RNS Number:8064P
Bank of Montreal
22 August 2000
PART 1
Bank of Montreal Reports Continued Strong Performance with Third Quarter Results
TORONTO, August 22, 2000 - Bank of Montreal reported financial results
today for the third quarter ended July 31, 2000. The highlights include:
- Net income: $401 million for the third quarter; $1,372 million year-to-date; -
Return on equity: 16.6 per cent on a cash basis in the third quarter; 19.7
per cent year-to-date;
- Earnings per share: $1.40 fully diluted in the third quarter; $4.81
year-to-date.
"The bank continues to experience strong growth in personal and commercial
banking and wealth management," said Tony Comper, Chairman and Chief Executive
Officer, Bank of Montreal. "Compared to the third quarter last year,
residential mortgages increased by $2.6 billion, credit cards and other personal
loans increased by $1.1 billion and loans to commercial enterprises, including
small business, increased $1.7 billion.
"With strong expense management, the bank is on track with its financial
objectives. I continue to feel very good about our progress in implementing the
bank's six-point strategy."
The bank said that while record-breaking performance in the first two quarters
has moderated as expected, due to weaker capital markets, year-over-year results
reflect good growth in most of its core businesses.
Summary of the Financial Results
Third quarter 2000 results versus third quarter 1999
* Net income increased $3 million, or 0.9 per cent.
- Excluding after-tax gains on dispositions of businesses, of $11 million in
the third quarter and $18 million in the third quarter of the prior year,
net income increased $10 million, or 2.8 percent
* Revenues increased $70 million, or 3.4 per cent.
- Excluding gains on the disposition of businesses, revenues increased $78
million, or 3.9 per cent. The increased revenue resulted from the net of:
- Growth in the Personal and Commercial Client Group of 9.5 per cent;
- Growth in the Private Client Group of 23.1 per cent;
- A decrease in the Grupo Financiero Bancomer ('Bancomer') contribution;
- A decrease in the Investment Banking Group of 12.1 per cent.
The Investment Banking Group's revenue decline was due, in part, to lower
spreads in capital market businesses resulting from rising interest rates,
and reductions in trading revenues.
* Expenses increased $42 million, or 3.1 per cent. Excluding revenue-driven
compensation, expenses decreased by 1.6 per cent.
* The provision for credit losses of $100 million increased by $20 million.
Third quarter 2000 results versus second quarter 2000
* Net income declined by $96 million, or 19.2 per cent.
- Excluding after-tax gains on dispositions of businesses, of $11 million in
the third quarter and $52 million in the second quarter of 2000, net income
decreased $55 million, or 12.2 per cent.
Revenues decreased $189 million, or 8.2 per cent.
- Excluding after-tax gains on dispositions of businesses, revenues
decreased $120 million, or 5.4 per cent. The decline in revenues resulted
from the net of:
- A decrease in the Private Client Group of 13.6 per cent;
- A decrease in the Investment Banking Group of 15.4 percent;
- A decrease in the Bancomer contribution;
- Growth in the Personal and Commercial Client Group of 3.6 per cent.
* Expenses decreased $22 million, or 1.7 per cent.
* The provision for credit losses remained unchanged.
Asset quality
* Asset quality remained sound.
* Gross impaired loans at the end of the quarter were $1,334 million, up from
$1,110 million a year ago and up $145 million from the immediately
preceding quarter.
* The allowance for credit losses exceeded gross impaired loans by $195
million at the end of the third quarter, compared with a $203 million
excess one year earlier and an excess of $283 million in the second
quarter.
Operating Group Highlights
Personal and Commercial Client Group
On a year-over-year basis, excluding the contribution from the bank's
investment in Bancomer, net income for the quarter increased $39 million, or
22.2 per cent. Excluding gains on dispositions, net income increased by $46
million, or 29.1 per cent. Revenues, excluding dispositions, increased $101
million. or 9.5 per cent. The increase was driven by volume growth across most
lines of business. Expenses increased by $20 million, or 2.8 per cent, due to
business growth and strategic initiative spending. The increase was offset
partially by ongoing cost reductions. The provision for credit losses increased
by $7 million.
Third quarter net income declined $44 million, or 16.7 per cent, from the second
quarter. Excluding gains on dispositions, net income decreased $3 million, or
1.1 per cent. Revenues increased $40 million, or 3.6 per cent, excluding gains,
as a result of volume growth. Expenses increased by $44 million, or 6.0 per
cent, due to extra days in the current quarter and increased compensation costs.
Bancomer
On a year-over-year basis, net income for the third quarter from the bank's
investment in Bancomer decreased $16 million. Net income declined $18 million
from the second quarter.
Private Client Group
On a year-over-year basis, net income for the quarter increased $9 million, or
27.0 per cent. Revenues increased by $71 million, or 23.1 per cent, primarily
driven by increased commission revenues earned on higher volumes of client
equity trading and by increased sales of retail investment products. The
increase was offset partially by lower revenue from institutional asset
management. Expenses increased by $51 million, or 20.8 per cent, largely due
to increased revenue-driven compensation.
Net income declined by $16 million, or 25.6 per cent, from the second quarter.
Revenues declined by $61 million, or 13.6 per cent, due to lower volumes of
client equity trading. Expenses decreased by $31 million, or 9.6 per cent,
largely due to lower revenue-driven compensation.
