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BMO Financial Group Reports Good Third Quarter Results, Contributing to Strong Year-to-Date Performance

TORONTO, ONTARIO--(Marketwire - Aug. 23, 2011) - BMO Financial Group (TSX:BMO)(NYSE:BMO) and BMO Bank of Montreal -

Third Quarter 2011 Report to Shareholders
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BMO Financial Group Reports Good Third Quarter Results, Contributing 
to Strong Year-to-Date Performance 

Financial Results Highlights: 

Third Quarter 2011 Compared with Third Quarter 2010:

- Reported net income of $793 million, up 18% or $124 million from a year
  ago

- Adjusted net income(1) of $843 million, up 24% or $165 million from a
  year ago

- Reported EPS(2) of $1.27, up 12% from a year ago

- Adjusted EPS(1),(2) of $1.36, up 19% from a year ago

- ROE of 14.7%, up from 13.7% a year ago

- Provisions for credit losses of $174 million, down $40 million from a
  year ago 

- Common Equity Ratio remains strong, at 9.11% 


Year-to-Date 2011 Compared with Year-to-Date 2010:

- Reported net income of $2,369 million, up 14% or $298 million from a year
  ago

- Adjusted net income(1) of $2,431 million, up 16% or $337 million from a
  year ago

For the third quarter ended July 31, 2011, BMO Financial Group reported net income of $793 million or $1.27 per share. On an adjusted basis, net income was $843 million or $1.36 per share.

"BMO continues to perform well, with adjusted earnings of $843 million for the quarter and more than $2.4 billion for the first nine months of the year," said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "The investments we are making continue to contribute to top-line growth and this remains our priority as we steadily introduce new initiatives that further enhance the experience of our customer."

During the quarter, BMO completed the acquisition of Marshall & Ilsley Corporation (M&I). Over 26 days, M&I's operations added $117 million of revenue to BMO's third quarter results and $32 million of adjusted net income, which excludes integration and related costs.

"This purchase is transforming our U.S. presence by adding scale and providing a strong entry into attractive new markets," said Mr. Downe. "We have more than doubled our U.S. branch count to 688 branches and are competing from a position of strength in a contiguous six-state area with a population and GDP greater than Canada's. The closing process was on time and efficient. Integration efforts are moving forward as planned as we welcome M&I shareholders as shareholders of BMO.

"In addition, the transaction almost triples the size of our U.S. wealth businesses as measured by assets under management and administration and our U.S. private banking presence now operates from twice as many outlets.

"Banks succeed when customers succeed. We are focused on deepening customer relationships and developing new ones. We are growing commercial loan balances in Canada. In the United States, our goal is to be the leading commercial lender in the Midwest. And we're competing aggressively in every market in which we do business. We have committed to making an additional US$5 billion available to small and medium-sized businesses over the next two years to play our part in supporting the economic recovery by spurring business investment and job creation.

"Global economic conditions have given us every reason to be cautious. We have been vigilant and continue to be vigilant by moderating the pace of investment. At the same time, we remain confident in our ability to grow and deliver an experience to customers that stands out, while maintaining our well-earned reputation for disciplined risk management," concluded Mr. Downe.

Concurrent with the release of results, BMO announced a fourth quarter dividend of $0.70 per common share, unchanged from the preceding quarter and equivalent to an annual dividend of $2.80 per common share.

(1) Results and measures in the MD&A are presented on a GAAP basis. They
    are also presented on an adjusted basis that excludes the impact of
    certain items. Items excluded from third quarter 2011 results in the
    determination of adjusted results totalled $50 million after tax,
    comprised of $53 million ($32 million after tax) of costs for the
    integration of the Marshall & Ilsley Corporation (M&I) acquisition
    including integration planning, a $17 million ($12 million after tax)
    charge for amortization of acquisition-related intangible assets and $9
    million ($6 million after tax) of charges for the hedge of foreign
    currency risk on the purchase of M&I. Management assesses performance
    on both a GAAP basis and adjusted basis and considers both bases to be
    useful in assessing underlying, ongoing business performance.
    Presenting results on both bases provides readers with an enhanced
    understanding of how management views results and may enhance readers'
    analysis of performance. Adjusted results and measures are non-GAAP and
    are detailed in the Adjusted Net Income section, the Net Income
    section, and in the Non-GAAP Measures section of Management's
    Discussion and Analysis (MD&A), where such non-GAAP measures and their
    closest GAAP counterparts are disclosed.

(2) All Earnings per Share (EPS) measures in this document refer to diluted
    EPS unless specified otherwise. 

Operating Segment Overview

P&C Canada

Net income was $432 million, up $8 million or 1.8% from a year ago. Volume growth continued across most products but growth has slowed while net interest margin has declined slightly. Revenue increased 3.6% from the second quarter while expense growth moderated to 1.1%, as we manage our expenses prudently while investing in our strategic priorities.

We continue to make improvements in enhancing the customer experience through investment in our workforce, improved processes and leveraging our performance management discipline. Customer loyalty, as measured by net promoter score, continues to improve in both our personal and commercial businesses and we have seen an increase in the average number of product categories used by both personal and commercial customers.

In personal banking, the productivity of our sales and distribution network continues to strengthen. New branch openings and renovations continue, as we opened seven new branches and redeveloped nine in the first nine months of the year. We have enhanced our online banking features that make it more convenient for customers to access their banking information and apply for products online. Early indicators demonstrate that our investments in our business are having an impact. There were more than 10 times the number of youth accounts opened in the first three months of our BMO SmartSteps for Parents campaign as were opened in the same timeframe last year. Online sales are up 14% year over year across all retail product categories and in the three months following our online bank account application upgrade, chequing and savings account sales were up almost 50%. We are confident that we are well positioned for future growth.

In commercial banking, we continue to rank second in market share for loans to small and medium-sized businesses with market share remaining stable year over year. In June, BMO was the only Canadian bank recognized in the top international information technology awards announced in International Data Group's CIO magazine. The award recognized BMO for its Online Banking for Business platform, a multi-channel, global commercial online banking solution that allows our customers to manage all of their global cash management, foreign exchange and card services online in a secure environment. In addition, earlier this year we launched a new mobile banking service that enables our business banking customers to make payments anytime and anywhere over mobile devices safely and securely. This is consistent with our ongoing investment in delivering a great customer experience to our business banking customers. We are committed to providing seamless, simple, and personalized access to all of their business banking services from one platform. Our goal is to become the bank of choice for businesses across Canada, by providing the knowledge, advice and guidance our customers want.

P&C U.S. (all amounts in US$)

Net income of $95 million increased $45 million or 94% from $50 million a year ago, with the acquired M&I business contributing $27 million of the increase. M&I results included in P&C U.S. reflect an $18 million charge for expected credit losses on the M&I portfolio, determined on a basis consistent with BMO's methodologies and in the same manner as expected losses are determined for other loans in P&C U.S. Differences between expected losses and actual losses on the portfolio are charged (or credited) to Corporate Services.

Excluding the M&I business, net income increased $18 million or 39%, primarily due to increased revenue from improved net interest margin and higher securities gains, partially offset by lower fee revenue. Revenue increased by 47% on a reported basis and by 8.1% excluding M&I. Higher provisions for credit losses under BMO's expected loss provisioning methodology were offset by lower expenses.

During the quarter, certain impaired real estate secured assets, primarily commercial real estate loans, were transferred to Corporate Services to allow our businesses to focus on ongoing customer relationships and leverage our risk management expertise in our special assets management unit. Prior period loan balances, revenues and expenses have been restated to reflect the transfer. Similar assets acquired in the M&I transaction have also been included in Corporate Services.

The M&I acquisition substantially increases our market presence in the Midwest. We have an enviable market position that will enable us to compete aggressively everywhere we do business. We plan to increase our focus on developing new customer relationships and deepening existing relationships across our businesses, and we are making an additional $5 billion in credit available to small and medium-sized businesses in our markets over the next two years.

We continue to focus on the customer experience, as reflected in our high loyalty scores. Our personal retail net promoter score of 43 continues to improve, and with three quarters of sequential growth and an increase of one point from 42 in the prior quarter, our score remains very strong compared to the scores of our major competitors. The preceding scores do not reflect any adjustments for the M&I acquisition and M&I loyalty scores.

Private Client Group (PCG)

Net income was $120 million, up $15 million or 14% from the same quarter a year ago. Private Client Group net income, excluding the insurance business, increased $30 million or 43% to $101 million as we continue to see growth across all of these businesses. Included in the current quarter is $4 million of earnings from the wealth businesses relating to M&I. As well, the current quarter includes results of Lloyd George Management (LGM), an acquisition that was completed on April 28, 2011 and was net income neutral in the quarter. Insurance net income was $19 million for the quarter, down $15 million or 45% from a year ago, primarily due to the effect of unfavourable long-term interest rate movements on policyholder liabilities relative to the prior year.

Revenue was $617 million, up $73 million or 13% from the prior year with growth across all of our businesses as we remain focused on continuing to deliver the high level of service and advice that our clients expect. The LGM acquisition and M&I wealth businesses together added $39 million to revenue. The productivity ratio of 74.7% increased by 30 basis points from the prior year.

Assets under management and administration improved by $177 billion to $429 billion as the M&I and LGM acquisitions brought $153 billion in client assets to our business. Assets in our U.S. wealth business increased from US$77 billion to US$239 billion. On a basis that excludes the impact of the M&I and LGM acquisitions and the weaker U.S. dollar, assets under management and administration grew $30 billion or 12% from a year ago.

As a result of the M&I acquisition, we have almost doubled our U.S. private banking footprint. Our Global Asset Management business is a multi-asset management firm that now manages over $100 billion in combined assets and is one of the 100 largest investment managers worldwide as measured by assets under management. By continuing to provide an exceptional client experience, we are building a strong foundation and positioning ourselves for expansion of our business.

BMO's Exchange Traded Fund (ETF) business has grown to $2.7 billion in assets under management. Since inception in June 2009, BMO's ETF product portfolio has grown to 40 funds that offer numerous benefits to investors including lower costs, diversification and tax efficiencies, while providing investment exposure to a broad range of asset classes, sectors and regions.

BMO Capital Markets

Net income for the quarter was $279 million, an increase of $149 million from a year ago. Return on equity was 25.5%, compared with 11.8% a year ago. Revenue was $837 million, up $158 million or 23% from the prior year. Trading revenues have increased significantly, as the trading environment has improved from the challenging conditions of a year ago. Mergers and acquisitions revenues have also shown strong growth over the previous year. Results also benefited from a recovery of prior periods' income taxes. BMO Capital Markets strategy remains focused on its core clients and businesses and remains on track to successfully deliver profitable growth over time.

As a testament to its expertise in trade finance, BMO Capital Markets has, for the second year in a row, been named as the winner of the "Best Trade Bank in Canada" award for excellence by Trade Finance magazine.

In the third quarter of 2011, BMO Capital Markets participated in 125 new issues, including 37 corporate debt deals, 32 government debt deals, 51 common equity transactions and five issues of preferred shares, raising $51 billion.

Corporate Services

Corporate Services net loss in the quarter was $130 million, including a $38 million loss related to M&I integration planning and foreign exchange hedging costs, up from a loss of $42 million a year ago. Revenues were $28 million worse, primarily due to the impact of the M&I acquisition and a less favourable impact year over year from hedging activities, partly offset by a lower group teb offset (see the Revenue section for an explanation of teb). Expenses were $51 million higher, mainly due to costs relating to the M&I integration. Provisions for credit losses were better by $34 million, contributing $24 million to Corporate Services net income, as a result of lower provisions charged to Corporate Services under BMO's expected loss provisioning methodology. 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.

Acquisition of Marshall & Ilsley Corporation (M&I)

On July 5, 2011, BMO completed the acquisition of M&I for consideration of approximately $4.0 billion in the form of approximately 67 million common shares issued to M&I shareholders. M&I Bank combined with Harris to form BMO Harris Bank. In addition, immediately prior to the closing of the transaction, a BMO subsidiary purchased from the U.S. Treasury all of M&I's outstanding Troubled Asset Relief Program (TARP) preferred shares and warrants for cash consideration of approximately US$1.7 billion.

The acquisition of M&I added $29 billion of loans, after adjustment for future expected losses, and $34 billion of deposits. The allocation of the purchase price is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed. The acquisition together with our existing U.S. operations more than doubles our U.S. branch count to 688, adds approximately two million customers and increases BMO's total assets under management and administration to over $530 billion.

We expect that annual cost savings from the integration of M&I and BMO will exceed US$300 million. We also expect there to be opportunities to add to revenues through expanded access to existing and new markets with increased brand awareness and a better ability to compete in the market. As previously indicated, we also anticipate that in fiscal 2011 M&I will contribute modestly positive net income to BMO's consolidated results, excluding integration and restructuring costs.

Integration and restructuring costs are included in non-interest expense in Corporate Services and are expected to approximate a total of US$600 million over the next few years. We recorded $53 million of such expenses in the current quarter and $25 million in the immediately preceding quarter. These costs include amounts related to system conversions, severance and other employee-related charges as well as other integration amounts, such as consulting fees and marketing costs in connection with customer communications and rebranding activities.

M&I's activities are primarily reflected in our P&C U.S., Private Client Group and Corporate Services segments, with a small amount included in BMO Capital Markets.

Prior to the close of the transaction, approximately US$1.0 billion of impaired real estate secured assets, comprised primarily of commercial real estate loans, were transferred from P&C U.S. to Corporate Services to allow our businesses to focus on ongoing customer relationships and leverage our risk management expertise in our special assets management unit. Prior period loan balances, revenues and expenses have been restated to reflect the transfer. In addition, similar assets valued at approximately US$1.5 billion that were acquired on the M&I acquisition were included in Corporate Services for the same reasons.

Also included in Corporate Services are the fair value adjustments that we have established at this time for future expected losses on the M&I loan portfolio and for the valuation of loans, deposits and debt instruments at market rates on the closing date. Corporate Services results will include in the provisions for credit losses any changes in our estimate of future expected losses and will also include the adjustments to net interest income that will occur as a result of having valued assets and liabilities at market rates on the closing date. These items were not significant to Corporate Services results in the quarter. The operating groups' results will reflect the provision for credit losses on an expected loss basis and net interest income based on the contractual rates for loans and deposits.

While the acquisition of M&I adds scale and provides a strong entry into new markets, integration risk is a key focus for the organization. It includes risk of customer and employee retention and system integration. The risks are addressed by maintaining our program management office, along with experienced BMO and M&I staff focused on ensuring these risks are well managed. Both organizations have considerable experience with integrating acquired businesses and the integration is now well underway. Our first critical milestone, closing the transaction and opening the combined bank for business on July 6, was successfully completed.

Adjusted Net Income

Management assesses performance on both a GAAP basis and adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Adjusted results for the third quarter of 2011 exclude the following items:

- costs for M&I of $53 million ($32 million after tax) for integration costs such as professional fees for integration planning as well as costs for systems development and certain severance;

- amortization of acquisition-related intangible assets of $17 million ($12 million after tax); and

- a charge to revenue for the hedge of foreign currency risk on the purchase of M&I of $9 million ($6 million after tax).

Adjusted net income was $843 million for the third quarter of 2011, up $165 million or 24% from a year ago. Adjusted earnings per share were $1.36, up 19% from $1.14 a year ago. The adjusting items above were recorded in Corporate Services except for the amortization of acquisition-related intangibles, which is charged across the groups. Adjusted results and measures are non-GAAP. Adjusted results and items excluded in determining adjusted results are disclosed in more detail in the Non-GAAP Measures section at the end of the MD&A, together with comments on the uses and limitations of such measures.

Caution

The foregoing sections contain forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

                   Management's Discussion and Analysis

MD&A commentary is as of August 23, 2011. 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 July 31, 2011, included in this document, and the annual MD&A for the year ended October 31, 2010, included in BMO's 2010 Annual Report. The material that precedes this section comprises part of this MD&A.

