News Releases

PDF format of entire Quarterly news release including this Performance Overview, Financial Highlights table, the Financial Performance Review and Unaudited Financial Statements

Fiscal 2006 Year-over-Year Operating Highlights:

• Record net income of $2,663 million, up $267 million or 11%
• EPS¹ up $0.52 or 11.2% to $5.15, and cash EPS² up $0.45 or 9.4% to $5.23
• ROE of 19.2%, up from 18.8%
• Total shareholder return of 24.1% for fiscal 2006
• Revenue² increases 1.5% (4.2% excluding Harrisdirect³ and 5.9% after also excluding the impact of the weaker U.S. dollar)
• Expense increases 0.3% (4.3% excluding Harrisdirect and 6.1% after also excluding the impact of the weaker U.S. dollar)
• Productivity ratio improves 77 basis points to 62.8% and cash productivity ratio by 25 basis points to 62.4%
• A $176 million provision for credit losses, consisting of $211 million of specific provisions and a $35 million reduction in the general allowance, compared with a $179 million provision for credit losses, consisting of $219 million of specific provisions and a $40 million reduction in the general allowance
• An effective tax rate² of 23.6%, compared with 28.8%

• Announced today, a quarterly dividend increase of $0.03 to $0.65 per common share, representing a 33% increase over last year.  On an annualized basis, the $0.65 dividend represents approximately 50% of 2006 earnings available to shareholders, consistent with BMO's industry-leading targeted dividend payout range of 45% to 55%

• Operating Group Net Income
  • Personal and Commercial Banking up $57 million or 4.8% to a record $1,256 million
    • P&C Canada up $67 million or 6.2% to a record $1,141 million, due to volume growth, the MasterCard IPO gain and a 2005 increase in our customer loyalty card reserves, partially offset by lower net interest margins and increased expenses
    • P&C U.S. down $10 million or 7.4% to $115 million as strong loan growth and improved deposits spreads were more than offset by the weaker U.S. dollar, lower loan spreads and higher costs associated with new branches and integrating acquisitions (net income down US$1 million in source currency)
  • Private Client Group up $40 million or 13% to a record $360 million, due to growth in fee-based revenues from higher asset levels as well as increased net interest income, partially offset by gains on the sale of Harrisdirect and TSX common shares in 2005
  • Investment Banking Group up $7 million or 0.9% to a record $860 million, largely due to significantly higher trading revenues, increases in merger and acquisition fees and commissions, and a low tax rate. Results in 2005 included $44 million ($37 million after tax) of revenue recognized on restructuring VIEs
  • Corporate Services up $163 million to $187 million, largely due to lower income taxes, reduced expenses and lower provisions for credit losses

�   Registered trade-mark of Bank of Montreal.

Year-over-Year Operating Highlights for the Quarter:

• Net income of $696 million, up $32 million or 4.8%
• EPS of $1.35, up $0.07 or 5.5%, and cash EPS of $1.37, up $0.05 or 3.8%
• ROE of 19.4%, down from 20.0%
• Revenue declines 5.9% (2.3% excluding Harrisdirect and 1.2% after also excluding the impact of the weaker U.S. dollar)
• Expense declines 0.9% (increases 3.0% excluding Harrisdirect and 4.3% after also excluding the impact of the weaker U.S. dollar)
• Productivity ratio deteriorates by 329 basis points to 64.6% and cash productivity ratio by 369 basis points to 64.2%
• A $16 million provision for credit losses, consisting of $51 million of specific provisions and a $35 million reduction in the general allowance, compared with $57 million of specific provisions and no reduction in the general allowance
• An effective tax rate of 17.4%, compared with 29.7%
• Operating Group Net Income
  • Personal and Commercial Banking down $11 million or 3.3% to $294 million
    • P&C Canada unchanged at $271 million, as volume growth was offset by lower net interest margin and an increase in expenses
    • P&C U.S. down $11 million to $23 million, due to the weaker U.S. dollar, costs of integrating acquisitions and branch technology expenses (net income down US$7 million in source currency)
  • Private Client Group down $22 million to $85 million, but up $12 million or 18% excluding gains on asset sales in the year-ago period, due to higher mutual fund fees and interest revenues
  • Investment Banking Group down $40 million or 17% to $186 million, due primarily to reductions in trading revenues and investment securities gains (in part due to a gain on sale of TSX shares in 2005), partially offset by low income taxes 
  • Corporate Services up $105 million to $131 million, largely due to lower income taxes and reduced provisions for credit losses

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.