Investment Banking Group
On a year-over-year basis, net income for the quarter decreased $31 million, or
18.0 per cent. Revenues decreased $76 million, or 12.1 per cent, partially due
to lower spreads in capital markets businesses resulting from rising interest
rates. The decrease in revenues was also due to reductions in trading revenues,
primarily in the commodities area, partially offset by higher securitization
revenues and securities gains. Expenses decreased by $14 million, or 4.5 per
cent, primarily because of higher 1999 expenses associated with Y2K projects.
Net income declined by $30 million, or 17.1 per cent, from the second quarter.
Revenues declined by $100 million, or 15.4 per cent, due to lower spreads and
trading revenues. Expenses declined by $39 million, or 11.9 per cent, due to
lower revenue-driven compensation.
Corporate Support
Net income for the quarter in Corporate Support areas increased $2 million from
the previous year and $12 million from the second quarter.
Financial Highlights
Q3 2000 Q3 2000 Q3 2000 YTD
B/(W)* B/(W)* B/(W)*
Q3 1999 Q2 2000 1999
Q3 Q3 2000
2000 $ % $ % YTD $ %
Reported
Net income ($ millions) $401 3 0.9 (96) (19.2) $1,372 248 22.1
Fully diluted EPS $1.40 0.03 2.2 (0.35) (20.0) $4.81 0.95 24.6
Basic EPS $1.41 0.03 2.2 (0.35) (19.9) $4.85 0.96 24.7
Return on equity (%) 15.0% (1.2) (4.8) 17.9% 2.3
Return on equity
- cash basis (%) 16.6% (1.5) (5.2) 19.7% 2.2
Reported results
- excluding gains **
Net income ($ millions) $390 10 2.8 (55) (12.2) $1,242 136 12.3
Fully diluted EPS $1.36 0.06 4.6 (0.20) (12.8) $4.34 0.55 14.5
Basic EPS $1.37 0.06 4.6 (0.20) (12.7) $4.37 0.55 14.4
Return on equity (%) 14.5% (0.9) (3.1) 16.1% 0.8
Return on equity
- cash basis (%) 16.2% (1.9) (3.3) 17.8% 0.6
* Better/(Worse)
**After-tax gains included $11 million from the sale of branches in the third
quarter of 2000. The second quarter of the current year included
after-tax gains of $44 million from the sale of the bank's U.S. corporate
trust businesses and $8 million from the sale of branches. The third
quarter of the prior year included $18 million of after-tax gains from
the sale of the bank's global custody business. Current year-to-date
after-tax gains totalled $130 million and included $67 million from the
sale of Partners First in the first quarter. The prior year-to-date
after-tax gains totalled $18 million.
Third Quarter 2000 Compared with Third Quarter 1999
Revenues increased by $70 million, or 3.4 per cent, year-over-year.
Revenue gains on the sale of branches were $19 million in the third
quarter. Revenue gains on the sale of the bank's global custody business
were $27 million in the third quarter of 1999. Revenues increased by $78
million, or 3.9 per cent, excluding gains. The increases were driven by
strong loan and fee growth in retail and commercial banking, and by growth
in trading commission revenue, retail investment products and loans in
wealth management. Results also benefited from higher investment securities
gains. Improved results were partly offset by lower trading revenues, as
explained above, and by lower net interest income due to lower spreads in
capital markets businesses. Revenues were also reduced by a $16 million
decline in the contribution from Bancomer. Expenses increased by $42 million,
or 3.1 per cent, as a result of higher revenue-driven compensation. The
provision for credit losses increased $20 million year-over-year.
Third Quarter 2000 Compared with Second Quarter 2000
Third quarter revenues decreased by $189 million, or 8.2 per cent, from the
second quarter. Revenue from gains on the sale of branches was $19 million in
the third quarter. Revenue from gains on the sales of the bank's corporate
trust business and branches was $88 million in the second quarter. Revenues,
excluding gains decreased $120 million, or 5.4 per cent. The decrease was
driven by lower securities commissions, due to a return to a more normal level
of equity market activities, and by a decline in trading revenues in the third
quarter, as explained above. Particularly strong trading results in the prior
quarter also affected comparatives, together with the decline in the
contribution from Bancomer. Expenses were reduced by $22 million, or 1.7 per
cent, from the previous quarter as a result of reduced revenue-driven
compensation.
2000 Year-to-date Compared with 1999 Year-to-date
Year-to-date net income was $1,372 million, an increase of $248 million
over the prior year. Excluding the gains on sales in the current and 1999
year-to-date results, net income increased $136 million, or 12.3 per cent,
driven by revenue growth of $390 million, or 6.6 per cent. Expenses increased
by $141 million, or 3.7 per cent. The provision for credit losses increased by
$60 million, or 25.0 per cent. Improved results were driven by widespread
volume growth.
Strategic Highlights
Bank of Montreal continued to make progress in implementing its six-point growth
strategy:
1. Continue to aggressively build the value of Harris
- On a U.S. dollar/U.S. GAAP basis, Harris Bank earnings were $60
million, an increase of $4 million, or 6.9 per cent, from the same
quarter a year earlier. Excluding securities gains, earnings
increased 11.1 per cent from the prior year.
- Harris Bank earnings included in the bank's consolidated results,
on a Canadian dollar/Canadian GAAP basis, were $88 million, an
increase of 9.5 per cent from the same period last year.
