News Releases

Toronto, January 19, 2005

Click here to view entire speech

Investors should buy or continue to hold BMO Financial Group shares because the organization has a solid reputation as Canada’s high-return, low-risk bank, according to Tony Comper, President and CEO, BMO Financial Group. 

Mr. Comper told a gathering of investors at the RBC Capital Markets Canadian Financial Services CEO Conference today that BMO has the right business mix, the right growth strategy and the right priorities to maintain its growing reputation as Canada’s high-return, low-risk bank — “a compelling proposition for likeminded investors,” according to Mr. Comper.

“BMO’s strategy to grow our core Canadian franchise and improve and selectively expand our U.S. franchise reflects both our longstanding strengths and our desire to build new strengths,” said Mr. Comper.

“Building for the future, we are successfully executing a Canada-U.S. growth strategy that is clearly working. Our unparalleled advantages include an already strong franchise, a track record as an accomplished acquirer, and both a proven capacity and a strong corporate will to significantly improve performance.”

He said that in Canada, this translates into growing the bank’s position in the commercial market; gaining share in the rapidly growing high net-worth market, and expanding BMO’s share of wallet in the investment banking business.

In the United States, this means growing organically and through retail banking acquisitions to be a leading player in the Midwest in the personal and business banking markets and the corporate mid-market and wealth management sectors.

“We are also capitalizing on the fragmentation and high-growth potential in the wealth market by growing these businesses in selected areas across the U.S.,” he said.

Mr. Comper outlined what he called “unparalleled advantages” that BMO enjoys over its Canadian counterparts who are at varying stages of U.S.-focused growth strategies.  BMO strengths include:

·         An already strong franchise in the U.S.,

·         A track record as an accomplished acquirer

·         A proven capacity and a strong corporate will to significantly improve performance.

“What sets us apart from our Canadian competitors in terms of the growth potential of our U.S. franchise is the franchise itself, established in one of the highest-growth, highest-potential areas of the United States and distinguished by the Harris brand and a powerful business model,” he said.

“We are successfully competing against large and determined new market entrants; we have a proven capacity to achieve targeted growth from our existing Harris retail, business banking and wealth platform; we have an established and growing mid-market presence in the Midwest; and, of course, we have unparalleled equity research capability. Together, these strengths translate into below-average reinvestment risk in the U.S. market,” he stated.

2005 Operational Priorities
Mr. Comper also reviewed the company’s operational priorities for 2005:

Personal and Commercial Client Group Canada

“We continue to see strong growth potential for BMO in Canadian commercial lending and deposits, where BMO is already a recognized leader.”

“After strong personal banking volume growth in 2004, we are expecting volumes to continue growing, although the revenue mix will differ.

“A key priority is to maintain our personal banking market share and increase our commercial banking market share relative to our major competitors.  In making pricing decisions, we constantly balance profitability and market share considerations.

“Customer loyalty scores for personal banking customers rebounded during the year while commercial client loyalty scores maintained their improved 2003 ratings. This suggests that we are on the right track as we continue to focus on this priority,” said Mr. Comper.

Personal & Commercial Client Group – U.S.

“We are very determined to improve the performance of all our U.S. businesses,” stated Mr. Comper. “A key driver will be our superior business model, which retains the best of the Harris heritage while positioning us for higher growth and profits in the future.“

“We are unique among our Canadian and local competitors in implementing a community-based network-banking model in the U.S., which we consider a significant competitive advantage, “ said Mr. Comper.   “We are now using BMO’s Canadian experience in operating a large and diverse banking network to blend the best of two banking models — network banking and community banking — to create a powerful, growth-generating bank, which combines a community-focused front office with a high-efficiency back office.”

Private Client Group

Mr. Comper told his audience that retail brokerage and asset management are large and successful businesses for BMO in Canada, where growth is constrained. 

He also noted that the bank is beginning to see the return on its investment of Canadian profits to fund the cost of building out its wealth management businesses in the U.S, creating a strong foundation to participate in this rapidly growing sector, which will become increasingly important over time. 