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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.
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Summary Data

(Unaudited)                                    Increase          Increase  
 (Canadian $ in millions,                     (Decrease)        (Decrease) 
 except as noted)             Q3-2011       vs. Q3-2010       vs. Q2-2011  
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Net interest income             1,692      121        8%      72        4% 
Non-interest revenue            1,582      246       18%     (15)      (1%)
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Revenue                         3,274      367       13%      57        2% 
Specific provision for credit                                              
 losses                           174      (40)     (19%)    (13)      (7%)
Decrease in the general                                                    
 allowance                          -        -        -      (42)   (+100%)
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Total provision for credit                                                 
 losses                           174      (40)     (19%)     29       20% 
Non-interest expense            2,111      213       11%      88        4% 
Provision for income taxes        178       71       67%     (53)     (23%)
Non-controlling interest in                                                
 subsidiaries                      18       (1)      (2%)      -        -  
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Net income                        793      124       18%      (7)      (1%)
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Adjusted net income(1)            843      165       24%      39        5% 

Earnings per share - basic ($)   1.28     0.15       13%   (0.07)      (5%)
Earnings per share -
 diluted ($)                     1.27     0.14       12%   (0.07)      (5%)
Adjusted earnings per share -                                              
 diluted ($)(1)                  1.36     0.22       19%    0.01        1% 
Return on equity (ROE)           14.7%              1.0%             (2.0%)
Adjusted ROE(1)                  15.6%              1.7%             (1.2%)
Productivity ratio               64.5%             (0.8%)             1.6% 
Adjusted productivity ratio(1)   62.2%             (2.8%)             0.6% 
Operating leverage                1.5%               nm                nm  
Adjusted operating leverage(1)    4.9%               nm                nm  
Net interest margin on earning                                             
 assets                          1.78%            (0.10%)           (0.11%)
Effective tax rate               18.0%              4.6%             (4.0%)

Capital Ratios:                                                            
 Tier 1 Capital Ratio           11.48             (2.07)            (2.34) 
 Common Equity Ratio             9.11             (1.16)            (1.56) 

Net income:                                                                
Personal and Commercial Banking   524       48       10%      69       15% 
 P&C Canada                       432        8        2%      30        8% 
 P&C U.S.                          92       40       79%      39       72% 
Private Client Group              120       15       14%      19       19% 
BMO Capital Markets               279      149     +100%      44       19% 
Corporate Services, including                                              
 Technology and Operations                                                 
 (T&O)                           (130)     (88)   (+100%)   (139)   (+100%)
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BMO Financial Group Net Income    793      124       18%      (7)      (1%)
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(Unaudited)                                    Increase  
 (Canadian $ in millions,         YTD         (Decrease)  
 except as noted)                2011      vs. YTD-2010  
----------------------------------------------------------
Net interest income             4,939      314        7% 
Non-interest revenue            4,898      542       12% 
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Revenue                         9,837      856       10% 
Specific provision for credit                             
 losses                           609     (187)     (23%)
Decrease in the general                                   
 allowance                        (42)      42       nm  
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Total provision for credit                                
 losses                           567     (229)     (29%)
Non-interest expense            6,180      613       11% 
Provision for income taxes        667      176       36% 
Non-controlling interest in                               
 subsidiaries                      54       (2)      (2%)
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Net income                      2,369      298       14% 
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Adjusted net income(1)          2,431      337       16% 

Earnings per share - basic ($)   3.93     0.40       11% 
Earnings per share -
 diluted ($)                     3.91     0.40       11% 
Adjusted earnings per share -                             
 diluted ($)(1)                  4.02     0.47       13% 
Return on equity (ROE)           15.7%              0.9% 
Adjusted ROE(1)                  16.1%              1.2% 
Productivity ratio               62.8%              0.8% 
Adjusted productivity ratio(1)   61.5%             (0.2%)
Operating leverage               (1.5%)              nm  
Adjusted operating leverage(1)    0.2%               nm  
Net interest margin on earning                            
 assets                          1.83%            (0.04%)
Effective tax rate               21.6%              2.8% 

Capital Ratios:                                           
 Tier 1 Capital Ratio           11.48             (2.07) 
 Common Equity Ratio             9.11             (1.16) 

Net income:                                               
Personal and Commercial Banking 1,476       86        6% 
 P&C Canada                     1,277       55        5% 
 P&C U.S.                         199       31       19% 
Private Client Group              374       43       13% 
BMO Capital Markets               771      169       28% 
Corporate Services, including                             
 Technology and Operations                                
 (T&O)                           (252)       -        -  
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BMO Financial Group Net Income  2,369      298       14% 
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(1) These are non-GAAP amounts or non-GAAP measures. Please see the Non-
    GAAP Measures section at the end of the MD&A, which outlines the use
    of non-GAAP measures in this document.

nm - not meaningful.

Management's Responsibility for Financial Information

Bank of Montreal's Chief Executive Officer and Chief Financial Officer have signed certifications relating to the appropriateness of the financial disclosures in our interim MD&A and unaudited interim consolidated financial statements for the period ended July 31, 2011 and relating to the design of our disclosure controls and procedures and internal control over financial reporting. Bank of Montreal's management, under the supervision of the CEO and CFO, has evaluated the effectiveness, as at July 31, 2011, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective. On July 5, 2011, BMO completed the acquisition of Marshall & Ilsley Corporation (M&I) which has not been included in our evaluation of the design effectiveness of the bank's disclosure controls and procedures and internal control over financial reporting as at July 31, 2011. M&I represents 8.9% of consolidated assets, 3.8% of consolidated revenue and 3.5% of consolidated net income as at and for the period ended July 31, 2011. The estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition are outlined in Note 7 of the attached unaudited interim consolidated financial statements.

Bank of Montreal's internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of BMO; provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with Canadian generally accepted accounting principles and the requirements of the Securities and Exchange Commission in the United States, as applicable; ensure receipts and expenditures of BMO are being made only in accordance with authorizations of management and directors of Bank of Montreal; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of BMO assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Further, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

There were no changes in our internal control over financial reporting during the quarter ended July 31, 2011 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As in prior quarters, Bank of Montreal's audit committee reviewed this document, including the unaudited interim consolidated financial statements, and Bank of Montreal'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 2010 Annual Report, which can be accessed on our website 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 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; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal or economic policy; the degree of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital and liquidity requirements and guidance; 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 markets activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes.

With respect to the M&I transaction, such factors include, but are not limited to: the possibility that the anticipated benefits from the transaction such as it being accretive to earnings and other impacts on earnings, expanding our North American presence and synergies are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations (including changes to capital requirements) and their enforcement, and the degree of competition in the geographic and business areas in which the combined businesses now operate; the ability to promptly and effectively integrate the businesses of M&I and BMO; reputational risks and the reaction of M&I's customers to the transaction; diversion of management time on integration and restructuring related issues; and increased exposure to exchange rate fluctuations. A significant amount of M&I's business involved making loans or otherwise committing resources to specific companies, industries or geographic areas. Unforeseen events affecting such borrowers, industries or geographic areas could have a material adverse effect on the performance of our integrated U.S. operations.

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, 30, 61 and 62 of BMO's 2010 Annual Report, which outlines in detail certain key factors that may affect Bank of Montreal'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 statements, 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.

In calculating the pro-forma impact of Basel III on our regulatory capital and regulatory capital ratios, we have assumed our interpretation of the proposed rules announced by the Basel Committee on Banking Supervision (BCBS) as of this date and our models used to assess those requirements are consistent with the final requirements that will be promulgated by BCBS and the Office of the Superintendent of Financial Institutions Canada (OSFI). We have also assumed that the proposed changes affecting capital deductions, risk-weighted assets, the regulatory capital treatment for non-common share capital instruments (i.e. grandfathered capital instruments) and the minimum regulatory capital ratios are adopted as proposed by BCBS and OSFI. We also assumed that existing capital instruments that are non-Basel III compliant but are Basel II compliant can be fully included in such estimates. The full impact of the Basel III proposals has been quantified based on our financial and risk positions at July 31 or as close to July 31 as was practical. The impacts of the changes from IFRS are based on our analysis to date, as set out in Transition to International Financial Reporting Standards in the Future Changes in Accounting Policies - IFRS section in our 2010 Annual Report and later in this document. In setting out the expectation that we will be able to refinance certain capital instruments in the future, as and when necessary to meet regulatory capital requirements, we have assumed that factors beyond our control, including the state of the economic and capital markets environment, will not impair our ability to do so.

In determining the impact of reductions to interchange fees in the U.S. Legislative Developments section, we have assumed that business volumes remain consistent with our expectations and that certain management actions are implemented that will modestly reduce the impact of the rules on our revenues.

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.

Regulatory Filings

Our continuous disclosure materials, including our interim filings, annual MD&A and audited consolidated financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders and Proxy Circular are available on our website at www.bmo.com/investorrelations, on the Canadian Securities Administrators' website at www.sedar.com and on the EDGAR section of the SEC's website at www.sec.gov.

Economic Outlook and Review

The global economic outlook has deteriorated in recent months. Stock markets worldwide have fallen sharply, undermining household wealth and confidence. The S&P downgrade of the U.S.'s triple-A credit rating to AA+ and the intense political resistance to raising the U.S. government's borrowing capacity have heightened concerns about the U.S. fiscal outlook, which risks damaging business confidence. The European debt crisis remains unresolved and there are concerns about European bank exposure to sovereign debt. While we do not anticipate another recession, we have revised down meaningfully our outlook for the Canadian and U.S. economies.

Following good growth earlier this year, Canada's economy has slowed as a result of weak U.S. demand and disruptions to automobile production following the earthquake and tsunami in Japan. Despite strong employment growth, consumer spending slowed due to elevated levels of debt and high gasoline prices, restraining personal loan growth. Home sales moderated as well, partly in response to mortgage rule changes that took effect in March. Economic activity is expected to improve moderately in the second half of the year in response to a recovery in auto production and firmer U.S. demand. Business investment is projected to remain healthy due to strong demand for resources from emerging-market economies, supporting commercial loan growth. After expanding 3.2% in 2010, the Canadian economy is expected to grow at more modest rates of 2.4% in 2011 and 2.3% in 2012, held back by the impact of a strong Canadian dollar and more restrictive fiscal policies. The Bank of Canada will likely refrain from raising interest rates until mid-2012 due to the uncertain global economic environment. The Canadian dollar should continue to trade above parity with the U.S. dollar in 2012, benefiting from firm commodity prices and Canada's relatively healthy fiscal standing among advanced economies. Home sales should remain healthy in response to low borrowing costs, supporting residential mortgage demand. After climbing sharply in the past year, existing house prices are expected to stabilize in 2012.

The U.S. economy slowed sharply in the first half of the year in response to higher gasoline prices, disruptions in auto production and reductions in government spending. Consumer spending stalled in the second quarter, though business investment and exports remained healthy. Employment growth slowed, raising the unemployment rate back above 9%. Real estate markets remained weak and prices declined further in most regions. Economic growth is projected to improve only modestly in the second half of the year as a result of an upturn in motor vehicle production, lower oil prices, a weak U.S. dollar and strong demand from emerging-market economies. Business investment should remain healthy, benefiting from tax incentives and the solid earnings growth of U.S. multinational corporations. However, restrictive fiscal policy will continue to temper the expansion. After expanding 3.0% in 2010, the U.S. economy is expected to grow 1.7% in 2011 and 2.5% in 2012. Inflation should decline due to steadier commodity prices and subdued wage growth. The Federal Reserve is projected to maintain its low-interest rate policy well into 2013 to address high unemployment. Continued low interest rates should support capital markets activity this year, but the uncertain economic outlook and volatile equity markets will temper the benefit.

In the Midwest, where the bulk of our U.S. operations are located, the economy slowed in the spring. Consumer spending and manufacturing weakened, while construction and house prices remained subdued. However, business spending was steady and credit conditions improved. In the year ahead, the Midwest economy should benefit from stronger automobile production, continued strength in exports and high agricultural prices. Growth is expected to improve modestly, consistent with the overall U.S. economy, supporting personal and business loan demand. Firmer job growth should support home sales and residential mortgage demand.

This Economic Outlook section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Foreign Exchange

The Canadian dollar equivalents of BMO's U.S.-dollar-denominated net income, revenues, expenses, provisions for credit losses and income taxes were decreased relative to the third quarter of 2010 by the weakening of the U.S. dollar but were unchanged relative to the second quarter of 2011. The average Canadian/U.S. dollar exchange rate, expressed in terms of the Canadian dollar cost of a U.S. dollar, fell by 7.9% from a year ago and increased by 0.1% from the average of the second quarter of 2011. The following table indicates the relevant average Canadian/U.S. dollar exchange rates and the impact of changes in the rates.

Effects of U.S. Dollar Exchange Rate Fluctuations on BMO's Results

(Canadian $ in millions,                     Q3-2011           YTD-2011 vs.
 except as noted)                  vs. Q3-2010   vs. Q2-2011      YTD-2010
---------------------------------------------------------------------------
Canadian/U.S. dollar exchange
 rate (average)
 Current period                         0.9628        0.9628        0.9777
 Prior period                           1.0453        0.9623        1.0439
Increased (decreased) revenue              (73)            -          (161)
Decreased (increased) expense               50             -           108
Decreased (increased) provision
 for credit losses                           7             -            20
Decreased (increased) income
 taxes and non-controlling
 interest in subsidiaries                   (4)            -             1
---------------------------------------------------------------------------
Increased (decreased) net income           (20)            -           (32)
---------------------------------------------------------------------------
---------------------------------------------------------------------------

At the start of each quarter, BMO assesses whether to enter into hedging transactions that are expected to partially offset the pre-tax effects of exchange rate fluctuations in the quarter on our expected U.S.-dollar-denominated net income for that quarter. As such, these activities partially mitigate the impact of exchange rate fluctuations, but only within that quarter. As a result, the sum of the hedging gains/losses for the four quarters in a year is not directly comparable to the impact of year-over-year exchange rate fluctuation on earnings for the year. Over the course of the current quarter, the U.S. dollar strengthened modestly, as the exchange rate increased from Cdn$0.9464 per U.S. dollar at April 30, 2011 to an average of Cdn$0.9628. Hedging transactions resulted in an after-tax loss of $1 million for the quarter and after-tax gain of $2 million for the year to date. The gain or loss from hedging transactions in future periods will be determined by both future currency fluctuations and the amount of underlying future hedging transactions, since the transactions are entered into each quarter in relation to expected U.S.-dollar-denominated net income for the next three months.

The effect of currency fluctuations on our investments in foreign operations is discussed in the Income Taxes section.

Other Value Measures

BMO's average annual total shareholder return for the five-year period ended July 31, 2011 was 3.9%.

Net economic profit (NEP) was $226 million, compared with $293 million in the second quarter and $158 million in the third quarter of 2010. NEP is a non-GAAP measure. The decrease from the second quarter was largely due to an increased cost of capital due to the issuance of common shares in connection with the M&I acquisition in the quarter. NEP of $226 million represents the net income that is available to common shareholders ($754 million), plus the after-tax amortization of intangible assets ($12 million), net of a charge for capital ($540 million), and is considered an effective measure of added economic value. Please see the Non-GAAP Measures section at the end of the MD&A for a discussion on the use and limitations of non-GAAP measures.

Net Income

Q3 2011 vs Q3 2010

Net income was $793 million for the third quarter of 2011, up $124 million or 18% from a year ago. Earnings per share were $1.27, up 12% from $1.13 a year ago. BMO completed the acquisition of M&I on July 5, 2011 and issued approximately 67 million BMO common shares, as disclosed in the preceding Acquisition of Marshall & Ilsley Corporation section, and its results are included with BMO's as of that date. Results for the quarter in respect of M&I included a loss of $10 million and adjusted net income of $32 million.

Management assesses performance on both a GAAP basis and adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Adjusted results for the third quarter of 2011 exclude the following items:

- costs for M&I of $53 million ($32 million after tax) for integration costs such as professional fees for integration planning as well as costs for systems development and certain severance;

- amortization of acquisition-related intangible assets of $17 million ($12 million after tax) including $7 million ($4 million after tax) for M&I; and

- a charge to revenue for the hedge of foreign currency risk on the purchase of M&I of $9 million ($6 million after tax).

Adjusted net income was $843 million for the third quarter of 2011, up $165 million or 24% from a year ago. Adjusted earnings per share were $1.36, up 19% from $1.14 a year ago. Adjusted results and measures are non-GAAP. Adjusted results and items excluded in determining adjusted results are disclosed in more detail in the Non-GAAP Measures section at the end of the MD&A, together with comments on the uses and limitations of such measures.

There were improved results in each of the operating groups with particularly strong growth in BMO Capital Markets due in part to a more favourable environment than a year ago, resulting in good growth in trading revenue and mergers and acquisitions revenue. P&C U.S. grew strongly, benefiting from the inclusion of M&I's results. Private Client Group net income growth was also good, with growth across all businesses except insurance. There was reduced net income in Corporate Services due to lower revenues and integration costs.

Revenue increases outpaced expense increases in all of the operating groups, although operating leverage was modestly negative in both P&C Canada and Private Client Group. Provisions for credit losses in the current quarter decreased in the improved credit environment.

