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BMO Financial Group Reports Results for the Third Quarter of 2005

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Personal and Commercial Banking Earns Record Net Income and Wealth Management Continues to Achieve Solid Year-over-Year Growth. BMO’s Overall Earnings Decline Compared to a Year Ago Due to Unusually Favourable Credit Performance in 2004 and Lower Earnings in Certain Investment Banking Group Businesses. Quarterly Dividends Increase by $0.03 or 6.5% per Common Share.

Year-over-Year Operating Highlights for the Quarter:

Net income of $541 million, down $102 million or 16%
A $73 million specific provision for credit losses and no reduction in the general allowance, compared with specific recoveries of $70 million and a $40 million reduction in the general allowance a year ago, resulting in a $183 million increase in provisions for credit losses, excluding which, net income would have increased $17 million
EPS¹ of $1.05 and cash EPS² of $1.08, both down 15%
ROE of 16.5%, compared with 21.0%
Revenue² growth of 2.0% (4.2% growth excluding the impact of the weaker U.S. dollar)
Expense growth of 2.6% (5.2% growth excluding the impact of the weaker U.S. dollar)
Productivity ratio² deteriorates by 42 basis points to 64.7% and cash productivity ratio² deteriorates by 59 basis points to 63.8%
Tier 1 capital ratio of 9.39%, compared with 9.44% a year ago and 9.38% at the end of the second quarter
Operating Group Net Income
- Personal and Commercial Client Group up $39 million or 15% to $307 million
- Private Client Group up $5 million or 8% to $63 million
- Investment Banking Group down $46 million or 20% to $184 million
- Corporate Support down $100 million, due to very favourable credit performance in 2004

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

Net income of $1,743 million, down $12 million or 0.7%
EPS of $3.37 and cash EPS of $3.48, both up $0.01
ROE of 18.4%, compared with 20.0%
Productivity ratio improves 51 basis points to 64.2% and cash productivity ratio improves 40 basis points to 63.2%

Other Highlights:

Net income down $59 million or 10% from the second quarter of 2005
Quarterly dividends increase by $0.03 or 6.5% to $0.49 per common share, up 11% from a year ago

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.

® Registered trade-mark of Bank of Montreal.

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.

THIRD QUARTER 2005 MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A)
MD&A commentary is as of August 23, 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, August 23, 2005 — BMO Financial Group reported net income of $541 million for the third quarter ended July 31, 2005, down $102 million or 16% from the record results of a year ago. EPS declined $0.19 or 15% to $1.05.

PERFORMANCE OVERVIEW
“This quarter’s earnings did not match the record results of a year ago, which benefited from particularly favourable credit performance,” said Tony Comper, President and Chief Executive Officer, BMO Financial Group. “Our personal and commercial banking and wealth management businesses continue to deliver strong year-over-year earnings growth; however, some of our investment banking businesses have not performed as well in the current interest rate environment.”

Personal and Commercial Client Group earned record net income in the third quarter, rising $39 million or 15% from a year ago. In Canada, there was growth in both personal and commercial product volumes and effective cost containment. In the United States, higher volumes were attributable to acquisitions and to loan growth. The impact of volume growth in both Canada and the U.S. was partially offset by lower net interest margins. Private Client Group earnings increased $5 million or 8%, due to strength in full-service investing and mutual funds. Investment Banking Group net income declined $46 million or 20%, in large part due to last year’s $39 million ($25 million after tax) recovery of a credit loss and the collection of $20 million ($13 million after tax) of associated interest revenue on a loan that was previously written off. Corporate Support net income declined $100 million from a year ago due to a lower recovery of credit losses, including the impact of a $40 million ($26 million after tax) reduction in the general allowance in the year-ago period. The weaker U.S. dollar lowered BMO’s earnings by $12 million relative to a year ago.

Relative to the second quarter of 2005, BMO’s net income declined $59 million or 10%, primarily because that quarter’s results included: a $44 million ($37 million after tax) revenue increase in Investment Banking Group related to the restructuring of customer securitization Variable Interest Entities (VIEs); and a $40 million ($26 million after tax) reduction in the general allowance for credit losses reflected in Corporate Support. Net income was higher than in the second quarter in personal and commercial banking due to volume growth and the impact of three more calendar days in the third quarter, while net income declined in wealth management as reductions in full-service and direct investing revenues were only partially offset by the impact of higher mutual fund revenue. Investment Banking Group net income declined but was higher after adjusting for the VIE revenues, due in part to higher net investment securities gains.

Year to date, net income of $1,743 million fell $12 million or 0.7% from the comparable period in 2004. EPS was $3.37 and cash EPS was $3.48, both up $0.01 or 0.3%. Results in both periods were affected by certain items that largely offset. The weaker U.S. dollar lowered BMO’s earnings for the year to date by $37 million relative to a year ago.

