News Releases
NOTE: As previously announced on May 17, 2007, and as noted in BMO Financial Group's second quarter 2007 earnings release on May 23, BMO restated its interim financial statements and MD&A for the first quarter of 2007 to reflect the effects of commodities trading losses that relate to that quarter. Please refer to those releases by clicking on the following links…
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BMO Financial Group Reports First Quarter Results Toronto, March 1, 2007 – BMO Financial Group today reported financial results for its first quarter ended January 31, 2007. Year-over-Year Operating Highlights:
Tony Comper, on his last day as President and Chief Executive Officer of BMO Financial Group, said, “This is my final report on results as BMO's CEO. I'm pleased to report that net income increased appreciably from a year ago, excluding the restructuring charge we announced at the end of January. I have great faith that Bill Downe and his leadership team will build on this and lead BMO forward to achieve our goals.” The impact of solid broad-based volume growth in P&C Canada and Private Client Group was partially offset by increased costs associated with the front-line sales and service staff we added in the latter half of last year to generate future sales growth. Investment Banking Group's earnings were good but declined, as trading revenues were at record levels a year ago amid high volatility in the energy sector. P&C U.S. again benefited from growth in personal and commercial loans but continues to be affected by margin pressures. Reported results declined from the fourth quarter of 2006 due to reduced earnings in our Corporate Services group, in part due to the current quarter's restructuring charge. Corporate Services' results in the fourth quarter benefited from an unusually low tax rate and a reduction in the general allowance for credit losses. However, earnings in each of our client operating groups were stronger in the current quarter, bouncing back from soft results in the fourth quarter. Bill Downe, BMO's incoming President and Chief Executive Officer, remarked that, “I'm very pleased with our broad-based growth this quarter. We had high-quality earnings in each of our operating groups. There was favourable operating leverage as revenue growth exceeded expense growth, and provisions for credit losses remain low and stable. “P&C Canada and Private Client Group performed well with revenue growth in most product areas and P&C Canada generated increased market share in some of our key segments. Results this quarter provide a great foundation for the future and I'm focused on the opportunity to make this great company even better.” Operating Segment Overview P&C Canada In the commercial banking segment, there was strong year-over-year loan growth of 6.8%. We continue to view this as an area of competitive strength as BMO ranks second in Canadian business banking market share. P&C Canada has an integrated client service approach and a broad spectrum of product offers to be a market leader in this segment. The launch of a new loan product focused on the less than $1 million category and the establishment of commercial operating units in our three largest urban markets: Toronto, Montreal and Vancouver, in 2006 are evidence of our focus on the commercial segment. P&C U.S. We generated good loan growth despite weaker housing markets in a slowing economy, but the impact of this growth was offset by spread compression. Spread compression was caused by competitive pressures on pricing and changes in loan and deposit mix as customer preferences have shifted from high-spread to lower-spread loan and deposit products. We made good progress on controlling expenses, as net income increased 22% from the fourth quarter. We anticipate reducing our staffing levels, as part of the restructuring charge we announced. We also plan to slow our new branch openings and now anticipate opening three to five new branches this year. We continue to optimize our branch structure, closing one location and announcing an additional branch closure in the quarter. In early January, we completed the acquisition of First National Bank & Trust, a 32-branch community bank with locations in Indianapolis and surrounding communities, the second-fastest growing market in the U.S. Midwest. The acquisition increases the number of Harris locations to 233, taking us closer to our goal of 350 to 400 locations across the U.S. Midwest. Business Banking announced expansion to the Phoenix market during the quarter. Harris has been a part of the Arizona market for more than 30 years through its wealth management group, Harris Private Bank. Many of the Private Bank's clients are also business owners, making this a natural extension of the organization's services. Business Banking loan production offices are also being established in Milwaukee and Indianapolis. Private Client Group There were a number of customer service awards and initiatives in the quarter. BMO Harris Private Banking was selected Best Local Private Bank in Canada in Euromoney Magazine's Global Survey of private banking services, the fourth consecutive year that the private bank has been recognized with one of the magazine's most prestigious awards. BMO Mutual Funds was awarded the 2006 Mutual Fund Service Award by Dalbar, Inc., a leading financial services research firm. We won top honours for best overall customer service in both the English and French-language categories. BMO InvestorLine enhanced its online investing service, providing research from the top-ranked equity research group in Canada, BMO Capital Markets. BMO Term Investments launched three new market-linked GIC's under the banner, BMO Progressive GICs. These new products offer customers the ability to safely access potentially higher returns through participation in equity markets while retaining the benefits of principal protection. Investment Banking Group In our Investment and Corporate Banking business we continued to grow corporate banking assets, with average loans and acceptances, excluding securities purchased under resale agreements, increasing $5.7 billion or 35% year-over-year. Much of this growth has taken place in the United States. Undrawn credit commitment levels have continued to increase which should provide continued momentum for growth in corporate loans. We were sole lead on a $1 billion bridge loan for Borealis Infrastructure Management Inc. to support its acquisition of MDS Diagnostic Services for $1.3 billion. Although this loan was advanced in February, it is an example of the activities in the quarter that contributed to our loan growth. Loan spreads continue to be challenged in a competitive marketplace. During the quarter BMO Capital Markets continued to demonstrate its Canadian leadership in high-return fee businesses, participating in 139 new issues including 42 corporate debt deals, 7 issues of preferred shares, 71 common equity transactions and 19 government debt issues, raising a total of $40.9 billion. We also acted as financial advisor on several significant M&A transactions. We advised the special committee of Bema Gold Corporation on its $3.1 billion sale to Kinross Gold Corporation and were the strategic advisor to Goldcorp Inc. on its $9.9 billion acquisition of Glamis Gold Ltd., creating one of the world's largest gold mining companies. We also advised Calpine Power Income Fund on its restructuring and hostile takeover defence, which resulted in an increased $875 million bid from Harbinger Capital. There was significant growth in our trading products businesses this quarter, as evidenced by increases in securities purchased under resale agreements and in investment and trading securities, as compared to both the prior year and preceding quarter. This growth is consistent with our strategy of expanding our trading activities in 2007. During the quarter, our Structured Products team launched the three new principal protected structured GICs that were developed in conjunction with Private Client Group and marketed through the BMO Bank of Montreal branch network. 1 Results stated on a basis that excludes the restructuring charge are Non-GAAP measures. Please see the Non-GAAP Measures section. 2 All Earnings per Share (EPS) measures in this release refer to diluted EPS unless specified otherwise. 3 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. � 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.
