News Releases
$739 Million of Net Income with Revenues of $3.2 Billion in the Fourth Quarter
$2.8 Billion of Net Income with Revenues of $12.2 Billion in the Fiscal Year
P&C Canada Continues to Deliver Strong Performance with Good Revenue Growth in the Quarter
Private Client Group Posts Good Growth from a Year Ago and the Third Quarter
BMO Capital Markets Net Income Rises Significantly From the Third Quarter
Tier 1 Capital Ratio Remains Strong, at 13.45%
Financial Results Highlights:
Fourth Quarter 2010 Compared with Fourth Quarter 2009:
- Net income of $739 million, up $92 million or 14% from a year ago
- EPS1 of $1.24 and cash EPS2 of $1.26, both up $0.13 from a year ago
- Return on equity of 15.1%, up from 14.0% a year ago
- Provisions for credit losses of $253 million, down $133 million from a year ago but up $39 million from the third quarter
Fiscal 2010:
- Net income of $2,810 million, up $1,023 million or 57% from 2009
- EPS of $4.75 compared with $3.08 and cash EPS of $4.81 compared with $3.14
- Return on equity of 14.9%, up from 9.9% a year ago
- Income Before Credit Provisions and Income Taxes2 of $4.6 billion in fiscal 2010, up from $3.7 billion a year ago
- Provision for credit losses of $1,049 million comprised solely of specific provisions, compared with a provision for credit losses of $1,603 million a year ago comprised of specific provisions of $1,543 million and an increase in the general allowance of $60 million
Toronto, December 7, 2010 – For the fourth quarter ended October 31, 2010, BMO Financial Group reported net income of $739 million or $1.24 per share. Canadian personal and commercial banking continued to deliver strong performance, with net income of $420 million, up $22 million or 5.5% from a year ago.
Today, BMO announced a first quarter 2011 dividend of $0.70 per common share, unchanged from the preceding quarter and equivalent to an annual dividend of $2.80 per common share.
BMO's 2010 audited annual consolidated financial statements and accompanying management's discussion & analysis (MD&A) will be available today at www.bmo.com, along with the supplementary financial information report, which includes fourth quarter financial information.
“We are investing strategically to raise the bar on customer experience. It's differentiating us in the marketplace and positioning us for future growth,” said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "Good results this quarter and for our 2010 fiscal year, as well as our strong balance sheet, reflect the consistent execution of our strategy – and the benefits of our diversified business mix.
“P&C Canada had another strong quarter, driven by volume growth across most lines of business. We continue to demonstrate momentum in the market with the introduction of new products that compete on the basis of providing value to the customer. And we are seeing year-over-year increases in the average number of product categories used by both personal and commercial customers. We continue to invest in the size and capabilities of our commercial workforce to deliver guidance and advice to more customers. Our Prairies Financial Flood Relief Program is just one example of our consistent approach to helping our customers, an approach that is helping us gain commercial loan market share, which was 20.29% based on the latest available statistics.
"Results in BMO Capital Markets this quarter reflect an improvement in trading and investment banking activity from the third quarter. Revenue performance returned to levels experienced in the first half of the year with year-over-year growth across a number of businesses. Annual net income of $820 million with an ROE of 18.8% demonstrates our good use of capital to deliver the right balance of risk and return.
“Private Client Group produced strong results with net income substantially higher than in the same quarter a year ago. We saw strong revenue growth across most of our businesses due to new clients, new assets and improved equity market conditions. We remain focused on our clients' total wealth management needs and on delivering best-in-class financial products and services to them from our operations in Canada, the United States, China and the United Kingdom.
“P&C U.S. is seeing the benefit of loan spread improvement, new accounts opened and growing deposit balances. Results were affected by higher credit losses, the impact of impaired loans and higher acquisition integration costs. The visibility of our brand continues to rise in the Midwest. During the fourth quarter, we successfully completed the integration of the operations of the Rockford, Illinois-based bank and the assets and liabilities we acquired at the end of the second quarter.
“During the quarter, BMO continued to expand its presence in select international markets with the incorporation of a wholly-owned subsidiary in China, Bank of Montreal (China) Company Limited. BMO ChinaCo gives us the flexibility to expand our product and service offerings for our clients. Our presence in China is unmatched by our peers.