“We remain focused on the financial targets we set for the year,” added Mr. Comper. “We made significant improvements in productivity in the last two years; however, despite strong improvements in both our personal and commercial banking and wealth management businesses, based on our year-to-date performance, achieving our enterprise-wide productivity target for this year will be quite challenging.”

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 recoveries of credit losses in Corporate Support, due in part to a greater reduction in the general allowance in 2004.

Revenue¹ for the quarter increased $48 million or 2.0% from a year ago to $2,441 million. Adjusted for the impact of the weaker U.S. dollar, revenue increased $102 million or 4.2%. Personal and Commercial Client Group revenue increased $62 million due to higher volumes in both Canada and the United States, partially offset by lower net interest margins. Acquired businesses in the United States contributed $22 million to revenue growth. Private Client Group revenue increased $33 million on growth in full-service investing and mutual fund revenues and on improved spreads on term investment products. Revenue fell $60 million in Investment Banking Group due to lower net interest income. There were high interest collections in the year-ago period on loans that were previously written off, and in 2005 there were lower spreads on corporate loans and in our interest rate sensitive businesses. There were higher net investment securities gains, mergers and acquisitions fees, debt underwriting activity and commission revenues.

Revenue increased $13 million or 0.5% from the second quarter due to three more calendar days in the third quarter, higher net investment securities gains and volume growth in personal and commercial banking. Private Client Group revenue declined due to softer client trading activity in full-service and direct investing. Investment Banking Group revenue was down as the second quarter included $44 million of revenue on restructuring VIEs. There were increases in net investment securities gains and growth in debt underwriting and mergers and acquisitions activities.

Year to date, revenue rose $99 million or 1.4% to $7,308 million. Revenue increased $260 million or 3.6%, adjusted for the impact of the weaker U.S. dollar. There was strong growth in Personal and Commercial Client Group, driven by higher volumes, particularly in commercial products, higher insurance revenues and higher card fees, due in part to a $51 million adjustment recorded in the second quarter of 2004. There was also growth in Private Client Group full-service investing, mutual fund and term investment product revenues, which more than offset lower direct investing revenues. Investment Banking Group revenues declined due to lower net interest income, attributable to the same factors affecting results for the third quarter relative to a year ago. Corporate Support revenue declined, largely due to high net investment securities gains and an adjustment to mortgage loan prepayment fees in 2004.

Net interest margin¹ was 1.65% in the third quarter of 2005, down 22 basis points from a year ago. Net interest margin was lower in both U.S. and Canadian personal and commercial banking and in Investment Banking Group. 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 in the first and second quarters of 2005 relative to comparable periods as it resulted in the inclusion of approximately $21 billion of average assets in BMO’s balance sheet. On April 29, 2005, we completed the restructuring of these VIEs; consequently, the VIE assets were no longer included in BMO’s balance sheet as of that date. BMO’s net interest margin in the first and second quarters was approximately 12 basis points lower than it would have been if we were not required to consolidate VIE assets in those periods and Investment Banking Group’s net interest margin was approximately 9 basis points lower than it would have been. Relative to the second quarter, BMO’s net interest margin in the third quarter increased by 5 basis points as personal and commercial banking margins in Canada rose modestly but declined in the United States. Net interest margin in Investment Banking Group declined due to rising short-term interest rates in the United States and a lower spread between longer-term and short-term rates. Net interest margin declined for the year to date, largely due to the same factors discussed above. Net interest margins are detailed in the Revenue section of the Financial Performance Review.

Non-interest expense in the third quarter of 2005 increased $41 million or 2.6% from a year ago to $1,579 million, and was unchanged from the second quarter. Acquired businesses in U.S. retail and business banking contributed $15 million to year-over-year expense growth. Expenses in the second quarter included a $25 million litigation provision, the impact of which on comparisons was partially offset by three more calendar days in the third quarter.

The non-interest expense-to-revenue ratio¹ (productivity ratio) was 64.7% in the third quarter, compared with 64.3% a year ago and 65.0% in the second quarter. The cash productivity ratio¹ of 63.8% in the quarter deteriorated 59 basis points from a year ago. The deterioration related to a higher expense-to-revenue ratio in Investment Banking Group, as its reduced revenues were primarily concentrated in businesses with relatively low variable costs. BMO’s year-to-date cash productivity ratio of 63.2% improved 40 basis points from the comparable period in 2004. Our target is to improve cash productivity by 150 to 200 basis points in 2005. The year-to-date shortfall is primarily attributable to below-target performance in Investment Banking Group, although that Group’s productivity ratio has been better than most of its Canadian peers.