3 In the fourth quarter of 2005, BMO completed the sale of Harrisdirect, our former U.S. direct-investing business. Certain of our revenue and expense growth and productivity measures have been disclosed on a basis that excludes Harrisdirect results in the comparative periods, to assist in explaining performance.

References to retail and business banking refer to Personal and Commercial Banking 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.

FOURTH QUARTER 2006 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A)

This MD&A commentary is as of November 28, 2006. 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). This MD&A should be read in conjunction with the unaudited consolidated financial statements for the twelve and three month periods ended October 31, 2006, included in this release, and the annual MD&A for the year ended October 31, 2005, included in BMO's 2005 Annual Report.

Summary Data

Toronto, November 28, 2006 – BMO Financial Group reported net income of $696 million for the fourth quarter ended October 31, 2006, up $32 million or 4.8% from a year ago. EPS increased $0.07 or 5.5% to $1.35 and Cash EPS increased $0.05 or 3.8% to $1.37.

PERFORMANCE OVERVIEW
“While operating momentum slowed in the fourth quarter due to a weaker business environment, BMO earned record net income in 2006 with 11% earnings growth and a 19.2% return on equity,” said Tony Comper, President and Chief Executive Officer, BMO Financial Group. “It was a good year overall, marking BMO's fourth consecutive year of record results. All three operating groups delivered record net income, for the second consecutive year. The total return on BMO common shares was just over 24% and we increased our dividend payout target to an industry leading range of 45% to 55% of income available to shareholders.

“In the final quarter, favourable income taxes and low credit losses helped us maintain strong financial performance in spite of our businesses facing a more difficult operating environment. Net income for the quarter was surpassed only by our record performance in the third quarter.

“We met or exceeded four of our five performance targets for the year. We did not achieve our targeted cash productivity improvement due to continued investment in our retail businesses and a change in our business mix. Our targets for 2007 are again ambitious as we continue to pursue our vision of becoming the top-performing financial services company in North America.”

BMO's net income increased $32 million or 4.8% from the fourth quarter a year ago to $696 million. Results in the current quarter benefited from a particularly low effective tax rate and the $23 million ($0.04 per share) after-tax effect of a $35 million reduction in the general allowance for credit losses.  Results in the fourth quarter of 2005 benefited from the $43 million ($0.09 per share) after-tax net impact of: a $49 million ($18 million after tax) gain on sale of Harrisdirect; a $50 million ($32 million after tax) gain on sale of TSX common shares; and a $29 million ($19 million after tax) gain on sale of a Calgary office tower; net of a $40 million ($26 million after tax) increase in customer loyalty card reserves.

Personal and Commercial Banking (P&C) net income declined $11 million or 3.3% from the fourth quarter a year ago to $294 million. Personal and Commercial Banking Canada (P&C Canada) net income was unchanged, at $271 million. Volume growth was offset by lower net interest margins and increased expenses. Personal and Commercial Banking U.S. (P&C U.S.) net income declined $11 million or 28% to $23 million. The weaker U.S. dollar and higher costs associated with the integration of acquisitions and a new technology platform offset revenue growth. Private Client Group net income decreased $22 million or 21%, but increased $12 million or 18% excluding a $49 million ($18 million after tax) gain on the sale of Harrisdirect and a $25 million ($16 million after tax) share of the gain on the sale of TSX common shares in the fourth quarter a year ago. Investment Banking Group net income decreased $40 million or 17%, driven by lower trading revenues in the weaker capital markets environment, partially offset by a lower effective income tax rate. The prior year benefited from IBG's $25 million ($16 million after tax) share of the gain on the sale of TSX common shares. Corporate Services net income increased $105 million, primarily due to a low effective tax rate and reduced provisions for credit losses.