- The earnings increase was driven by continued double digit earnings growth
in community banking, private client banking and mid-market businesses,
sustained cost control and top-tier asset quality.
- Small business, consumer and mortgage loans in Harris Bank Community
Banking increased 8.9 per cent over last year, with particularly strong
consumer loan growth of 12.6 per cent.
2. Rapidly grow the wealth management business
- Private Client Group net income increased by 27.0 per cent and revenues by
23.1 per cent, from the comparable quarter in the prior year.
- Assets under Management and Administration and term deposits have
increased approximately $26 billion, or 13.0 per cent, over the prior
year.
- Private Client Group's specialized investment salesforce, trained to
provide quality advice and proactive sales, was established this year and
has now grown to 321 specialists.
- The bank enhanced its direct brokerage capabilities in North
America with the purchase of Seattle-based direct brokerage firm
Freeman Welwood. The acquisition allows the bank to extend its
service to key locations in the Northwest and West Coast.
- BMO InvestorLine, the bank's direct investing line of business,
introduced fixed income trading through Fixed Income Online.
- The bank launched BMO Harris Private Banking, its new Private Banking
operation, to provide seamless North American delivery of customized
wealth management solutions.
3. Capitalize on the bank's strong Canadian position in personal and
commercial banking
- Residential mortgages increased by $2.6 billion, or 6.9 per cent, after
adjusting for securitizations; credit cards and other personal loans
increased by $1.1 billion, or 6.4 per cent: and loans to commercial
enterprises, including small business, increased $1.7 billion, or 8.4
per cent, from the third quarter of the prior year.
- The bank continued transforming its distribution channels by
arranging for the purchase of 12 Ontario TD/Canada Trust branches
from TD Financial Group and by opening seven in-store branches in
large supermarkets.
- The bank enhanced its Air Miles program by introducing the only
Line of Credit to offer bonus reward miles on new accounts and
monthly rewards based on the average monthly balance.
4. Build on the bank's strong leadership position in investment banking
- On a year-to-date basis, Investment Banking Group ranked first
among Canadian brokers in institutional equity, research and
securitizations, and second in corporate underwriting.
- BMO Nesbitt Burns co-led the initial debt offering of Hydro One Inc. This
$1 billion deal was the third largest ever in Canada.
5. Drive e-business opportunities
- The bank enhanced its leadership position through Veev wireless
financial services with the addition of news reports from Canadian
Press, full-service capability in French, an Air Miles collector
card balance feature and a first-time user Air Miles bonus.
- E-post, the bank's joint venture with Canada Post Corporation, delivered
the first Canadian municipal government e-bill, for the City of Toronto.
- During the third quarter, plans were announced to launch a new
merchant processing company with Royal Bank of Canada. The new
company will provide merchants, retailers and e-tailers across
North America with one-stop card-based transaction processing,
including credit cards, debit cards and stored-value payments. The
new company will be owned equally by Bank of Montreal and Royal
Bank. The transaction is subject to approval from Canadian and U.S.
regulators.
- Harris Wireless was launched in Chicago, making Harris the first
bank in the U.S. to provide banking services to its customers via
digital mobile phones.
- The bank has increased its investment and ownership in Symcor
Services Inc. from 28.0 per cent to 33.3 per cent. Symcor Services
Inc. delivers technology-driven solutions to meet the items
processing and information delivery needs of major financial
institutions in North America and is the largest company of its kind
in Canada.
6. Intensely focus on cost, capital and risk management
- The bank completed the sale of another 31 branches to a group of
credit unions, for an after-tax gain of $11 million, and has now
completed 48 branch sales for year-to-date gains of $19 million.
During the third quarter, the bank announced the sale of three
additional branches to local credit unions in Alberta. Recently
another 13 branches were sold to credit unions in British Columbia.
Most of these transactions are expected to close by the end of the
year.
- On May 24, 2000, the bank announced a program to purchase up to 10
million common shares, or approximately 3.7 per cent, of the
then-issued and outstanding common shares of the bank, through a
normal-course issuer bid expiring October 31, 2000. To July 31,
2000, the bank had purchased approximately 6.1 million shares at a
cost of $385 million.
- The Tier 1 Capital ratio improved from 7.87 per cent last year to
8.44 per cent at July 31, 2000.
- Cost reduction initiatives totalled $67 million for the quarter,
$182 million year-to-date, and were on track to achieve the year's
$250 million objective. Year-to-date expenses, excluding
revenue-driven compensation, declined by $89 million, or 1.7 per
cent.
Financial Statement Review
Revenues
Total revenues for the quarter were $2,095 million, an increase of $70 million,
or 3.4 per cent, from a year ago. Excluding $19 million of revenues on the sale
of branches in the current period and $27 million of revenues on the sale of the
bank's global custody business in the third quarter of the prior year, revenues
increased $78 million, or 3.9 per cent.
Net interest income for the quarter was $1,090 million, a decrease of $2 million
from the prior year. Net interest income included volume increases across most
lines of business, offset by lower spreads in capital markets businesses, a
decline in the contribution from Bancomer and reduced cash collections on
impaired loans.
Other income was $1,005 million for the quarter, an increase of $72 million from
the prior year. Excluding gains on disposal of businesses, other income
increased $80 million, or 8.8 per cent. The increase, a result of greater
volumes across most lines of business and higher investment securities gains,
was offset partially by lower trading revenues and lower custodial fees due to
the sale of our trust business.
