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
Media Relations Contacts: Paul
Gammal, Toronto,
paul.gammal@bmo.com, 416-867-6543; Investor Relations Contacts:
Jill Homenuk, Head, Investor
Relations, jill.homenuk@bmo.com, 416-867-4770; Tom Little, Director, Investor Relations,
tom.little@bmo.com, 416-867-7834