increased $10.7 billion or 13% from the prior year, driven
by growth in commercial loans of 15% and personal loans of 6%.
Average deposits of $83.1 billion
increased $9.4 billion or 13%, with
18% growth in commercial deposit balances and 9% growth in personal
deposit balances.
Q4 2019 vs. Q3 2019
Reported net
income and adjusted net income both increased
$25 million or 7% from the prior
quarter. All amounts in the remainder of this section
are on a U.S. dollar basis.
Reported net income and adjusted net income both increased
$20 million or 7%, reflecting lower
provisions for credit losses and lower expenses.
Revenue was unchanged from the prior quarter, as the
impact of lower interest rates offset higher loan and deposit
balances and fee income. Net interest margin of 3.35%
decreased 11 basis points, due to lower deposit margins.
Personal revenue decreased $11
million or 3%, due to lower deposit revenue. Commercial
revenue increased $10 million or 2%,
due to higher loan and fee income.
Total provision for credit losses decreased $19 million. The provision for credit losses on
impaired loans increased $6 million,
due to higher consumer provisions, partially offset by lower
commercial provisions. There was a $3
million provision for credit losses on performing loans in
the current quarter, compared with a $28
million provision for credit losses on performing loans in
the prior quarter.
Non-interest expense and adjusted non-interest expense
decreased $8 million or 1%, as higher
technology investment and other costs were more than offset by
lower premises costs and good expense management
discipline.
Average gross loans and acceptances increased $2.5 billion or 3%, with growth in both
commercial and personal loans. Average deposits increased
$2.6 billion or 3%, with growth in
both commercial and personal deposit balances.
Adjusted results in this U.S. P&C section are non-GAAP
amounts or non-GAAP measures. Please refer to the Non-GAAP Measures
section.
BMO Wealth Management
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest
income
|
236
|
237
|
210
|
935
|
826
|
Non-interest revenue
(1)
|
1,331
|
1,876
|
1,361
|
6,727
|
5,475
|
Total revenue
(1)
|
1,567
|
2,113
|
1,571
|
7,662
|
6,301
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
335
|
887
|
390
|
2,709
|
1,352
|
Revenue, net of
CCPB
|
1,232
|
1,226
|
1,181
|
4,953
|
4,949
|
Provision for
(recovery of) credit losses on impaired loans
|
1
|
-
|
2
|
2
|
6
|
Provision for
(recovery of) credit losses on performing loans
|
(1)
|
(2)
|
1
|
(2)
|
-
|
Total provision for
(recovery of) credit losses
|
-
|
(2)
|
3
|
-
|
6
|
Non-interest expense
(1)
|
860
|
885
|
882
|
3,522
|
3,515
|
Income before income
taxes
|
372
|
343
|
296
|
1,431
|
1,428
|
Provision for income
taxes
|
105
|
94
|
77
|
371
|
356
|
Reported net
income
|
267
|
249
|
219
|
1,060
|
1,072
|
Amortization of
acquisition-related intangible assets (2)
|
9
|
8
|
10
|
37
|
41
|
Reinsurance adjustment
(3)
|
25
|
-
|
-
|
25
|
-
|
Adjusted net
income
|
301
|
257
|
229
|
1,122
|
1,113
|
Traditional Wealth
businesses reported net income
|
237
|
225
|
192
|
862
|
805
|
Traditional Wealth
businesses adjusted net income
|
246
|
233
|
202
|
899
|
846
|
Insurance reported
net income
|
30
|
24
|
27
|
198
|
267
|
Insurance adjusted
net income
|
55
|
24
|
27
|
223
|
267
|
Net income growth
(%)
|
22.0
|
(14.3)
|
25.3
|
(1.1)
|
11.0
|
Adjusted net income
growth (%)
|
31.3
|
(14.4)
|
21.2
|
0.8
|
8.0
|
Revenue growth
(%)
|
(0.2)
|
37.2
|
(6.8)
|
21.6
|
1.3
|
Revenue growth, net
of CCPB (%)
|
4.4
|
(3.6)
|
6.1
|
0.1
|
5.7
|
Adjusted
CCPB
|
310
|
887
|
390
|
2,684
|
1,352
|
Revenue growth, net
of adjusted CCPB (%)
|
6.5
|
(3.6)
|
6.1
|
0.6
|
5.7
|
Non-interest expense
growth (%)
|
(2.6)
|
1.0
|
4.9
|
0.2
|
4.8
|
Adjusted non-interest
expense growth (%)
|
(2.4)
|
1.2
|
5.6
|
0.3
|
5.8
|
Return on equity
(%)
|
16.6
|
15.3
|
14.1
|
16.7
|
17.8
|
Adjusted return on
equity (%)
|
18.7
|
15.9
|
14.7
|
17.7
|
18.5
|
Operating leverage,
net of CCPB (%)
|
7.0
|
(4.6)
|
1.2
|
(0.1)
|
0.9
|
Adjusted operating
leverage, net of CCPB (%)
|
8.9
|
(4.8)
|
0.5
|
0.3
|
(0.1)
|
Reported efficiency
ratio (%)
|
54.9
|
41.9
|
56.2
|
46.0
|
55.8
|
Reported efficiency
ratio, net of CCPB (%)
|
69.8
|
72.2
|
74.8
|
71.1
|
71.0
|
Adjusted efficiency
ratio (%)
|
54.1
|
41.3
|
55.4
|
45.3
|
55.0
|
Adjusted efficiency
ratio, net of CCPB (%)
|
67.5
|
71.2
|
73.7
|
69.8
|
70.0
|
Assets under
management
|
471,160
|
464,711
|
438,274
|
471,160
|
438,274
|
Assets under
administration (4)
|
393,576
|
391,622
|
382,839
|
393,576
|
382,839
|
Average
assets
|
42,750
|
41,891
|
37,510
|
40,951
|
35,913
|
Average gross loans
and acceptances
|
24,660
|
24,068
|
21,559
|
23,519
|
20,290
|
Average net loans and
acceptances
|
24,628
|
24,036
|
21,531
|
23,487
|
20,260
|
Average
deposits
|
38,123
|
36,190
|
33,968
|
36,419
|
34,251
|
(1)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied. As a result,
certain out-of-pocket expenses reimbursed to BMO from customers
have been reclassified from a reduction in non-interest expense to
non-interest revenue.
