Skip navigation
Navigation skipped

News Releases

BMO Financial Group Reports Year-over-Year Earnings Growth of 47% in the Second Quarter of 2004  

Higher Operating Group Results and Improved Credit Performance Drive Growth

Year-over-Year Operating Highlights:

  • Net income of $602 million, up 47%
  • EPS1 of $1.12, up 45%, and cash EPS2 of $1.17, up 44%
  • ROE of 20.4%
  • A specific provision for credit losses of $45 million and a $40 million reduction of the general allowance for credit losses result in a net provision for credit losses of $5 million, compared with a specific provision of $120 million a year ago
  • Revenue2 growth of 12% and expense growth of 5%
  • Productivity ratio2 improves to 63.2% from 67.2% and cash productivity ratio2 improves 380 basis points to 62.2%
  • Strong Tier 1 Capital Ratio of 9.67%, up from 9.10%


1 All Earnings per Share (EPS) measures in this release refer to diluted EPS unless specified otherwise.

2 The adjustments that change results under generally accepted accounting principles (GAAP) to cash results and GAAP revenue and income taxes to a taxable equivalent basis (teb) are outlined in the Non-GAAP Measures section in the Financial Performance Review, where all non-GAAP measures and their closest GAAP counterparts are outlined. Revenues and income taxes in the financial statements are stated in accordance with GAAP. Otherwise, all revenues and income taxes and measures that include revenues or income taxes in this document are stated on a taxable equivalent basis.

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.


Summary Data
(1) These are non-GAAP amounts or non-GAAP measures. Please see footnote 2 to the previous table and the Non-GAAP Measures section in the Financial Performance Review, which outline the use of non-GAAP measures in this MD&A.

Toronto, May 26, 2004 - BMO Financial Group reported that its net income for the second quarter ended April 30, 2004 was up 47% from a year ago.

Net income was $602 million and EPS was $1.12 for the second quarter of 2004, increasing $193 million and $0.35, respectively, from the second quarter of 2003.

"Our quarterly net income is again up sharply from a year ago," said Tony Comper, President and Chief Executive Officer, BMO Financial Group. "This is due to strong operating performance in all of our groups and the continuation of good credit performance."

Net income of Private Client Group more than doubled on stronger equity markets and cost control initiatives implemented in 2003. Investment Banking Group increased earnings by 28%, and, while Personal and Commercial Client Group results were down, they would have grown 12% excluding an adjustment to card fees that is explained in the following paragraph. The above increases were achieved notwithstanding that the benefits of volume growth in our businesses were partially offset by reduced net interest margins in the competitive low-rate environment.

Personal and Commercial Client Group non-interest revenue was lowered by a $51 million ($33 million after tax) adjustment to credit card fees that increased the recorded liability associated with our customer loyalty rewards program due to rising reward redemption rates.

Year-to-date, net income of $1,134 million was up $326 million or 40% from the comparable period in 2003. Business volumes were up strongly and net income of each of the operating groups was appreciably higher than a year ago. Private Client Group results were up 92% from the comparable period in 2003, while Investment Banking Group net income was 23% higher, as both benefited from the more favourable capital markets environment. Personal and Commercial Client Group net income was 4% higher, but was 12% higher excluding the impact of the adjustment to card fees, as the benefits of volume growth were only partially offset by the impact of lower net interest margins in the competitive low-rate environment. Improved credit performance also contributed significantly to net income growth, as the provision for credit losses was reduced by $250 million ($166 million after tax) from the comparable period a year ago.

"We are well positioned to achieve all of our financial targets for the year," added Mr. Comper. "We continue to benefit from growth in business volumes, our focus on productivity and our superior asset quality."

Revenue (on a taxable equivalent basis - see the Non-GAAP Measures section) for the quarter increased $268 million or 12% from a year ago to $2,476 million, but would have grown by $335 million or 15% if the Canadian/U.S. dollar exchange rate had remained at the same level of a year ago. The growth was attributable to improved volumes in each of our operating groups and to $93 million of net investment securities gains this quarter, compared with $45 million of net losses a year ago. These increases were partially offset by the $51 million card fees adjustment and the impact of lower net interest margins, including the effect of a $44 million loss on unwinding hedges associated with investment securities that were sold.

Revenue was up $75 million or 3% from the first quarter, benefiting from higher securities trading commissions, underwriting fees, net investment securities gains and the stronger U.S. dollar. These increases were partially offset by the impact of two fewer calendar days in the second quarter, lower net interest margins and the adjustment to card fees. Year-to-date, revenue rose $351 million or 8%, driven by strong growth in securities trading commissions, underwriting fees and net gains on investment securities, compared with net losses a year ago. Acquired businesses also contributed to the growth. These increases were partially offset by the card fees adjustment, lower securitization revenue and the impacts of lower net interest margins and the weaker U.S. dollar.

During the quarter, there were $52 million of net investment securities gains in Investment Banking Group, primarily on the sale of fixed income securities from its non-relationship portfolio. This portfolio is being reduced as an element of the Group's business strategies. The gains were largely offset by $44 million of interest expense from the unwinding of associated interest rate swaps. There were also $44 million of net investment securities gains in Corporate Support, primarily from sales of fixed income securities. These sales were from the securities portfolio used in the management of U.S. interest rate risk. The sales helped offset the increased risk to higher interest rates in the U.S. mortgage portfolio resulting from lower expected principal prepayments as mortgage rates increased.