Revenues for the quarter decreased $189 million, or 8.2 per cent, from
the second quarter of 2000. The second quarter included $88 million of
revenues related to the gains on sales of branches and the corporate trust
business. The third quarter included $19 million of gains on the sale of
branches. Excluding these gains, revenues decreased $120 million, or 5.4 per
cent.
Net interest income increased $6 million, or 0.6 per cent, as a result
of volume growth, and was offset partially by a lower net interest margin in
capital markets and the reduced contribution from Bancomer.
Other income decreased $195 million, or 16.2 per cent. Excluding gains of $88
million in the second quarter and $19 million in the third quarter, other income
declined by $126 million, or 11.2 per cent, driven primarily by lower capital
market activities and reduced trading revenues.
Expenses
Expenses for the quarter increased $42 million, or 3.1 per cent, from the third
quarter of the prior year. Excluding an increase in revenue-driven compensation
of $60 million, expenses declined by $18 million, or 1.6 per cent. This decline
reflected a reduction in ongoing business-operations expenses, including $67
million of cost reduction initiatives, partially offset by $50 million of
spending on strategic initiatives.
Expenses for the quarter decreased $22 million, or 1.7 per cent, from the second
quarter of 2000. Excluding decreased revenue-driven compensation of $46 million
expenses increased $24 million, or 1.7 per cent. In part, the increase was due
to higher spending on strategic initiatives.
Asset Quality
The provision for credit losses was $100 million for the quarter, versus $80
million in 1999. The quarterly provision is based on an annual forecast of $400
million, compared with $320 million in 1999. The annual forecast is based on a
methodology used for a number of years and considers the level of expected loss
in the loan portfolio, management's view of the economic cycle, the level of
impaired loans, and the balance of the general allowance for credit losses,
which is currently $970 million. The split of the specific and general
provision will be determined in the fourth quarter.
Gross impaired loans at the end of the quarter were $1,334 million, up from
$1,110 million a year ago and from $1,189 million at April 30, 2000. The
allowance for credit losses continues to exceed the gross amount of impaired
loans and was $195 million higher at the end of the third quarter, compared with
a $203 million excess a year earlier and a $283 million excess at April 30,
2000.
Capital Management
At July 31, 2000, the bank's Tier 1 and Total Capital ratios were 8.44 per cent
and 12.33 per cent respectively, up from 7.87 per cent and 10.84 per cent at
July 31, 1999, and up from 8.06 per cent and 11.13 per cent at April 30, 2000.
Risk-weighted assets were $132.8 billion, a decrease of 2.8 per cent from a year
ago and a decrease of 5.5 per cent from April 30, 2000.
Operating Group Review
Personal and Commercial Client Group
The Personal and Commercial Client Group provides financial services, including
electronic financial services, to households and commercial businesses in Canada
and the U.S.
Net income for the quarter, excluding the contribution from the bank's
investment in Bancomer, was $217 million, an increase of $39 million, or 22.2
per cent, from the comparable period last year. Excluding the $11 million
after-tax gains on sales of branches in the third quarter and the $18 million of
after-tax gains on sale of the global custody business in the corresponding
quarter of the prior year, net income increased $46 million, or 29.1 per cent.
Revenues for the quarter increased $93 million, or 8.5 per cent, over last year.
Excluding branch sales and the sale of the global custody business, revenues
increased $101 million, or 9.5 per cent, driven by volume growth across most
business lines.
Expenses for the quarter increased by $20 million, or 2.8 per cent, from last
year, mainly due to strategic initiatives spending, partly offset by ongoing
cost reductions.
Net income declined $44 million, or 16.7 per cent, from the second quarter.
Excluding gains on disposition, net income decreased $3 million, or 1.1 per
cent. Revenues, excluding gains on dispositions of businesses, increased $40
million, or 3.6 per cent, as a result of volume growth. Expenses increased by
$44 million. or 6.0 per cent, due to increased compensation costs and to the
fact that there were more days in the current quarter.
Bancomer
Net income for the third quarter from the bank's investment in Bancomer was $3
million, a decrease of $16 million from the comparable period last year. Net
income declined $18 million from the second quarter. As of June 30, 2000, the
shareholders approved Bancomer's merger with Grupo Financiero Probursa. With
this event, as previously announced, the bank adopted the cost basis of
accounting, replacing the equity basis of accounting for the investment.
Private Client Group
The Private Client Group encompasses all of the bank's wealth management
capabilities in six lines of business: retail investment products (including
term deposits), direct and full-service investing, BM0 Harris private banking,
U.S. private banking and institutional asset management.
Net income for the quarter was $45 million, an increase of $9 million, or 27.0
per cent, from the comparable period last year. Revenues for the quarter
increased $71 million, or 23.1 per cent, over 1999, primarily due to increased
volumes in full-service and direct-investing client equity trading. Increased
deposit volumes also contributed to higher revenues, partially offset by reduced
trading returns in the managed futures program. Expenses increased $51
million, or 20.8 per cent, due to higher revenue-driven compensation, expenses
associated with higher business volumes and initiative spending.
Net income for the quarter decreased $16 million, or 25.6 per cent, from the
second quarter of 2000. Revenues decreased $61 million, or 13.6 per cent, due
to a reduction in the high volume of equity trading that was experienced in
prior quarters and, due to weaker institutional asset management revenues. This
was offset partially by higher mutual fund management fees. Expenses decreased
$31 million. or 9.6 per cent, primarily due to lower revenue-driven
compensation.
