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BMO Financial Group will continue to build on its successful performance with its disciplined, focused, and consistent execution of strategy, Chairman and CEO Tony Comper said today in a presentation to the RBC Capital Markets Canadian Financial Services CEO Conference.
“At BMO we have deliberated at length about how to set our organization apart within the Canadian financial services industry,” said Mr. Comper. “My own view is that the most significant differentiator in the current environment is effective strategy execution. I think it’s fair to say we’re making real progress — as demonstrated by our rising financial results and improving relative performance.”
Fiscal 2003 was a very successful year for BMO. Net income grew 29 per cent, with all operating groups contributing higher results, and collectively generating a 33 per cent total shareholder return. All of the financial targets set at the beginning of fiscal 2003 were met. At $3.59, cash earnings per share grew 27 per cent or 23.4 per cent against a target of 10 to 15 per cent; and return on equity improved 2.6 percentage points to 16.4 per cent against a target of 14 to 15 per cent. The annual provision for credit losses came in at $455 million compared to the target of at, or below, $820 million. The Tier 1 capital ratio of 9.55 per cent was above a target of at least eight per cent.
Good progress was also achieved on BMO’s number-one priority in 2003, productivity. Cash productivity improved by 260 basis points, as all three operating groups improved their own cash productivity ratios by more than 150 basis points.
“While investing in our sales force and improving our sales culture, we brought expenses down substantially,” said Mr. Comper. “However, I want to emphasize that we are not cutting costs for short-term gain. We are going to great lengths to protect and foster sales-related activities while improving profitability on a long-term, permanent basis.”
Revenue grew 4.7 per cent in 2003, which is above the Canadian peer group average. Revenue would have been about three percentage points higher if the Canadian/U.S. dollar exchange rate had stayed where it was at the start of the year.
BMO has set the following financial targets for 2004, which take into account the lower lift in credit performance from the previous year:
- Earnings per share growth of 10 to 15 per cent;
- Return on equity of 16 to 18 per cent;
- Tier 1 capital ratio of at least eight per cent;
- Provision for credit losses of $500 million or less; and
- Cash productivity improvement of 150 to 200 basis points.
BMO’s leadership team is focused on the enterprise growth strategy, which is to continue to transform BMO into a top-performing financial services company operating broadly in Canada and through significant, focused franchises in the U.S..
Productivity remains BMO’s top enterprise priority in 2004, with particular emphasis on improving productivity and profitability in its U.S. operations. Additional priorities include steps to improve customer loyalty in Canadian personal and commercial operations, continue to drive sales and business referrals to earn a larger share of existing customers’ business across the enterprise and enhance the distribution network. For example, plans were announced last July to add 80 BMO branded In-store locations in the Sobey’s grocery chain over the next five years.
In the U.S., BMO is aggressively pursuing acquisitions in chosen markets with the main emphasis on retail acquisitions in the Chicago area, Illinois and surrounding states that will extend the reach and profitability of the Harris Bank network. BMO is on track to expand its U.S. distribution network to 200 branches by 2007. Ten branches were added in 2003, including two key strategic locations with the acquisition of Lakeland Community Bank announced last November. At least 14 more branches will be added in 2004, with real estate secured for 10 of them.
“All of the major banks are targeting North America to a greater or lesser extent. What differentiates BMO in terms of U.S. growth potential is our capacity to achieve targeted growth from our existing Harris retail, business banking and wealth platform, tied together by the highly-regarded Harris brand; our growing mid-market business in the Midwest; our unparalleled equity research capability; and, of course, our leadership in corporate governance and credit risk management,” said Mr. Comper.
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. Comper’s speech may be found at www.bmo.com/investorrelations.
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Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this presentation, 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 2004 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.
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