“We have achieved an annual compound growth rate of 22%, based on U.S. dollars, in wealth management business revenues since 2001 through a combination of acquisitions and increased higher-margin sales from improved client segmentation,” he noted.  “We have also taken aggressive action over the past few years to implement more cost-effective business models, improving cash productivity in our U.S. wealth management businesses by well over 1000 basis points from 2002 to 2004.”

Mr. Comper also stated,” We will expand the sales force in Harris Private Banking in 2005, beginning in the Chicago area and then fanning out to our other locations throughout the U.S.”

Investment Banking Group

Mr. Comper noted that Investment Banking benefited from stronger market conditions in 2004, particularly in the first half of the year. Net income increased 19% due to improved revenues combined with lower provisions for credit losses.

“A key Investment Banking Group priority for 2005 is to further improve the integrated delivery of our capabilities to our clients to optimize revenue opportunities,” he said.

“In Canada, where we are already recognized as a major player, we will continue to reinforce our leading position by exercising our strengths in mergers and acquisitions, debt and equity underwriting, and unparalleled equity research capability.”

In the U.S., where Harris Nesbitt is a mid-market firm targeting private and under-served public companies, Mr. Comper stated that the firm will build on it’s longstanding mid-market expertise.  ”This really sets us apart from our Canada-based competitors,” said Mr. Comper.  “Our integrated U.S. investment and corporate banking business will enable us to accelerate growth by strengthening and broadening relationships with target clients across our expanded range of capabilities. We will also focus on increasing the proportion of fee-based income.”

Focused, Disciplined, Balanced and Measured
Mr. Comper ended his remarks by returning to a discussion of some significant, enterprise-wide competitive advantages: 

·         A Leader in Credit Quality

o        “Our longstanding and ingrained credit culture enables us to provide more predictable and consistent returns for shareholders than many of our peers.”

·         Ingrained Productivity Culture

o        “The real strength of our approach to productivity is that it’s not just about cutting costs; it’s about growing revenue through disciplined spending.”

o        “Our commitment to improve our cash productivity ratio by 150 to 200 basis points each and every year, while also continuing to invest for future growth, imposes a daily discipline that is being felt in every corner of this enterprise.”

·         Compensation Rigorously tied to BMO’s Financial Performance

o        “BMO is a leader in aligning compensation with shareholder interests, which, we believe, will positively influence our relative performance for years to come.”

·         Effective Capital Management Pays Dividends

o        “A balanced and measured pace of investment has positioned us well competitively.” 

o        “Our priorities for capital investments are business growth, acquisitions, dividends and a modest share buyback program, which is primarily used to offset the impact of dilution from the exercise of stock options.”

Outlook
“Since the vast majority of investors are looking for sustainable long-term performance, it is also worth noting that over the past 20 years, BMO shareholders have earned an average annual return of 17.5%. That’s almost twice the TSX average. Only one bank in our Canadian peer group has done better over the past two decades, and BMO is the leader in dividend contributions to Total Shareholder Return,” he stated.

Mr. Comper stated that BMO’s future operating leverage will come from continued productivity improvement, organic growth from existing operations and recent acquisitions, BMO’s credit expertise, a strong capital base for future acquisitions, technology investments in Canadian personal and commercial operations, commercial and mid-market credit utilization in the U.S., and any improvement in the economy.

Full text of Mr. Comper’s remarks is available at www.bmo.com/investorrelations.com.

About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization.  With total assets of $265 billion as at October 31, 2004, and more than 33,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and solutions.  BMO Financial Group serves clients across Canada through its Canadian retail arm, BMO Bank of Montreal, and through BMO Nesbitt Burns, one of Canada’s leading full-service investment firms.  In the United States, BMO serves clients through Chicago-based Harris, an integrated financial services organization that provides more than 1.5 million personal, business, corporate and institutional clients with banking, lending, investing, financial planning, trust administration, portfolio management, family office and wealth transfer services.

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 2005 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.

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