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BMO Financial Group Reports Results for the Second Quarter of 2005

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EPS Increases 3.6% due to Benefit of Strong Growth in Personal and Commercial Banking and Wealth Management Businesses which is Reduced by Lower Earnings in Certain Investment Banking Group Businesses and Lower Corporate Portfolio Securities Gains

Year-over-Year Operating Highlights for the Quarter:

Net income of $600 million, up $9 million or 1.6%. Excluding significant items, net income was down $30 million or 5.2%.
EPS¹ up 3.6% to $1.16 and cash EPS² up 3.4% to $1.21
ROE of 19.5%, compared with 20.4%
A $46 million specific provision for credit losses and a $40 million reduction in the general allowance, similar to a year ago
Revenue² decline of 0.7% (1.6% growth excluding the impact of the weaker U.S. dollar)
Expense growth of 0.9% (3.4% growth excluding the impact of the weaker U.S. dollar)
Productivity ratio² slips 101 basis points to 65.0% and cash productivity ratio² slips 106 basis points to 64.0%
Tier 1 capital ratio of 9.38%, compared with 9.67% a year ago and 9.72% at the end of the first quarter

Year-over-Year Operating Highlights for the Year to Date:

Net income of $1,202 million, up $90 million or 8.1%
EPS of $2.32, up 9.4%, and cash EPS of $2.40, up 9.1%
ROE of 19.5%, compared with 19.4%
Productivity ratio improves 98 basis points to 63.9% and cash productivity ratio improves 90 basis points to 62.9%

Other Highlights:

Net income relatively unchanged from the first quarter of 2005
Record quarterly net income in Private Client Group
Specific provision for credit losses now anticipated to be $275 million or less in fiscal 2005, down from our annual target of $400 million or less and most recent estimate of $350 million or less

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.

References to retail and business banking refer to Personal and Commercial Client Group activities and references to wealth management refer to Private Client Group activities.

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, together with its subsidiaries.

SECOND QUARTER 2005 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)
MD&A commentary is as of May 25, 2005. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (GAAP).

Summary Data

(1) These are non-GAAP amounts or non-GAAP measures. Please see footnote 2 to the preceding Operating Highlights and the Non-GAAP Measures section in the Financial Performance Review, which outline the use of non-GAAP measures in this document.

Toronto, May 25, 2005 — BMO Financial Group reported net income of $600 million for the second quarter ended April 30, 2005, up $9 million or 1.6% from a year ago. EPS increased $0.04 or 3.6% to $1.16.

PERFORMANCE OVERVIEW
"Reported earnings were modestly higher than a year ago, but excluding significant items, earnings declined," said Tony Comper, President and Chief Executive Officer, BMO Financial Group. "Our personal and commercial banking and wealth management businesses both delivered solid earnings growth. However, results were weaker in some of our investment banking businesses and we had lower corporate portfolio securities gains."

Results for the quarter and comparative periods include a number of significant items. The analysis that follows discloses the impact of these significant items to help readers assess underlying performance. This quarter, at the end of the MD&A, immediately preceding the financial statements, we have also included a and their impact on group and total bank net income for those readers who wish to also review a summary.

Excluding the significant items outlined below from results in both quarters, net income was $537 million in the second quarter of 2005, down $30 million or 5.2% from the second quarter a year ago. On a similarly-adjusted basis, EPS was $1.04 and cash EPS was $1.09, compared with $1.07 and $1.12, respectively, in the year ago period. The weaker U.S. dollar lowered BMO's earnings by $12 million relative to a year ago.

Net income in the second quarter of 2005 was increased by the $63 million after-tax net impact of:

A $44 million ($37 million after tax) revenue increase in Investment Banking Group related to the restructuring of customer securitization Variable Interest Entities (VIEs);
A $40 million ($26 million after tax) reduction in the general allowance for credit losses reflected in Corporate Support;
A $20 million recovery of prior years' income taxes recorded in Personal and Commercial Client Group;
A $25 million ($16 million after tax) litigation provision reflected in Corporate Support expenses; and
A $6 million ($4 million after tax) reduction in investment securities gains in Investment Banking Group, representing the second quarter impact of the change in accounting for investments of merchant banking subsidiaries that was adopted in the first quarter.

Net income in the second quarter of 2004 was increased by the $24 million after-tax net impact of:

A $40 million ($26 million after tax) reduction in the general allowance for credit losses reflected in Corporate Support;
$93 million ($60 million after tax) of net investment securities gains recorded in Investment Banking Group and Corporate Support;
Interest expense of $44 million ($29 million after tax) recorded in Investment Banking Group on the unwinding of hedge contracts associated with the sale of fixed income securities; and
A $51 million ($33 million after tax) adjustment that decreased Personal and Commercial Client Group's card fees revenue.