BMO's net income decreased $14 million or 2.0% from the record results of the third quarter. P&C net income decreased $82 million or 22%. P&C Canada net income declined $74 million or 21%. Their third quarter results included a $38 million ($25 million after tax) gain on the MasterCard Incorporated IPO and a $26 million recovery of prior years' income taxes. The balance of the decline was attributable to lower revenues as expense levels were comparable in both periods as we continued to invest in our businesses. P&C U.S. net income declined $8 million or 25% as increased costs and spread compression offset the benefits of volume growth. Expense growth was attributable to higher technology expense, costs associated with higher business volumes, and increased marketing and branch maintenance costs. Private Client Group net income was unchanged as lower commission revenues were matched by reduced costs. Investment Banking Group net income declined $15 million or 7.5% due to lower trading and commission revenues, partially offset by a lower effective income tax rate. Corporate Services net income increased $83 million due to low income taxes, reduced provisions for credit losses and higher revenues.

Net income for fiscal 2006 was $2,663 million, up $267 million or 11% from 2005. EPS was $5.15, up $0.52 or 11%, and cash EPS was $5.23, up $0.45 or 9.4%.

P&C net income for fiscal 2006 increased $57 million or 4.8% to $1,256 million.  P&C Canada's net income for 2006 was $1,141 million, up $67 million or 6.2% from the record results of a year ago.  Results in fiscal 2005 included the $8 million net benefit of the $40 million ($26 million after tax) customer loyalty card reserve increase and $34 million of recoveries of prior years' income taxes.  Results in fiscal 2006 included the $51 million benefit of the $38 million ($25 million after tax) MasterCard IPO gain and a $26 million recovery of prior years' income taxes.  The remaining increase was driven by volume growth, partially offset by lower net interest margins and increases in expenses and the provision for credit losses.  P&C U.S. net income decreased by $10 million or 7.4% as the impact of strong loan growth was offset by the effect of the weaker U.S. dollar, reduced net interest margin and increased expenses.  Excluding the impact of the weaker U.S. dollar, our investments in acquisitions integration and branch technology in 2006 and the branch charter consolidation in 2005, our net income increased 4.1% from the prior year.  Private Client Group net income of $360 million increased $40 million or 13%, but would have increased $74 million or 27% excluding the gains on the sales of Harrisdirect and TSX common shares in 2005.  The increase was attributable to higher fee-based revenue from increased asset levels and higher net interest income, excluding the impact of having sold Harrisdirect.  Investment Banking Group net income was $860 million, an increase of $7 million or 0.9%.  Results in 2005 included $44 million ($37 million after tax) of revenue recognized on restructuring VIEs.  Excluding this item, net income increased $44 million or 5.5%. Results benefited from income tax initiatives, strong trading revenue, higher merger and acquisition fees and improved commissions.  Corporate Services net income increased $163 million to $187 million, due primarily to lower income taxes, reduced expenses and a higher recovery of credit losses.

Revenue for the quarter decreased $156 million or 5.9% from a year ago to $2,494 million but decreased $60 million or 2.3% excluding Harrisdirect, and by $21 million or 0.8% after also excluding the $39 million effect of last year's gains on sale of TSX shares and the Calgary office tower net of the credit card fees reduction.  The weaker U.S. dollar lowered revenue growth by $30 million or 1.1 percentage points.  P&C revenue increased $51 million or 3.8% to $1,383 million.  P&C Canada revenue increased $50 million or 4.4% to $1,158 million, due to volume growth in personal and commercial products and the 2005 customer loyalty card reserve increase. These factors were partially offset by the effects of lower net interest margin, as mortgage and personal loans were competitively priced, and by lower securitization revenue.  P&C U.S. revenue increased $1 million or 0.7% to $225 million.  The weaker U.S. dollar lowered P&C U.S. revenue growth by $13 million or 5.6 percentage points.  Increased revenues were attributable to strong loan growth, acquisitions and new branches, partly offset by reduced net interest margin.  Private Client Group revenue decreased $107 million, but increased $14 million or 3.0% excluding the operating results of Harrisdirect and last year's asset sales, and by $18 million or 4.0% after also excluding the impact of the weaker U.S. dollar.  Higher net interest income and mutual fund revenues were partially offset by lower brokerage fees.  Investment Banking Group revenue decreased $73 million or 10%, or by $56 million and 7.9% excluding the impact of the weaker U.S. dollar.  There was a sharp decline in trading revenues.  The largest contributor was a reduction in commodity derivative revenues primarily driven by reduced client flows, and declines in market prices and implied volatility in crude oil, as well as our positioning in natural gas. These factors resulted in a small trading loss in commodity of derivatives.  Lower equity underwriting, the continuing effect of compressed spreads in interest-rate-sensitive businesses and the run-off of non-core assets also contributed to the decline.  The impact of higher corporate banking assets was partially offset by the effect of reduced spreads in the competitive environment.  There were increases in merger and acquisition fees, lending fees and investment securities gains, excluding the 2005 gain on the sale of the TSX shares. 