|
(2)
|
Before tax amounts of
$11 million in both Q4-2019 and Q3-2019, $13 million in Q4-2018;
$47 million in fiscal 2019 and $52 million in fiscal 2018 are
included in non-interest expense.
|
(3)
|
Q4-2019 reported net
income included a reinsurance adjustment of $25 million (pre-tax
and after-tax) in CCPB for the net impact of major reinsurance
claims from Japanese typhoons that were incurred after our
announced decision to wind down our reinsurance business. This
reinsurance adjustment is included in CCPB.
|
(4)
|
We have certain
assets under management that are also administered by us and are
included in assets under administration.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
Q4 2019 vs. Q4 2018
BMO Wealth
Management reported net income was $267
million, an increase of $48
million or 22% and adjusted net income was $301 million, an increase of $72 million or 31% from the prior year. Adjusted
net income in the current quarter excludes the net impact of major
reinsurance claims from Japanese typhoons that were incurred after
our announced decision to wind down our reinsurance business and
the amortization of acquisition-related intangible assets in both
the current and prior year. Traditional Wealth reported net income
was $237 million, an increase of
$45 million or 24% and adjusted net
income was $246 million, an increase
of $44 million or 22%, due to the
impact of a legal provision in the prior yearand higher deposit and
loan revenue and higher fee-based revenue. Insurance reported net
income was $30 million, an increase
of $3 million or 9% and adjusted net
income was $55 million, an increase
of $28 million, primarily due to
benefits from changes in investments to improve asset liability
management.
Revenue of $1,567 million
was relatively unchanged, compared with the prior year. Revenue,
net of reported CCPB, was $1,232
million, an increase of $51
million or 4%. Revenue in Traditional Wealth was
$1,155 million, an increase of
$53 million or 5%, due to the impact
of a legal provision in the prior year, higher deposit and loan,
and fee-based revenue. Insurance revenue, net of reported CCPB, was
relatively unchanged compared with the prior year and Insurance
revenue, net of adjusted CCPB, increased $24
million, due to benefits from changes in investments to
improve asset-liability management.
Reported non-interest expense was $860 million, a decrease of $22 million or 3%, and adjusted non-interest
expense was $849 million, a decrease
of $20 million or 2%, primarily due
to below trend expenses in the current quarter and the impact of
the legal provision in the prior year.
Assets under management of $471.2
billion increased $32.9
billion or 8% from the prior year, primarily driven by
stronger equity markets. Assets under administration of
$393.6 billion increased $10.7 billion or 3% from the prior year,
primarily driven by stronger equity markets and underlying growth.
Average gross loans and average deposits increased 14% and 12%,
respectively, as we continue to diversify our product
mix.
Q4 2019 vs. Q3 2019
Reported net
income increased $18 million or 7%,
and adjusted net income increased $44
million or 17% from the prior quarter. Traditional Wealth
reported net income increased $12
million or 5%, and adjusted net income increased
$13 million or 5% from the prior
quarter, primarily due to lower expenses. Insurance reported net
income increased $6 million or 27%,
and adjusted net income increased $31
million, primarily due to benefits from changes in
investments to improve asset-liability management.
Revenue was $1,567 million,
compared with $2,113 million in the
prior quarter. Revenue, net of CCPB, increased $6 million or 1%. Revenue, net of adjusted CCPB,
increased $31 million or 3%. Revenue
in Traditional Wealth was relatively unchanged. Insurance revenue,
net of CCPB, increased $4 million and Insurance revenue, net
of adjusted CCPB, increased $29
million, due to benefits from changes in
investments to improve asset-liability
management.
Reported and adjusted non-interest expense both decreased
$25 million or 3%, primarily due to
the benefit of below trend expenses in the current quarter and
continued good expense management discipline.
Assets under management increased $6.4 billion or 1% and assets under
administration increased $2.0
billion, relatively unchanged from the prior
quarter, primarily driven by stronger equity markets. Average gross
loans increased 2% and average deposits increased 5% from the prior
quarter.
Adjusted results in this BMO Wealth Management section are
non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP
Measures section.
