Financial Results Highlights
Second Quarter 2020 Compared With Second Quarter
2019:
- Net income of $689 million,
compared with $1,497 million;
adjusted net income1 of $715
million, compared with $1,522
million
- Reported EPS2 of $1.00, compared with $2.26; adjusted EPS1,2 of $1.04, compared with $2.30
- Revenue, net of CCPB3, of $5,461 million, compared with $5,652 million
- Provision for credit losses (PCL) of $1,118 million, compared with $176 million; current quarter includes PCL on
performing loans of $705
million
- ROE of 5.3%, compared with 13.6%; adjusted
ROE1 of 5.5%, compared with 13.9%
- Common Equity Tier 1 Ratio of 11.0%
- Dividend of $1.06, unchanged
from the prior quarter
Year-to-Date 2020 Compared With Year-to-Date 2019:
- Net income of $2,281 million,
compared with $3,007 million;
adjusted net income1 of $2,332 million, compared with $3,060 million
- Reported EPS2 of $3.37, compared with $4.54; adjusted EPS1,2 of $3.45, compared with $4.62
- Revenue, net of CCPB3, of $11,492 million, compared with $11,243 million
- Provision for credit losses of $1,467
million, compared with $313
million
- ROE of 9.2%, compared with 13.6%; adjusted
ROE1 of 9.4%, compared with 13.9%
TORONTO, May 27, 2020 /PRNewswire/ -- For the second
quarter ended April 30, 2020, BMO
Financial Group (TSX:BMO) (NYSE:BMO) recorded net income of
$689 million or $1.00 per share on a reported basis,
and net income of $715 million or $1.04 per share on an adjusted basis.
"The economic and social consequences of the COVID-19 pandemic
have been immediate and disruptive and at the same time, the
response by policy makers has been swift and unprecedented in
scale. At BMO, our top priority has been, and continues to be, the
health and safety of all our employees and customers and the
delivery of critical banking services," said Darryl White, CEO BMO Financial Group.
"We acted quickly to mobilize our workforce and adapt the ways
we serve our customers while maintaining operational stability in
every business. We have helped customers experiencing financial
stress by providing relief options, personalized advice and access
to experts. We've announced community support initiatives focused
on helping those with the greatest need.
"While the full scope and scale of the economic and social
impact of the pandemic remains uncertain, we have never been better
positioned to face these challenges. We entered this crisis from a
position of strength, with good operating momentum across our
diverse businesses, strong capital and liquidity, a strong record
of performance in risk management, disciplined expense management
and long history of overcoming challenges together with our
customers.
"For the second quarter, we demonstrated the resilience of our
earnings power as we earned through the impact of market volatility
and prudent loan loss provisioning. As we transition to the
re-opening of our economies, we will sustain and adapt operations
to support our customers, employees, communities and the broader
economic recovery, and together emerge from this crisis even
stronger," concluded Mr. White.
While COVID-19 had a meaningful impact on the bank's earnings in
the current quarter, the bank's operational performance remains
solid. Reported net income of $689
million and adjusted net income of $715 million were largely impacted by higher
provisions for credit losses, which increased $942 million pre-tax or $693 million after tax. Revenue decreased, with
growth in our P&C businesses more than offset by lower revenue
in our market sensitive businesses. We maintained a disciplined
approach to expense management, with expenses decreasing 2%
year-over-year. Overall results demonstrated the resiliency of
our diversified earnings platform in a challenging economic and
market environment.
Return on equity (ROE) was 5.3%, compared with 13.6% in the
prior year, and adjusted ROE was 5.5%, compared with 13.9% in the
prior year. Return on tangible common equity (ROTCE) and adjusted
ROTCE were both 6.4% in the current quarter, compared with 16.4% on
both a reported and an adjusted basis in the prior year.
Concurrent with the release of results, BMO announced a third
quarter 2020 dividend of $1.06 per
common share, unchanged from the prior quarter and up $0.03 per share or 3% 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.