BMO's revenue fell $109 million or 4.2% from the third quarter, in part due to that quarter's $38 million MasterCard IPO gain. P&C revenue declined $74 million or 5.1%. P&C Canada revenue declined $70 million or 5.8%, due to the MasterCard IPO gain in the third quarter, as well as lower securitization and insurance revenues and reduced net interest margins from decreased mortgage refinancing fees. P&C U.S. revenue declined $4 million or 1.6% due to competitive pressures on loan pricing and changes in product mix as customers shifted to lower-margin deposits and fixed-rate loan products. Private Client Group revenue decreased $12 million or 2.5%, primarily due to lower direct investing commission revenue. Investment Banking Group revenue declined by $45 million or 6.6%, due to reduced trading and commission revenues. Commodity derivatives trading revenues were significantly lower due primarily to the same factors that affected the year-over-year comparison. In addition, during the third quarter, the commodity derivatives business was well positioned to benefit from increased volatility and associated client flows stemming from increased market sensitivity to geopolitical events. Corporate Services revenues increased $22 million as it earned $23 million of our $27 million gain on the securitization of $1.5 billion of our credit card receivables.

BMO's fiscal 2006 revenue rose $154 million or 1.5% to $10.1 billion, but increased $407 million or 4.2% excluding Harrisdirect. The weaker U.S. dollar lowered revenue growth by $170 million or 1.7 percentage points. P&C revenue rose $269 million or 5.1% to $5,485 million. P&C Canada revenue increased $260 million or 6.0% to $4,579 million, due to volume growth in personal and commercial products, the 2005 customer loyalty card reserve increase, the gain on the MasterCard IPO, higher revenue from insurance and increased sales of term investment products and mutual funds. These factors were partially offset by the effects of lower net interest margins and reduced securitization revenue. P&C U.S. revenue increased $9 million or 0.9% to $906 million. The weaker U.S. dollar lowered P&C U.S. revenue growth by $65 million or 7.2 percentage points. Increased revenues were attributable to strong loan growth, acquisitions and new branches, partly offset by reduced net interest margin. Private Client Group revenue decreased $143 million or 7.0%, but increased $135 million or 7.7% excluding Harrisdirect's operating results and last year's asset sales, and by $157 million or 8.9% after also excluding the impact of the weaker U.S. dollar. Strong revenue growth was driven by increased fee-based asset growth, higher client trade volumes in direct investing and increased net interest income. Investment Banking Group revenue increased $39 million or 1.4%, but rose by $83 million or 3.1% excluding the $44 million gain on restructuring VIEs in 2005. The weaker U.S. dollar lowered revenue growth by $96 million or 3.5 percentage points. Trading revenues were appreciably higher, largely related to increased commodity derivatives trading revenues associated with high volatility in the energy sector. There was significantly higher merger and acquisition revenue and growth in commission revenues. Corporate Services revenues declined by $11 million but were $18 million higher excluding the gain on sale of the Calgary office building in 2005.

BMO's overall net interest margin¹ was 1.55% in the fourth quarter of 2006, a decline of 7 basis points from a year ago and 5 basis points from the third quarter. Net interest margin declined in each of our business segments relative to the third quarter and was lower than a year ago in all segments except Private Client Group. BMO's net interest margin in fiscal 2006 was 1.58%, a decline of 7 basis points from fiscal 2005. Net interest margin was down comparably in each of the segments, except Private Client Group where spreads increased. Net interest margins are detailed in the Revenue section of the Financial Performance Review.