BMO Capital Markets
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest income
(teb) (1)
|
696
|
538
|
493
|
2,394
|
1,784
|
Non-interest revenue
(1)(2)
|
477
|
662
|
639
|
2,340
|
2,579
|
Total revenue (teb)
(1)(2)
|
1,173
|
1,200
|
1,132
|
4,734
|
4,363
|
Provision for
(recovery of) credit losses on impaired loans
|
32
|
7
|
(3)
|
52
|
(17)
|
Provision for
(recovery of) credit losses on performing loans
|
8
|
3
|
(4)
|
28
|
(1)
|
Total provision for
(recovery of) credit losses
|
40
|
10
|
(7)
|
80
|
(18)
|
Non-interest expense
(2)
|
788
|
794
|
765
|
3,261
|
2,859
|
Income before income
taxes
|
345
|
396
|
374
|
1,393
|
1,522
|
Provision for income
taxes (teb)
|
76
|
83
|
76
|
307
|
366
|
Reported net
income
|
269
|
313
|
298
|
1,086
|
1,156
|
Acquisition
integration costs (3)
|
2
|
2
|
9
|
10
|
11
|
Amortization of
acquisition-related intangible assets (4)
|
9
|
3
|
2
|
17
|
2
|
Adjusted net
income
|
280
|
318
|
309
|
1,113
|
1,169
|
Global Markets
revenue (5)
|
688
|
665
|
630
|
2,704
|
2,541
|
Investment and
Corporate Banking revenue
|
485
|
535
|
502
|
2,030
|
1,822
|
Net income growth
(%)
|
(9.6)
|
4.0
|
(5.6)
|
(6.0)
|
(9.4)
|
Adjusted net income
growth (%)
|
(9.4)
|
5.0
|
(2.3)
|
(4.8)
|
(8.5)
|
Revenue growth
(%)
|
3.6
|
8.6
|
1.5
|
8.5
|
(4.7)
|
Non-interest expense
growth (%)
|
3.0
|
13.3
|
12.4
|
14.1
|
2.6
|
Adjusted non-interest
expense growth (%)
|
3.1
|
12.8
|
10.5
|
13.5
|
2.1
|
Return on equity
(%)
|
9.7
|
11.3
|
12.2
|
9.8
|
12.8
|
Adjusted return on
equity (%)
|
10.1
|
11.5
|
12.6
|
10.1
|
13.0
|
Operating leverage
(teb) (%)
|
0.6
|
(4.7)
|
(10.9)
|
(5.6)
|
(7.3)
|
Adjusted operating
leverage (teb) (%)
|
0.5
|
(4.2)
|
(9.0)
|
(5.0)
|
(6.8)
|
Efficiency ratio
(teb) (%)
|
67.2
|
66.1
|
67.6
|
68.9
|
65.5
|
Adjusted efficiency
ratio (teb) (%)
|
66.0
|
65.6
|
66.4
|
68.2
|
65.1
|
Average
assets
|
341,745
|
343,009
|
317,655
|
342,347
|
307,087
|
Average gross loans
and acceptances
|
62,752
|
60,870
|
47,972
|
60,034
|
46,724
|
Average net loans and
acceptances
|
62,642
|
60,771
|
47,909
|
59,946
|
46,658
|
(1)
|
Effective Q1-2019,
certain dividend income in our Global Markets business has been
reclassified from non-interest revenue to net interest income.
Results for prior periods and related ratios have been reclassified
to conform with the current period's presentation.
|
(2)
|
Effective Q1-2019,
the bank adopted IFRS 15, Revenue from Contracts with
Customers (IFRS 15) and elected to retrospectively present
prior periods as if IFRS 15 had always been applied.
As a result, certain out-of-pocket expenses reimbursed to
BMO from customers have been reclassified from a reduction in
non-interest expense to non-interest revenue.
|
(3)
|
KGS-Alpha acquisition
integration costs before tax amounts of $2 million in Q4-2019, $3
million in Q3-2019 and $12 million in Q4-2018; $13 million in
fiscal 2019 and $14 million in fiscal 2018 are included in
non-interest expense.
|
(4)
|
Before tax amounts of
$12 million in Q4-2019, $3 million in Q3-2019 and $2 million in
Q4-2018; $22 million for fiscal 2019 and $3 million for fiscal 2018
are included in non-interest expense.
|
(5)
|
Global Markets was
previously known as Trading Products.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
Q4 2019 vs. Q4 2018
BMO Capital
Markets reported net income was $269
million, compared with $298
million in the prior year, and adjusted net income was
$280 million, compared with
$309 million in the prior year.
Adjusted net income excludes the amortization of
acquisition-related intangible assets and acquisition integration
costs. Higher revenue was more than offset by higher provisions for
credit losses and higher expenses.
Revenue was $1,173 million,
an increase of $41 million or 4%.
Global Markets revenue increased, driven by higher interest rate
trading revenue, primarily due to the impact of the acquisition of
KGS-Alpha, higher commodities and foreign exchange trading,
partially offset by lower equities trading. Investment and
Corporate Banking revenue decreased slightly from the prior year,
driven by lower underwriting and advisory revenue, partially offset
by higher corporate banking-related revenue.
Total provision for credit losses was $40 million, an increase of $47 million from a $7
million recovery of credit losses in the prior year.
The provision for credit losses on impaired loans was
$32 million in the current quarter,
compared with a $3
million recovery of credit losses on impaired loans in the
prior year. There was a $8 million
provision for credit losses on performing loans in the current
quarter, compared with a $4 million recovery of credit losses
on performing loans in the prior year.
Non-interest expense was $788
million, an increase of $23
million or 3% and adjusted non-interest expense was
$774 million, an increase of
$23 million or 3%, or 2% excluding the impact of the stronger
U.S. dollar. The increase was due to higher other operating
expenses and the impact of the acquisition of KGS-Alpha, partially
offset by lower other employee-related costs.
