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BMO Financial Group will continue to build on its strong growth momentum while maintaining productivity improvement as its top priority, Deputy Chair William Downe said today in a presentation at the Scotia Capital Financial Summit 2003.

Mr. Downe pointed to BMO’s recent third quarter results – the fifth straight quarter of rising earnings – which included a 46 per cent increase in net income from the previous year, and a return on equity of 18 per cent, up 5.1 percentage points.

“These results come from a consistent, focused strategy to build on BMO’s strength in Canada, and expand in some of the most lucrative markets of the United States,” he said. “We intend to become a top-tier North American bank in terms of performance and we will do this by staying focused on our growth strategy; investing in our core Canadian business, while growing and strengthening our solid franchise in the U.S.”

The U.S. franchise includes a strong asset base of $76 billion, a solid – and expanding – retail platform in the Chicago area with Harris Bank, a wealth management business with national reach, a growing commercial business in the Midwest, and the excellent reputation of the Harris brand, under which all U.S. businesses now operate. Approximately 30 per cent of BMO’s revenues come from the U.S. and over the next five years, the organization expects to see an increase in the proportion of earnings from its U.S. business.

“We began to reposition ourselves in 1999, exiting low-return businesses, or businesses where we did not have scale,” said Mr. Downe. “But we also made significant investments in such areas as direct brokerage, private banking and our new technology platform in the personal and commercial banking line of business. This has set the stage and we’re starting to see the results: our revenue growth is above our Canadian peer average and we’ve managed our expenses, resulting in a 28 per cent increase in earnings per share so far this year.”

Given the strong financial performance, BMO recently revised its guidance for the year, increasing its anticipated earnings per share growth to between 15 to 20 per cent, up from 10 to 15 per cent and increasing the estimate for return on equity to 15 to16 per cent – up from 14 to15 per cent.  Given favourable credit performance this year, BMO now estimates that the annual provision for credit losses will be at or below $500 million, down from its previously reduced guidance of $600 million.

“However, this does not mean we shift into automatic pilot.  We still have work to do to reach our goal of top-tier performance. Productivity improvement will remain our top priority,” said Mr. Downe. “We are confident we will reach our goal of lowering the cash productivity ratio by 150 to 200 basis points for the year and maintaining a similar rate of progress in 2004 and beyond.”

BMO has also increased the target range for its dividend payout ratio to between 35 and 45 per cent of income. Dividends have increased every year for the past 11 years. A further 6 per cent increase in the dividend payment was announced last month. That brought BMO’s dividend increase for the year to 17 percent, highlighting management’s confidence in the sustainability of earnings.

Established in 1817 as Bank of Montreal, BMO Financial Group (TSX, NYSE: BMO) is a highly diversified North American financial services organization. It includes BMO Bank of Montreal, its Canadian retail arm; Chicago-based Harris Bank, a major Midwest financial services provider; BMO Nesbitt Burns, one of Canada’s largest full-service investment firms; and Harris Nesbitt, BMO’s U.S. investment banking operation.

A full transcript of Mr. Downe’s speech may be found at www.bmo.com/investorrelations.

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