Non-interest expense in the fourth quarter of 2006 decreased $13 million or 0.9% from a year ago to $1,613 million, but increased $47 million or 3.0% excluding Harrisdirect. The weaker U.S. dollar lowered expense growth by $20 million or 1.3 percentage points. P&C Canada expenses rose $26 million or 3.7% due to the expansion of the retail and commercial sales forces as well as increased initiative and marketing expenditures. P&C U.S. expenses were $15 million or 9.8% higher than a year ago, due to acquisitions and their integration costs, new branches and costs of implementing a new branch technology platform, partially offset by the effects of the weaker U.S. dollar. Private Client Group expenses were $55 million or 14% lower than in 2005, but were $5 million higher excluding Harrisdirect and $7 million or 2.2% higher after also excluding the impact of the weaker U.S. dollar. The low rate of growth was due to reduced revenue-based costs, in line with lower revenues, and effective cost containment. Investment Banking Group expenses rose $22 million or 5.8% mainly due to increased performance-based costs. The fourth quarter of 2005 included reductions to performance-based costs to align with the full year results.

Non-interest expense increased $13 million or 0.7% from the third quarter. The increase was primarily attributable to increased expenses in P&C U.S. due to higher technology costs and expenses associated with higher business volumes, marketing and branch maintenance.

In fiscal 2006, non-interest expense increased $21 million or 0.3% to $6,353 million, but increased $264 million or 4.3% excluding Harrisdirect. The weaker U.S. dollar lowered expense growth by $112 million or 1.8 percentage points. Expenses increased $117 million or 4.7% in P&C Canada due to expansion of the sales forces and increased investments in our physical distribution network, including replacing our ABM network, technology enhancements for the customer-facing workforce and marketing expenditures. P&C U.S. expenses rose $22 million or 3.4% due to acquisition-related expenses, new branch expansion, implementing our new technology platform and costs associated with higher business volumes, partially offset by the effects of the weaker U.S. dollar and savings from last year's costs of implementing the branch charter consolidation. Private Client Group expenses declined $186 million, but would have increased $57 million or 4.4% excluding Harrisdirect and by $75 million or 5.9% after also excluding the impact of the weaker U.S dollar. Higher expenses were due to increased revenue-based costs and investment in our sales force and U.S. investment management business. Investment Banking Group's expenses rose $124 million or 8.4% due to higher performance-based compensation costs, as stronger revenues in 2006 were concentrated in businesses with relatively higher variable costs. Corporate Services expenses fell $56 million due in part to a $25 million litigation provision recorded in the second quarter of 2005.

The productivity ratio was 64.6% in the fourth quarter of 2006, compared with 61.4% a year ago. The cash productivity ratio deteriorated 369 basis points to 64.2%, or by 335 basis points excluding Harrisdirect in the year-ago period. Our productivity ratio deteriorated by 314 basis points and our cash productivity ratio by 312 basis points from the third quarter. In fiscal 2006, our productivity ratio improved 77 basis points from 2005, while our cash productivity ratio improved by 25 basis points, the differing rates of change relating largely to the sale of Harrisdirect and the resulting reduction in the amortization of intangible assets, a non-cash charge. The 25 basis point improvement in our cash productivity ratio in fiscal 2006 fell short of BMO's 2006 financial target of improving cash productivity by 100 to 150 basis points. The overall shortfall was primarily due to a change in the mix of Investment Banking Group's revenues and continued investment in our P&C businesses. We made good progress in improving productivity in P&C Canada as solid revenue growth outstripped expense growth, but the improvement fell short of BMO's overall target as revenue growth was lowered by reduced net interest margin, while expenses were affected by the initiatives discussed in the preceding paragraph. P&C U.S. expense growth exceeded revenue growth, as we invested in integrating acquisitions, branch expansion and improving our branch technology platform. Investment Banking Group's productivity ratio deteriorated as its revenue growth was concentrated in businesses with higher variable costs. Their productivity was the second best of the Canadian peer group in 2005 and through the third quarter of 2006. Private Client Group's productivity improvement surpassed BMO's target and the Group has made very significant productivity improvements for three straight years. In 2007, BMO's financial target remains to improve our cash productivity ratio by 100 to 150 basis points.