Q3 2011 vs Q2 2011

Net income decreased $7 million from the second quarter and earnings per share decreased $0.07 or 5.2% from $1.34. Adjusted net income increased $39 million or 4.8% from $804 million in the second quarter. The increase was largely attributable to the inclusion of M&I results. Adjusting items are detailed in the Non-GAAP Measures section at the end of the MD&A.

Revenue increased due to the addition of M&I. Expenses increased but, excluding the impact of M&I, were lower. Specific provisions for credit losses were modestly lower than in the second quarter but overall provisions were higher due to a reduction in the general allowance in the second quarter.

Q3 YTD 2011 vs Q3 YTD 2010

Net income increased $298 million or 14% to $2,369 million. Adjusted net income increased $337 million or 16% to $2,431 million. A strong increase in reported revenue outpaced the increase in reported expense and there were reduced provisions for credit losses.

Revenue

BMO analyzes consolidated revenues on a GAAP basis. However, like many banks, BMO analyzes the revenues of its operating groups and associated ratios computed using revenue on a taxable equivalent basis (teb). This basis includes an adjustment that increases GAAP revenues and the GAAP provision for income taxes by an amount that would raise revenues on certain tax-exempt items to a level equivalent to amounts that would incur tax at the statutory rate. The offset to the group teb adjustments is reflected in Corporate Services revenues and income tax provisions.

Total revenue for the third quarter of 2011 increased $367 million or 13% from a year ago, due in part to M&I revenue of $117 million. Adjusted revenue increased $376 million or 13%. There was solid growth in net interest income and also in non-interest revenue, both due in part to M&I. The weaker U.S. dollar decreased revenue growth by $73 million or 2.5 percentage points.

Revenue increased $57 million or 1.7% from the second quarter with solid growth in net interest income. Increased revenues were in part due to M&I and the impact of three more days in the third quarter. Net interest income was higher in each of the operating groups and non-interest revenue was higher in each of the operating groups except BMO Capital Markets. Revenues were lower in Corporate Services.

Changes in net interest income and non-interest revenue are reviewed in the sections that follow.

Net Interest Income

Net interest income increased $121 million or 7.7% from a year ago, with solid growth in P&C Canada, P&C U.S. and Private Client Group. Higher average earning assets drove the overall increase.

BMO's overall net interest margin decreased by 10 basis points year over year to 1.78%. There were decreases in P&C Canada and BMO Capital Markets and increases in P&C U.S. and Private Client Group. The reduction in net interest margin in P&C Canada was mainly due to lower deposit spreads in a low interest environment. The reduction in net interest margin in BMO Capital Markets was primarily attributable to lower trading net interest income. Increased margin in P&C U.S. was mainly due to improved loan spreads, as a result of a favourable change in the mix of loan balances, and higher deposit balances. In Private Client Group, the increase was due to higher deposit balances in private banking and higher deposit spreads in the brokerage businesses.

Average earning assets increased $45.3 billion or 14% relative to a year ago, and adjusted to exclude the impact of the weaker U.S. dollar, increased by $57.1 billion. Average earning assets included approximately one month of M&I balances, which added approximately $9.9 billion to BMO's average earning asset levels. Higher asset levels were attributable to loan growth in P&C Canada, increased trading assets in BMO Capital Markets and increases in personal loans in Private Client Group's Canadian private banking business. There were also higher cash balances, representing increased deposits with the U.S. Federal Reserve. Excluding the impact of M&I, P&C U.S. average earning assets were lower as credit and economic conditions continue to affect credit utilization. There was improved commercial loan growth in certain categories, in addition to increases from the acquisition of certain assets and liabilities of a Rockford, Illinois-based bank, but these were offset by planned run-off in the portfolio and new mortgage originations sold in the secondary market.

Relative to the second quarter, net interest income increased $72 million or 4.4%. There was higher net interest income in each of the groups, due to asset growth.

BMO's overall net interest margin decreased 11 basis points from the second quarter to 1.78%. Reduced net interest income in Corporate Services was a significant contributor to the overall reduction in net interest margin.

Net interest margin was stable in P&C Canada with a small decrease due to lower mortgage refinancing fees. Net interest margin in P&C U.S. was unchanged including the impact of M&I but otherwise increased by 6 basis points as a result of improved loan spreads due to the continuation of a favourable change in the mix of loan balances and increased deposit balances, partially offset by reduced spreads on deposits.

Average earning assets increased $24.4 billion or 6.9% from the second quarter due in part to the inclusion of M&I assets. There were increases across all the operating groups. There was growth in trading assets in BMO Capital Markets and growth across all lines in Private Client Group. P&C Canada average earning assets increased 5.1% year over year and 1.1% quarter over quarter.

Year to date, net interest income increased $314 million or 6.8%, due to higher revenues in all operating groups, except BMO Capital Markets. There were increased average earning assets in all operating groups and increased margins in all groups except BMO Capital Markets.

BMO's overall net interest margin decreased by 4 basis points to 1.83% for the year to date. P&C Canada was relatively unchanged. P&C U.S. margin increased due to improved loan spreads, as discussed above, and higher deposit balances. Private Client Group margin increased primarily due to improved deposit spreads in the brokerage businesses, partially offset by growth in insurance assets, which have no net interest income impact. BMO Capital Markets experienced lower trading net interest income and held higher deposits with the U.S. Federal Reserve, resulting in lower net interest margin.

Average earning assets for the year to date increased $30.3 billion or 9.2%, and by $38.9 billion adjusted to exclude the impact of the weaker U.S. dollar. M&I contributed $3.4 billion to growth as its assets were included in the average for only 26 days. On a Canadian dollar basis, there was organic growth in P&C Canada, Private Client Group and BMO Capital Markets, combined with an increase in Corporate Services. As indicated above, in P&C U.S., there was improved commercial loan growth in certain categories but the effects were offset by other factors. Private Client Group grew average earning assets across most lines of business and in BMO Capital Markets there was growth in trading assets.

Net Interest Margin (teb)(i)

                             Increase     Increase                Increase
(In basis                   (Decrease)   (Decrease)              (Decrease)
 points)         Q3-2011  vs. Q3-2010  vs. Q2-2011  YTD-2011  vs. YTD-2010
---------------------------------------------------------------------------
P&C Canada           292           (4)          (1)      295             1 
P&C U.S.             447           66            -       438            72 
---------------------------------------------------------------------------
Personal and
 Commercial
 Client Group        321           11            4       319            13
Private Client
 Group               289           12          (21)      297            18
BMO Capital
 Markets              73          (22)          (3)       76           (20)
Corporate
 Services,
 including
 Technology and
 Operations
 (T&O)(ii)            nm           nm           nm        nm            nm
---------------------------------------------------------------------------
Total BMO            178          (10)         (11)      183            (4)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total Canadian
 Retail(iii)         292           (6)          (3)      296            (1)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i)   Net interest margin is disclosed and computed with reference to
      average earning assets, rather than total assets. This basis provides
      a more relevant measure of margins, and changes in margins. Operating
      group margins are stated on a teb basis while total BMO margin is
      stated on a GAAP basis.
(ii)  Corporate Services net interest income is negative and lowers BMO's
      overall net interest margin.
(iii) Total Canadian retail margin represents the net interest margin of
      the combined Canadian business of P&C Canada and Private Client
      Group.
nm - not meaningful

Non-Interest Revenue

Non-interest revenue in the current quarter increased $246 million or 18% from a year ago. Results included $48 million related to M&I, consisting primarily of investment management fees in Private Client Group, deposit and payment service charges in P&C U.S., and other revenue. Overall growth in BMO's total non-interest revenue was mostly attributable to strong growth in BMO Capital Markets and a solid increase in Private Client Group. Non-interest revenue is detailed in the attached summary unaudited consolidated financial statements.

Non-interest revenue in the quarter improved from a year ago, due to strong growth in BMO Capital Markets mergers and acquisitions fees, as well as good growth in trading revenues, which were very low in the weak trading environment of a year ago. There were also healthy increases in Private Client Group mutual fund revenues and investment management and custodial fees. There was a $1.3 billion credit card securitization late in the second quarter; as a result, credit card fees were lowered this quarter and securitization non-interest revenue was increased.

Relative to the second quarter, non-interest revenue decreased $15 million or 1.0%. The reduction was attributable to decreases in Corporate Services and BMO Capital Markets, partially offset by improved revenues in P&C U.S. and Private Client Group. P&C U.S. non-interest revenues included increased investment securities gains and Private Client Group benefited from higher investment management fees. Private Client Group experienced declines in securities and commission fees but saw improvements in insurance revenues. The second quarter was affected by unusually high reinsurance claims from the earthquakes in Japan and New Zealand. The current quarter was affected, to a lesser extent, by increases in the adverse effects of unfavourable long-term interest rate movements on policyholder liabilities. Credit card fees decreased and securitization revenues rose, as discussed above. Corporate Services reduced non-interest revenue was due to a net reduction in a number of small items in other non-interest revenue in the third quarter and a credit card loan securitization gain in the second quarter.

Year to date, non-interest revenue increased $542 million or 12%. Non-interest revenue growth in BMO Capital Markets was very strong due to sizable increases in underwriting and advisory fees, securities commissions and trading revenues. Private Client Group also grew strongly with good growth in securities commissions, investment management and custodial fees and mutual fund revenues. Growth in insurance revenue was more than offset by the earthquake-related reinsurance claims and the adverse effect from unfavourable long-term interest rate movements on policyholder liabilities relative to the same period a year ago. P&C Canada non-interest revenue growth was driven by the inclusion of two more months of Diners Club North American franchise results in the current year and higher mutual fund revenues, offset in part by lower card fees.

Non-Interest Expense

Non-interest expense for the third quarter of 2011 increased $213 million or 11% from a year ago to $2,111 million. Adjusted non-interest expense increased $153 million or 8.0% from a year ago to $2,041 million. Adjusted expense excludes $53 million of integration costs relating to the M&I acquisition and $17 million in respect of the amortization of acquisition-related intangible assets. M&I increased expense by $137 million and adjusted non-interest expense by $76 million. Non-interest expense is detailed in the attached summary unaudited consolidated financial statements.

Increased employee compensation accounted for approximately two-thirds of the increase in reported expense and one-third of that amount was attributable to M&I. The growth was due in part to higher performance-based compensation, in line with improved revenues. There were also continued investments in the business including staffing increases across groups and higher costs from our other acquisitions. Computer and equipment costs and travel expense also increased. Professional fees increased substantially due to M&I. Lower other expenses include the benefit of a sales tax recovery. The weaker U.S. dollar reduced expense growth by $50 million or 2.6 percentage points, but the harmonized sales tax that was implemented in both Ontario and British Columbia on July 1, 2010 increased expenses year over year by approximately one-third of that amount.

Relative to the second quarter, non-interest expense increased $88 million or 4.3%, but fell when adjusted for the $137 million of M&I costs included in results in the quarter and the $25 million of pre-acquisition integration planning costs in the second quarter. On a reported basis, there were increases in employee compensation, travel and business development due to continued investment, partially offset by lower other expenses including the benefit of the sales tax recovery. The nominally stronger U.S. dollar relative to the second quarter had no impact on quarter-over-quarter expense growth.

Non-interest expense for the year to date increased $613 million or 11% to $6,180 million. Adjusted non-interest expense increased $525 million or 9.5%. M&I accounted for $162 million of expense growth and $76 million of adjusted expense growth. There was growth in employee compensation, including performance-based costs in line with improved results, increased computer and equipment costs, and higher professional fees and travel and business development expense. Expense growth was due in part to continued investment in our P&C and wealth businesses including technology development initiatives and the addition of employees, as well as the effects of our other acquisitions.

Risk Management

The global economic recovery has slowed due to heightened uncertainty surrounding both the European and U.S. economies. In the United States, continued high unemployment levels and weak real estate markets have weakened consumer confidence and increased ongoing economic uncertainty.

Loans acquired in connection with the M&I transaction were recorded at fair value at acquisition and as a result, no allowance for credit losses has been recorded on these loans. The fair value of the purchased portfolio of $29.2 billion included an adjustment for estimated future losses of $3.3 billion. In addition, an adjustment to the fair value of undrawn commitments and letters of credit of $206 million has been recorded in other liabilities. As the purchased portfolio was written down at acquisition to the amount expected to be collected, the purchased loans are not included in gross impaired loans. We expect to recover the fair value (or new carrying amount) of the purchased portfolio.

Provisions for credit losses totalled $174 million in the third quarter of 2011. Specific provisions were $174 million or an annualized 39 basis points of average net loans and acceptances, compared with $187 million or 45 basis points in the second quarter and $214 million or 50 basis points in the third quarter of 2010. The preceding ratios have been calculated excluding the impact of the purchased portfolios that were recorded at fair value at acquisition and prior quarters have been restated accordingly. There was no change in the general allowance in the current quarter or in the third quarter of 2010. There was a $42 million reduction in the general allowance in the second quarter of 2011.

On a geographic basis, specific provisions in Canada and other countries (excluding the United States) were $94 million in the third quarter of 2011, $97 million in the second quarter of 2011 and $110 million in the third quarter of 2010. Provisions in the United States for the comparable periods were $80 million, $90 million and $104 million, respectively.

BMO employs a methodology for segmented reporting purposes whereby credit losses are charged to the client operating groups quarterly, based on their share of expected credit losses. The difference between quarterly charges based on expected losses and required quarterly provisions based on actual losses is charged (or credited) to Corporate Services. The following paragraphs outline credit losses by client operating group based on actual credit losses, rather than their share of expected credit losses.

Actual credit losses in the third quarter of 2011 were: $161 million in P&C Canada; $51 million in P&C U.S.; $7 million in BMO Capital Markets; and a recovery of $2 million in Private Client Group. In addition, there were $19 million of actual credit losses in the quarter in respect of the loans transferred from P&C U.S. to Corporate Services. The P&C Canada losses of $161 million include credit losses of $62 million related to securitized assets, which are not included in BMO's $174 million of specific provisions.

Actual credit losses in the second quarter of 2011 were: $151 million in P&C Canada; $79 million in P&C U.S.; $5 million in Private Client Group; and $nil in BMO Capital Markets. The P&C Canada losses of $151 million include credit losses of $48 million related to securitized assets, which are not included in BMO's $187 million of specific provisions.

Actual credit losses in the third quarter of 2010 were: $171 million in P&C Canada; $103 million in P&C U.S.; $nil in Private Client Group; and a recovery of $10 million in BMO Capital Markets. The P&C Canada losses of $171 million include credit losses of $50 million related to securitized assets, which are not included in BMO's $214 million of specific provisions.

Impaired loan formations totalled $252 million in the current quarter, up from $147 million in the second quarter of 2011 and $242 million a year ago. Consistent with recent quarters, U.S.-related formations represented over half of BMO's total formations in the quarter.

Total gross impaired loans were $2,290 million at the end of the current quarter, down from $2,465 million in the second quarter and from $2,801 million a year ago. Effective the third quarter of 2011, gross impaired loans exclude the purchased portfolios and prior quarters have been restated accordingly.

The acquisition of M&I has increased BMO's exposure to U.S. real estate related loans and to potential deterioration in U.S. real estate markets. However, we are satisfied that estimated future credit losses were appropriately considered in determining the fair value of the purchased portfolio at acquisition and we continue to proactively manage these exposures.

BMO's liquidity and funding, market and insurance risk management practices and key measures are outlined on pages 82 to 88 of BMO's 2010 Annual Report.

There were no significant changes to our level of liquidity and funding risk over the quarter. We remain satisfied that our liquidity and funding management framework provides us with a strong liquidity position. During the quarter, our core deposits increased to $172 billion from $136 billion primarily due to the addition of M&I's core deposit base.

Trading and Underwriting Market Value Exposure (MVE) rose quarter over quarter due to increased activity in our fixed income businesses. Exposure in the bank's available-for-sale (AFS) portfolios was virtually unchanged over the quarter and continues to be concentrated in portfolios holding significant levels of high quality, hedged bonds.

There were no significant changes in our structural market risk management practices during the quarter. Structural MVE is driven by rising interest rates and primarily reflects a lower market value for fixed-rate loans. Structural Earnings Volatility (EV) is driven by falling interest rates and primarily reflects the risk of prime-based loans repricing lower. MVE and EV increased modestly from the prior quarter primarily due to the acquisition of M&I assets and liabilities.

There were no significant changes in the risk management practices or risk levels of our insurance business during the quarter.