Investment Banking Group
The Investment Banking Group provides a full range of financial products and
services to institutional investors and corporate, government and institutional
client segments.
Net income for the quarter was $145 million, a decrease of $31 million, or 18.0
per cent, from the comparable period in 1999. Revenues decreased by $76
million, or 12.1 per cent. The decrease in revenue was driven by lower spreads
in capital markets businesses, which resulted from rising interest rates, and
lower trading revenues, primarily in the commodities area. These items were
partly offset by higher securitization revenues and securities gains. Expenses
declined by $14 million, or 4.5 per cent, from the previous year, primarily
because of higher 1999 expenses associated with Y2K projects.
Net income for the quarter decreased $30 million, or 17.1 per cent, from the
second quarter of 2000. Revenues declined $100 million, or 15.4 per cent, driven
by lower trading revenues due to weaker secondary capital markets. Expenses
decreased $39 million, or 11.9 per cent, mainly due to lower revenue-driven
compensation.
Corporate Support
The net loss for the quarter was $9 million, an improvement of $2 million from
the third quarter of the prior year. This increase was due to gains from sales
of securities and was offset partially by higher loan loss provisions.
The net loss for the quarter improved by $12 million from the second quarter of
2000 because of securities gains in the current quarter.
Bank of Montreal (TSE, NYSE: BMO), Canada's first bank, is a highly
diversified financial services institution. The bank operates in more
than 30 lines of business within its group of companies, including BMO
Nesbitt Burns, one of Canada's largest full-service investment firms and
Chicago-based Harris Bank, a major U.S. mid-west financial institution.
Media Relations Contacts:
Joe Barbera (416) 927-2740
Ronald Monet (514) 877-1101
Investor Relations Contacts:
Bob Wells (416) 867-4009
Susan Payne (416) 867-6656
Lynn Inglis (416) 867-5452
Internet: http://www.bmo.com
Notes: A live Internet broadcast of the third quarter conference call with the
investor community and media will take place on August 22, 2000, at 2:30 p.m.
E.S.T. at www.bmo.com/investor relations. The third quarter financial
statements, supplemental financial information and a slide presentation to
investors are available on the site. The live third quarter conference call can
be accessed by calling 1-877-871-4065. A replay of the conference call can be
accessed by calling (416) 626-4100 and entering the passcode 15875497.
BANK OF MONTREAL
FINANCIAL HIGHLIGHTS
(Canadian $ in millions
except as noted) For the three months ended
Jul 31, Apr 30, Jan 31, July 31,
2000 2000 2000 1999
Net Income Statement
Net Interest Income (TEB)(a) $1,090 $1,084 $1,081 $1,092
Other Income 1,005 1,200 1,042 933
Total revenue (TEB) (a) 2,095 2,284 2,123 2,025
Provision for credit losses 100 100 100 80
Non-interest expense 1,326 1,348 1,254 1,284
Provision for Income taxes (TEB)(a) 252 322 279 247
Non-controlling Interest in
subsidiaries 4 5 4 5
Net Income before goodwill 413 509 486 409
Amortization of goodwill,
net of applicable income tax 12 12 12 11
Net Income 401 497 474 398
Taxable equivalent Adjustment 33 35 31 34
Per Common Share ($)
Net income before goodwill
- basic $1.46 $1.81 $1.72 $1.42
- fully diluted 1.45 1.79 1.71 1.41
Net Income
- basic 1.41 1.76 1.68 1.38
- fully diluted 1.40 1.75 1.66 1.37
Dividends declared 0.50 0.50 0.50 0.47
Book value per share 37.74 37.45 35.77 34.91
Market value per share 63.75 53.75 48.15 54.90
Total market value of
common shares ($ billions) 16.7 14.4 12.9 14.6
(Canadian $ in millions
except as noted) For the nine months ended
Change from Jul 31, Jul 31, Change from
Jul 31, 1999 2000 1999 Jul 31, 1999
Net Income Statement
Net Interest Income (TEB)(a) (0.2)% $3,255 $3,293 (1.1)%
Other Income 7.7 3,247 2,627 23.6
Total revenue (TEB) (a) 3.4 6,502 5,920 9.8
Provision for credit losses 25.0 300 240 25.0
Non-interest expense 3.1 3,928 3,787 3.7
Provision for Income taxes (TEB)(a) 1.9 853 721 18.4
Non-controlling Interest in
subsidiaries (3.4) 13 17 (20.5)
Net Income before goodwill 1.2 1,408 1,155 21.8
Amortization of goodwill,
net of applicable income tax 13.0 36 31 12.2
Net Income 0.9 1,372 1,124 22.1
Taxable equivalent Adjustment (3.0) 99 105 (5.6)
Per Common Share ($)
Net income before goodwill
- basic $0.39 $4.99 $4.01 $0.98
- fully diluted 0.38 4.95 3.98 0.97
Net Income