In 2007, we are targeting to improve our cash productivity ratio by 100 to 150 basis points.  We plan to achieve this by driving revenues through an increased customer focus, ongoing expense management, and by working to create greater efficiency and effectiveness in all support functions, groups and business processes that support the front line.  While specific measures have not yet been determined, we expect workforce reductions, primarily in non-customer-facing work groups.

Provisions for credit losses remained at low levels in the fourth quarter, totalling $16 million, consisting of $51 million of specific provisions and a $35 million reduction in the general allowance. This compared with specific provisions of $57 million a year ago and $42 million in the third quarter, with no decrease in the general allowance in either comparative period. The reduction in the general allowance in the fourth quarter of 2006 was primarily attributable to the $1.5 billion credit card receivables securitization in the quarter.

For fiscal 2006, provisions for credit losses totalled $176 million, consisting of $211 million of specific provisions and a $35 million reduction in the general allowance. In fiscal 2005, provisions for credit losses totalled $179 million, consisting of $219 million of specific provisions and a $40 million reduction in the general allowance. Specific provisions for credit losses of $211 million in fiscal 2006 were below our 2006 performance target of $400 million or less established at the beginning of the year, and below our $250 million estimate at the end of the third quarter.

Net income from U.S.-based businesses totalled CDN$89 million or 12.9% of BMO's net income in the quarter, compared with CDN$102 million and 15.3% a year ago. The reduction was due to the Harrisdirect gain in 2005, lower P&C U.S. results in 2006 and the weaker U.S. dollar. In fiscal 2006, net income from U.S.-based businesses totalled CDN$441 million or 16.6% of BMO's net income, compared with CDN$472 million and 19.7% for fiscal 2005. The decline was due to lower U.S.-based earnings in Investment Banking Group, due to the VIE revenue in 2005, lower P&C U.S. results and the weaker U.S. dollar.

The Tier 1 Capital Ratio was 10.22%, up from 10.07% at the end of the third quarter but down from 10.30% at the end of 2005. The Total Capital Ratio was 11.76%, compared with 11.59% at the end of the third quarter and 11.82% at the end of last year. The increases in the Tier 1 and Total Capital Ratios from the third quarter were due to higher common shareholders' equity, partially offset by an increase in risk-weighted assets. The decreases in the ratios from 2005 were primarily attributable to higher risk-weighted assets, largely due to loan growth and increased market risk.

During the quarter, we repurchased 975,000 Bank of Montreal common shares under our common share repurchase program at an average cost of $65.84 per share, for a total cost of $64 million. In 2006, BMO repurchased 5,919,400 common shares under our share repurchase program at a cost of $376 million. Our common share repurchase program is primarily intended to offset, over time, the impact of dilution caused by the exercise of stock options, our dividend reinvestment plan and the conversion of convertible shares. Our existing normal course issuer bid expired on September 5, 2006. On September 1, 2006, we announced a new normal course issuer bid, commencing September 6, 2006 and ending September 5, 2007, under which BMO may repurchase for cancellation up to 15 million Bank of Montreal common shares, representing approximately 3% of BMO's public float.

On November 28, 2006, BMO's Board of Directors declared a quarterly dividend payable to common shareholders of $0.65 per common share, representing a 4.8% increase from $0.62 per share in the fourth quarter and a 33% increase from $0.49 per share in the first quarter of 2006. On an annualized basis, the dividend represents approximately 50% of 2006 earnings available to shareholders, consistent with BMO's industry-leading targeted dividend payout range of 45% to 55%.

Unrealized gains on investments increased $80 million from the third quarter and $58 million from the end of 2005 to $55 million, due to growth in the portfolio, higher equity valuations relative to both periods and increased gains on fixed income securities relative to the third quarter.

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

1. BMO's policy is to maintain a Tier 1 Capital Ratio of at least 8% but no longer states the ratio as an annual financial performance target.