The extent to which the COVID-19 pandemic impacts our business,
results of operations, reputation and financial condition,
including our regulatory capital and liquidity ratios, and credit
ratings, as well as its impact on our customers, competitors and
trading exposure, including the potential from loss from higher
credit, counterparty or mark-to-market losses, will depend on
future developments, which are highly uncertain and cannot be
predicted, including the scope and duration of the pandemic and
actions taken by governmental authorities, which could vary by
country, and other third parties in response to the pandemic. The
COVID-19 pandemic may also impact our ability to achieve, or the
timing to achieve, certain previously announced targets, goals and
objectives. Please refer to the Impact of COVID-19 and Risk
Management sections in our Second Quarter 2020 Report to
Shareholders.
Our complete Second Quarter 2020 Report to Shareholders,
including our unaudited interim consolidated financial statements
for the period ended April 30, 2020,
is 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 payable on other equity instruments.
|
(3)
|
On a basis that nets
insurance claims, commissions and changes in policy benefit
liabilities (CCPB) against insurance revenue.
|
Note: All ratios and
percentage changes in this document are based on unrounded
numbers.
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Second Quarter Operating Segment Overview
Canadian P&C
Reported net income was
$361 million, compared with $616 million in the prior
year, and adjusted net income was $362 million, compared with
$616 million. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Net income was lower due to
higher provisions for credit losses, with higher revenue partially
offset by higher expenses.
During the quarter, we introduced measures to help Canadian
consumers and businesses affected by COVID-19. These measures
included deferring up to six months of payments for our personal
and business clients and reducing interest rates on consumer and
small business credit cards for those customers needing extra help.
We also increased working capital loans to businesses and assisted
clients with tapping into relief funds, as quickly as possible. In
the quarter, we helped over 200,000 personal and commercial banking
customers access these programs and we continued to offer banking
services to all clients through our branches, digital and call
centre channels.
U.S. P&C
Reported net income was $339 million, compared with $406 million in the prior year, and adjusted net
income was $349 million, compared with $417 million.
Adjusted net income excludes the amortization of
acquisition-related intangible assets.
Reported net income was US$246
million, compared with US$305
million, and adjusted net income was US$253 million,
compared with US$313 million in the prior year, primarily due
to higher provisions for credit losses, partially offset by higher
revenue.
During the quarter, BMO Harris Bank announced relief measures
and hardship assistance to help U.S. consumers, small businesses,
commercial clients, communities and team members experiencing
financial pressures, as a result of COVID-19. As of April 30, 2020, we have originated US$4.2 billion in small business relief
loans through the Small Business Administration's Paycheck
Protection Program.
BMO Wealth Management
Reported net income was
$144 million, compared with
$305 million in the prior year, and
adjusted net income was $153 million,
compared with $315 million. Adjusted net income excludes the
amortization of acquisition-related intangible assets. Traditional
Wealth reported net income was $160 million, compared with
$226 million, and adjusted net income
was $169 million, compared with
$236 million, with the majority of
the decrease driven by a legal provision. Insurance net loss was
$16 million, compared with net income
of $79 million in the prior year,
primarily due to the impact of unfavourable market movements,
compared with the prior year.
We continue to support our clients' evolving needs during this
challenging time, including providing expert advice and help to
access financial relief measures, extending the grace period for
most insurance premiums, digitizing processes and enabling our call
centres to support a significant increase in online brokerage
transaction volumes and new accounts. We were proud to be selected
as the asset manager for the Bank of Canada's Provincial Bond Purchase Program,
which aims to support the liquidity and efficiency of provincial
government funding markets and will hold up to a total of
$50 billion of assets.
BMO Capital Markets
Reported net loss was $74 million, compared with reported net income of
$250 million in the prior year, and
adjusted net loss was $68 million, compared with adjusted net
income of $254 million. Adjusted net
income excludes the amortization of acquisition-related intangible
assets and acquisition integration costs. Higher provisions for
credit losses and lower revenue in both Global Markets and
Investment and Corporate Banking were partially offset by lower
expenses. The higher provisions for credit losses accounted for
approximately 90% of the decrease in net income.