- basic 0.38 4.85 3.89 0.96
- fully diluted 0.38 4.81 3.86 0.95
Dividends declared 0.03 1.00 1.41 (0.41)
Book value per share 2.54 37.74 34.91 2.83
Market value per share (1.15) 63.75 54.90 8.85
Total market value of
common shares ($ billions) (0.2) 16.7 14.6 2.1
As at
Jul 31, Apr 30, Jan 31, Jul 31, Change from
2000 2000 2000 1999 Jul 31, 1999
Balance Sheet Summary
Assets $235,646 $238,414 $228,525 $225,218 5.9%
Loans 137,134 136,697 133,148 136,263 0.3
Deposits 156,675 162,067 154,469 150,424 7.7
Capital funds 16,603 16,428 15,920 15,914 3.2
Common equity 9,904 10,037 9,571 9,291 8.0
Net impaired loans
and acceptances (195) (283) (240) (203) 3.7
Average Balances
Loans 135,356 136,536 135,659 136,965 (0.3)
Assets 238,488 233,354 230,195 226,541 3.0
For the three months For the nine months
ended ended
Jul 31, Apr 30, Jan 31, Jul 31, Jul 31, July 31
2000 2000 2000 1999 2000 1999
Primary Financial
Measures (%)(b)
5 year total
shareholder return 21.5 18.2 17.5 22.6 21.5 22.6
Net economic profit
($ Millions) 124 226 201 147 551 409
Earnings per share
growth 2.2 40.0 33.9 4.6 24.6 (1.0)
Return on equity 15.0 19.8 19.0 16.2 17.9 15.6
Revenue growth 3.4 16.5 9.8 5.8 9.8 4.7
Expense-to-revenue
ratio 63.2 59.1 59.0 63.4 60.4 64.O
Provision for credit
losses as a % of
average loans and
acceptances 0.28 0.28 0.28 0.22 0.28 0.22
Gross impaired loans
and acceptances as
a % of equity and
allowance for credit
losses 9.83 8.71 8.89 8.56 9.83 8.56
Liquidity ratio 29.1 30.1 29.9 28.6 29.1 28.6
Tier 1 capital ratio 8.44 8.06 7.84 7.87 8.44 7.87
Credit rating AA- AA- AA- AA- AA- AA-
Other Financial Ratios
(% except as noted) (b)
Total shareholder
return 16.7 (1.0) (12.0) (10.3) 16.7 (10.3)
Dividend yield 3.7 4.2 3.3 3.1 3.5 2.9
Price-to-earnings
ratio (times) 11.1 9.4 9.3 11.8 11.1 11.8
Market-to-book value
(times) 1.69 1.44 1.35 1.57 1.69 1.57
Cash earnings per
share - basic ($) 1.49 1.83 1.74 1.44 5.06 4.08
Cash return on common
shareholders'equity 16.6 21.8 21.0 18.1 19.7 17.5
Return on average
assets 0.67 0.87 0.82 0.70 0.78 0.66
Net interest margin 1.82 1.89 1.87 1.91 1.86 1.94
Other Income as a %
of total revenue 48.0 52.5 49.1 46.1 49.9 44.4
Expense growth 3.1 6.2 1.8 6.4 3.7 6.2
Tier 1 capital ratio
- U.S. basis 8.07 7.67 7.63 7.56 8.07 7.56
Total capital ratio 12.33 11.13 10.99 10.84 12.33 10.84
Equity-to-assets ratio 5.1 5.1 5.1 5.1 5.1 5.1
(a)Reported on a taxable equivalent basis (TEB).
(b)For the period ended or as at, appropriate.
(c)All ratios in this report are based an unrounded numbers.
Bank of Montreal:
Third Quarter Report 2000
BANK OF MONTREAL
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Canadian $ in millions except number of common shares)
For the three months
ended
Jul 31, Apr 30, Jan 31, Jul 31,
2000 2000 2000 1999
Interest, Dividend
and Fee Income
Loans $2,604 $2,654 $2,449 $2,405
Securities 745 673 701 569
Deposits with banks 283 263 231 258
3,632 3,590 3,381 3,232
Interest Expense
Deposits 1,835 1,905 1,754 1,545
Subordinated debt 90 83 86 85
Other liabilities 650 553 491 544
2,575 2,541 2,331 2,174
Net Interest Income 1,057 1,049 1,050 1,058
Provision for credit
losses 100 100 100 80
Net Interest Income
After Provision for
Credit Losses 957 949 950 978
Other Income
Deposit and payment
service charges 162 159 164 155
Lending fees 85 72 80 89
Capital market fees 237 341 224 207
Card services 59 47 53 56
Investment management
and custodial fees 92 100 104 111
Mutual fund revenues 62 57 52 52
Trading revenues 50 140 77 86
Securitization revenues 83 81 70 69
Other fees & commissions 175 203 218 108
1,005 1,200 1,042 933
Net Interest and Other
Income 1,962 2,149 1,992 1,911
Non-Interest Expense
Salaries and employee
benefits 764 805 734 705
Premises and equipment 270 272 257 280
Communications 66 64 65 62
Other expenses 220 201 194 232
1,320 1,342 1,250 1,279
Amortization of
intangible assets 6 6 4 5
Total non-interest
expense 1,326 1,348 1,254 1,284
Income Before Provision
for Income Taxes, Non-
Controlling Interest
in Subsidiaries and
Goodwill 636 801 738 627
Income Taxes 219 287 248 213
417 514 490 414
Non-controlling interest 4 5 4 5
Net Income before Goodwill 413 509 486 409
Amortization of goodwill,
net of applicable income tax 12 12 12 11
Net Income $ 401 $ 497 $ 474 $ 398
Dividends Declared
- preferred shares $ 25 $ 26 $ 25 $ 30
- common shares $ 131 $ 134 $ 134 $ 125
Average Number of Common
Shares Outstanding 266,387,269 267,820,009 267,248,718 266,031,542
Average Assets $ 238,488 $ 233,354 $ 230,195 $ 226,541
Net income Per Common