2007 Economic Outlook
We anticipate that the Canadian economy will continue to grow at a moderate pace in 2007. The housing market is expected to moderate as past increases in interest rates dampen sales and construction, tempering growth in residential mortgages. In contrast, business investment is anticipated to remain strong in response to continued healthy gains in corporate profits, supporting growth in business loans. Interest rates are expected to remain stable for some time, which, along with the steady economic expansion, should support fee-based investment banking activities. The resource-producing provinces of Western Canada, in particular Alberta, are expected to lead the nation's expansion in 2007 as a result of high commodity prices. Newfoundland & Labrador will also record strong growth due to an increase in offshore oil and nickel production. The Canadian dollar is expected to increase modestly relative to a generally weak U.S. dollar and inflation is expected to remain low.

The U.S. economy is also projected to grow at a moderate rate in 2007. However, the rate of growth is anticipated to improve through the year in response to an expected further easing in energy prices. Past increases in interest rates should continue to temper demand for residential mortgages and personal loans. In contrast, continued strong business investment, resulting from healthy corporate balance sheets, should support growth in business loans. The U.S. dollar is expected to depreciate against most major currencies in the year ahead as a result of the large U.S. trade deficit and an anticipated easing in Federal Reserve policy.

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 President & Chief Executive Officer (CEO) and the Chief Financial & Administrative Officer (CFAO) outlining management's responsibility for financial information contained in the report. BMO's CEO and CFAO are expecting to certify, as required in Canada by Multilateral Instrument 52-109 (Certification of Disclosure in Issuers' Annual and Interim Filings) and in the United States by the Securities and Exchange Act of 1934, the appropriateness of the financial disclosures in our annual filings and the design and effectiveness of our disclosure controls and procedures.

BMO Financial Group's management, including the CEO and CFAO, has evaluated the effectiveness of our internal control over financial reporting using the framework and criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management is expecting to conclude that internal control over financial reporting was effective as of October 31, 2006 and that there were no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. BMO's CEO and CFAO are expecting to certify the foregoing, as required in the United States by the Securities and Exchange Act of 1934.

BMO will file the applicable Canadian and U.S. CEO and CFAO certifications with the Canadian Securities Administrators and the SEC in the United States in December 2006 when we file our Annual Report and other annual disclosure documents.

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 2005 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.

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 document, and may be included in other 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, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2006 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, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. 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: general economic conditions in the countries in which we operate; interest rate and currency value fluctuations; changes in monetary policy; the degree of competition in the geographic and business areas in which we operate; changes in laws; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions; critical accounting estimates; operational and infrastructure risks; general political conditions; global capital market activities; the possible effects on our business of war or terrorist activities; disease or illness that impacts on local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors could adversely affect our results. For more information, please see the discussion on pages 29 and 30 of BMO's 2005 Annual Report, which outlines in detail certain key factors that may affect BMO's future results. 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.

Assumptions about the performance of the Canadian and U.S. economies in 2007 and how that will affect our businesses are material factors we consider when setting our strategic priorities and objectives and in determining our financial targets, including provisions for credit losses. Key assumptions include that the Canadian and U.S. economies will expand at a moderate pace in 2007 and that inflation will remain low. We have also assumed that interest rates in 2007 will remain little changed in Canada but decline in the United States and that the Canadian dollar will hold onto its recent gains in value relative to the U.S. dollar. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies. Tax laws in the countries in which we operate, primarily Canada and the United States, are material factors we consider when determining our sustainable effective tax rate.

Regulatory Filings

Our continuous disclosure materials, including our interim filings, annual MD&A, audited consolidated financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders & 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:

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, 18th 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, November 28, 2006 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 Sunday, December 10, 2006 by calling 416-695-5292 (from within Toronto) or 1-888-742-2491 (toll-free outside Toronto) and entering passcode 6791.

A live webcast of the call can be accessed on our web site at www.bmo.com/investorrelations. A replay can be accessed on the site until Wednesday, February 28, 2007.

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
Viki Lazaris, Senior Vice-President, Investor Relations, viki.lazaris@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, Chief Financial and Administrative Officer
karen.maidment@bmo.com, 416-867-6776

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