Q4 2019 vs. Q3 2019
Reported net
income was $269 million, compared
with $313 million in the prior
quarter, and adjusted net income was $280
million, compared with $318
million in the prior quarter.
Revenue decreased $27
million or 2%. Global Markets revenue increased, primarily
due to higher interest rate and commodities trading revenue,
partially offset by lower equities trading revenue. Investment and
Corporate Banking revenue decreased from the prior quarter,
primarily due to lower debt underwriting and advisory
revenue.
Total provision for credit losses increased $30 million. The provision for credit losses on
impaired loans increased $25 million
in the current quarter. There was a $8
million provision for credit losses on performing loans in
the current quarter, compared with a $3
million provision for credit losses on performing loans in
the prior quarter.
Non-interest expense decreased $6
million or 1% and adjusted non-interest expense decreased
$14 million or 2%, primarily due to
lower employee-related expenses.
Adjusted results in this BMO Capital Markets section are
non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP
Measures section.
Corporate Services
(Canadian $ in
millions, except as noted)
|
Q4-2019
|
Q3-2019
|
Q4-2018
|
Fiscal
2019
|
Fiscal
2018
|
Net interest income
before group teb offset
|
(88)
|
(49)
|
(52)
|
(241)
|
(243)
|
Group teb
offset
|
(77)
|
(74)
|
(67)
|
(296)
|
(313)
|
Net interest income
(teb)
|
(165)
|
(123)
|
(119)
|
(537)
|
(556)
|
Non-interest
revenue
|
68
|
63
|
77
|
238
|
248
|
Total revenue
(teb)
|
(97)
|
(60)
|
(42)
|
(299)
|
(308)
|
Provision for
(recovery of) credit losses on impaired loans
|
(2)
|
1
|
(1)
|
(7)
|
(13)
|
Provision for
(recovery of) credit losses on performing loans
|
-
|
(5)
|
(2)
|
(5)
|
(2)
|
Total provision for
(recovery of) credit losses
|
(2)
|
(4)
|
(3)
|
(12)
|
(15)
|
Non-interest expense
(1)
|
576
|
38
|
(161)
|
854
|
425
|
Income (loss) before
income taxes
|
(671)
|
(94)
|
122
|
(1,141)
|
(718)
|
Provision for
(recovery of) income taxes (teb)
|
(220)
|
(73)
|
(12)
|
(516)
|
-
|
Reported net income
(loss)
|
(451)
|
(21)
|
134
|
(625)
|
(718)
|
Acquisition
integration costs (1)
|
-
|
-
|
4
|
-
|
14
|
Restructuring costs
(2)
|
357
|
-
|
-
|
357
|
192
|
U.S. net deferred tax
asset revaluation (3)
|
-
|
-
|
-
|
-
|
425
|
Benefit from the
remeasurement of an employee benefit liability (4)
|
-
|
-
|
(203)
|
-
|
(203)
|
Adjusted net
loss
|
(94)
|
(21)
|
(65)
|
(268)
|
(290)
|
Adjusted non-interest
expense
|
92
|
38
|
110
|
370
|
422
|
(1)
|
Acquisition
integration costs related to the acquired BMO Transportation
Finance business are included in non-interest expense.
|
(2)
|
Q4-2019 reported net
income included a $357 million after-tax ($484 million pre-tax)
restructuring charge, related to severance and a small amount of
real estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives
focused on digitization, organizational redesign and simplification
of the way we do business, and Q2-2018 included a $192 million
after-tax ($260 million pre-tax) restructuring charge.
Restructuring charges are included in non-interest
expense.
|
(3)
|
Q1-2018 net income
included a $425 million (US$339 million) charge related to the
revaluation of our U.S. net deferred tax asset as a result of the
enactment of the U.S. Tax Cuts and Jobs Act.
For more information, refer to the Critical Accounting Estimates –
Income Taxes and Deferred Tax Assets section on page 119 of BMO's
2018 Annual Report.
|
(4)
|
Q4-2018 net income
included a benefit of $203 million after-tax ($277 million pre-tax)
from the remeasurement of an employee benefit liability, as a
result of an amendment to our employee future benefits plan for
certain employees. This amount was included in Corporate Services
in non-interest expense.
|
|
Adjusted results in
this table are non-GAAP amounts or non-GAAP measures. Please refer
to the Non-GAAP Measures section.
|
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, finance,
legal and regulatory compliance, human resources, communications,
marketing, real estate, procurement, data and analytics, and
innovation. T&O develops, monitors, manages and maintains
governance of information technology, and also provides cyber
security and operations services.
The costs of these Corporate Units and T&O services
are largely transferred to the three operating groups (Personal and
Commercial Banking, 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.
Reported results in the current quarter include a
restructuring charge and the prior year
included a benefit from the remeasurement of
an employee benefit liability, as well as certain
acquisition integration costs.
Q4 2019 vs. Q4 2018
Corporate
Services reported net loss was $451
million, compared with a reported net income of $134 million in the prior year. Adjusted net loss
was $94 million, compared with an
adjusted net loss of $65 million in
the prior year. Adjusted results in the current
quarter exclude the restructuring charge. Adjusted results in the
prior year exclude the benefit from the remeasurement
of an employee benefit liability and acquisition
integration costs. Adjusted results decreased, primarily due to
below trend revenue excluding taxable equivalent basis (teb)
adjustments, partially offset by lower expenses.