This Risk Management section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Provisions for Credit Losses

(Canadian $ in millions,
 except as noted)          Q3-2011   Q2-2011   Q3-2010  YTD-2011  YTD-2010 
---------------------------------------------------------------------------
New specific provisions        273       258       316       861     1,076
Reversals of previously
 established allowances        (38)      (21)      (57)      (83)     (149)
Recoveries of loans
 previously written off        (61)      (50)      (45)     (169)     (131)
---------------------------------------------------------------------------
Specific provision for
 credit losses                 174       187       214       609       796 
Decrease in the general
 allowance                       -       (42)        -       (42)        -
---------------------------------------------------------------------------
Provision for credit
 losses (PCL)                  174       145       214       567       796
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Specific PCL as a % of
 average net loans and
 acceptances
 (annualized)(1)              0.39%     0.45%     0.50%     0.47%     0.63%
PCL as a % of average
 net loans and
 acceptances
 (annualized)(1)              0.39%     0.36%     0.50%     0.44%     0.63%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Effective Q3 2011, the calculation excludes purchased portfolios. Prior
    periods were restated to reflect this change.



Changes in Gross Impaired Loans and Acceptances (GIL)(1)

(Canadian $ in millions,
 except as noted)
---------------------------------------------------------------------------
GIL, Beginning of Period     2,465     2,739     2,968     2,894     3,297
Additions to impaired
 loans & acceptances           252       147       242       682     1,064
Reductions in impaired
 loans & acceptances(2)       (140)     (139)     (129)     (428)     (636)
Write-offs                    (287)     (282)     (280)     (858)     (924) 
---------------------------------------------------------------------------
GIL, End of Period           2,290     2,465     2,801     2,290     2,801
---------------------------------------------------------------------------
---------------------------------------------------------------------------
GIL as a % of gross
 loans & acceptances(4)       1.29%     1.40%     1.61%     1.29%     1.61%
GIL as a % of equity and
 allowances for credit
 losses(3)(4)                 7.97%    10.22%    12.15%     7.97%    12.15%
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Restated to exclude the U.S. portfolio acquired in Q2 2010, since the
    portfolio was fair valued at the acquisition date.
(2) Includes impaired amounts returned to performing status, loan sales,
    repayments, the impact of foreign exchange fluctuations and offsets for
    consumer write-offs which have not been recognized as formations ($164
    million in Q3 2011; $156 million in Q2 2011; and $187 million in Q3
    2010).
(3) Effective Q4 2010, the calculation excludes non-controlling interest in
    subsidiaries. Prior periods were restated to reflect this change.
(4) Effective Q3 2011, the calculation excludes purchased portfolios. Prior
    periods were restated to reflect this change.


Total Trading and Underwriting Market Value Exposure (MVE) Summary
($ millions)(i)

                                                           As at     As at 
                   For the quarter ended July 31, 2011     April   October 
(Pre-tax                                                30, 2011  31, 2010 
 Canadian        Quarter-                                Quarter-  Quarter-
 equivalent)         end   Average      High       Low       end       end 
------------------------------------------------------- --------- ---------
Commodity VaR       (0.6)     (0.3)     (0.6)     (0.1)     (0.1)     (0.1)
Equity VaR          (3.9)     (4.2)     (6.6)     (3.4)     (4.0)     (7.5)
Foreign Exchange
 VaR                (0.6)     (2.0)     (4.3)     (0.1)     (1.8)     (0.6)
Interest Rate VaR
 (Mark-to-Market)  (10.7)    (11.3)    (16.0)     (8.3)    (10.9)     (7.5)
Diversification      4.1       5.5        nm        nm       5.8       4.8 
------------------------------------                    --------- ---------
Trading Market
 VaR               (11.7)    (12.3)    (17.1)     (9.2)    (11.0)    (10.9)
Trading &
 Underwriting
 Issuer Risk        (5.0)     (5.1)     (8.8)     (4.4)     (4.1)     (2.7)
------------------------------------                    --------- ---------
Total Trading &
 Underwriting MVE  (16.7)    (17.4)    (22.6)    (13.8)    (15.1)    (13.6)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Interest Rate
 VaR (AFS)         (12.1)    (12.7)    (13.6)    (12.1)    (13.1)     (7.4)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i) One-day measure using a 99% confidence interval. Losses are in brackets
    and benefits are presented as positive numbers.
nm - not meaningful


Structural Balance Sheet Market Value Exposure and Earnings Volatility
($ millions)(i)

---------------------------------------------------------------------------
                                           July 31    April 30     Oct. 31
(Canadian equivalent)                         2011        2011        2010 
---------------------------------------------------------------------------
Market value exposure (MVE) (pre-tax)       (637.8)     (612.9)     (564.1)
12-month earnings volatility (EV)
 (after-tax)                                 (87.9)      (78.8)      (63.8)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(i) Losses are in brackets. Measured at a 99% confidence interval.


Structural Balance Sheet Earnings and Value Sensitivity to Changes in
Interest Rates ($ millions)(i)(ii)

                                       Economic       Earnings sensitivity
                                          value                   over the
                                    sensitivity             next 12 months
(Canadian equivalent)                  (Pre-tax)                (After-tax)
---------------------------------------------------------------------------
                      July 31  Apr. 30  Oct. 31  July 31  Apr. 30  Oct. 31 
                         2011     2011     2010     2011     2011     2010
---------------------------------------------------------------------------
100 basis point
 increase              (514.0)  (430.9)  (380.5)     9.8     12.0     20.9
100 basis point
 decrease               364.9    356.1    322.3    (86.8)   (74.8)   (70.3)

200 basis point
 increase            (1,082.4)  (887.6)  (815.1)    38.5     12.4     33.4
200 basis point
 decrease               850.0    745.1    738.2    (21.7)     5.9    (12.8)
---------------------------------------------------------------------------
(i)  Losses are in brackets and benefits are presented as positive numbers.
(ii) For BMO's Insurance businesses, a 100 basis point increase in interest
     rates at July 31, 2011 results in an increase in earnings after tax of
     $97 million and an increase in before tax economic value of $302
     million ($81 million and $237 million, respectively, at April 30, 2011
     and $77 million and $295 million, respectively, at October 31, 2010).
     A 100 basis point decrease in interest rates at July 31, 2011 results 
     in a decrease in earnings after tax of $90 million and a decrease in 
     before tax economic value of $315 million ($76 million and $245
     million, respectively, at April 30, 2011 and $71 million and $304 
     million, respectively, at October 31, 2010). These impacts are not 
     reflected in the table above.

Income Taxes

As explained in the Revenue section, management assesses BMO's consolidated results and associated provisions for income taxes on a GAAP basis. We assess the performance of the operating groups and associated income taxes on a taxable equivalent basis and report accordingly.

The provision for income taxes of $178 million increased $71 million from the third quarter of 2010 and decreased $53 million from the second quarter of 2011. The effective tax rate for the quarter was 18.0%, compared with 13.4% in the third quarter of 2010 and 22.0% in the second quarter of 2011. The higher effective tax rate in the current quarter, as compared to the third quarter of 2010, was primarily due to lower tax-exempt income, partially offset by a reduction in the statutory Canadian income tax rate in 2011. The lower effective tax rate in the current quarter, as compared to the second quarter of 2011, was primarily due to a higher proportion of income from lower tax-rate jurisdictions and higher recoveries of prior periods' income taxes.

As explained at the end of the Q3 2011 Regulatory Capital Review section, to manage the impact of foreign exchange rate changes on BMO's investments in foreign operations and their effect on the bank's capital ratios to acceptable levels, BMO may partially or fully hedge foreign exchange risk by partially or fully funding its foreign investment in U.S. dollars. Under this program, the gain or loss from hedging and the unrealized gain or loss from translation of the investments in U.S. operations are charged or credited to shareholders' equity. For income tax purposes, the gain or loss on the hedging activities results in an income tax charge or credit in the current period in shareholders' equity, while the associated unrealized gain or loss on the investments in U.S. operations does not incur income taxes until the investments are liquidated. The income tax charge or benefit arising from a hedging gain or loss is a function of the fluctuation in the Canadian/U.S. exchange rate from period to period. Hedging of the investments in U.S. operations has given rise to an income tax recovery in shareholders' equity of $10 million for the quarter and an income tax charge of $170 million for the year to date. Refer to the Consolidated Statement of Changes in Shareholders' Equity included in the interim unaudited consolidated financial statements for further details.

Balance Sheet

Total assets were $476.6 billion at July 31, 2011. BMO completed the acquisition of M&I on July 5, 2011, acquiring $45.6 billion of assets. The M&I assets were comprised of loans totalling $29.2 billion, securities of $6.0 billion, cash of $2.8 billion and other items totalling $7.6 billion, including goodwill of $1.8 billion. The allocation of the purchase price for M&I is subject to refinement as we complete the valuation of the assets acquired and liabilities assumed.

Including the addition of the M&I assets, total assets increased $64.9 billion from October 31, 2010. The weaker U.S. dollar decreased the translated value of U.S.-dollar-denominated assets by $7.3 billion. There were increases in net loans and acceptances of $28.8 billion, cash and cash equivalents and interest bearing deposits with banks of $17.5 billion, securities borrowed or purchased under resale agreements of $10.2 billion, other assets of $4.9 billion and securities of $3.5 billion.

The $28.8 billion increase in net loans and acceptances was due to an increase in loans to businesses and governments of $17.0 billion, which included $19.5 billion from M&I, net of a reduction of $1.8 billion in other BMO loans due mainly to economic conditions. Spending remains weak and borrowers have reduced utilization of loan facilities. Given the low interest rate environment, more borrowers have accessed the capital markets at attractive rates and used the proceeds to pay down bank debt. There was an increase in consumer instalment and other personal loans of $6.9 billion including $4.4 billion from M&I, and a $2.8 billion increase in auto loans and home equity loans. There was a $5.8 billion increase in residential mortgages, including $3.9 billion from M&I. P&C Canada's commercial loan balances also increased. The above increases were partially offset by lower credit card loans due mainly to higher levels of securitization activity in April of this year.

The $17.5 billion increase in cash and cash equivalents and interest bearing deposits with banks was largely due to increased balances held at the Federal Reserve.

The $10.2 billion increase in securities borrowed or purchased under resale agreements was mainly due to increased client activities.

The $4.9 billion increase in other assets was all due to M&I, and included $1.8 billion of goodwill and $2.4 billion of deferred income taxes. Excluding the impact of M&I, BMO's other assets decreased due largely to lower carrying values for derivative instruments.

The $3.5 billion increase in securities resulted from an increase from M&I, partially offset by decreases in BMO's portfolios.

Liabilities and shareholders' equity totalled $476.6 billion at July 31, 2011. BMO's acquisition of M&I added $41.6 billion of liabilities including $33.9 billion of deposits on July 5, 2011. The weaker U.S. dollar decreased liabilities and shareholders' equity by $7.3 billion at July 31, 2011.

Including M&I, total liabilities and shareholders' equity increased $64.9 billion from October 31, 2010. The $64.9 billion increase primarily reflects growth in deposits of $42.2 billion, securities sold but not yet purchased of $9.0 billion, securities lent or sold under repurchase agreements of $6.8 billion, shareholders' equity of $5.1 billion, subordinated debt of $1.5 billion and other amounts totalling $4.8 billion. These factors were partially offset by a decrease in derivative financial liabilities of $4.1 billion and capital trust securities of $0.4 billion.

The $42.2 billion increase in deposits included a $17.4 billion increase in deposits from businesses and governments (which account for $148.2 billion or 51% of total deposits). Of the $17.4 billion increase, $12.4 billion was attributable to M&I. Deposits by individuals (which account for $120.2 billion or 41% of total deposits) increased $21.2 billion with virtually all of the increase attributable to M&I. Deposits by banks (which account for the remaining $23.0 billion or 8% of total deposits) increased $3.5 billion primarily due to higher wholesale deposits.

The $9.0 billion increase in securities sold but not yet purchased was mainly due to increased hedging requirements resulting from an increase in client activities.

The $6.8 billion increase in securities lent or sold under repurchase agreements was mainly due to increased client investments, mainly in Canada.

The $5.1 billion increase in shareholders' equity largely reflects the issuance of approximately 67 million common shares on the M&I acquisition at a value of $4.0 billion, a $0.3 billion issuance of preferred shares in the second quarter and an increase in retained earnings, partially offset by a decrease in accumulated other comprehensive loss due mainly to a net loss on translation of our net investment in foreign operations.

The $4.8 billion increase in other amounts included $3.2 billion from M&I.

The $1.5 billion increase in subordinated debt was due to an issuance during the second quarter.

Capital Management

Q3 2011 Regulatory Capital Review

BMO remains well capitalized at July 31, 2011, with a Basel II Tier 1 Capital Ratio of 11.48% and a Basel II Common Equity Ratio of 9.11%. Tier 1 capital was $24.3 billion, risk-weighted assets (RWA) were $212.0 billion, and regulatory common equity was $19.3 billion. At October 31, 2010, the Tier 1 Ratio was 13.45% and the Common Equity Ratio was 10.26%. The acquisition of M&I on July 5, 2011 caused reductions in the Tier 1 Ratio and Common Equity Ratio of 190 basis points and 130 basis points, respectively, while the ratios were also impacted by other items that affected both RWA and capital, as outlined below.

In the first quarter of 2011, the Office of the Superintendent of Financial Institutions (Canada) approved BMO's application to use the Advanced Internal Ratings Based (AIRB) Approach to determine credit risk RWA for Harris Bancorp, Inc. The change affected capital and RWA as noted in prior quarters.

Tier 1 capital increased $2.7 billion from October 31, 2010. The increase was due to the issuance of common shares to M&I shareholders as consideration for the acquisition, internally generated capital and the issuance of $290 million of 3.90% Preferred Shares Series 25 on March 11, 2011. These factors were partially offset by the redemption of $400 million of BMO BOaTS-Series B in the first quarter, higher Basel II capital deductions primarily related to the M&I acquisition and the adoption of the AIRB approach for Harris Bancorp Inc., as noted above.

RWA increased $50.8 billion from October 31, 2010 primarily due to the impact of the M&I acquisition, which added approximately $45 billion of RWA, and the adoption of the AIRB Approach for Harris Bancorp Inc. as outlined above. Corporate and commercial RWA and securitization RWA also increased in the third quarter. The effect of a strengthening Canadian dollar on U.S. dollar-denominated RWA partially offset the total increase in RWA.

BMO's Basel II Total Capital Ratio was 14.21% at July 31, 2011. The ratio decreased 170 basis points from 15.91% at the end of 2010. Total capital increased $4.5 billion to $30.1 billion as at July 31, 2011, primarily due to the impact of $1.5 billion of 3.979% Series G Medium Term Notes First Tranche subordinated indebtedness issued on March 2, 2011 and growth in Tier 1 capital as noted above.

BMO's investments in U.S. operations are primarily denominated in U.S. dollars. Foreign exchange gains or losses on the translation of the investments in foreign operations to Canadian dollars are reported in shareholders' equity, which, when coupled with the foreign exchange impact of U.S. dollar-denominated RWA on Canadian dollar-equivalent RWA, can create volatility in the bank's capital ratios. To manage the impact of foreign exchange rate changes on the bank's capital ratios to acceptable levels, BMO may partially or fully hedge this foreign exchange risk by partially or fully funding its foreign investment in U.S. dollars.

Qualifying Regulatory Capital

Basel II Regulatory Capital and Risk-Weighted Assets 
(Canadian $ in millions)                             Q3-2011       Q4-2010
---------------------------------------------------------------------------
Gross regulatory common shareholders' equity          23,580        18,753
Non-cumulative preferred shares                        2,861         2,571
Innovative Tier 1 Capital Instruments                  2,126         2,542
Non-controlling interest in subsidiaries                  33            23
Goodwill and excess intangible assets                 (3,374)       (1,619)
---------------------------------------------------------------------------
Net Tier 1 Capital                                    25,226        22,270
Securitization-related deductions                       (167)         (165)
Expected loss in excess of allowance - AIRB approach    (270)            -
Substantial investments/Investments in insurance
 subsidiaries                                           (445)         (427)
---------------------------------------------------------------------------
Adjusted Tier 1 Capital (Tier 1 Capital)              24,344        21,678
---------------------------------------------------------------------------
Subordinated debt                                      5,858         3,776
Trust subordinated notes                                 800           800
Accumulated net after-tax unrealized gains on
 available-for-sale equity securities                     12            10
Eligible general allowance for credit losses             292           292
---------------------------------------------------------------------------
Total Tier 2 Capital                                   6,962         4,878
Securitization-related deductions                        (29)          (29)
Expected loss in excess of allowance - AIRB approach    (270)            -
Substantial Investments/Investment in insurance
 subsidiaries                                           (875)         (890)
---------------------------------------------------------------------------
Adjusted Tier 2 Capital                                5,788         3,959
---------------------------------------------------------------------------
Total Capital                                         30,132        25,637
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Risk-Weighted Assets
(Canadian $ in millions)                             Q3-2011       Q4-2010
---------------------------------------------------------------------------
Credit risk                                          181,683       136,290
Market risk                                            5,715         5,217
Operational risk                                      24,588        19,658
---------------------------------------------------------------------------
Total risk-weighted assets                           211,986       161,165
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Outstanding Shares and Securities Convertible into Common Shares

                                                       Number of shares or 
As at August 17, 2011                                        dollar amount 
---------------------------------------------------------------------------
Common shares                                                  637,372,000
Class B Preferred Shares
 Series 5                                                  $   200,000,000
 Series 13                                                 $   350,000,000
 Series 14                                                 $   250,000,000
 Series 15                                                 $   250,000,000
 Series 16                                                 $   300,000,000
 Series 18                                                 $   150,000,000
 Series 21                                                 $   275,000,000
 Series 23                                                 $   400,000,000
 Series 25                                                 $   290,000,000
Convertible into common shares:
Class B Preferred Shares(1)    
 Series 10                                               US$   300,000,000
Stock options(2)    
 - vested                                                       10,192,000
 - non-vested                                                    7,702,000
---------------------------------------------------------------------------
(1) Convertible preferred shares may be exchanged for common shares on
    specific dates on a pro-rata basis based on 95% of the average trading
    price of common shares for the 20 days ending four days prior to the
    exchange date.
(2) Stock options include certain M&I options that were converted into BMO
    options.