Share Before Goodwill
Basic $ 1.46 $ 1.81 $ 1.72 $ 1.42
Fully Diluted 1.45 1.79 1.71 1.41
Net income Per Common
Share
Basic 1.41 1.76 1.68 1.38
Fully Diluted 1.40 1.75 1.66 1.37
For the nine months
ended
Jul 31, Jul 31
2000 1999
Interest, Dividend
and Fee Income
Loans $7,707 $7,292
Securities 2,119 1,817
Deposits with banks 777 795
10,603 9,904
Interest Expense
Deposits 5,494 4,757
Subordinated debt 259 254
Other liabilities 1,694 1,705
7,447 6,716
Net Interest Income 3,156 3,188
Provision for credit
losses 300 240
Net Interest Income
After Provision for
Credit Losses 2,856 2,948
Other Income
Deposit and payment
service charges 485 451
Lending fees 237 238
Capital market fees 802 576
Card services 159 150
Investment management
and custodial fees 296 316
Mutual fund revenues 171 147
Trading revenues 267 243
Securitization revenues 234 212
Other fees & commissions 596 294
3,247 2,627
Net Interest and Other
Income 6,103 5,575
Non-Interest Expense
Salaries and employee
benefits 2,303 2,071
Premises and equipment 799 828
Communications 195 196
Other expenses 615 676
3,912 3,771
Amortization of
intangible assets 16 16
Total non-interest
expense 3,928 3,787
Income Before Provision
for Income Taxes, Non-
Controlling Interest
in Subsidiaries and
Goodwill 2,175 1,788
Income Taxes 754 616
1,421 1,172
Non-controlling interest 13 17
Net Income before Goodwill 1,408 1,155
Amortization of goodwill,
net of applicable income
tax 36 31
Net Income $ 1,372 $ 1,124
Dividends Declared
- preferred shares $ 76 $ 90
- common shares $ 399 $ 375
Average 267,147,123 265,558,358
Number of
Common
Shares
Outstanding
Average Assets $ 234,017 $ 227,184
Net income Per Common
Share Before Goodwill
Basic $ 4.99 $ 4.01
Fully Diluted 4.95 3.98
Net income Per Common
Share
Basic 4.85 3.89
Fully Diluted 4.81 3.86
Note: Reporting under United States generally accepted accounting principles
would have resulted in consolidated net income of $382, basic earnings
per share of $1.34 and fully diluted earnings per share of $1.32 for the
three months and $1,317, $4.65 and $4.59, respectively, for the nine
months ended July 31,2000.
BANK OF MONTREAL
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited) (Canadian $ in Millions) As at
July 31, April 30, January 31, October 31, July 31,
2000 2000 2000 1999 1999
Cash resources $21,027 23,257 $ 23,441 $ 24,036 $ 25,776
Securities 47,462 48,398 44,913 43,273 38,557
68,489 71,655 68,354 67,309 64,333
Loans -
Residential mortgages 39,416 39,190 38,598 38,189 37,280
Consumer Instalment and other personal
loans 17,617 17,589 17,052 16,912 16,554
Credit card loans 1,367 1,275 1,217 1,160 1,026
Loans to businesses and
governments 60,270 58,887 59,727 57,998 60,292
Securities purchased under resale
agreements 19,993 21,228 17,958 25,090 22,424
138,663 138,169 134,552 139,349 137,576
Allowance for credit
losses (1,529) (1,472) (1,404) (1,348) (1,313)
137,134 136,697 133,148 138,001 136,263
Customers' liability
under acceptances 7,977 8,227 8,195 6,753 6,583
Other assets 22,046 21,835 18,828 18,552 18,039
Total Assets $ 235,646 $ 238,414 $ 228,525 $ 230,615 $ 225,218
Deposits
Banks $ 29,170 $ 30,248 $ 27,869 $ 30,398 $ 29,407
Businesses and
governments 64,755 68,253 64,564 65,459 60,051
Individuals 62,750 63,566 62,036 61,017 60,966
156,675 162,067 154,469 156,874 150,424
Acceptances 7,977 8,227 8,195 6,753 6,583
Securities sold but
not yet purchased 13,698 14,334 14,161 10,450 10,942
Securities sold under
repurchase agreements 21,371 18,425 19,504 24,177 25,527
Other liabilities 19,322 18,933 16,276 16,668 15,828
62,368 59,919 58,136 58,048 58,880
Subordinated debt 5,027 4,721 4,688 4,712 4,746
Shareholders' equity
Share capital
Preferred shares 1,672 1,670 1,661 1,668 1,877
Common shares 3,164 3,219 3,205 3,190 3,162
Retained earnings 6,740 6,818 6,366 6,123 6,129
11,576 11,707 11,232 10,981 11,168
Total Liabilities and
Shareholders Equity $ 235,646 $ 238,414 $ 228,525 $230,615 $ 225,218
Notes:
1. These consolidated financial statements should be read in conjunction with
our consolidated financial statements for the year ended October 31, 1999
as set out on pages 73 to 99 of our 1999 Annual Report. These consolidated
financial statements have been prepared in accordance with Canadian
generally accepted accounting principles, including the requirements of the
Superintendent of Financial Institutions Canada, using the same accounting
policies and methods of computation as were used for our consolidated
financial statements for the year ended October 31, 1999.