On April 6, 2020, we completed the
acquisition of Clearpool Group, Inc. (Clearpool), a New York-based provider of electronic trading
solutions, operating in the United
States and Canada. In
addition, BMO Capital Markets was a joint lead manager in the
largest-ever U.S. Dollar Supranational issuance in history, a
5-year US$8 billion global benchmark
sustainable development bond with the World Bank. The bond helped
raise awareness for the World Bank's global health program to
staff, train, purchase equipment and support local communication
campaigns associated with COVID-19, and strengthen healthcare
systems of developing countries.
Corporate Services
Reported and adjusted net loss for
the quarter was $81 million, compared
with a reported and adjusted net loss of $80
million in the prior year, relatively unchanged, with lower
expenses and higher revenue largely offset by the impact of a less
favourable tax rate in the current quarter.
Adjusted results in this Second 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
11.0% as at April 30, 2020. The
ratio, which remains comfortably above the minimum regulatory
expectation, is down from 11.4% at the end of the first quarter.
The change in our ratio largely reflects loan growth in support of
our customers through this challenging time.
Provision for Credit Losses
Total provision for credit
losses was $1,118 million, an
increase of $942 million pre-tax or
$693 million after tax from the prior
year. The total provision for credit losses ratio
was 94 basis points, compared with a low level of 16
basis points in the prior year that included the benefit of a large
recovery on a U.S. commercial loan. The provision for credit losses
on impaired loans was $413 million, an increase of
$263 million from $150 million in the prior year, primarily due to
higher provisions in our P&C businesses and BMO Capital
Markets. The provision for credit losses on impaired loans ratio
was 35 basis points, compared with a low level of
14 basis points in the prior year. There was a $705 million provision for credit losses on
performing loans in the current quarter, compared with a
$26 million provision for credit
losses on performing loans in the prior year. The $705 million provision for credit losses on
performing loans in the current quarter was primarily based on a
weaker 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 annual 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.
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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.
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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 on page 8 of our Second Quarter 2020 Report to Shareholders
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)
|
Q2-2020
|
Q1-2020
|
Q2-2019
|
YTD-2020
|
YTD-2019
|
Reported
Results
|
|
|
|
|
|
Revenue
|
5,264
|
6,747
|
6,213
|
12,011
|
12,730
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
197
|
(716)
|
(561)
|
(519)
|
(1,487)
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Revenue, net of
CCPB
|
5,461
|
6,031
|
5,652
|
11,492
|
11,243
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Total provision for
credit losses
|
(1,118)
|
(349)
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(176)
|
(1,467)
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(313)
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Non-interest
expense
|
(3,516)
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(3,669)
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(3,595)
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(7,185)
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(7,152)
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Income before income
taxes
|
827
|
2,013
|
1,881
|
2,840
|
3,778
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Provision for income
taxes
|
(138)
|
(421)
|
(384)
|
(559)
|
(771)
|
Net income
|
689
|
1,592
|
1,497
|
2,281
|
3,007
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EPS ($)
|
1.00
|
2.37
|
2.26
|
3.37
|
4.54
|
Adjusting Items
(Pre-tax) (1)
|
|
|
|
|
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Acquisition
integration costs (2)
|
(3)
|
(3)
|
(2)
|
(6)
|
(8)
|
Amortization of
acquisition-related intangible assets (3)
|
(30)
|
(29)
|
(30)
|
(59)
|
(61)
|
Adjusting items
included in reported pre-tax income
|
(33)
|
(32)
|
(32)
|
(65)
|
(69)
|
Adjusting Items
(After tax) (1)
|
|
|
|
|
|
Acquisition
integration costs (2)
|
(2)
|
(2)
|
(2)
|
(4)
|
(6)
|
Amortization of
acquisition-related intangible assets (3)
|
(24)
|
(23)
|
(23)
|
(47)
