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BMO Financial Group Reports 29 Per Cent Earnings Growth for both Fiscal 2003 and the Fourth Quarter  

 PDF format of entire Quarterly news release including this Performance Overview, Financial Highlights table, the Fourth Quarter MD&A and Unaudited Financial Statements

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Better Credit Quality, Solid Revenue Growth and Cost Containment Drive Higher Net Income, and  Earnings Improve In All Operating Groups
Fourth Quarter Year-over-Year Highlights1:
  • Net income of $513 million, up 29 per cent from $398 million
  • EPS2 of $0.97, up 29 per cent, and cash EPS3 of $1.00, up 27 per cent
  • ROE of 17.9 per cent, up 3.3 percentage points
  • Revenue3 growth of five per cent despite the weaker U.S. dollar
  • Expenses down four per cent, in part due to the weaker U.S. dollar
  • Provision for credit losses of $95 million, improves from $160 million
  • Productivity ratio improves to 64.0 per cent from 70.1 per cent and cash productivity3 improves 570 basis points to 63.1 per cent
  • Strong Tier 1 Capital Ratio of 9.55 per cent, up from 8.80 per cent
Fiscal 2003 Year-over-Year Highlights1:
  • Net income of $1,825 million, up 29 per cent from $1,417 million
  • EPS of $3.44, up 28 per cent, and cash EPS of $3.59, up 27 per cent
  • ROE of 16.4 per cent, up 3.0 percentage points
  • Revenue growth of five per cent and expense growth of one per cent
  • Provision for credit losses of $455 million, down from $820 million
  • Productivity ratio improves to 65.7 per cent from 68.1 per cent and cash productivity improves 260 basis points to 64.5 per cent
  • All operating groups improve productivity by more than 150 basis points
  • BMO achieves all financial targets for 2003
  • Quarterly dividends rise 16.7 per cent

1. There were $39 million ($25 million after tax) of acquisition-related costs in the fourth quarter of 2002 and $62 million ($39 million after tax) of such costs in fiscal 2002 that were designated as non-recurring, increasing earnings per share (EPS) by $0.05 and $0.08, respectively, in those periods.  We have discontinued disclosures of results excluding non-recurring items as explained in the Note on Performance Analysis and Performance Relative to Targets section.
2. All earnings per share (EPS) measures in this release refer to diluted EPS, unless specified otherwise.
3. The adjustments that change results under generally accepted accounting principles (GAAP) to cash results are outlined in the following table and explained in the section referenced in note 1 above.  The adjustment that changes GAAP revenue to its taxable equivalent basis (teb) is discussed in the revenue section of Management’s Discussion and Analysis.

Toronto, November 25, 2003 – BMO Financial Group reported net income of $1,825 million for its fiscal year ended October 31, 2003, up $408 million or 29 per cent from a year ago.  Earnings per share (EPS) of $3.44 rose 28 per cent. Cash net income, which reflects the add-back of the after-tax amortization of intangible assets, was  $1,904 million and cash EPS was $3.59.

“BMO’s strong fourth quarter results wrapped up a very successful year,” said Tony Comper, Chairman and Chief Executive Officer, BMO Financial Group.  “Income was up sharply and we achieved all of our financial targets.  Results were higher in all of our operating groups and they each improved their cash productivity ratio by more than 150 basis points, our number one priority for the year.  These successes were reflected in a 33 per cent total shareholder return for 2003.”

The $408 million increase in net income and $0.76 growth in EPS from fiscal 2002 were primarily driven by lower provisions for credit losses ($253 million and $0.50 per share), higher business income in our operating groups ($170 million and $0.34 per share) and reduced net investment securities losses ($73 million and $0.14 per share).  These were partially offset by a higher effective tax rate (-$88 million and -$0.17 per share) and the effects of a small increase in average outstanding diluted common shares (-$0.05 per share).

A $365 million reduction in the provision for credit losses was due to an overall improvement in credit performance year-over-year.

Revenue increased $412 million or five per cent, as growth was solid in all operating groups.  Personal and Commercial Client Group revenue rose on continued strong volume growth across all products in Canada and the United States, although the U.S. growth was offset by the effect of the decline in the Canadian/U.S. dollar exchange rate.  In Canada, growth was primarily in the personal segment, led by retail deposits, card services and residential mortgages.  Private Client Group revenue rose on improving market fundamentals and stronger performance in direct and full-service investing and investment products.  Investment Banking Group results rose on stronger income trust origination activity and higher trading revenue.  The incremental effects of acquired businesses and lower investment securities losses also contributed to BMO’s revenue increase, while the lower Canadian/U.S. dollar exchange rate curtailed growth by three per cent.