Details on share capital are outlined in the 2010 Annual Report in Note 20
to the audited financial statements on pages 145 to 146.

Potential Impacts of Proposed Regulatory Capital Changes and Conversion to IFRS

The rules on Basel III capital requirements have now been largely outlined and BMO's Basel III Capital Ratios are strong.

We consider the Common Equity Ratio and the Tier 1 Capital Ratio to be the primary capital ratios under Basel III. Based on our analysis and assumptions and including the estimated impact for the adoption of IFRS, BMO's pro-forma July 31, 2011 Common Equity Ratio and Tier 1 Capital Ratio would be 6.6% and 8.8%, respectively. The ratios decreased from 8.6% and 11.5%, respectively, in the second quarter primarily due to the impact of the M&I acquisition, higher RWA as noted above, and refined estimates for certain Basel III impacts.

The pro-forma calculations and statements in this section assume full implementation of announced Basel III regulatory capital requirements and include the potential impact of certain key changes associated with the adoption of IFRS.

BMO's pro-forma capital ratios are strong and the bank is well positioned to meet Basel III capital requirements in the near term.

Under Basel III, the bank's regulatory common equity (defined as common equity net of applicable regulatory capital adjustments) would decrease by approximately $4.4 billion from $19.3 billion to $14.9 billion as at July 31, 2011, and its Tier 1 capital would decrease by approximately $4.4 billion from $24.3 billion to $19.9 billion. The decrease is primarily a result of the impact of the adoption of International Financial Reporting Standards (IFRS) on retained earnings, as well as new Basel III capital deductions. These factors are partially offset by the removal of certain existing Basel II deductions from capital and their conversion to higher levels of RWA.

Our RWA as at July 31, 2011 would increase by approximately $14.7 billion from $212.0 billion to $226.7 billion, primarily due to higher counterparty credit risk RWA ($10.6 billion) and, to a lesser extent, higher market risk RWA, as well as the conversion of certain existing Basel II capital deductions to RWA ($4.2 billion), as noted above.

BMO's pro-forma Total Capital Ratio and Leverage Ratio exceed Basel III minimum requirements.

The impacts of the changes from IFRS are based on our analysis to date, as set out in Transition to International Financial Reporting Standards in the Future Changes in Accounting Policies -IFRS section in both our 2010 Annual Report and starting on the following page of this document. In calculating the Basel III Tier 1 Capital Ratio and commenting on the bank's Basel III Total Capital Ratio and Leverage Ratio, we also assumed existing non-common share Tier 1 and Tier 2 capital instruments are fully included in regulatory capital. These instruments do not meet Basel III capital requirements and will be subject to the grandfathering provisions outlined in our 2010 Annual Report. We expect to be able to refinance non-common share capital instruments as and when necessary to meet applicable non-common share capital requirements.

The Basel III pro-forma ratios do not reflect future management actions that may be taken to mitigate the impact of the changes, the benefit of retained earnings growth over time that could be available to meet these requirements, or factors beyond the control of management.

Other Capital Developments

During the quarter, there were 1,137,000 shares issued through the Shareholder Dividend Reinvestment and Share Purchase Plan and the exercise of stock options, and approximately 67 million common shares issued to M&I shareholders in consideration for the M&I acquisition. We did not repurchase any Bank of Montreal common shares under our common share repurchase program during the quarter.

On August 23, 2011, BMO announced that the Board of Directors declared a quarterly dividend payable to common shareholders of $0.70 per share, unchanged from a year ago and from the preceding quarter. The dividend is payable November 28, 2011, to shareholders of record on November 1, 2011. Common shareholders may elect to have their cash dividends reinvested in common shares of the bank in accordance with the bank's Shareholder Dividend Reinvestment and Share Purchase Plan ("Plan"). Under the Plan, the Board of Directors determines whether the common shares will be purchased in the secondary market or issued by the bank from treasury. At this time, the common shares purchased under the Plan will be issued from treasury without discount from the average market price of the common shares (as defined in the Plan).

This Capital Management section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

Eligible Dividends Designation

For the purposes of the Income Tax Act (Canada) and any similar provincial and territorial legislation, BMO designates all dividends paid or deemed to be paid on both its common and preferred shares as "eligible dividends", unless indicated otherwise.

Credit Rating

The credit ratings assigned to BMO's senior debt securities by external rating agencies are important in the raising of both capital and funding to support our business operations. Maintaining strong credit ratings allows us to access the capital markets at competitive pricing levels. Should our credit ratings materially decrease, our cost of funds would likely increase significantly and our access to funding and capital through capital markets could be reduced. A material downgrade of our rating could have additional consequences, including those set out in Note 10 to the audited consolidated financial statements on page 130 of the 2010 Annual Report.

BMO's senior debt credit ratings were unchanged in the quarter. All four ratings are indicative of high-grade, high-quality issues. The ratings are as follows: DBRS (AA); Fitch Ratings (AA-); Moody's Investors Service (Aa2); and Standard & Poor's Ratings Services (A+). These credit ratings are also disclosed in the Financial Highlights section located near the beginning of this document.

During the quarter, Moody's affirmed its long-term ratings of Bank of Montreal (Aa2) and returned BMO's rating outlook to stable after placing its rating under review for downgrade following the announcement of our intention to acquire M&I. The other three ratings agencies continue to maintain their ratings with a stable outlook.

Transactions with Related Parties

In the ordinary course of business, we provide banking services to our directors and executives and their affiliated entities, joint ventures and equity-accounted investees on the same terms that we offer to our customers for those services. A select suite of customer loan and mortgage products is offered to our employees at rates normally made available to our preferred customers. We also offer employees a fee-based subsidy on annual credit card fees.

Stock options and deferred share units granted to directors and preferred rate loan agreements for executives, relating to transfers we initiate, are both discussed in Note 27 to the audited consolidated financial statements on page 159 of the 2010 Annual Report.

Off-Balance-Sheet Arrangements

BMO enters into a number of off-balance-sheet arrangements in the normal course of operations. The most significant of these are Credit Instruments, Variable Interest Entities and Guarantees, which are described on pages 64 to 66 and 68 to 70 of the 2010 Annual Report as well as in Notes 4 and 6 to the attached unaudited interim consolidated financial statements. See the Select Financial Instruments section for comments on any significant changes to our off-balance-sheet arrangements during the quarter ended July 31, 2011.

Accounting Policies and Critical Accounting Estimates

The notes to BMO's October 31, 2010 audited consolidated financial statements outline our significant accounting policies.

Pages 68 to 70 of the 2010 Annual Report contain a discussion of certain accounting estimates that are considered particularly important as they require management to make significant judgments, some of which relate to matters that are inherently uncertain. Readers are encouraged to review that discussion.

Select Financial Instruments

Pages 63 to 67 of BMO's 2010 Annual Report provide enhanced disclosure relating to select financial instruments that, commencing in 2008, markets had come to regard as carrying higher risk. Readers are encouraged to review that disclosure to assist in understanding the nature and extent of BMO's exposures. We follow a practice of reporting on significant changes, if any, in our interim MD&A. The acquisition of M&I has increased overall levels of certain of the asset categories discussed in the Select Financial Instruments section of BMO's 2010 Annual Report.

The amount drawn on the liquidity facilities BMO provides to the Structured Investment Vehicles (SIVs) was lowered to US$2.8 billion and EUR277 million at the end of the quarter, down from US$3.2 billion and EUR313 million at the end of the second quarter and US$4.3 billion and EUR478 million at the end of fiscal 2010. The decreases were attributable to asset sales and asset maturities. The book values of the subordinated capital notes at quarter end were US$475 million and EUR107 million for Links and Parkland, respectively, compared with US$689 million and EUR141 million at the end of fiscal 2010.

Select Geographic Exposures

In the euro zone, BMO's direct credit exposures in Greece, Ireland, Italy, Spain and Portugal are primarily to banks for trade finance, lending and trading products. Exposures remain modest at $131 million at quarter end. In addition, our Irish subsidiary is required to maintain reserves with the Irish central bank. These reserves totalled approximately $164 million at quarter end.

Given the level of European sovereign debt held by European banks, we continue to proactively monitor BMO's direct exposure to these counterparties, giving appropriate consideration to the potential for indirect exposure to European sovereign debt.

The BMO-managed SIVs had exposure with a par value of approximately $34 million to counterparties in Ireland, with no exposure in Greece, Italy, Spain or Portugal. This exposure was comprised solely of government guaranteed Irish bank senior debt. We are closely monitoring our exposure to banks in other European countries.

Future Changes in Accounting Policies

Transition to International Financial Reporting Standards

Canadian public companies will be required to prepare their financial statements in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), for fiscal years beginning on or after January 1, 2011. Effective November 1, 2011, we will adopt IFRS as the basis for preparing our consolidated financial statements. We will report our financial results for the quarter ended January 31, 2012 prepared on an IFRS basis. We will also provide comparative data on an IFRS basis, including an opening balance sheet as at November 1, 2010 (transition date).

Our enterprise-wide project to transition to IFRS remains on track. We have completed our diagnostic review and assessment phase. Our implementation and education phase is substantially completed, and we have entered the third and final phase of our transition. This final phase includes the development of controls and procedures necessary to restate our 2011 opening balance sheet and financial results on an IFRS basis in preparation for our transition to IFRS in 2012, and finalizing our choices on the policy decisions available under IFRS.

Based on our analysis to date, the main accounting changes that will result from the adoption of IFRS are expected to be in the areas of pension and other employee future benefits, asset securitization, consolidation and accumulated other comprehensive loss on translation of foreign operations. The differences between the bank's accounting policies and IFRS requirements associated with these areas, combined with our decisions on the optional exemptions from retroactive application of IFRS, will result in measurement and recognition differences when we transition to IFRS. The net impact of these differences will be recorded in opening retained earnings, affecting shareholders' equity. These impacts will also extend to our capital ratios, with the exception of the change related to accumulated other comprehensive loss on translation of foreign operations, which will have no impact on our capital ratios.

The main accounting changes listed should not be considered a comprehensive list of the impacts of adopting IFRS, but rather the most significant of certain key changes based on our analysis to date. Precisely quantifying all of the impacts that will result from adopting IFRS will be dependent on the completion of all our project workstreams, finalization of all decisions where choices of accounting policies are available, including optional exemptions from retroactive restatement available under IFRS, and the prevailing market conditions and economic circumstances at the time of transition. Other significant differences may be identified prior to our transition to IFRS.

Pension and Other Employee Future Benefits

On transition to IFRS, we can choose to recalculate pension and other future employee benefits expense back to inception of the plans as though we had always applied the IFRS employee benefits requirements, or to record market-related amounts that exist on November 1, 2010 directly in retained earnings (the fresh start method). Market-related amounts include unrealized market-related gains or losses on pension fund assets and the impact of changes in discount rates on pension obligations. We have decided to elect the fresh start method as permitted under IFRS.

Asset Securitization

In 2010, we substantially completed our assessment of the accounting treatment under IFRS of loans and mortgages sold to the bank's securitization vehicles and to the Canada Mortgage Bond program. Our preliminary conclusion is that the loans and mortgages sold by the bank to these securitization programs will remain on our balance sheet. Under Canadian GAAP, the mortgages and loans sold through these programs are removed from our balance sheet.

In the current quarter, we substantially completed our assessment of the accounting treatment under IFRS of the bank's Canadian mortgage loans sold to the National Housing Act Mortgage-Backed Securities program (NHA MBS). We assessed whether the mortgages qualify for off-balance sheet treatment based on the transfer of the risk and rewards, as determined under the derecognition criteria contained in the IFRS financial instruments standard (IAS 39). Based on the analysis completed to date, our preliminary conclusion is that the mortgages sold through the NHA MBS program will remain on our balance sheet. Under Canadian GAAP, the mortgages sold through this program are removed from our balance sheet. If the securitized assets sold to the NHA MBS program were to be recognized on the bank's balance sheet, assets and liabilities would increase by approximately $4 billion on November 1, 2010, the beginning of our comparative year. We do not expect that this would result in any significant adjustment to opening retained earnings on November 1, 2010.

Additional information on our asset securitizations is included in Note 8 on page 126 of the consolidated financial statements in our 2010 Annual Report.

Consolidation

In 2010, we substantially completed our assessment of whether we are required to consolidate our credit protection vehicle Apex Trust ("Apex") and our structured investment vehicles ("SIVs") when we transition to IFRS. Our preliminary conclusion is that the bank would be required to consolidate Apex and the SIVs. Under Canadian GAAP, we are not required to consolidate Apex and the SIVs.

In the second quarter, we substantially completed our assessment of whether we are required to consolidate our U.S. customer securitization vehicle. We assessed the consolidation requirement based on whether the bank would, in substance, control the vehicle as determined under the criteria contained in the IFRS consolidated and separate financial statements standard (IAS 27) and, where appropriate, SIC-12 (an interpretation of IAS 27). Our preliminary conclusion is that the bank would be required to consolidate the vehicle. Under Canadian GAAP, we are not required to consolidate our U.S. customer securitization vehicle. Consolidation of the vehicle would impact the bank's balance sheet, increasing assets and liabilities by approximately $3 billion on November 1, 2010, the beginning of our comparative year. We do not expect that this would result in any significant adjustment to opening retained earnings on November 1, 2010 or the calculation of our Tier 1 Capital Ratio.

In the current quarter, we substantially completed our assessment of whether we are required to consolidate our Canadian customer securitization vehicles. We assessed the consolidation requirement based on whether the bank would, in substance, control the vehicle as determined under the criteria contained in the IFRS consolidated and separate financial statements standard (IAS 27) and, where appropriate, SIC-12 (an interpretation of IAS 27). Our analysis considered whether the activities of the vehicle are conducted on behalf of the bank, the bank's exposure to the risks and benefits of the vehicle, its decision-making power over the vehicle, and whether these considerations demonstrate that the bank, in substance, controls the vehicle and therefore must consolidate it. We determined that for five of our eight Canadian customer securitization vehicles, the requirements to consolidate were not met under IFRS, a result that is consistent with how the vehicles are accounted for under Canadian GAAP. As a result, when we transition to IFRS there will be no change in the accounting treatment of our Canadian customer securitization vehicles.

We expect to complete our assessment of other less significant VIE's in the fourth quarter of 2011.

Information on all our VIEs, including total assets, our exposure to loss and our assessment of the consolidation requirement under Canadian GAAP, is included in Note 9 on page 128 of the consolidated financial statements in our 2010 Annual Report.

Accumulated other Comprehensive Loss on Translation of Foreign Operations

On transition to IFRS, we can either recalculate translation differences on an IFRS basis as through we had always applied the IFRS requirements or reset the accumulated other comprehensive loss on translation of net foreign operations to zero. We expect to elect to reset our accumulated other comprehensive loss on translation of net foreign operations to zero.

Acquisition of Marshall & Ilsley Corporation (M&I)

Under Canadian GAAP, the M&I purchase price is based on an average of the market price of the shares over a reasonable period before and after the date the terms of the acquisition are agreed to and announced. Under IFRS, the purchase price will be based on the market price of the shares at the closing date of the transaction. Additionally acquisition costs are capitalized under Canadian GAAP and classified as goodwill. IFRS requires acquisition costs to be expensed. When we transition to IFRS in fiscal 2012, we will restate the acquisition of M&I and reflect these differences in our comparative year. We do not expect these differences will have a significant impact on our comparative year financial results.