2. On May 24, 2000 we announced a program to repurchase through recognized
exchanges up to 10,000,000 of our common shares to be completed no later
than October 31, 2000. At an average price of $63.09 per share we had
repurchased 6,106,100 shares as at July 31, 2000.
3. On June 8, 2000 we issued new subordinated debt in the form of Series B
Medium-Term Notes in the amount of $300, redeemable at our option, carrying
an interest rate of 6.6% per annum. The notes mature on June 8, 2010.
4. Subsequent event - On August 8, 2000 we redeemed all of our Series 13
debentures at a redemption price equal to their principal amount of $150.
Bank of Montreal Third
Ouarter Report 2000
BANK OF MONTREAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited) (Canadian $ in millions) For the three For the nine
months ended months ended
July 31, July 31, July 31, July 31,
2000 1999 2000 1999
Cash Flows From (Used in)
Operating Activities
Net Income $ 401 $ 398 $ 1,372 $ 1,124
Other adjustments to determine
net cash flows (130) 1,115 (4,878) 5,217
271 1,513 (3,506) 6,341
Cash Flows From (Used in)
Financing Activities
Deposits (5,392) 3,459 (199) 6,441
Securities sold but not yet
purchased 2,668 1,626 (504) ( 63)
Debt and share capital (67) 70 (38) ( 59)
Dividends paid (156) (155) (475) (465)
(2,947) 5,000 (1,216) 5,854
Cash Flows From (Used in)
Investing Activities
Investment securities 1,056 (565) 1,341 790
Loans (537) (3,282) 567 (6,702)
Premises and equipment-net
purchases (73) (105) (136) (237)
Interest bearing deposits
with banks 2,166 (2,463) 3,248 (6,125)
Acquisition of an interest
in a subsidiary - - (59) -
2,612 (6,415) 4,961 (12,274)
Net Increase(Decrease) in
Cash and Cash Equivalents (64) 98 239 (79)
Cash and Cash Equivalents at
Beginning of Period 2,722 2,785 2,419 2,962
Cash and Cash Equivalents at
End of Period $2,658 $2,883 $2,658 $2,883
BANK OF MONTREAL
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited) (Canadaian $ in millions) For the nine months ended
July 31,2000 July 31, 1999
Balance at Beginning of Period $ 10,981 $ 10,608
Net Income 1,372 1,124
Dividends - Preferred shares (76) (90)
- Common shares (399) (375)
Preferred share redemption - (72)
Common shares issues 47 67
Common shares repurchased (385) -
Translation adjustment on preferred shares
issued in a foreign currency 4 (9)
Unrealized gain (loss) on translation of net
investment in foreign operations, net of
hedging activities and applicable income taxes 32 (60)
Costs of proposed merger, net of applicable
income taxes - (25)
Balance at End of Period $11,576 $11,168
Share Capital Information July 31, 2000
Principal
Preferred Shares Number Amount Convertible into..
Class B - Series 1 10,000,000 $ 250 common shares (1)
Class B - Series 2 10,000,000 372 common shares (1)
Class B - Series 3 16,000,000 400 common shares (1)
Class B - Series 4 8,000,000 200 common shares (1)
Class B - Series 5 8,000,000 200 -
Class B - Series 6 10,000,000 250 common shares (1)
Common Shares 262,405,712 3,164 -
Subordinated Debt - Series 13 n/a 150 common shares (1)
Stock options issued for
Investment in Grupo Financiero
Bancomer 9,957,285 n/a 9,957,285 common
shares
Stock options issued under
Stock Option Plan 17,241,259 n/a 17,241,259 common
shares
(1) The number of shares issuable on conversion is not determinable until
the date of conversion.
(2) n/a - not applicable
(3) For additional information refer to pages 86 and 87 of our 1999 Annual
Report.
BANK OF MONTREAL
NET INCOME & AVERAGE ASSETS BY OPERATING GROUP
For the three months ended
Personal & Commercial Private
Client Group (1) Client Group (2)
July 31, April 30, July 31, April 30,
2000 2000 2000 2000
Net Income ($ millions)
Canada 168 170 39 55
United States 33 75 9 8
Mexico 3 22 0 0
Other Countries 16 15 (3) (2)
Total 220 282 45 61
Average Assets ($ billions)
Canada 81.3 80.5 1.8 1.7
United States 18.2 17.9 2.4 2.3
Mexico 0.8 0.7 0.0 0.0
Other Countries 0.3 0.3 0.1 0.1
Total 100.6 99.4 4.3 4.1
Investment
Banking Group (3) Total Considered (4)
July 31, April 30, July 31, April 30,
2000 2000 2000 2000
Net Income ($ millions)
Canada 77 77 250 281
United States 62 73 112 157
Mexico 1 2 23 24
Other Countries 5 23 16 35
Total 145 175 401 497
Average Assets ($ billions)
Canada 56.4 54.6 130.1 128.0
United States 59.2 54.2 80.7 77.2
Mexico 0.8 0.8 1.8 1.7
Other Countries 25.5 26.1 25.9 26.5
Total 141.9 135.7 238.5 233.4
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