|
(47)
|
Adjusting items
included in reported net income after tax
|
(26)
|
(25)
|
(25)
|
(51)
|
(53)
|
Impact on EPS
($)
|
(0.04)
|
(0.04)
|
(0.04)
|
(0.08)
|
(0.08)
|
Adjusted
Results
|
|
|
|
|
|
Revenue
|
5,264
|
6,747
|
6,213
|
12,011
|
12,730
|
Insurance claims,
commissions and changes in policy benefit liabilities
(CCPB)
|
197
|
(716)
|
(561)
|
(519)
|
(1,487)
|
Revenue, net of
CCPB
|
5,461
|
6,031
|
5,652
|
11,492
|
11,243
|
Total provision for
credit losses
|
(1,118)
|
(349)
|
(176)
|
(1,467)
|
(313)
|
Non-interest
expense
|
(3,483)
|
(3,637)
|
(3,563)
|
(7,120)
|
(7,083)
|
Income before income
taxes
|
860
|
2,045
|
1,913
|
2,905
|
3,847
|
Provision for income
taxes
|
(145)
|
(428)
|
(391)
|
(573)
|
(787)
|
Net income
|
715
|
1,617
|
1,522
|
2,332
|
3,060
|
EPS ($)
|
1.04
|
2.41
|
2.30
|
3.45
|
4.62
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(1)
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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.
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(2)
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KGS–Alpha and
Clearpool acquisition integration costs are reported in BMO Capital
Markets. Acquisition integration costs are recorded in non-interest
expense.
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(3)
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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 on pages 19, 20, 22, 24 and 26 of our Second Quarter 2020
Report to Shareholders.
|
Adjusted results and
measures in this table are non-GAAP amounts or non-GAAP
measures.
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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, our response
to the COVID-19 pandemic and its expected impact on our business,
operations, earnings, results and financial condition, including
our capital and liquidity ratios and credit ratings, as well as its
impact on our customers, competitors and trading exposure,
including the potential from loss from higher credit, counterparty
or mark-to-market losses, 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. The uncertainty created by
the COVID-19 pandemic has heightened this risk given the increased
challenge in making assumptions, 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 severity, duration and spread of the COVID-19
pandemic, its impact on local, national or international economies
and its heightening of certain risks that may affect our future
results the possible impact on our business and operations of
outbreaks of disease or illness that affect local, national or
international economies; the Canadian housing market and consumer
leverage; 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; 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, and the Risk Management section on page
35 of our Second Quarter 2020 Report to Shareholders, 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 and updated in the Economic Review and Outlook section set
forth in our Second Quarter 2020 Report to Shareholders.
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, we primarily consider historical economic data, past
relationships between economic and financial variables, changes in
government policies, and the risks to the domestic and global
economy. Please refer to the Economic Review and Outlook section in
our Second Quarter 2020 Report to Shareholders.
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 Wednesday, May 27, 2020, at 7:15 a.m. (ET). The call may be accessed by
telephone at 416-340-2217 (from within Toronto) or 1-800-806-5484 (toll-free outside
Toronto), entering Passcode:
3639556#. A replay of the conference call can be accessed until
Thursday, June 25 2020, by calling
905-694-9451 (from within Toronto)
or 1-800-408-3053 (toll-free outside Toronto) and entering Passcode: 4025448#.
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
website.
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Shareholder
Dividend Reinvestment and Share Purchase
Plan (the
Plan)
Average market price
as defined under the Plan
February 2020:
$100.71
March 2020:
$66.70
April 2020:
$71.80
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.
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Our 2019 Annual MD&A, audited annual consolidated financial
statements, annual information form 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.
® 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, Media
& Government Relations, jill.homenuk@bmo.com, 416-867-4770;
Bill Anderson, Director, Investor
Relations, bill2.anderson@bmo.com, 416-867-7834