Quantification of the impact of certain key differences

Pages 71 through 73 of our 2010 Annual Report contain discussions on the key elements of our transition plan, approximate impacts to our 2011 opening balance sheet and capital ratios of certain key differences, and our assessment of the optional exemptions from retroactive application of IFRS. Readers are encouraged to review these discussions for more details.

This Transition to International Financial Reporting Standards section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.

U.S. Legislative Developments

On July 21, 2010, President Obama signed into law the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act is broad in scope and we continue to assess the impact of the legislation on our operations. Many aspects of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate at this time the overall financial impact on our operations or the financial industry more generally. The change to overdraft fees as a result of Regulation E came into effect in the summer of 2010, and is now included in our results. The reductions to interchange fees under Dodd-Frank will be effective on October 1, 2011. The reductions are expected to lower P&C U.S. pre-tax income on an annual basis by approximately US$40 million, after mitigating management actions. We also anticipate an increase in regulatory costs, and will be focused on managing the complexity and breadth of the regulatory changes.

The Financial Crisis Responsibility Fee that the Obama Administration has proposed levying on U.S. financial institutions that have assets exceeding a certain threshold was re-proposed in the Administration's 2012 budget. Although the details of the proposed fee have not been fully released, the proposed fee, if implemented, could apply to some or all of our U.S. operations. The proposed fee will not become law unless approved by the President and the United States Congress.

Summary Quarterly Results Trends

(Canadian $ in
 millions, except      Q3     Q2     Q1     Q4     Q3     Q2     Q1     Q4 
 as noted)           2011   2011   2011   2010   2010   2010   2010   2009 
---------------------------------------------------------------------------
Total revenue       3,274  3,217  3,346  3,229  2,907  3,049  3,025  2,989
Provision for
 credit losses -
 specific             174    187    248    253    214    249    333    386
Provision for
 (recovery of)
 credit losses -
 general                -    (42)     -      -      -      -      -      -
Non-interest
 expense            2,111  2,023  2,046  2,023  1,898  1,830  1,839  1,779
Net income            793    800    776    739    669    745    657    647
Adjusted net income   843    804    784    748    678    752    664    690
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Basic earnings
 per share ($)       1.28   1.35   1.31   1.25   1.13   1.27   1.12   1.12
Diluted earnings
 per share ($)       1.27   1.34   1.30   1.24   1.13   1.26   1.12   1.11
Adjusted diluted
 earnings per
 share ($)           1.36   1.35   1.32   1.26   1.14   1.28   1.13   1.18
Net interest
 margin on
 earning
 assets (%)          1.78   1.89   1.82   1.89   1.88   1.88   1.85   1.73
Effective income
 tax rate (%)        18.0   22.0   24.5   20.6   13.4   21.4   20.8   19.2
Canadian/U.S.
 dollar exchange
 rate (average)      0.96   0.96   1.01   1.04   1.05   1.03   1.06   1.08

Net income:
 P&C Canada           432    402    443    418    424    395    403    402
 P&C U.S.              92     53     54     46     52     55     61     59
---------------------------------------------------------------------------
Personal and
 Commercial
 Banking              524    455    497    464    476    450    464    461
Private Client
 Group                120    101    153    129    105    115    111    106
BMO Capital
 Markets              279    235    257    214    130    260    212    259
Corporate
 Services,
 including T&O       (130)     9   (131)   (68)   (42)   (80)  (130)  (179)
---------------------------------------------------------------------------
BMO Financial
 Group                793    800    776    739    669    745    657    647
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Prior periods have been restated to give effect to the current periods'
organizational structure; see Review of Operating Groups' Performance.

BMO's quarterly earning trends were reviewed in detail on pages 94 and 95 of the 2010 Annual Report. Readers are encouraged to refer to that review for a more complete discussion of trends and factors affecting past quarterly results including the modest impact of seasonal variations in results. The above table outlines summary results for the fourth quarter of fiscal 2009 through the third quarter of fiscal 2011.

Results in the past year have been strengthening, generally, reflecting a trend toward stronger revenues, reduced provisions for credit losses and increased net income. Adjusted earnings growth has been stronger and more sustained. Expenses have been growing, reflecting acquisitions, initiative spending and business growth. Current quarter results include the impact of the acquisition of M&I, which reduced net income by $10 million, and increased revenue by $117 million and expenses by $137 million, including $53 million of integration costs. The acquisition improved results in P&C U.S. substantially and Private Client Group modestly.

P&C Canada benefited from strong volume growth in 2010 with favourable movements in market share in a number of key businesses. P&C Canada has performed well with generally increasing revenues and profitability, and good revenue increases in both personal and commercial businesses, driven by volume growth across most products and improved net interest margin. Current period net income has increased but revenue and expense growth are moderating. Results include the impact of the Diners Club North American franchise effective in the first quarter of 2010.

P&C U.S. has operated in a difficult economic environment since 2007. Results in 2010 were also affected by acquisition integration costs and the economic environment that year led to a drop in loan utilization, which affected revenue growth and net income. Commencing in the second quarter of 2010, P&C U.S. results reflect the acquisition of certain assets and liabilities of a Rockford, Illinois-based bank. Good results in the current quarter were augmented by the addition of M&I, which increased net income in P&C U.S. by US$27 million. As explained in the introduction to the Review of Operating Groups' Performance section, during the quarter certain impaired real estate secured assets were transferred to Corporate Services. Prior period loan balances, revenues and expenses have been restated to reflect the transfer.

Private Client Group results in recent quarters reflected growth in most businesses. Included in the current quarter is one month of earnings from the wealth businesses relating to the M&I acquisition, as well as a full quarter of earnings from the LGM acquisition. Results in the insurance business in the prior quarter were impacted by unusually high reinsurance claims of $47 million after tax related to the earthquakes in Japan and New Zealand.

BMO Capital Markets results in 2010 varied by quarter, with strong results in the second quarter and particularly weak net income in the third quarter. First quarter 2011 results were particularly strong, while second quarter results returned to more normal levels and third quarter results benefited from tax recoveries related to prior periods.

Corporate Services results showed continued improvement throughout 2010 due to decreased provisions for credit losses and better revenues. Results in the second quarter of 2011 benefited from reduced provisions for credit losses, including a $42 million reduction in the general allowance, and higher revenues. Results in the current quarter reflect lower interest on the settlement of certain income tax matters, lower revenues primarily due to the impact of the M&I acquisition and lower securitization-related revenues largely related to a credit card securitization in the second quarter. Results also reflect $53 million of integration costs in respect of M&I.

The effective income tax rate can vary as it depends on the timing of resolution of certain tax matters, recoveries of prior periods' income taxes and the relative proportion of earnings attributable to the different jurisdictions in which we operate.

The U.S. dollar has generally weakened over the past two years. A weaker U.S. dollar lowers the translated values of BMO's U.S.-dollar-denominated revenues and expenses.

Review of Operating Groups' Performance                                    

Operating Groups' Summary Income Statements and Statistics for Q3-2011     

                                                    Q3-2011                
                               --------------------------------------------
                                                         Corporate         
(Canadian $ in millions,                                 including  Total 
 except as noted)                P&C     PCG   BMO CM          T&O    BMO 
---------------------------------------------------------------------------
Net interest income (teb)(1)   1,500     111      318         (237) 1,692 
Non-interest revenue             517     506      519           40  1,582 
---------------------------------------------------------------------------
Total revenue (teb)(1)         2,017     617      837         (197) 3,274 
Provision for credit losses      189       2       30          (47)   174 
Non-interest expense           1,086     461      458          106  2,111 
---------------------------------------------------------------------------
Income before income taxes                                                 
 and non-controlling interest                                              
 in subsidiaries                 742     154      349         (256)   989 
Income taxes                                                               
 (recovery)(teb)(1)              218      34       70         (144)   178 
Non-controlling interest in                                                
 subsidiaries                      -       -        -           18     18 
---------------------------------------------------------------------------
Net income Q3-2011               524     120      279         (130)   793 
---------------------------------------------------------------------------
Net income Q2-2011               455     101      235            9    800 
---------------------------------------------------------------------------
Net income Q3-2010               476     105      130          (42)   669 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Other statistics                                                           
---------------------------------------------------------------------------
Net economic profit              288      81      157         (300)   226 
Return on equity                23.5%   32.0%    25.5%          nm   14.7%
Operating leverage               2.2%   (0.5%)   14.6%          nm    1.5%
Productivity ratio (teb)        53.8%   74.7%    54.7%          nm   64.5%
Net interest margin on                                                     
 earning assets (teb)           3.21%   2.89%    0.73%          nm   1.78%
Average common equity          8,486   1,462    4,138        6,304 20,390 
Average earning assets ($                                                  
 billions)                     185.3    15.2    172.3          3.4  376.1 
Full-time equivalent                                                       
 employees                    25,010   6,539    2,188       13,878 47,615 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

                                                    YTD-2011               
                               --------------------------------------------
                                                         Corporate         
(Canadian $ in millions,                                 including  Total 
 except as noted)                P&C      PCG  BMO CM          T&O    BMO 
---------------------------------------------------------------------------
Net interest income (teb)(1)   4,244      322     951         (578) 4,939 
Non-interest revenue           1,486    1,538   1,685          189  4,898 
---------------------------------------------------------------------------
Total revenue (teb)(1)         5,730    1,860   2,636         (389) 9,837 
Provision for credit losses      533        6      90          (62)   567 
Non-interest expense           3,110    1,357   1,419          294  6,180 
---------------------------------------------------------------------------
Income before income taxes                                                 
 and non-controlling interest                                              
 in subsidiaries               2,087      497   1,127         (621) 3,090 
Income taxes                                                               
 (recovery)(teb)(1)              611      123     356         (423)   667 
Non-controlling interest in                                                
 subsidiaries                      -        -       -           54     54 
---------------------------------------------------------------------------
Net income Q3-2011             1,476      374     771         (252) 2,369 
---------------------------------------------------------------------------
Net income Q2-2011                                                         
---------------------------------------------------------------------------
Net income Q3-2010             1,390      331     602         (252) 2,071 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Other statistics                                                           
---------------------------------------------------------------------------
Net economic profit              838      270     398         (732)   774 
Return on equity                24.8%    37.3%   22.9%          nm   15.7%
Operating leverage              (0.4%)    0.3%    3.7%          nm   (1.5%)
Productivity ratio (teb)        54.3%    73.0%   53.8%          nm   62.8%
Net interest margin on                                                     
 earning assets (teb)           3.19%    2.97%   0.76%          nm   1.83%
Average common equity          7,640    1,320   4,278        6,076 19,314 
Average earning assets ($                                                  
 billions)                     177.9     14.5   166.4          1.9  360.7 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
nm - not meaningful

(1) Operating group revenues, income taxes and net interest margin are     
    stated on a taxable equivalent basis (teb). The group teb adjustments  
    are offset in Corporate, and Total BMO revenue, income taxes and net   
    interest margin are stated on a GAAP basis. 

The following sections review the financial results of each of our operating segments and operating groups for the third quarter of 2011.

Periodically, certain business lines and units within the business lines are transferred between client groups to more closely align BMO's organizational structure with its strategic priorities. Results for prior periods are restated to conform to the current presentation.

During the quarter, approximately US$1.0 billion of impaired real estate secured assets, comprised primarily of commercial real estate loans, were transferred to Corporate Services from P&C U.S. to allow our businesses to focus on ongoing customer relationships and leverage our risk management expertise in our special assets management unit. Prior period loan balances, revenues and expenses have been restated to reflect the transfer. Approximately US$1.5 billion of similar assets acquired in the M&I transaction have also been included in Corporate Services.

As explained in the Acquisition of Marshall & Ilsley Corporation section, during the quarter we acquired M&I. M&I's activities are primarily reflected in our P&C U.S., PCG and Corporate Services segments, with a small amount included in BMO Capital Markets.

Loans acquired in connection with the M&I acquisition were recorded at fair value at the date of acquisition and as a result no allowance for credit losses has been recorded on these loans. The fair value of the purchased portfolio of $29.2 billion included a write-down for estimated future losses of $3.3 billion (excluding a write-down for commitments and letters of credit). As the purchased portfolio was written down at acquisition to the amount expected to be collected, the purchased loans are not included in gross impaired loans. We expect to recover the fair value (or new carrying amount) of the purchased portfolio.

Corporate Services is generally charged (or credited) with differences between the periodic provisions for credit losses charged to the client groups under our expected loss provisioning methodology and the periodic provisions required under GAAP. We have included expected losses in P&C US for the M&I loan portfolio on the same basis as expected losses are determined for other loans in P&C U.S.

Personal and Commercial Banking (P&C)                                      

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease) 
 except as noted)                Q3-2011       vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income (teb)          1,500       158      12%    157     12%
Non-interest revenue                 517         6       1%     38      8%
---------------------------------------------------------------------------
Total revenue (teb)                2,017       164       9%    195     11%
Provision for credit losses          189        29      18%     18     10%
Non-interest expense               1,086        69       7%     79      8%
---------------------------------------------------------------------------
Income before income taxes           742        66      10%     98     16%
Income taxes (teb)                   218        18       9%     29     16%
---------------------------------------------------------------------------
Net income                           524        48      10%     69     15%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Return on equity                    23.5%             (5.5%)         (1.6%)
Operating leverage                   2.2%               nm             nm  
Productivity ratio (teb)            53.8%             (1.1%)         (1.5%)
Net interest margin on earning                                             
 assets (teb)                       3.21%             0.11%          0.04% 
Average earning assets                                                     
 ($ billions)                      185.3      13.5       8%   11.4      7% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease) 
 except as noted)               YTD-2011      vs. YTD-2010  
------------------------------------------------------------
Net interest income (teb)          4,244       362       9% 
Non-interest revenue               1,486         4       -  
------------------------------------------------------------
Total revenue (teb)                5,730       366       7% 
Provision for credit losses          533        70      15% 
Non-interest expense               3,110       208       7% 
------------------------------------------------------------
Income before income taxes         2,087        88       4% 
Income taxes (teb)                   611         2       -  
------------------------------------------------------------
Net income                         1,476        86       6% 
------------------------------------------------------------
------------------------------------------------------------

Return on equity                    24.8%             (3.4%)
Operating leverage                  (0.4%)              nm  
Productivity ratio (teb)            54.3%              0.2% 
Net interest margin on earning                              
 assets (teb)                       3.19%             0.13% 
Average earning assets                                      
 ($ billions)                      177.9       8.6       5% 
------------------------------------------------------------
------------------------------------------------------------
nm - not meaningful                                               

Personal and Commercial Banking (P&C) represents the sum of our two retail and business banking operating segments, Personal and Commercial Banking Canada (P&C Canada) and Personal and Commercial Banking U.S. (P&C U.S.). These operating segments are reviewed separately in the sections that follow.

Personal and Commercial Banking Canada (P&C Canada)                        

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease)
 except as noted)               Q3-2011        vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income (teb)         1,103        39        4%     45      4% 
Non-interest revenue                424        (1)       -       8      2% 
----------------------------------------------------------------------------
Total revenue (teb)               1,527        38        3%     53      4% 
Provision for credit losses         137         8        6%      1      -  
Non-interest expense                788        23        3%     10      1% 
---------------------------------------------------------------------------
Income before income taxes          602         7        1%     42      8% 
Income taxes (teb)                  170        (1)      (1%)    12      8% 
---------------------------------------------------------------------------
Net income                          432         8        2%     30      8% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Personal revenue                    951        23        3%     31      3% 
Commercial revenue                  576        15        3%     22      4% 
Operating leverage                 (0.5%)               nm             nm  
Productivity ratio (teb)           51.6%               0.3%          (1.2%)
Net interest margin on earning                                             
 assets (teb)                      2.92%             (0.04%)        (0.01%)
Average earning assets                                                     
 ($ billions)                     149.7       7.0        5%    1.5      1% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease)  
 except as noted)              YTD-2011       vs. YTD-2010  
------------------------------------------------------------
Net interest income (teb)         3,270       197        6% 
Non-interest revenue              1,260        23        2% 
------------------------------------------------------------
Total revenue (teb)               4,530       220        5% 
Provision for credit losses         409        39       11% 
Non-interest expense              2,340       143        7% 
------------------------------------------------------------
Income before income taxes        1,781        38        2% 
Income taxes (teb)                  504       (17)      (3%)
------------------------------------------------------------
Net income                        1,277        55        5% 
------------------------------------------------------------
------------------------------------------------------------

Personal revenue                  2,827       124        5% 
Commercial revenue                1,703        96        6% 
Operating leverage                 (1.4%)               nm  
Productivity ratio (teb)           51.7%               0.7% 
Net interest margin on earning                              
 assets (teb)                      2.95%              0.01% 
Average earning assets                                      
 ($ billions)                     148.1       8.3        6% 
------------------------------------------------------------
------------------------------------------------------------
nm - not meaningful                                         

Q3 2011 vs Q3 2010

P&C Canada net income was $432 million, up $8 million or 1.8% from a year ago. Reported results reflect provisions for credit losses in BMO's operating groups on an expected loss basis. Net income increased $19 million or 4.9% on a basis that adjusts reported results to reflect provisions on an actual loss basis.