Q4 2019 vs. Q3 2019
Reported net
loss for the quarter was $451
million, compared with a reported net loss of $21 million in the prior quarter. Adjusted net
loss was $94 million compared with $21
million in the prior quarter. Adjusted results exclude the
restructuring charge in the current quarter and
decreased, primarily due to an increase in expenses from a
below trend level recorded in the prior quarter, which included the
impact of a gain on the sale of an office building, and below trend
revenue excluding teb adjustments.
Adjusted results in this Corporate Services section are non-GAAP
amounts or non-GAAP measures. Please refer to the Non-GAAP Measures
section.
Risk Management
Our risk
management policies and processes to measure, monitor and control
credit and counterparty, market, insurance, liquidity and funding,
operational, legal and regulatory, business, strategic,
environmental and social and reputation risk are outlined in the
Enterprise-Wide Risk Management section on pages 68 to 106 of BMO's
2019 Annual Report.
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,
|
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Interest, Dividend
and Fee Income
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
5,072
|
$
|
5,120
|
$
|
4,486
|
$
|
19,824
|
$
|
16,275
|
Securities
|
|
1,415
|
|
1,407
|
|
1,186
|
|
5,541
|
|
4,119
|
Deposits with
banks
|
|
195
|
|
187
|
|
206
|
|
787
|
|
641
|
|
|
6,682
|
|
6,714
|
|
5,878
|
|
26,152
|
|
21,035
|
Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
2,203
|
|
2,224
|
|
1,881
|
|
8,616
|
|
6,080
|
Subordinated
debt
|
|
71
|
|
69
|
|
61
|
|
279
|
|
226
|
Other
liabilities
|
|
1,044
|
|
1,204
|
|
921
|
|
4,369
|
|
3,291
|
|
|
3,318
|
|
3,497
|
|
2,863
|
|
13,264
|
|
9,597
|
Net Interest
Income
|
|
3,364
|
|
3,217
|
|
3,015
|
|
12,888
|
|
11,438
|
Non-Interest
Revenue
|
|
|
|
|
|
|
|
|
|
|
Securities
commissions and fees
|
|
262
|
|
259
|
|
256
|
|
1,023
|
|
1,025
|
Deposit and payment
service charges
|
|
314
|
|
309
|
|
290
|
|
1,204
|
|
1,134
|
Trading
revenues
|
|
(21)
|
|
115
|
|
131
|
|
298
|
|
705
|
Lending
fees
|
|
313
|
|
314
|
|
266
|
|
1,181
|
|
997
|
Card fees
|
|
107
|
|
109
|
|
111
|
|
437
|
|
428
|
Investment management
and custodial fees
|
|
449
|
|
444
|
|
441
|
|
1,747
|
|
1,749
|
Mutual fund
revenues
|
|
359
|
|
357
|
|
359
|
|
1,419
|
|
1,473
|
Underwriting and
advisory fees
|
|
221
|
|
260
|
|
244
|
|
986
|
|
943
|
Securities gains,
other than trading
|
|
68
|
|
90
|
|
83
|
|
249
|
|
239
|
Foreign exchange
gains, other than trading
|
|
29
|
|
48
|
|
42
|
|
166
|
|
182
|
Insurance
revenue
|
|
435
|
|
989
|
|
485
|
|
3,183
|
|
1,879
|
Investments in
associates and joint ventures
|
|
39
|
|
31
|
|
38
|
|
151
|
|
167
|
Other
|
|
148
|
|
124
|
|
132
|
|
551
|
|
546
|
|
|
2,723
|
|
3,449
|
|
2,878
|
|
12,595
|
|
11,467
|
Total
Revenue
|
|
6,087
|
|
6,666
|
|
5,893
|
|
25,483
|
|
22,905
|
Provision for
Credit Losses
|
|
253
|
|
306
|
|
175
|
|
872
|
|
662
|
Insurance Claims,
Commissions and Changes in Policy Benefit
Liabilities
|
|
335
|
|
887
|
|
390
|
|
2,709
|
|
1,352
|
Non-Interest
Expense
|
|
|
|
|
|
|
|
|
|
|
Employee
compensation
|
|
2,381
|
|
1,960
|
|
1,613
|
|
8,423
|
|
7,461
|
Premises and
equipment
|
|
759
|
|
734
|
|
745
|
|
2,988
|
|
2,753
|
Amortization of
intangible assets
|
|
148
|
|
135
|
|
125
|
|
554
|
|
503
|
Travel and business
development
|
|
134
|
|
142
|
|
150
|
|
545
|
|
519
|
Communications
|
|
72
|
|
72
|
|
70
|
|
296
|
|
282
|
Professional
fees
|
|
165
|
|
141
|
|
160
|
|
568
|
|
572
|
Other
|
|
328
|
|
307
|
|
330
|
|
1,256
|
|
1,387
|
|
|
3,987
|
|
3,491
|
|
3,193
|
|
14,630
|
|
13,477
|
Income Before
Provision for Income Taxes
|
|
1,512
|
|
1,982
|
|
2,135
|
|
7,272
|
|
7,414
|
Provision for income
taxes
|
|
318
|
|
425
|
|
438
|
|
1,514
|
|
1,961
|
Net Income
attributable to Equity Holders of the Bank
|
$
|
1,194
|
$
|
1,557
|
$
|
1,697
|
$
|
5,758
|
$
|
5,453
|
Earnings Per Share
(Canadian $)
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
1.79
|
$
|
2.34
|
$
|
2.58
|
$
|
8.68
|
$
|
8.19
|
Diluted
|
|
1.78
|
|
2.34
|
|
2.58
|
|
8.66
|
|
8.17
|
Dividends per common
share
|
|
1.03
|
|
1.03
|
|
0.96
|
|
4.06
|
|
3.78
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation and for changes in accounting policy.