“Overall, BMO's results reflect a very good quarter and a strong year with sound capital and liquidity positions. Our brand promise stands out and is continuing to gain relevance and drive customer loyalty. We head into 2011 with significant momentum – with each of our businesses well positioned – and each of our 38,000 employees committed to exceeding our customers' expectations,” concluded Mr. Downe.
1 All Earnings per Share (EPS) measures in this document refer to diluted EPS, unless specified otherwise.
2 The adjustments that change results under generally accepted accounting principles (GAAP) to cash results and net income to income before provisions for credit losses, income taxes and non-controlling interest in subsidiaries are outlined in the Non-GAAP Measures section at the end of the attached Financial Review, where such non-GAAP measures and their closest GAAP counterparts are outlined.
Operating Segment Overview
P&C Canada
Net income was a strong $420 million, up $22 million or 5.5% from a year ago. There were revenue increases across each of our personal, commercial and cards businesses, driven by volume growth across most products, the inclusion in our financial results of the Diners Club North American franchise we acquired and an improved net interest margin.
Our goal is to be the bank that defines great customer experience. We seek to continue to deepen our relationship with our customers by providing innovative product offers, enhancing our performance management system and improving the productivity of our distribution network. This has resulted in improved customer loyalty as well as year-over-year increases in the average number of product categories used by both personal and commercial customers.
In personal banking, we continue to add distribution capability with the hiring of additional mortgage specialists and financial planners and we have also made significant improvements in our branch processes.
In commercial banking, our market share for loans to small- and medium-sized businesses has exceeded 20% for two consecutive quarters. We continue to rank second in Canadian business lending market share and our goal is to become the bank of choice for businesses across Canada.
We are the largest MasterCard issuer in Canada, as measured by transaction volumes, and are one of the largest commercial card issuers in North America. During the quarter, we entered into an exclusive strategic relationship with Sobeys Inc. to provide their customers with new credit card products, allowing them to quickly and easily accumulate Club Sobeys points or AIR MILES reward miles on items they buy and use everyday. This relationship should expand our footprint as Canada's leading MasterCard issuer and help us establish relationships with Sobeys' customers.
P&C U.S. (all amounts in U.S. $)
Net income of $37 million was down $11 million or 21% from $48 million a year ago, but was essentially unchanged adjusted to exclude acquisition integration costs. The benefits of loan spread improvement and deposit balance growth were largely offset by an increase in the impact of impaired loans, higher provisions for credit losses, a decrease in loan balances and deposit spread compression.
On a basis that adjusts for the impact of impaired loans, a reduction in our Visa litigation accrual and acquisition integration costs, net income was $59 million, an increase of $1 million or 2.1% from a year ago on a comparably-adjusted basis. On this basis, the cash productivity ratio was 66.0%.
Late in the second quarter, we acquired certain assets and liabilities of AMCORE Bank, N.A., a Rockford, Illinois-based bank. In the fourth quarter, we successfully integrated its operations into ours, providing our new customers with access to all of our products and services, branches and ABMs as well as our telephone and online banking services.
During the quarter we were the recipient of a 2010 TNS Choice Award for superior performance in the Metro Chicago retail banking market. Winners of the award were chosen by Chicago-area residents for their strong performance in attracting new customers, satisfying and retaining existing customers, and their success in winning a larger share of their customers' total banking business.
We continue to focus on the customer experience as reflected in our high loyalty scores. Our retail net promoter score was 40 for the fourth quarter 2010 and 41 in the prior quarter, and it remains very strong compared to the scores of our major competitors.
Private Client Group
Net income was $131 million, a strong increase of $25 million or 25% from the same quarter a year ago. Private Client Group net income, excluding the insurance business, was $89 million, up a strong $25 million or 40% from a year ago as we continue to see growth across most of our businesses. Insurance net income of $42 million for the quarter was unchanged year over year, as the benefit from higher premium revenue was offset by the effect of unfavourable market movements on policyholder liabilities.
Revenue increased $48 million or 8.6% with strong growth across most of our businesses, as we remain focused on continuing to deliver the high level of service and advice that our clients expect, especially in the current economic environment. Expense growth was modest, as we continue to focus on effective cost management.
Assets under management and administration improved by $30 billion or 13%, after adjusting to exclude the impact of the weaker U.S. dollar.
During the quarter, Private Client Group announced that its Exchange Traded Funds (ETF) business had reached $1 billion in assets under management, achieving this milestone only 15 months after having entered the ETF market. Investors can choose from a diverse line-up of 30 BMO ETFs.