Results for the third quarter included a $73 million specific provision for credit losses, compared with specific recoveries of $70 million a year ago and a $46 million specific provision in the second quarter. There was no change in the general allowance for credit losses in the third quarter of 2005 but there was a $40 million reduction in the second quarter and in each of the first three quarters of 2004. Specific provisions for credit losses were $162 million for the year to date, compared with $30 million in the comparable period a year ago. We continue to anticipate specific provisions for credit losses of $275 million or less in fiscal 2005, down from our annual target of $400 million or less that was established at the beginning of the year.

The Tier 1 capital ratio was 9.39% at the end of the quarter, compared with 9.38% at the end of the second quarter and 9.81% at the end of 2004. The decrease from the year end was primarily attributable to increased risk-weighted assets, largely due to loan growth in Personal and Commercial Client Group and loan and commitment growth in Investment Banking Group.

During the quarter, we repurchased 842,200 Bank of Montreal common shares under our common share repurchase program at an average cost of $56.26 per share for total consideration of $47.4 million. Our 12-month normal-course issuer bid expired on August 6 and 7,520,900 shares were repurchased under the program at an average cost of $55.51 for total consideration of $417.5 million. Subsequent to the quarter end, BMO’s Board of Directors authorized management to file a Notice of Intention to make a new normal-course issuer bid, subject to the approval of the Toronto Stock Exchange, to repurchase for cancellation up to 15 million Bank of Montreal common shares, representing approximately 3% of BMO’s public float.

On August 8, 2005, BMO announced that it had signed a definitive agreement to sell its interest in its U.S. direct investing operation, Harrisdirect. The sale is expected to result in aggregate cash proceeds of approximately $910 million (US$750 million), including a distribution of approximately $60 million (US$50 million) to be paid by Harrisdirect immediately prior to closing. The transaction, which is subject to normal regulatory clearances, is expected to close by October 31, 2005. After deduction of transaction costs and other adjustments that are expected to be finalized on closing, the transaction is expected to result in a modest gain on sale and add approximately 35 basis points to BMO’s Tier 1 capital ratio. The operations of Harrisdirect are not material to the results of BMO Financial Group.

BMO’s dividend payout ratio for the year to date was 39.5%. On August 23, 2005, BMO announced an increase in quarterly common share dividends, raising the quarterly payment for the second time this year, by 6.5% from $0.46 to $0.49. The increase is reflective of BMO’s policy of achieving a 35% to 45% dividend payout ratio over time. Quarterly dividends have now increased 11% from a year ago.

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

Annual Targets for 2005

2005 Earnings and Economic Outlook
We remain focused on our annual targets for 2005, which are outlined in the foregoing table and were established at the end of last year. However, achieving our target of improving cash productivity by 150 to 200 basis points will be quite challenging. We improved our cash productivity ratio by 260 basis points in fiscal 2003 and by 160 basis points in fiscal 2004. Our personal and commercial banking and wealth management businesses should both achieve targeted productivity improvements in fiscal 2005; however, our investment banking businesses will likely lag the target as that Group’s results were very strong in 2004 but have been affected by the interest rate environment in 2005. Investment Banking Group’s productivity ratio has been one of the best of the Canadian peer group.

After expanding 2.9% in calendar year 2004, Canada’s economy is projected to grow at a similar pace in 2005, modestly below our 3.2% estimate established at the start of the year. Low interest rates continue to support personal spending, business investment and housing activity. Recent data suggest that the negative effect of the high Canadian dollar on economic growth has started to dissipate. As a result, the Bank of Canada is widely expected to resume raising short-term interest rates in September. Fortunately, low inflation implies only a gradual tightening of monetary policy, so the still-low interest rate environment should support growth in household and business lending for the remainder of this year. The Canadian dollar is projected to trade within a range of 80 to 83 cents US in the months ahead, with support from the large Canadian trade surplus offsetting the effects of lower interest rates in Canada than in the United States.

Though moderating from the 4.2% pace of 2004 in response to reduced monetary and fiscal stimulus and increased energy costs, the U.S. economy is projected to grow at a still-solid rate of 3.7% in 2005, unchanged from our year-end estimate. Business spending on capital equipment grew at a solid rate in the first six months of 2005 due to rising confidence and growing profits. Continued spending should promote further strong business loan growth in the year ahead. In contrast, further gradual increases in interest rates will likely moderate the pace of personal spending and housing activity, 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 July 31, 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:

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 Tuesday, August 23, 2005 at 2:30 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 Tuesday, September 6, 2005 by calling 416-695-5292 (from within Toronto) or 1-888-742-2491 (toll-free outside Toronto) and entering pass code 1164.

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, November 28, 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

BMO Financial Group President and CEO Tony Comper said BMO's personal and commercial banking and wealth management businesses continue to deliver strong year-over-year earnings growth and he indicated management remains focused on the financial targets it set for the year.

BMO Financial Group reported net income of $541 million for the third quarter ended July 31, 2005, driven by strong growth in its personal and commercial banking and wealth management businesses.