Personal and Commercial Client Group net income in the second quarter rose $87 million or 42% from a year ago, in part due to the income tax recovery and the card fees adjustment. Excluding these two significant items, the Group's net income rose 14%. Broadly-based volume growth in both Canada and the U.S. contributed to the increase, which was partially offset by lower net interest margins. Private Client Group earnings increased $14 million or 24% due to strength in full-service investing and mutual funds and due to reduced expenses. Investment Banking Group net income was unchanged, but declined after adjusting for the significant items above, due to lower revenues in some of its businesses. The Group's expenses and provision for credit losses were lower than a year ago. Corporate Support net income declined $92 million from a year ago, due to a lower recovery of credit losses and the litigation provision in 2005 and to high net investment securities gains and foreign exchange translation gains in 2004.

Relative to the first quarter, net income declined $2 million. Net income in the first quarter benefited from the $53 million after-tax impact of certain significant items, recorded primarily in Investment Banking Group:

The $32 million ($21 million after tax) impact of a change in accounting for investments of merchant banking subsidiaries that increased investment securities gains; and
A $32 million recovery of prior years' income taxes.

Excluding the impact of the $63 million after-tax benefit of the significant items included in results in the second quarter of 2005 and the $53 million after-tax benefit of the significant items above included in the first quarter, net income declined $12 million or 2.1% from the first quarter.

Net income in our wealth management businesses increased from the first quarter due to strength in full-service investing, while net income in personal and commercial banking was unchanged, as the recovery of prior years' income taxes was offset by the impact of three fewer calendar days in the quarter and higher costs. Excluding the significant items noted above that affected Investment Banking Group, the Group's results declined, as reduced revenue more than offset the benefits of lower expenses.

Year to date, net income of $1,202 million rose $90 million or 8.1% from the comparable period in 2004. EPS was $2.32, up $0.20 or 9.4%, and cash EPS was $2.40, up $0.20 or 9.1%.

As outlined previously, certain significant items affected results in each of the first two quarters of 2005 and in the second quarter of 2004. Net income in the first quarter of 2004 also benefited from the $18 million net effect of the following significant items, recorded in Corporate Support:

The one-time impact of a change in accounting for mortgage loan prepayment fees that increased net interest income by $42 million ($27 million after tax);
The one-time impact of a change in accounting for gains and losses on Bank of Montreal shares held by BMO subsidiaries that reduced non-interest trading revenue $26 million ($16 million after tax);
A reduction in the general allowance for credit losses that reduced the provision for credit losses by $40 million ($26 million after tax); and
An increase to future income tax liabilities related to U.S. real estate that increased the provision for income taxes by $19 million.

Excluding the $116 million (or $0.22 per share) after-tax impact of the significant items benefiting the current year-to-date period and the $42 million (or $0.08 per share) after-tax net impact of the significant items benefiting results of the comparable year-to-date period in 2004, net income for the year to date was $1,086 million, up $16 million or 1.5% from a year ago. On a similarly-adjusted basis, EPS for the year-to-date period rose $0.06 or 2.9% to $2.10 and cash EPS rose $0.06 or 2.8% to $2.18. The weaker U.S. dollar lowered BMO's earnings for the year to date by $25 million relative to a year ago.

Results for the year-to-date period benefited from effective cost containment, volume growth in personal and commercial banking, and higher full-service investing and mutual fund fees in wealth management. These increases were partially offset by reduced revenues in certain of our investment banking businesses and sharply lower revenues and lower recoveries of credit losses in Corporate Support, due in part to a greater reduction in the general allowance in 2004.

"Based on our year-to-date performance, we remain committed to achieving the financial targets we set for the year, although achieving our target of improving cash productivity by 150 to 200 basis points will be quite challenging as we continue to invest in growing our businesses," added Mr. Comper. "While growth in some of our business lines was somewhat less robust than in the recent past, we should continue to benefit from the breadth of our business strengths, our efforts to grow and improve performance of our U.S. businesses, and our effective credit management."

Revenue¹ for the quarter declined $17 million or 0.7% from a year ago to $2,428 million. Revenue increased $38 million or 1.6%, adjusted for the impact of the weaker U.S. dollar. Personal and Commercial Client Group revenue increased $118 million due to much higher volumes in both Canada and the United States and the impact of the card fees adjustment recorded in the prior year, partially offset by lower net interest margins. Acquired businesses in the United States contributed $25 million to revenue growth. Private Client Group revenue increased $13 million on growth in full-service investing and mutual fund revenues and improved spreads on term investments. Revenue fell $57 million in Investment Banking Group on lower net interest income and reduced trading revenue and equity and debt underwriting activity. However, commission revenue and mergers and acquisitions revenues rose on increased levels of client activity while the restructuring of VIEs also increased revenue. Corporate Support revenues were appreciably lower because of high levels of net investment securities gains and foreign exchange gains in the year-ago period.