Fiscal 2003 non-interest expenses totalled $6,087 million, an increase of $57 million or one per cent from a year ago. The incremental impact of businesses acquired part way through 2002 and in 2003 had the effect of increasing expenses in 2003, relative to 2002, by $180 million.  The lower Canadian/U.S. dollar exchange rate had the effect of lowering expenses in 2003 by $181 million.  As such, the impact of these two factors offset.  Higher performance-based compensation costs, associated with BMO’s 29 per cent increase in net income, increased expenses by $93 million and higher pension costs increased expenses by $78 million.  There was a net reduction of other expenses of $113 million, $72 million of which related to reduced professional fees and travel expenses.  There were $62 million of acquisition-related costs in 2002.  The non-interest expense-to-revenue ratio (also called the productivity ratio) was 65.7 per cent in 2003, compared with 68.1 per cent a year ago; the cash productivity ratio was 64.5 per cent, a 260 basis point improvement.  Excluding acquisition-related costs in 2002, cash productivity improved 190 basis points.

In the fourth quarter, BMO announced a $0.02 per share increase in quarterly common share dividends, bringing the increase to $0.05 or 16.7 per cent for the year.

“Fourth quarter results were up sharply from a year ago and quarterly earnings have now increased for the sixth consecutive quarter,” added Mr. Comper.  “Our improved credit performance, our success in achieving our productivity goals and the strong earnings performance of the past six months provide great momentum.  We will continue our intense focus on further improving productivity in the year ahead and look forward to even better performance.”

Net income for the fourth quarter of 2003 increased $115 million or 29 per cent from the fourth quarter a year ago.  Solid revenue growth, reduced expenses and a lower provision for credit losses drove the improvement.  Results of a year ago included $39 million ($25 million after tax) of acquisition-related costs, partially offset by proportionately higher tax benefits realized, which resulted in a low effective tax rate.

Each of the operating groups contributed to the 29 per cent improvement in quarterly earnings.  Personal and Commercial Client Group continues to generate higher earnings from Canadian operations, which benefited from sustained volume growth in all products, while U.S. operations also improved, continuing its trend of growing earnings in each quarter this year.  Private Client Group results were up sharply from last year as revenue increased in the more favourable market environment, while expenses declined.  Investment Banking Group’s earnings growth was attributable to equal parts expense reduction and revenue growth, primarily from stronger origination activity.  Corporate Support earnings also rose, although its reduced provision for credit losses was offset by the recognition of proportionately lower tax benefits.

Relative to the strong results of the third quarter of 2003, net income rose two per cent, as revenue grew more than expenses.  The increase was largely attributable to U.S. retail and business banking and Private Client Group.

Revenue was $2,411 million in the quarter, up $122 million or five per cent from a year earlier, but would have grown by 10 per cent if the U.S. dollar had remained at the exchange rate of a year ago.  There was solid growth across each of the operating groups.  Strong volume growth in Canadian personal and commercial banking was only partially offset by reduced net interest margins that related to changes in customer product preferences, driven by the competitive environment.  In the United States, retail and business banking revenue was substantially unchanged due to the effect of the weaker U.S. dollar, but increased nine per cent on a U.S. dollar basis, driven by loan and deposit growth.  Private Client Group also posted strong increases in the more favourable investment climate that boosted client trading activity and fee-based revenue.  Investment Banking Group revenue grew on higher equity origination fees and from interest received on previously impaired loans.

Net interest margins are detailed in the table in the revenue section of the MD&A.  Net interest margin was 1.91 per cent for fiscal 2003, a decline of 8 basis points from a year ago.  Personal and Commercial Client Group net interest margin in Canada was slightly higher than in 2002 but net interest margin declined in the United States and in Investment Banking Group.

Net interest margin of 1.91 per cent in the fourth quarter was down 1 basis point from a year ago.  Personal and commercial banking margin fell in Canada, as the competitive environment is driving shifts in customer product preferences.  Margins were higher in U.S. retail and business banking and in Investment Banking Group.

Relative to the third quarter, net interest margin rose 7 basis points.  Personal and commercial banking margins in Canada declined due to product shifts and the competitive environment, but rose in the U.S. due to growth in higher margin loan and deposit products.  Net interest margin also rose in Investment Banking Group.