BMO Capital Markets
Net income for the quarter was $216 million, a decrease of $44 million or 17% from the strong results of a year ago. Revenues in the current quarter were higher than the strong levels of a year ago, reflecting in part the work we have undertaken to focus on our core client base. However, the increase in overall revenues was more than offset by higher provisions for credit losses as well as higher expenses from the investments we have made to expand our business.
The increase in revenue was driven by gains in investment securities and higher mergers and acquisitions fees and debt underwriting fees. Trading revenues were up considerably due to higher client activity in the current quarter and the favourable impact of credit spread movements this quarter compared to the negative impact last quarter. Although trading revenue improved significantly from the third quarter, overall trading revenue was slightly lower than in the prior year.
Our strategy emphasizes a focus on the client and we have been making ongoing efforts to expand and strengthen our distribution platform and focus on key strategic sectors to position us for long-term success. Recently, BMO Capital Markets was ranked first as an overall institutional equity franchise (for research, sales and trading combined) with the highest reputational franchise score in the 2010 Brendan Wood International Survey of Institutional Investors. We were also named Best Trade Bank in Canada by Trade Finance Magazine and Best Foreign Exchange Bank, Canada & North America by European CEO Magazine.
BMO Capital Markets participated in 123 new issues in the quarter including 34 corporate debt deals, 36 government debt deals, 48 common equity transactions and five issues of preferred shares, raising $47 billion.
Corporate Services
Corporate Services incurred a net loss in the quarter of $66 million. Results were $102 million better than in the prior year due primarily to lower provisions for credit losses, offset in part by higher expenses. BMO employs a methodology for segmented reporting purposes whereby expected credit losses are charged to the client operating groups, and the difference between expected losses and actual losses is charged (or credited) to Corporate Services.
Medium-Term Financial Performance Objectives
BMO has medium-term objectives of increasing EPS by an average of 12% per year over time, earning average annual ROE of between 17% and 20%, achieving average annual cash operating leverage of at least 1.5% and maintaining strong capital ratios that meet both current and expected regulatory requirements. Our medium-term financial objectives are discussed further in the Management's Discussion and Analysis for fiscal 2010.
Caution
The foregoing sections contain forward-looking statements. Please see the Caution Regarding Forward-Looking 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 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 harbour 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 2011 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 and market 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 Management's Discussion and Analysis for fiscal 2010, 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, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented and our strategic priorities and objectives, and may not be appropriate for other purposes.
Assumptions about the performance of the Canadian and U.S. economies as well as overall market conditions and their combined effect on the bank's business are material factors we consider when determining our strategic priorities, objectives and expectations for our business. 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.
To view the rest of this news release consisting of:
| Financial Highlights | click here |
| Quarterly Financial Review | click here |
| Summary Unaudited Quarterly Consolidated Financial Statements | click here |
INVESTOR AND MEDIA PRESENTATION
Investor Presentation Materials
Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our fourth quarter and fiscal 2010 results. This quarter's news release, presentation materials and a supplementary financial information package together with BMO Financial Group's audited Consolidated Financial Statements (including Notes to the Consolidated Financial Statements) and the accompanying Management's Discussion and Analysis will be available online.
Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on Tuesday, December 7, 2010, at 2:00 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 Monday, February 28, 2011, by calling 416-695-5800 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering passcode 6850310.
A live webcast of the call can be accessed on our website at www.bmo.com/investorrelations. A replay can be accessed on the site until Monday, February 28, 2011.
Media Relations Contacts
Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1873
Investor Relations Contacts
Viki Lazaris, Senior Vice-President, viki.lazaris@bmo.com, 416-867-6656
Terry Glofcheskie, Director, terry.glofcheskie@bmo.com, 416-867-5452
Andrew Chin, Senior Manager, andrew.chin@bmo.com, 416-867-7019
Chief Financial Officer
Russel Robertson, Chief Financial Officer
russ.robertson@bmo.com, 416-867-7360
Corporate Secretary
Blair Morrison, Senior Vice-President, Deputy General Counsel,
Corporate Affairs and Corporate Secretary
corp.secretary@bmo.com, 416-867-6785
Annual Meeting 2011
The next Annual Meeting of Shareholders will be held on Tuesday, March 22, 2011, in Vancouver, British Columbia.