Revenue declined $11 million or 0.5% from the first quarter, in part due to three fewer calendar days in the second quarter. Private Client Group revenue was appreciably higher on growth in full-service investing and mutual funds, while Personal and Commercial Client Group revenue declined as the effect of fewer calendar days and slightly lower net interest margin offset the benefits of volume growth. Investment Banking Group revenue was down on lower debt underwriting activity, reduced trading income and a decline in net investment securities gains. The first quarter included a $30 million increase and the second quarter included a $6 million reduction of unrealized gains when valuing merchant banking investments at fair value as a result of the first quarter change in accounting policy to record investments of merchant banking subsidiaries at fair value. The Group's revenue growth benefited from the revenue recognized on restructuring VIEs.

Year to date, revenue rose $51 million or 1.1% to $4,867 million. Revenue increased $158 million or 3.3%, adjusted for the impact of the weaker U.S. dollar. There was strong growth in Personal and Commercial Client Group, driven by higher volumes across most business lines including higher card fees, and growth in Private Client Group full-service investing and mutual fund revenues. There was lower revenue in Investment Banking Group and Corporate Support, largely due to the same factors affecting their year-over-year revenue growth in the second quarter. Revenue growth benefited from the $54 million combined year-over-year effect of the revenue recognized on restructuring VIEs and recording merchant banking investments at fair value in 2005 and the 2004 changes in accounting policies for mortgage loan prepayment fees and gains and losses on Bank of Montreal shares held by subsidiaries.

Net interest margin¹ was 1.60% in the second quarter of 2005, a decline of 15 basis points from a year ago, of which 12 basis points related to VIE assets, and 4 basis points from the first quarter. Net interest margin in both Personal and Commercial Client Group and Investment Banking Group declined relative to a year ago and relative to the first quarter. On November 1, 2004, we commenced the consolidation of certain of our customer securitization vehicles, pursuant to the adoption of the Canadian Institute of Chartered Accountants' (CICA's) new accounting requirement on the consolidation of VIEs. This lowered net interest margin as it resulted in the inclusion of approximately $21 billion of average assets in BMO's balance sheet in both the first and second quarters of 2005 (12 basis point impact in both periods). On April 29, we completed the restructuring of these VIEs and the VIE assets are no longer included in BMO's balance sheet as of that date. As a result, net interest margin in future quarters will be approximately 12 basis points higher than it would otherwise. Net interest margins are detailed in the Revenue section of the Financial Performance Review.

Non-interest expense in the second quarter of 2005 increased $14 million or 0.9% from a year ago to $1,579 million, and $46 million or 2.9% from the first quarter. The increases were partly due to the litigation provision included in Corporate Support costs. Acquired businesses in U.S. retail and business banking contributed $20 million to year-over-year expense growth.

The non-interest expense-to-revenue ratio¹ (productivity ratio) was 65.0% in the second quarter, compared with 64.0% a year ago and 62.9% in the first quarter. The cash productivity ratio¹ of 64.0% in the quarter slipped 106 basis points from a year ago. The deterioration related to a higher expense-to-revenue ratio in Investment Banking Group, as the declines in revenue were primarily concentrated in businesses with relatively low variable costs. It also related to reduced revenue in corporate support due to lower investment portfolio securities gains and lower foreign exchange gains, and to the litigation provision. The year-to-date cash productivity ratio of 62.9% improved 90 basis points from the comparable period in 2004. Excluding revenue related to the restructuring of VIEs, the year-to-date cash productivity ratio improved 31 basis points. Our target is to improve cash productivity by 150 to 200 basis points in 2005. The year-to-date shortfall was attributable to the deterioration in the second quarter.

Non-interest expense includes a $25 million provision in respect of a legal claim against a company acquired by Private Client Group in the United States in 2002. The provision was recorded in the U.S. results of the Corporate Support segment since the subject of the litigation does not relate to ongoing operations of Private Client Group.

Results for the quarter included a $46 million specific provision for credit losses, compared with a specific provision of $45 million a year ago and a $43 million specific provision in the first quarter. There was a $40 million reduction in the general allowance for credit losses in the second quarter of 2005 and in each of the first and second quarters of 2004. Specific provisions for credit losses were $89 million for the year to date, compared with $100 million a year ago. We now anticipate specific provisions for credit losses of $275 million or less in fiscal 2005, down from our annual target of $400 million or less and most recent estimate of $350 million or less.