Non-interest expenses of $1,545 million in the fourth quarter were $59 million or four per cent lower than in 2002 but would have been one per cent higher than a year ago if the Canadian/U.S. dollar exchange rate were unchanged.  Results in the fourth quarter of 2002 included $50 million of severance costs and $39 million of acquisition-related costs, while the current period included a $71 million increase in performance-based compensation costs associated with improved results.  The productivity ratio was 64.0 per cent in the quarter, significantly improved from 70.1 in the fourth quarter a year ago.  The cash productivity ratio was 63.1 per cent, compared with 68.8 per cent a year ago.

Relative to the third quarter, non-interest expenses rose $60 million or four per cent due to higher performance-based compensation costs.  Productivity ratios increased somewhat as a result.

Gross impaired loans of $1,918 million decreased by $419 million from a year ago and by $125 million from the third quarter.  Impaired loan formations totalled $397 million in the quarter, down $65 million from the fourth quarter of last year, but up $148 million from the third quarter.  The latter increase was due primarily to the deterioration of a number of U.S.-based corporate accounts in the electric power generation industry.

The provision for credit losses was $455 million for 2003, down from $820 million in the prior year.  In the fourth quarter, the provision was $95 million, down from $160 million a year ago and up $5 million from the third quarter.

The Canadian dollar equivalent of BMO’s U.S. denominated revenues, expenses and provision for credit losses reflected in results in 2003 was lowered by the weakening of the U.S. dollar.  The lower translation rate in fiscal 2003 reduced revenue by $264 million, expenses by $181 million and the provision for credit losses by $27 million relative to fiscal 2002.  The lower rate in the fourth quarter of 2003, relative to a year earlier, lowered revenue, non-interest expenses and the provision for credit losses in the fourth quarter by $110 million, $78 million and  $9 million, respectively.   The effect of exchange rate movements is discussed more fully in the discussions of Net Income and Income Taxes in the attached fourth quarter 2003 MD&A.

Annual Targets for 2003

1. Measured against 2002 EPS of $2.76, excluding non-recurring items. Growth on a GAAP basis was 28.4 per cent.
2. Measured against 2002 cash EPS of $2.91, excluding non-recurring items.
3. Measured against 2002 productivity, excluding non-recurring items. BMO improved 260 basis points on a reported basis.
4. Improved cash productivity was not designated as a 2003 financial target. It was added as a priority focus in the first quarter of 2003.

2004 Economic Outlook
Canadian real GDP is estimated to have grown at 2.0 per cent in 2003, as the economy and exports in particular were affected by the SARS crisis, the international ban on Canadian beef exports, a power outage in Ontario and the sharp appreciation of the Canadian dollar. Canadian economic growth is expected to strengthen in 2004, growing at an anticipated 3.3 per cent.  Robust U.S. demand should support Canadian exports, though increases in the Canadian dollar in 2003 will temper the gains.  The jobless rate is expected to decline modestly and interest rates, which have been at four-decade lows, are expected to rise gradually starting in the summer.  We do not anticipate significant change in the Canadian/U.S. exchange rate in 2004.  This economic environment should continue to support growth in mortgages and facilitate a pickup in business credit in the year ahead.

U.S. economic growth is estimated to be 3.0 per cent in 2003, as the economy gathered strength over the course of the year.  Continued support from expansionary monetary and fiscal policies should sustain the U.S. recovery at a strong pace, with real GDP estimated to grow 4.4 per cent in the year ahead.  Interest rates should remain stable in the near term, but start to rise in the spring.  Low rates, together with rising employment, should support growth in residential mortgages and consumer credit.  Consumer spending should remain firm, though automobile and home sales will likely moderate from their highs of 2003. Business investment and lending are also expected to strengthen.

Note on Performance Analysis and Performance Relative to Targets
Management and certain other observers believe that analyzing results excluding non-recurring items can enhance analysis of financial performance.  However, the Securities and Exchange Commission (SEC) enacted rules over the past year that, from that date, severely restrict designating items as non-recurring.  This impairs the usefulness of such measures and we discontinued our practice of reporting results excluding non-recurring items.  As such, there were no items designated as non-recurring in fiscal 2003.  In fiscal 2002 there were $62 million ($39 million after tax) of acquisition-related costs incurred by our Private Client Group that were designated as non-recurring, increasing EPS for the year by $0.08 when stated on a basis that excludes non-recurring items.  We continued to assess our 2003 performance relative to EPS growth targets using the 2002 results excluding non-recurring items, a more conservative approach.    