The above table contains forward looking statements. Please see the Caution Regarding Forward-Looking Statements below. FIRST QUARTER 2007 MANAGEMENT'S DISCUSSION AND ANALYSIS (MD&A) MD&A commentary is as of March 1, 2007. 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). The MD&A should be read in conjunction with the unaudited consolidated financial statements for the period ended January 31, 2007, included in this document, and the annual MD&A for the year ended October 31, 2006, included in BMO's 2006 Annual Report. The material that precedes this section comprises part of this MD&A.
(2) These are non-GAAP amounts or non-GAAP measures. Please see footnotes 1 and 3 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. 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 2007 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 28 and 29 of BMO's 2006 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 were material factors we considered when setting our strategic priorities and objectives and in determining our financial targets, including provisions for credit losses. Key assumptions included that the Canadian and U.S. economies would expand at a moderate pace in 2007 and that inflation would remain low. We also assumed that interest rates in 2007 would remain little changed in Canada but decline in the United States and that the Canadian dollar would hold onto its value relative to the U.S. dollar. Although the U.S. dollar strengthened relative to the Canadian dollar in the first quarter, we believe that our other assumptions are valid. We have continued to rely upon those assumptions and the views outlined in the following Economic Outlook in considering our ability to achieve our 2007 targets. 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. 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 filed certifications, signed by the CEO and CFAO, with the Canadian Securities Administrators and the SEC in the United States in December 2006 when we filed our Annual Report and other annual disclosure documents. In those filings, BMO's CEO and CFAO 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 effectiveness of our disclosure controls and procedures. As part of our annual assessment process, BMO Financial Group's management, including the CEO and CFAO, 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 concluded that internal control over financial reporting was effective as of October 31, 2006. BMO's CEO and CFAO certified the foregoing, as required in the United States by the Securities and Exchange Act of 1934. BMO's CEO and CFAO will certify the appropriateness of the financial disclosures in our interim MD&A and unaudited interim consolidated financial statements for the period ended January 31, 2007. They will also certify that they are responsible for the design of disclosure controls and procedures and internal control over financial reporting. There have been no changes in internal control over financial reporting during the quarter ended January 31, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 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 2006 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. Economic Outlook We continue to anticipate that the Canadian economy will grow at a moderate pace in 2007. Housing market activity is expected to continue slowing as past increases in interest rates dampen sales and construction, tempering growth in residential mortgages. In contrast, in response to healthy corporate balance sheets, business investment should stay strong, supporting growth in business loans. Although the manufacturing sector has been weak, manufacturers and exporters should benefit from the recent softness in the Canadian dollar. The currency is forecast to trade around 85 cents U.S. this year. Interest rates are likely to remain fairly stable in an environment of low inflation and moderate growth. Western Canada should continue to lead the nation's performance due to elevated resource prices. However, Central and Atlantic Canada should see some improvement in manufacturing activity. The U.S. economy is projected to grow moderately in 2007. Although the correction in housing markets appears to be stabilizing, it will likely continue to weigh on demand for residential mortgages this year. In contrast, continued strength in business investment, supported by rising corporate profits, should foster growth in business loans. Although the U.S. dollar strengthened relative to the Canadian dollar in the first quarter, it weakened relative to most major currencies. It is expected to continue to depreciate against most major currencies in the near term as a result of the large U.S. trade deficit and possible diversification of China's foreign exchange reserves. The Midwest economy is anticipated to strengthen through the year as manufacturing activity benefits from the weaker dollar. This Economic Outlook section contains forward looking statements. Please see the Caution Regarding Forward Looking Statements above. To view the rest of this news release consisting of:
INVESTOR AND MEDIA PRESENTATION Investor Presentation Materials Quarterly Conference Call and Webcast Presentations 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 Tuesday, May 22, 2007. Media Relations Contacts Investor Relations Contacts Chief Financial Officer Corporate Secretary |