The Tier 1 capital ratio was 9.38%, down from 9.72% at the end of the first quarter and 9.81% at the end of 2004. The decreases were primarily attributable to increases in risk-weighted assets, largely due to loan growth in Personal and Commercial Client Group and Investment Banking Group.

During the quarter, we sold our interest in the land and building at 111 West Monroe Street, our Chicago headquarters, for US$114 million. At that time, we entered into lease agreements covering approximately one-half the building. The nominal gain on sale has been deferred and will be amortized over the leaseback term.

During the quarter, we repurchased 3,252,800 Bank of Montreal common shares under our common share repurchase program at an average cost of $55.48 per share for total consideration of $180 million.

____________________
¹ On a taxable equivalent basis — see the Non-GAAP Measures section

Annual Targets for 2005

2005 Earnings and Economic Outlook
We remain committed to achieving our annual targets for 2005 that were established at the end of last year and which are outlined above; however, achieving our target of improving cash productivity by 150 to 200 basis points will be quite challenging as we continue to invest in growing our businesses.

After expanding 2.8% in calendar year 2004, Canadian real GDP is expected to grow 2.9% in 2005, down modestly from our 3.2% estimate established at the start of the year. Low interest rates continue to support personal and business spending, while the high Canadian dollar continues to restrict exports. Short-term interest rates are expected to remain stable until autumn, before rising modestly late in the year. The low interest rate environment should underpin growth in household and business lending for the remainder of the year. The Canadian dollar should remain within a narrow range of 79 to 81 cents U.S. in the months ahead, with support from the Canadian trade surplus offsetting the effects of rising U.S. interest rates and political uncertainty in Canada.

Though moderating from the 4.4% pace of 2004 due to reduced monetary and fiscal stimulus and increased energy costs, the U.S. economy is projected to grow at a still solid rate of 3.6% in 2005, down marginally from our year-end estimate of 3.7%. Business spending on productivity-enhancing capital equipment is expected to remain firm amid rising confidence and growing profits. This should support demand for business loans. However, continued gradual increases in interest rates by the Federal Reserve may moderate personal spending and cool housing markets, thereby slowing demand for residential mortgages.

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 in December 2004 when we filed our Annual Report and other annual 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 and the effectiveness of controls and procedures over those disclosures. BMO's CEO and CFO certify the appropriateness of our financial disclosures in BMO's interim filings with securities regulators, including this MD&A and the accompanying unaudited interim consolidated financial statements for the period ended April 30, 2005.

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

A comprehensive discussion of our businesses, strategies and objectives can be found in Management's Discussion and Analysis in BMO's 2004 Annual Report, which can be accessed on our web site at www.bmo.com/investorrelations. Readers are also encouraged to visit the site to view other 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 www.bmo.com/investorrelations, on the Canadian Securities Administrators' web site at www.sedar.com, and on the EDGAR section of the SEC's web site at www.sec.gov.

To view the rest of this news release consisting of:

Effects of Significant Items Schedule
Financial Highlights
Financial Performance Review
Unaudited Financial Statements

CAUTION REGARDING FORWARD-LOOKING 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 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.

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 on local, national or international economies; the effects of disruptions to public infrastructure, such as transportation, communications, power or water supply; 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 AND MEDIA PRESENTATION

Investor Presentation Materials
Interested parties are invited to visit our web site at www.bmo.com/investorrelations 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, 18^th Floor, 1 First Canadian Place, Toronto, Ontario, M5X 1A1.

Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on Wednesday, May 25, 2005 at 2:30 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 Wednessday, June 8, 2005 by calling 416-695-5292 (from within Toronto) or 1-888-742-2491 (toll-free outside Toronto) and entering passcode 1163.

A live webcast of the quarterly conference call can be accessed on our web site at www.bmo.com/investorrelations. A replay can be accessed on the site until Monday, August 22, 2005.

Media Relations Contacts
Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1101

Investor Relations Contacts
Susan Payne, Senior Vice-President, Investor Relations, susan.payne@bmo.com, 416-867-6656
Steven Bonin, Director, Investor Relations, steven.bonin@bmo.com, 416-867-5452
Krista White, Senior Manager, Investor Relations, krista.white@bmo.com, 416-867-7019

Chief Financial Officer
Karen Maidment, Senior Executive Vice-President and Chief Financial Officer, karen.maidment@bmo.com, 416-867-6776

Corporate Secretary
Velma Jones, Vice-President and Corporate Secretary, Corporate and Legal Affairs, corp.secretary@bmo.com, 416-867-6785