Net interest margin (on a taxable equivalent basis - see the Non-GAAP measures section) for the second quarter of 2004 was 1.80%, a decline of 16 basis points from a year ago and 12 basis points from the first quarter. However, excluding the one-time impact of the accounting for $42 million of mortgage prepayment fees in the first quarter, net interest margin was down 6 basis points from the first quarter, as personal and commercial banking net interest margin was relatively unchanged. Net interest margins are detailed in the Revenue section in the Financial Performance Review.

Non-interest expense of $1,565 million was $81 million or 5% higher than a year ago, but would have increased by $124 million or 8% if the Canadian/U.S. dollar exchange rate were unchanged.  The increase was largely attributable to higher performance-based compensation costs and the incremental impact of acquired businesses.  The non-interest expense-to-revenue ratio (productivity ratio) was 63.2% (on a taxable equivalent basis--see the Non-GAAP Measures section) in the second quarter, compared with 67.2% a year ago.  The cash productivity ratio of 62.2% (on a taxable equivalent basis--see the Non-GAAP Measures section) improved 380 basis points from a year ago.  Our target at the start of the year was to improve cash productivity by 150 to 200 basis points in 2004.

This quarter's specific provision for credit losses was $45 million, down from $120 million in the second quarter of 2003. The decrease reflects the continuing improvement in the performance of BMO's credit portfolios and our success in selling impaired loans for proceeds in excess of net book value. The net provision for credit losses was $5 million this quarter, consisting of specific provisions of $45 million, net of a $40 million reduction in the general allowance for credit losses. In the first quarter, the net provision for credit losses was $15 million, consisting of a specific provision of $55 million, net of a $40 million reduction in the general allowance. Year-to-date, the provision for credit losses was $20 million, consisting of specific provisions of $100 million, net of a reduction in the general allowance of $80 million. The provision was down from $270 million of specific provisions in the first six months of fiscal 2003. There was no change in the general allowance in the first six months of fiscal 2003. We continue to expect our annual specific provision for credit losses to be at or below $300 million for fiscal 2004, below the $500 million target established at the beginning of the year.

During the quarter, we repurchased 1,350,000 Bank of Montreal common shares under our common share repurchase program at an average cost of $53.60 per share for total consideration of $72.4 million.

Annual Targets for 2004

2004 Earnings and Economic Outlooks
BMO's earnings and productivity in the second half of 2003 were appreciably better than in the first half of 2003. Our high EPS growth rate and significant improvement in cash productivity for the current year-to-date relative to our annual 2004 targets are in part due to that earnings pattern in 2003. We continue to anticipate achieving our annual targets for 2004.

Canadian real GDP is now expected to grow 2.3% in 2004, down from our first quarter estimate of 2.8% and year-end estimate of 3.1%. In contrast, U.S. real GDP is projected to grow 4.6% in 2004, unchanged from our first quarter estimate, but up from the year-end estimate of 4.4%. Growth in the Canadian economy has been undermined by the sharp increases in the value of the Canadian dollar experienced in prior quarters, though declining interest rates have provided solid support to domestic demand. In the United States, highly expansionary monetary and fiscal policies, the weaker U.S. dollar and strong productivity growth continue to support the American economy. In both Canada and the United States, the recovery in equity markets continues to promote investment banking and wealth management activities, and low credit costs have underpinned growth in residential mortgages and personal loans. However, healthy increases in business profits and cash flows, together with increased capital financing, have tempered demand for business loans. Expected monetary tightening by the Federal Reserve will likely push North American interest rates higher in the near term, though the stable policy of the Bank of Canada should limit increases in Canadian long-term rates.

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 filed certifications, signed by the CEO and CFO, with the SEC in the United States on January 23, 2004 when we filed our Annual Report and other continuous disclosure documents. In those filings, BMO's CEO and CFO certify, as required by the United States Sarbanes Oxley Act, the appropriateness of BMO's financial disclosures in our Form 40-F filings of continuous disclosure materials and the effectiveness of controls and procedures over those disclosures. Pursuant to new Canadian securities legislation, BMO's CEO and CFO will certify the appropriateness of our financial disclosures in BMO's interim filings with securities regulators, including this quarterly results news release and the attached unaudited interim consolidated financial statements.

As in prior quarters, BMO's audit committee reviewed this document, including the attached unaudited interim consolidated financial statements. BMO's Board of Directors continues to approve this document prior to its release.

A comprehensive discussion of our businesses, strategies and objectives can be found in Management's Discussion and Analysis of Operations and Financial Condition in BMO's 2003 Annual Report, which can be accessed on our web site at Readers are also encouraged to visit our web site to view quarterly financial information.

Regulatory Filings
Our continuous disclosure materials, including our interim filings, annual MD&A and audited consolidated financial statements, our Annual Information Form and the Notice of Annual Meeting of Shareholders and Proxy Circular are available on our web site, at the Canadian Securities Administrators' web site,, and on the EDGAR section of the SEC's web site at

To view the rest of this news release consisting of:

Financial Highlights  
Financial Performance Review  
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 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.

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, presentation materials 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 Wednesday, May 26, 2004 at 2:00 p.m. (EDT). 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 Wednesday, June 9, 2004 by calling 416-695-5292 (from within Toronto) or 1-888-742-2491 (toll-free outside Toronto) and entering pass code 3482.

A live webcast of the quarterly conference call can be accessed on our web site at A replay can be accessed on the site until Monday, August 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, Senior Executive Vice-President and Chief Financial Officer,,

Corporate Secretary, 416-867-6785