|
Condensed 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,
|
|
|
2019
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
Income
|
$
|
1,194
|
$
|
1,557
|
$
|
1,697
|
$
|
5,758
|
$
|
5,453
|
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
securities
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on fair value through OCI debt securities
arising
|
|
|
|
|
|
|
|
|
|
|
during the period
(1)
|
|
67
|
|
112
|
|
(49)
|
|
412
|
|
(251)
|
Reclassification to
earnings of (gains) in the period (2)
|
|
(29)
|
|
(14)
|
|
(22)
|
|
(72)
|
|
(65)
|
|
|
38
|
|
98
|
|
(71)
|
|
340
|
|
(316)
|
Net change in
unrealized gains (losses) on cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on
derivatives designated as cash flow hedges arising during the
period (3)
|
|
(36)
|
|
290
|
|
(309)
|
|
1,444
|
|
(1,228)
|
Reclassification to
earnings of losses on derivatives designated as
|
|
|
|
|
|
|
|
|
|
|
cash flow hedges in
the period (4)
|
|
21
|
|
36
|
|
120
|
|
143
|
|
336
|
|
|
(15)
|
|
326
|
|
(189)
|
|
1,587
|
|
(892)
|
Net gains (losses) on
translation of net foreign operations
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains
(losses) on translation of net foreign operations
|
|
35
|
|
(577)
|
|
303
|
|
(11)
|
|
417
|
Unrealized gains
(losses) on hedges of net foreign operations (5)
|
|
(17)
|
|
94
|
|
(62)
|
|
(13)
|
|
(155)
|
|
|
18
|
|
(483)
|
|
241
|
|
(24)
|
|
262
|
Items that will not
be reclassified to net income
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on
remeasurement of pension and other employee
|
|
|
|
|
|
|
|
|
|
|
future benefit plans
(6)
|
|
(169)
|
|
(233)
|
|
(42)
|
|
(552)
|
|
261
|
Gains (losses) on
remeasurement of own credit risk on financial
|
|
|
|
|
|
|
|
|
|
|
liabilities designed
at fair value (7)
|
|
63
|
|
31
|
|
(18)
|
|
75
|
|
(24)
|
Unrealized gains on
fair value through OCI equity securities
|
|
|
|
|
|
|
|
|
|
|
during the period
(8)
|
|
1
|
|
-
|
|
-
|
|
1
|
|
-
|
|
|
(105)
|
|
(202)
|
|
(60)
|
|
(476)
|
|
237
|
Other
Comprehensive Income (Loss), net of taxes
|
|
(64)
|
|
(261)
|
|
(79)
|
|
1,427
|
|
(709)
|
Total
Comprehensive Income attributable to Equity Holders of the
Bank
|
$
|
1,130
|
$
|
1,296
|
$
|
1,618
|
$
|
7,185
|
$
|
4,744
|
(1)
|
Net of income tax
(provision) recovery of $(23) million, $(39) million, $22 million
for the three months ended, and $(140) million, $69 million for the
twelve months ended, respectively.
|
(2)
|
Net of income tax
provision of $11 million, $5 million, $8 million for the three
months ended, and $26 million, $23 million for the twelve months
ended, respectively.
|
(3)
|
Net of income tax
(provision) recovery of $15 million, $(106) million, $114 million
for the three months ended, and $(521) million, $432 million for
the twelve months ended, respectively.
|
(4)
|
Net of income tax
(recovery) of $(7) million, $(13) million, $(43) million for the
three months ended, and $(51) million, $(121) million for the
twelve months ended, respectively.
|
(5)
|
Net of income tax
(provision) recovery of $6 million, $(35) million, $22 million for
the three months ended, and $4 million, $56 million for the twelve
months ended, respectively.
|
(6)
|
Net of income tax
(provision) recovery of $58 million, $83 million, $23 million for
the three months ended, and $196 million, $(111) million for the
twelve months ended, respectively.
|
(7)
|
Net of income tax
(provision) recovery of $(23) million, $(11) million, $7 million
for the three months ended, and $(27) million, $6 million for the
twelve months ended, respectively.
|
(8)
|
Net of income tax
(provision) of $(1) million, $nil and $nil for the three months
ended, and $(1) million, $nil for the twelve months ended,
respectively.
|
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation and for changes in accounting policy.