Revenue increased $38 million or 2.5%, with volume growth across most products partially offset by a lower net interest margin. Net interest margin decreased 4 basis points, driven by lower deposit spreads in a low interest environment.

In the personal banking segment, revenue increased $23 million or 2.5%. Volume growth in both loans and deposits was partially offset by lower deposits spread in the low rate environment. Total personal lending balances (including mortgages, Homeowner ReadiLine and other consumer lending products) increased 5.7% year over year. Total personal lending market share was unchanged year over year. Our goal is to grow market share and we continue to focus on improving the total personal lending business through investment in the sales force and achieving productivity gains while remaining attentive to the credit quality of the portfolio.

Personal cards loan balances increased 0.9% while market share decreased year over year.

Personal deposit balances increased 0.5% year over year with an increase in retail operating deposits and a reduction in term deposits. Market share for both retail operating deposits and term deposits decreased year over year in the highly competitive environment.

In the commercial banking segment, revenue increased $15 million or 2.5% year over year. The effects of volume growth, favourable product mix and higher activity fees were partially offset by lower spread in commercial deposits and lower cards revenue.

Commercial loan balances grew 4.5% and our market share remained stable year over year. We continue to rank second in Canadian business banking market share of small and mid-sized business loans.

Commercial cards balances decreased 3.6%, primarily due to attrition in Diners Club North American franchise balances, as expected.

Commercial deposit balances grew 10.2%. We continue to invest in the size and capabilities of our commercial workforce to deepen our relationships and provide better advice to our customers.

Provisions for credit losses on an expected loss basis increased $8 million or 6.1% due to growth in the portfolio.

Non-interest expense increased $23 million or 3.0% due to increased initiative spending and growth in the sales force, partially offset by the benefit of a sales tax recovery. The group's operating leverage was negative 0.5%, as we continue to invest strategically to improve our competitive position while managing expenses prudently.

Average current loans and acceptances, including securitized loans, increased $7.3 billion or 5.1% from a year ago and personal and commercial deposits grew $3.7 billion or 3.7%.

Q3 2011 vs Q2 2011

Net income increased $30 million or 7.9% as revenue growth outpaced expense growth.

Revenue increased $53 million or 3.6%, driven by volume growth across most products and the impact of more days in the current quarter. Net interest margin decreased 1 basis point due to lower mortgage refinancing fees.

Non-interest expense increased $10 million or 1.1%, primarily due to higher employee costs and the impact of more days in the quarter, partially offset by the benefit of the sales tax recovery.

Average current loans and acceptances, including securitized loans, increased $1.7 billion or 1.1% from the preceding quarter, while personal and commercial deposits increased $2.0 billion or 2.0%.

Q3 YTD 2011 vs Q3 YTD 2010

Net income increased $55 million or 4.5% to $1,277 million.

Revenue increased $220 million or 5.1%, driven by volume growth, higher mutual funds revenue and the inclusion of two more months of results of the Diners Club business in the current year. Net interest margin improved by 1 basis point primarily due to favourable spread in lending products, partially offset by lower spread in deposits.

Non-interest expense increased $143 million or 6.5%, primarily due to increases in initiative spending, growth in the sales force and the inclusion of two more months of results of the Diners Club North American franchise business in the current year.

Average current loans and acceptances, including securitized loans, increased $8.7 billion or 6.2%, while personal and commercial deposits increased $3.2 billion or 3.3%.

Personal and Commercial Banking U.S. (P&C U.S.)                             

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease)
 except as noted)               Q3-2011        vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income (teb)           397       119       43%   112      40%
Non-interest revenue                 93         7        9%    30      47&
---------------------------------------------------------------------------
Total revenue (teb)                 490       126       35%   142      41%
Provision for credit losses          52        21       71%    17      50%
Non-interest expense                298        46       18%    69      30%
---------------------------------------------------------------------------
Income before income taxes          140        59       75%    56      66%
Income taxes (teb)                   48        19       69%    17      57%
---------------------------------------------------------------------------
Net income                           92        40       79%    39      72%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Operating leverage                 17.0%                nm             nm
Productivity ratio (teb)           60.8%              (8.7%)         (5.0%)
Net interest margin on earning                                            
 assets (teb)                      4.47%              0.66%             -
Average earning assets                                                     
 ($ billions)                      35.6       6.5       22%   9.8      38%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

U.S. Select Financial Data (US$                                            
 in millions, except as noted)                                             

Net interest income (teb)           413       148       56%   117      40%
Non-interest revenue                 96        15       18%    31      47%
---------------------------------------------------------------------------
Total revenue (teb)                 509       163       47%   148      41%
Non-interest expense                310        69       29%    72      30%
Net Income                           95        45       94%    40      72%
Average earning assets                                                     
 (US$ billions)                    37.1       9.2       33%  10.3      38%
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease)  
 except as noted)              YTD-2011       vs. YTD-2010  
------------------------------------------------------------
Net interest income (teb)           974      165        20% 
Non-interest revenue                226      (19)       (8%)
------------------------------------------------------------
Total revenue (teb)               1,200      146        14% 
Provision for credit losses         124       31        34% 
Non-interest expense                770       65         9% 
------------------------------------------------------------
Income before income taxes          306       50        20% 
Income taxes (teb)                  107       19        22% 
------------------------------------------------------------
Net income                          199       31        19% 
------------------------------------------------------------
------------------------------------------------------------

Operating leverage                  4.7%                nm  
Productivity ratio (teb)           64.1%              (2.8%)
Net interest margin on earning                                  
 assets (teb)                      4.38%              0.72% 
Average earning assets                                          
 ($ billions)                      29.7      0.2        1% 
------------------------------------------------------------
------------------------------------------------------------

U.S. Select Financial Data (US$                                 
 in millions, except as noted)                                  

Net interest income (teb)           999      225       29% 
Non-interest revenue                231       (3)      (1%)
------------------------------------------------------------
Total revenue (teb)               1,230      222       22% 
Non-interest expense                789      114       17% 
Net Income                          204       43       27% 
Average earning assets                                          
 (US$ billions)                    30.5      2.2        8% 
------------------------------------------------------------
------------------------------------------------------------
nm - not meaningful                                        

Q3 2011 vs Q3 2010

Net income of Cdn$92 million increased Cdn$40 million or 79%. Amounts in the rest of this section are in U.S dollars. Net income of $95 million increased $45 million from $50 million a year ago, with the M&I business contributing $27 million of the increase. The inclusion of the acquired M&I business increased revenue by $135 million, the provision for credit losses by $18 million, reflecting expected loss provisions based on BMO's expected loss methodologies, and expense by $75 million.

As explained more fully in the preceding introduction to the Review of Operating Groups' Performance section, during the quarter certain impaired real estate secured assets were transferred to Corporate Services. Prior period loan balances, revenues and expenses have been restated to reflect the transfer.

Excluding the M&I business, net income increased $18 million or 39%, primarily due to increased revenues driven in part by higher net interest margins and increased securities gains. Higher provisions for credit losses under BMO's expected loss provisioning methodology were offset by lower expenses.

Revenue of $509 million increased $163 million or 47%. Adjusting for the impact of the M&I business, revenue increased by $28 million or 8.1%, primarily due to increased loan spreads as a result of a favourable change in mix of loan balances, and higher deposit balances and securities gains, partially offset by lower fee revenue.

Excluding M&I, net interest margin of 4.53% increased 72 basis points, primarily due to improved loan spreads as a result of the favourable change in mix of loan balances and higher deposit balances.

Non-interest expense of $310 million was $69 million or 29% higher primarily due to the addition of M&I. Excluding M&I, expenses were down $6 million or 2.5% from a year ago, primarily due to a valuation adjustment on our serviced mortgage portfolio recognized in the prior year.

Average current loans and acceptances of $33.7 billion increased $9.1 billion or 37% year over year. Average deposits of $37.9 billion increased $12.0 billion or 46% year over year. For both loans and deposits, the M&I balances are included in the average balances for one third of the quarter, due to the timing of the closing of the acquisition.

Q3 2011 vs Q2 2011

Net income increased Cdn$39 million or 72% from the prior quarter. Amounts in the rest of this section are stated in U.S. dollars. Net income increased $40 million or 72% from the prior quarter as results reflected the $27 million impact of M&I and higher revenue.

Revenue increased $148 million or 41%, primarily due to the addition of M&I and higher securities gains.

Excluding M&I, net interest margin increased 6 basis points as a result of improved loan spreads due to a continuation of the favourable change in the mix of loan balances and increased deposit balances, partially offset by reduced spreads on deposits.

Non-interest expense increased $72 million or 30%, primarily due to the M&I acquisition. Excluding M&I, expenses decreased $3 million or 1.1%.

Average current loans and acceptances increased $10.0 billion from the preceding quarter, while average deposits increased $10.9 billion. For both loans and deposits, the increases relate primarily to the inclusion of M&I balances for approximately one month.

Q3 YTD 2011 vs Q3 YTD 2010

Net income increased Cdn$31 million or 19% from the prior year to Cdn$199 million. Amounts in the rest of this section are stated in U.S. dollars. Net income was $204 million, up $43 million or 27% from the prior year.

The M&I business increased revenue, expense and net income as outlined above. In addition, the acquired assets and liabilities on the April 2010 Rockford transaction increased revenue by $28 million and expense by $27 million relative to the comparable period in 2010.

Revenue of $1,230 million was $222 million or 22% higher. Adjusting for the impact of M&I and the Rockford transaction, revenue increased $59 million or 6.4%, primarily driven by loan spread improvement as a result of the favourable change in the mix of loan balances and higher deposit balances and securities gains, partially offset by lower fee revenue.

Excluding M&I, net interest margin of 4.39% increased 73 basis points primarily due to improved loan spreads, as discussed above, and higher deposit balances.

Provisions for credit losses, on an expected loss basis, increased $38 million or 43%, primarily due to higher expected losses on commercial loans and M&I.

Non-interest expense of $789 million increased $114 million or 17%. Adjusting for the impact of M&I and the Rockford transaction, expenses increased $12 million or 1.8%. The increase was primarily due to higher incentives related to the improved financial results and increases in advertising costs and deposit insurance premiums.

Average current loans and acceptances of $27.3 billion increased $2.5 billion or 10% year over year, primarily due to M&I. Average deposits of $30.8 billion increased $6.2 billion or 25% year over year, with $3.2 billion due to M&I, $1.2 billion due to the Rockford acquisition and $1.8 billion due to organic growth.

Private Client Group (PCG)                                                  

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease)
 except as noted)               Q3-2011        vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income (teb)           111        19       20%    3        3%
Non-interest revenue                506        54       12%   32        7%
---------------------------------------------------------------------------
Total revenue (teb)                 617        73       13%   35        6%
Provision for credit losses           2         1       35%    -        -
Non-interest expense                461        57       14%   24        6%
---------------------------------------------------------------------------
Income before income taxes          154        15       12%   11        7%
Income taxes (teb)                   34         -        -    (8)     (22%)
---------------------------------------------------------------------------
Net income                          120        15       14%   19       19%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Return on equity                   32.0%              (2.1%)         (0.5%)
Operating leverage                 (0.5%)               nm             nm
Productivity ratio (teb)           74.7%               0.3%          (0.3%)
Net interest margin on earning                                              
 assets (teb)                      2.89%              0.12%         (0.21%)
Average earning assets           15,216     1,942       15%  916        6%
---------------------------------------------------------------------------
---------------------------------------------------------------------------

U.S. Select Financial Data (US$                                             
 in millions, except as noted)                                              
Total revenue (teb)                 102        42       70%   35       51%
Non-interest expense                 79        28       55%   23       41%
Net income                           13         9     +100%    7     +100%
Average earning assets            2,219       166        8%  312       16%
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease)  
 except as noted)              YTD-2011       vs. YTD-2010  
------------------------------------------------------------
Net interest income (teb)           322       56        21% 
Non-interest revenue              1,538      152        11% 
------------------------------------------------------------
Total revenue (teb)               1,860      208        13% 
Provision for credit losses           6        1        16% 
Non-interest expense              1,357      149        12% 
------------------------------------------------------------
Income before income taxes          497       58        13% 
Income taxes (teb)                  123       15        16% 
------------------------------------------------------------
Net income                          374       43        13% 
------------------------------------------------------------
------------------------------------------------------------

Return on equity                   37.3%               2.2% 
Operating leverage                  0.3%                nm  
Productivity ratio (teb)           73.0%              (0.2%)
Net interest margin on earning                                 
 assets (teb)                      2.97%              0.18% 
Average earning assets           14,489    1,730        14% 
------------------------------------------------------------
------------------------------------------------------------

U.S. Select Financial Data (US$                                
 in millions, except as noted)                                 
Total revenue (teb)                 233       52        29% 
Non-interest expense                193       34        21% 
Net income                           23       11        91% 
Average earning assets            2,019      (81)       (4%)
---------------------------------------------------------------
---------------------------------------------------------------
nm - not meaningful                                            

Q3 2011 vs Q3 2010

Net income was $120 million, up $15 million or 14% from the same quarter a year ago. Private Client Group net income, excluding the insurance business, increased $30 million or 43% to $101 million as we continue to see growth across all these businesses. Included in the current quarter is one month of earnings from the wealth businesses relating to the M&I acquisition that added US$4 million of net income, US$31 million of revenue and US$25 million of expense. As well, the current quarter includes earnings from the Lloyd George Management (LGM) acquisition that was completed on April 28, 2011, adding $9 million to both revenue and expense while having minimal effect on our net income. Insurance net income was $19 million for the quarter, down $15 million or 45% from a year ago, primarily due to the adverse effect of unfavourable long-term interest rate movements on policyholder liabilities relative to the prior year.

Revenue was $617 million, up $73 million or 13% from the prior year. PCG revenue, excluding insurance, grew 20% or 12% adjusting for the impact of the M&I and LGM businesses as we continue to see improvement in client assets under management and administration. Revenue from the insurance business was down primarily due to the adverse effect of unfavourable long-term interest rate movements. Net interest income grew from the prior year primarily due to higher deposit spreads in our brokerage businesses, higher loan and deposit balances in private banking, and the M&I acquisition. The weaker U.S. dollar lowered revenue by $10 million or 1.8%.

Non-interest expense increased $57 million or 14%, primarily due to higher revenue-based costs associated with the revenue growth in PCG excluding insurance and expenses from the acquisitions. After adjusting for the impact of the M&I and LGM businesses, non-interest expense growth was $24 million or 5.7%. The weaker U.S. dollar reduced expenses by $7 million or 1.8%.

Assets under management and administration improved by $177 billion to $429 billion as the M&I and LGM acquisitions brought $153 billion in client assets to our business. Assets in our U.S. wealth business increased from US$77 billion to US$239 billion. On a basis that excludes the impact of the M&I and LGM acquisitions and the weaker U.S. dollar, assets under management and administration grew $30 billion or 12% from a year ago as a result of attracting new client assets and improved equity market conditions.

Q3 2011 vs Q2 2011

Net income improved $19 million or 19% from the second quarter. PCG net income, excluding the insurance business, was up $1 million or 1.0% as the benefit from the M&I acquisition was mostly offset by lower brokerage revenue. Insurance net income was up $18 million, as the prior quarter included unusually high reinsurance claims from the earthquakes in Japan and New Zealand that reduced net income by $47 million. This impact was partly offset by the adverse effect of unfavourable long-term interest rate movements on policyholder liabilities relative to the prior quarter.

Revenue increased $35 million or 5.9%. PCG revenue excluding insurance increased 5% but decreased 2.1% adjusting for the impact of the M&I and LGM businesses, primarily due to lower revenue in brokerage businesses due to lower trading volumes, partially offset by higher mutual fund and private banking revenue. Insurance revenue improved, as the prior quarter included earthquake-related reinsurance claims that lowered revenue by $50 million, partly offset by the adverse effect of unfavourable long-term interest rate movements on policyholder liabilities relative to the second quarter. Net interest income increased relative to the prior quarter primarily due to the M&I acquisition.