Cash earnings and cash productivity measures may enhance comparisons between periods when there has been an acquisition, particularly because the purchase decision may not consider the amortization of intangible assets to be a relevant expense.  Cash EPS measures are also provided because analysts frequently focus on these measures and cash EPS is used by Thomson First Call, which tracks third-party earnings forecast estimates that are frequently reported in the media.  Securities regulators require that corporations caution readers that earnings as adjusted for such items do not have standardized meanings under GAAP and are unlikely to be comparable to similar measures used by other companies.

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.

Management's Responsibility for Financial Information
A rigorous and comprehensive financial governance framework is in place at BMO and its subsidiaries at both the management and board levels.  Each year, BMO’s Annual Report contains a statement signed by the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) outlining management’s responsibility for financial information contained in the report.  As in the prior year, BMO will file certifications, signed by the CEO and CFO, with the SEC in the United States in January 2004 when we file our Annual Report and other continuous disclosure documents.  In those filings, BMO’s CEO and CFO certify, as required by U.S. law, the appropriateness of BMO’s financial disclosures in the Annual Report and the effectiveness of controls and procedures over those disclosures.  Our CEO and CFO voluntarily certify to the SEC the appropriateness of our financial disclosures in BMO’s quarterly results news releases, including the attached unaudited interim consolidated financial statements.

As in prior quarters, BMO’s audit committee reviewed this release, including the attached unaudited consolidated financial statements and the Fourth Quarter 2003 Management’s Discussion and Analysis of Results of Operations and Financial Condition.  BMO’s Board of Directors continues to approve these documents prior to their release.  Management’s Discussion and Analysis of Results of Operations and Financial Condition (MD&A) for the quarter is attached.  A more comprehensive discussion of our businesses, strategies and objectives can be found in the MD&A in BMO’s 2002 Annual Report, which can be accessed on our web site at  Readers are also encouraged to visit our web site to view other quarterly financial information.

The 2003 annual MD&A and Bank of Montreal’s audited consolidated financial statements for the year ended October 31, 2003 will be available on our web site at on or about December 19, 2003.

To view the rest of this news release consisting of:

Financial Highlights  
Fourth Quarter 2003 MD&A  
Unaudited Financial Statements  

Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this news release, and may be included in 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 the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for 2003 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian and U.S. economies.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors 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: global capital market activities; interest rate and currency value fluctuations; the effects of war or terrorist activities; the effects of disease or illness that impact on local, national or international economies; the effects of disruptions to public infrastructure, such as transportation, communications, power or water supply disruptions; industry and worldwide economic and political conditions; regulatory and statutory developments; the effects of competition in the geographic and business areas in which we operate; management actions; and technological changes. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statement, whether written or oral, that may be made, from time to time, by the organization or on its behalf.


Investor Presentation Materials
Interested investors, the media and others are invited to visit our web site at to review this quarterly news release, presentations and a supplementary financial information package online.  Copies of these documents are also available at BMO Financial Group’s offices at 100 King Street West, 18th Floor, 1 First Canadian Place, Toronto, Ontario, M5X 1A1.

Quarterly Conference Call and Webcast Presentations
Interested parties are invited to listen to our quarterly conference call on Tuesday, November 25, 2003 at 2:00 p.m. (EST).  At that time, senior BMO executives will comment on results for the quarter and respond to questions from the investor community.  The call may be accessed by telephone at 416-695-9753 (from within Toronto) or 1-888-789-0089 (toll-free outside Toronto).  A replay of the conference call can be accessed until Friday, December 5, 2003 by calling 416-695-5278 (from within Toronto) or 1-888-742-2491 (toll-free outside Toronto) and entering passcode 5967.

A live webcast of the quarterly conference call can be accessed at  A replay of the webcast can be accessed on our website until Monday, February 23, 2004.

Media Relations Contacts
Ralph Marranca, Toronto,, 416-867-3996
Ian Blair, Toronto,, 416-867-3996

Ronald Monet, Montreal,, 514-877-1101

Investor Relations Contacts
Susan Payne, Senior Vice-President, Investor Relations,, 416-867-6656
Lynn Inglis, Director, Investor Relations,, 416-867-5452
Amanda Mason, Senior Manager, Investor Relations,, 416-867-3562

Chief Financial Officer
Karen Maidment, Executive Vice-President and Chief Financial Officer,, 416-867-6776

Corporate Secretary, 416-867-6785