|
Condensed Consolidated Financial
Statements
Consolidated Balance Sheet
(Unaudited) (Canadian
$ in millions)
|
|
|
|
As at
|
|
|
|
|
October
31,
|
|
July 31,
|
|
October
31,
|
|
|
2019
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
|
|
Cash and Cash
Equivalents
|
$
|
48,803
|
$
|
38,938
|
$
|
42,142
|
Interest Bearing
Deposits with Banks
|
|
7,987
|
|
6,899
|
|
8,305
|
Securities
|
|
|
|
|
|
|
Trading
|
|
85,903
|
|
94,906
|
|
99,697
|
Fair value through
profit or loss
|
|
13,704
|
|
13,548
|
|
11,611
|
Fair value through
other comprehensive income
|
|
64,515
|
|
67,434
|
|
62,440
|
Debt securities at
amortized cost
|
|
24,472
|
|
15,024
|
|
6,485
|
Other
|
|
844
|
|
813
|
|
702
|
|
|
189,438
|
|
191,725
|
|
180,935
|
Securities
Borrowed or Purchased Under Resale Agreements
|
|
104,004
|
|
106,612
|
|
85,051
|
Loans
|
|
|
|
|
|
|
Residential
mortgages
|
|
123,740
|
|
122,054
|
|
119,620
|
Consumer instalment
and other personal
|
|
67,736
|
|
65,989
|
|
63,225
|
Credit
cards
|
|
8,859
|
|
8,749
|
|
8,329
|
Business and
government
|
|
227,609
|
|
222,857
|
|
194,456
|
|
|
427,944
|
|
419,649
|
|
385,630
|
Allowance for credit
losses
|
|
(1,850)
|
|
(1,802)
|
|
(1,639)
|
|
|
426,094
|
|
417,847
|
|
383,991
|
Other
Assets
|
|
|
|
|
|
|
Derivative
instruments
|
|
22,144
|
|
22,200
|
|
25,422
|
Customersʼ liability
under acceptances
|
|
23,593
|
|
24,741
|
|
18,585
|
Premises and
equipment
|
|
2,055
|
|
1,989
|
|
1,986
|
Goodwill
|
|
6,340
|
|
6,329
|
|
6,373
|
Intangible
assets
|
|
2,424
|
|
2,319
|
|
2,272
|
Current tax
assets
|
|
1,165
|
|
1,257
|
|
1,515
|
Deferred tax
assets
|
|
1,568
|
|
1,662
|
|
2,039
|
Other
|
|
16,580
|
|
16,662
|
|
14,677
|
|
|
75,869
|
|
77,159
|
|
72,869
|
Total
Assets
|
$
|
852,195
|
$
|
839,180
|
$
|
773,293
|
Liabilities and
Equity
|
|
|
|
|
|
|
Deposits
|
$
|
568,143
|
$
|
553,383
|
$
|
520,928
|
Other
Liabilities
|
|
|
|
|
|
|
Derivative
instruments
|
|
23,598
|
|
23,613
|
|
23,629
|
Acceptances
|
|
23,593
|
|
24,741
|
|
18,585
|
Securities sold but
not yet purchased
|
|
26,253
|
|
27,375
|
|
28,804
|
Securities lent or
sold under repurchase agreements
|
|
86,656
|
|
89,829
|
|
66,684
|
Securitization and
structured entities' liabilities
|
|
27,159
|
|
25,544
|
|
25,051
|
Current tax
liabilities
|
|
55
|
|
32
|
|
50
|
Deferred tax
liabilities
|
|
60
|
|
74
|
|
74
|
Other
|
|
38,607
|
|
37,070
|
|
36,985
|
|
|
225,981
|
|
228,278
|
|
199,862
|
Subordinated
Debt
|
|
6,995
|
|
6,876
|
|
6,782
|
Equity
|
|
|
|
|
|
|
Preferred shares and
other equity instruments
|
|
5,348
|
|
5,348
|
|
4,340
|
Common
shares
|
|
12,971
|
|
12,958
|
|
12,929
|
Contributed
surplus
|
|
303
|
|
303
|
|
300
|
Retained
earnings
|
|
28,725
|
|
28,241
|
|
25,850
|
Accumulated other
comprehensive income
|
|
3,729
|
|
3,793
|
|
2,302
|
Total
Equity
|
|
51,076
|
|
50,643
|
|
45,721
|
Total Liabilities
and Equity
|
$
|
852,195
|
$
|
839,180
|
$
|
773,293
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation and for changes in accounting policy.
|
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,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Preferred Shares
and Other Equity Instruments
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
$
|
5,348
|
$
|
4,240
|
$
|
4,340
|
$
|
4,240
|
Issued during the
period
|
|
-
|
|
400
|
|
1,008
|
|
400
|
Redeemed during the
period
|
|
-
|
|
(300)
|
|
-
|
|
(300)
|
Balance at End of
Period
|
|
5,348
|
|
4,340
|
|
5,348
|
|
4,340
|
Common
Shares
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
12,958
|
|
12,924
|
|
12,929
|
|
13,032
|
Issued under the
Stock Option Plan
|
|
13
|
|
26
|
|
62
|
|
99
|
Repurchased for
cancellation
|
|
-
|
|
(21)
|
|
(20)
|
|
(202)
|
Balance at End of
Period
|
|
12,971
|
|
12,929
|
|
12,971
|
|
12,929
|
Contributed
Surplus
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
303
|
|
302
|
|
300
|
|
307
|
Stock option expense,
net of options exercised
|
|
(1)
|
|
(2)
|
|
-
|
|
(12)
|
Other
|
|
1
|
|
-
|
|
3
|
|
5
|
Balance at End of
Period
|
|
303
|
|
300
|
|
303
|
|
300
|
Retained
Earnings
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
28,241
|
|
24,901
|
|
25,850
|
|
23,700
|
Impact from adopting
IFRS 9
|
|
-
|
|
-
|
|
-
|
|
99
|
Net income
attributable to equity holders of the bank
|
|
1,194
|
|
1,697
|
|
5,758
|
|
5,453
|
Dividends
– Preferred shares
|
|
(52)
|
|
(43)
|
|
(211)
|
|
(184)
|
– Common
shares
|
|
(658)
|
|
(614)
|
|
(2,594)
|
|
(2,424)
|
Equity issue
expense
|
|
-
|
|
(5)
|
|
(8)
|
|
(5)
|
Common shares
repurchased for cancellation
|
|
-
|
|
(86)
|
|
(70)
|
|
(789)
|
Balance at End of
Period
|
|
28,725
|
|
25,850
|
|
28,725
|
|
25,850
|
Accumulated Other
Comprehensive Income (Loss) on Fair Value through OCI Securities,
net of taxes
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
(13)
|
|
(244)
|
|
(315)
|
|
56
|
Impact from adopting
IFRS 9
|
|
-
|
|
-
|
|
-
|
|
(55)
|
Unrealized gains
(losses) on fair value through OCI debt securities arising during
the period
|
|
67
|
|
(49)
|
|
412
|
|
(251)
|
Unrealized gains on
fair value through OCI equity securities arising during the
period
|
|
1
|
|
-
|
|
1
|
|
-
|
Reclassification to
earnings of (gains) on fair value through OCI debt securities
during the period
|
|
(29)
|
|
(22)
|
|
(72)
|
|
(65)
|
Balance at End of
Period
|
|
26
|
|
(315)
|
|
26
|
|
(315)
|
Accumulated Other
Comprehensive Income (Loss) on Cash Flow Hedges, net of
taxes
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
528
|
|
(885)
|
|
(1,074)
|
|
(182)
|
Gains (losses) on
derivatives designated as cash flow hedges arising during the
period
|
|
(36)
|
|
(309)
|
|
1,444
|
|
(1,228)
|
Reclassification to
earnings of losses on derivatives designated as cash flow hedges in
the period
|
|
21
|
|
120
|
|
143
|
|
336
|
Balance at End of
Period
|
|
513
|
|
(1,074)
|
|
513
|
|
(1,074)
|
Accumulated Other
Comprehensive Income on Translation
|
|
|
|
|
|
|
|
|
of Net Foreign
Operations, net of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
3,685
|
|
3,486
|
|
3,727
|
|
3,465
|
Unrealized gains
(losses) on translation of net foreign operations
|
|
35
|
|
303
|
|
(11)
|
|
417
|
Unrealized (losses)
on hedges of net foreign operations
|
|
(17)
|
|
(62)
|
|
(13)
|
|
(155)
|
Balance at End of
Period
|
|
3,703
|
|
3,727
|
|
3,703
|
|
3,727
|
Accumulated Other
Comprehensive Income (Loss) on Pension and Other
Employee
|
|
|
|
|
|
|
|
|
Future Benefit
Plans, net of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
(214)
|
|
211
|
|
169
|
|
(92)
|
Gains (losses) on
remeasurement of pension and other employee future benefit
plans
|
|
(169)
|
|
(42)
|
|
(552)
|
|
261
|
Balance at End of
Period
|
|
(383)
|
|
169
|
|
(383)
|
|
169
|
Accumulated Other
Comprehensive (Loss) on Own Credit Risk on
|
|
|
|
|
|
|
|
|
Financial
Liabilities Designated at Fair Value, net of taxes
|
|
|
|
|
|
|
|
|
Balance at beginning
of period
|
|
(193)
|
|
(187)
|
|
(205)
|
|
(181)
|
Gains (losses) on
remeasurement of own credit risk on financial liabilities
designated at fair value
|
63
|
|
(18)
|
|
75
|
|
(24)
|
Balance at End of
Period
|
|
(130)
|
|
(205)
|
|
(130)
|
|
(205)
|
Total Accumulated
Other Comprehensive Income
|
|
3,729
|
|
2,302
|
|
3,729
|
|
2,302
|
Total
Equity
|
$
|
51,076
|
$
|
45,721
|
$
|
51,076
|
$
|
45,721
|
Certain comparative
figures have been reclassified to conform with the current period's
presentation and for changes in accounting policy.
|
INVESTOR AND MEDIA PRESENTATION
Investor Presentation
Materials
Interested parties are invited to
visit our website at www.bmo.com/investorrelations to review our
2019 annual MD&A and audited annual consolidated financial
statements, quarterly presentation materials and supplementary
financial information package.
Quarterly Conference Call and Webcast
Presentations
Interested parties are also
invited to listen to our quarterly conference call on Tuesday, December 3, 2019, at 8:00 a.m. (ET). The call may be accessed by
telephone at 416-641-2144 (from within Toronto) or 1-888-789-9572 (toll-free outside
Toronto), entering Passcode:
7865067#. A replay of the conference call can be accessed until
Monday, February 24, 2020, by calling
905-694-9451 (from within Toronto)
or 1-800-408-3053 (toll-free outside Toronto) and entering
Passcode: 2812262#.
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 site.
Shareholder
Dividend Reinvestment and Share Purchase
Plan (the
Plan)
Average market price
as defined under the Plan
August 2019:
$93.12
September 2019:
$96.93
October 2019:
$98.58
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, including the notice for our normal course
issuer bid, 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
Fax: (416)
867-6793
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 our website at
www.bmo.com/investorrelations.
|
Our 2019 Annual MD&A, audited annual consolidated financial
statements 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 2019 audited financial statements are
available free of charge upon request at 416-867-6785 or
corp.secretary@bmo.com.
|
|
Annual Meeting
2020
The next Annual
Meeting of Shareholders will be held on Tuesday, March 31, 2020, in
Toronto, Ontario.
|
|
® Registered trademark of Bank of Montreal
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content:http://www.prnewswire.com/news-releases/bmo-financial-group-reports-fourth-quarter-and-fiscal-2019-results-300968081.html
SOURCE BMO Financial Group