Non-interest expense increased $24 million or 5.5% primarily due to the impact of the acquisitions. After adjusting for the impact of the M&I and LGM businesses, non-interest expenses were lower by $9 million or 2% primarily due to lower revenue in the brokerage businesses, in line with lower trading volumes.

Assets under management and administration increased by $145 billion, but declined by $4 billion if adjusted to exclude the impacts of the LGM and M&I acquisitions and the weaker U.S. dollar.

Q3 YTD 2011 vs Q3 YTD 2010

Net income increased $43 million or 13% from the prior year. PCG net income, excluding the insurance business, was up $73 million or 35% with growth in all of our underlying businesses. The M&I acquisition also contributed to growth. Insurance net income was down $30 million or 25% as growth in net premium revenue was more than offset by the earthquake-related reinsurance claims and the adverse effect of unfavourable long-term interest rate movements on policyholder liabilities relative to the same period a year ago.

Revenue increased $208 million or 13%. Revenue in PCG, excluding insurance, increased 17%, or 14% adjusting for the impact of the M&I and LGM acquisitions, with growth in all of our businesses, particularly in brokerage and private banking. Insurance revenue declined as growth in net premium revenues was more than offset by the earthquake-related reinsurance claims and the adverse effect of unfavourable long-term interest rate movements relative to the same period a year ago. Net interest income grew, largely due to higher deposit spreads in the brokerage businesses and higher loan and deposit balances in private banking. The weaker U.S. dollar lowered revenue by $18 million or 1.1%.

Non-interest expense increased $149 million or 12%, primarily due to higher revenue-based costs associated with the revenue growth in PCG excluding insurance, and selective investments to benefit future revenue growth. After adjusting for the impact of the LGM and M&I businesses, non-interest expense growth would be $116 million or 10%. The weaker U.S. dollar reduced expenses by $14 million or 1.1%.

BMO Capital Markets (BMO CM)                                               

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease)
 except as noted)               Q3-2011        vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income (teb)           318       (35)     (10%)  21        7% 
Non-interest revenue                519       193       59%  (20)      (4%)
---------------------------------------------------------------------------
Total revenue (teb)                 837       158       23%    1        -  
Provision for credit losses          30       (36)     (55%)   -        -  
Non-interest expense                458        36        8%  (10)      (2%)
---------------------------------------------------------------------------
Income before income taxes          349       158       82%   11        3% 
Income taxes (teb)                   70         9       14%  (33)     (31%)
---------------------------------------------------------------------------
Net income                          279       149     +100%   44       19% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Trading Products revenue            508       112       28%   22        5% 
Investment and Corporate Banking                                           
 revenue                            329        46       16%  (21)      (6%)
Return on equity                   25.5%              13.7%           4.1% 
Operating leverage                 14.6%                nm             nm  
Productivity ratio (teb)           54.7%              (7.3%)         (1.3%)
Net interest margin on earning                                             
 assets (teb)                      0.73%             (0.22%)        (0.03%)
Average earning assets                                                     
 ($ billions)                     172.3      24.0       16% 11.2        7% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------

U.S. Select Financial Data (US$                                            
 in millions, except as noted)                                             
Total revenue (teb)                 260        30       13%    9        4% 
Non-interest expense                196        25       15%    1        1% 
Net Income                           33        23     +100%    8       30% 
Average earning assets                                                     
 (US$ billions)                    64.4      15.5       32%  9.7       18% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease) 
 except as noted)              YTD-2011       vs. YTD-2010  
------------------------------------------------------------
Net interest income (teb)           951      (143)     (13%)
Non-interest revenue              1,685       337       25% 
------------------------------------------------------------
Total revenue (teb)               2,636       194        8% 
Provision for credit losses          90      (108)     (55%)
Non-interest expense              1,419        57        4% 
------------------------------------------------------------
Income before income taxes        1,127       245       28% 
Income taxes (teb)                  356        76       27% 
------------------------------------------------------------
Net income                          771       169       28% 
------------------------------------------------------------
------------------------------------------------------------

Trading Products revenue          1,589        49        3% 
Investment and Corporate Banking                            
 revenue                          1,047       145       16% 
Return on equity                   22.9%               4.6% 
Operating leverage                  3.7%                nm  
Productivity ratio (teb)           53.8%              (1.9%)
Net interest margin on earning                              
 assets (teb)                      0.76%             (0.20%)
Average earning assets                                      
 ($ billions)                     166.4      14.4        9% 
------------------------------------------------------------
------------------------------------------------------------

U.S. Select Financial Data (US$                             
 in millions, except as noted)                              
Total revenue (teb)                 782        39        5% 
Non-interest expense                586        67       13% 
Net Income                           39       (25)     (39%)
Average earning assets                                      
 (US$ billions)                    58.3      11.2       24% 
------------------------------------------------------------
------------------------------------------------------------
nm - not meaningful                    

Q3 2011 vs Q3 2010

Net income was $279 million, up $149 million from the previous year. Revenue increased and there was a reduction in the provision for credit losses. Provisions for credit losses are charged to the groups on an expected loss basis.

Revenue increased $158 million or 23% to $837 million. The most significant increase was in trading revenues, which were higher largely due to the more favourable trading environment than in the prior year. Mergers and acquisitions fees were significantly higher than in the previous year. Securities commissions and equity underwriting fees also increased considerably over the prior year. The weaker U.S. dollar decreased revenue by $26 million relative to a year ago. Our strategy of building out our distribution platform and continuing to diversify our business is on track and contributing to our business performance.

Non-interest expense increased $36 million or 8.4% primarily due to higher variable compensation costs, in line with revenue performance, and our initiative to invest in strategic hiring across certain lines of business. The weaker U.S. dollar decreased expenses by $13 million relative to a year ago.

Results for the current period benefited from a recovery of prior periods' income taxes.

Q3 2011 vs Q2 2011

Net income increased $44 million or 19% from the second quarter. Revenue was relatively unchanged. There were increased mergers and acquisitions fees along with increased revenue from our interest-rate-sensitive businesses. There were reductions in net securities gains and debt underwriting fees.

Non-interest expense decreased by $10 million, primarily due to lower employee costs, offset in part by higher support costs.

Results for the current period benefited from a recovery of prior periods' income taxes.

Q3 YTD 2011 vs Q3 YTD 2010

Net income increased $169 million or 28% to $771 million.

Revenue increased $194 million or 8% due to increases in investment banking fees, securities commissions and revenues from our interest-rate-sensitive businesses. Although overall revenues improved from the prior year, trading revenue decreased primarily due to the very strong results in the first half of the prior year. Provisions for credit losses were lower than in the prior year.

Non-interest expense was $57 million or 4.2% higher than in the prior year mainly due to higher employee costs, as we continue to invest in strategic hiring across certain lines of business, and increased support costs.

Results for the current period included a provision for prior periods' income taxes in the U.S. segment in the first quarter of the year as well as a recovery of prior periods' income taxes in the third quarter.

Corporate Services, Including Technology and Operations                    

                                                  Increase       Increase 
(Canadian $ in millions,                         (Decrease)     (Decrease)
 except as noted)               Q3-2011        vs. Q3-2010    vs. Q2-2011 
---------------------------------------------------------------------------
Net interest income before teb                                             
 offset                            (182)      (87)     (89%) (107)  (+100%)
Group teb offset                    (55)       66       55%    (2)     (4%)
---------------------------------------------------------------------------
Net interest income (teb)          (237)      (21)      (9%) (109)    (87%)
Non-interest revenue                 40        (7)     (16%)  (65)    (62%)
---------------------------------------------------------------------------
Total revenue (teb)                (197)      (28)     (17%) (174)  (+100%)
Provision for credit losses         (47)      (34)   (+100%)   11      18% 
Non-interest expense                106        51       93%    (5)     (4%)
---------------------------------------------------------------------------
Loss before income taxes and                                               
 non-controlling                                                           
interest in subsidiaries            256        45       22%   180    +100% 
Income taxes recovery (teb)         144       (44)     (23%)   41      40% 
Non-controlling interest in                                                
 subsidiaries                        18        (1)      (2%)    -       -  
---------------------------------------------------------------------------
Net loss                            130        88     +100%   139    +100% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Adjusted net loss                    92        50     +100%    97    +100% 

U.S. Select Financial Data (US$                                            
 in millions, except as noted)                                             
Total revenue (teb)                (141)      (78)   (+100%) (106)  (+100%)
Provision for credit losses           6       (12)     (60%)  (15)    (65%)
Non-interest expense                 51        49     +100%     8      14% 
Income tax recovery (teb)            88        52     +100%    25      34% 
Net loss                            115        63     +100%    75    +100% 
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                                                  Increase  
(Canadian $ in millions,                         (Decrease) 
 except as noted)              YTD-2011       vs. YTD-2010  
------------------------------------------------------------
Net interest income before teb                             
 offset                            (409)     (83)      (25%)
Group teb offset                   (169)     122        42% 
-----------------------------------------------------------
Net interest income (teb)          (578)      39         6% 
Non-interest revenue                189       49        34% 
-----------------------------------------------------------
Total revenue (teb)                (389)      88        18% 
Provision for credit losses         (62)    (192)    (+100%)
Non-interest expense                294      199      +100% 
-----------------------------------------------------------
Loss before income taxes and                               
 non-controlling                                           
interest in subsidiaries            621      (81)      (12%)
Income taxes recovery (teb)         423      (83)      (16%)
Non-controlling interest in                                
 subsidiaries                        54       (2)       (2%)
-----------------------------------------------------------
Net loss                            252        -         -  
-----------------------------------------------------------
-----------------------------------------------------------
Adjusted net loss                   219      (33)      (13%)

U.S. Select Financial Data (US$                            
 in millions, except as noted)                             
Total revenue (teb)                (248)    (126)    (+100%)
Provision for credit losses         100      (60)      (37%)
Non-interest expense                 95      104      +100% 
Income tax recovery (teb)           234      125      +100% 
Net loss                            223       45        25% 
-----------------------------------------------------------
-----------------------------------------------------------

Corporate Services

Corporate Services consists of the corporate units that provide enterprise-wide expertise and governance support in a variety of areas, including strategic planning, risk management, finance, legal and compliance, communications and human resources. Operating results reflect the impact of certain securitization and asset-liability management activities, the elimination of teb adjustments, the impact of our expected loss provisioning methodology, the results from certain impaired loan portfolios, and the impact of certain fair value adjustments and integration costs relating to the acquisition of M&I.

BMO's practice is to charge loss provisions to the client operating groups each year, using an expected loss provisioning methodology based on each group's share of expected credit losses. Corporate Services is generally charged (or credited) with differences between the periodic provisions for credit losses charged to the client operating groups under our expected loss provisioning methodology and provisions required under GAAP. See the Review of Operating Groups' Performance section for more details.

Technology and Operations

Technology and Operations (T&O) manages, maintains and provides governance over information technology, operations services, real estate and sourcing for BMO Financial Group. T&O focuses on enterprise-wide priorities that improve service quality and efficiency to deliver an excellent customer experience.

Financial Performance Review

Technology and Operations operating results are included with Corporate Services for reporting purposes. However, the costs of T&O services are transferred to the three operating groups (P&C, PCG and BMO Capital Markets) and only minor amounts are retained in T&O results. As such, results in this section largely reflect the corporate activities outlined in the preceding description of the Corporate Services unit.

Corporate Services reported a net loss in the quarter of $130 million and an adjusted net loss of $92 million. The net loss includes a loss of $39 million in respect of M&I, essentially matching the $38 million after-tax costs of integration and hedging foreign currency risk on the purchase. Excluding those items, M&I's results were virtually break-even.

The rest of the discussion that follows excludes the impact of M&I. On that basis, Corporate Services net loss in the current quarter was $91 million, an increase of $49 million from the prior year. Revenues were $15 million better, primarily due to a lower group teb offset, partially offset by a less favourable impact year over year from hedging activities. Expenses were $12 million worse, mainly due to higher employee costs and technology investment spending. Provisions for credit losses were $16 million lower as a result of lower provisions charged to Corporate Services under BMO's expected loss provisioning methodology, and income taxes were $69 million higher primarily due to a lower group teb offset.

As explained more fully in the preceding introduction to the Review of Operating Groups' Performance section, during the quarter certain impaired real estate secured assets were transferred to Corporate Services from P&C U.S. As well, certain real estate secured assets acquired on the M&I transaction are included in Corporate Services.

Corporate Services net loss in the current quarter increased $139 million from the second quarter. As explained above, results for the current quarter include a loss of $39 million in respect of M&I and a loss of $1 million in respect of M&I after adjusting for the after-tax costs of integration and hedging foreign currency risk. M&I related results in the second quarter included a loss of $25 million which was comprised entirely of the after-tax costs of integration and hedging foreign currency risk that quarter. Excluding those items, there was no loss in respect of M&I related results in the second quarter, compared with a $1 million loss on that basis in the third quarter.

The discussion that follows excludes the impact of M&I. On that basis, Corporate Services net loss in the third quarter increased $125 million from the second quarter. Revenues were $142 million lower, largely due to lower interest on the settlement of certain income tax matters and lower securitization-related revenues largely related to a credit card securitization in the second quarter. Expenses were $19 million lower, primarily due to reduced technology investment spending, and provisions for credit losses were higher, largely due to a $42 million reduction in the general allowance in the second quarter.

The net loss for the year to date of $252 million was unchanged from the prior year. The rest of the discussion that follows excludes the impact of M&I. The net loss for the year to date was $188 million, a decrease of $64 million from the prior year. Revenues were $142 million higher, primarily driven by a lower group teb offset and higher interest on the settlement of certain income tax matters. Expenses were $135 million higher, largely due to an increase in employee costs, technology investment spending and costs related to the impaired loan portfolio. The provision for credit losses decreased by $174 million.

GAAP and Related Non-GAAP Results and Measures used in the MD&A             

(Canadian $ in millions, except as         Q3     Q2     Q3     YTD     YTD 
 noted)                                  2011   2011   2010    2011    2010 
----------------------------------------------------------------------------

Reported Results                                                            
Revenue                                 3,274  3,217  2,907   9,837   8,981 
Non-interest expense                   (2,111)(2,023)(1,898) (6,180) (5,567)
----------------------------------------------------------------------------
Pre-provision, pre-tax earnings         1,163  1,194  1,009   3,657   3,414 
Provision for credit losses              (174)  (145)  (214)   (567)   (796)
Provision for income taxes               (178)  (231)  (107)   (667)   (491)
Non-controlling interest in                                                 
 subsidiaries                             (18)   (18)   (19)    (54)    (56)
----------------------------------------------------------------------------
Net Income                                793    800    669   2,369   2,071 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Reported Measures                                                           
EPS ($)                                  1.27   1.34   1.13    3.91    3.51 
Net income growth (%)                    18.5    7.5   20.1    14.4    81.7 
EPS growth (%)                           13.2    6.3   16.3    11.5    76.6 
Revenue growth (%)                       12.6    5.5   (2.4)    9.5    11.2 
Non-interest expense growth (%)          11.1   10.5    1.4    11.0    (0.6)
Productivity ratio (%)                   64.5   62.9   65.3    62.8    62.0 
Operating leverage (%)                    1.5   (5.0)  (3.8)   (1.5)   11.8 
Return on equity (%)                     14.7   16.7   13.7    15.7    14.8 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusting Items                                                             
Charges to net interest income                                              
Acquisition-related items - hedge of                                        
 foreign currency risk on the                                          
 purchase of M&I                           (9)   (11)     -     (20)      - 

Charges to non-interest expense                                             
Acquisition-related items - costs of                                        
 M&I integration and integration                                            
 planning                                 (53)   (25)     -     (78)      - 
Amortization of acquisition-related                                         
 intangible assets                        (17)   (10)   (10)    (36)    (26)

Decrease in the general allowance for                                       
 credit losses                              -     42      -      42       - 

Income tax benefit (charge) related to                                      
 the above                                 29      -      1      30       3 

After-tax impact of Adjusting Items                                         
Acquisition-related items - hedge of                                        
 foreign currency risk on the                                          
 purchase of M&I                           (6)    (8)     -     (14)      - 
Acquisition-related items - costs of                                        
 M&I integration and integration                                            
 planning                                 (32)   (17)     -     (49)      - 
Amortization of acquisition-related                                         
 intangible assets                        (12)    (9)    (9)    (29)    (23)
Decrease in the general allowance for                                       
 credit losses                              -     30      -      30       - 
----------------------------------------------------------------------------
Net Income                                (50)    (4)    (9)    (62)    (23)
EPS ($)                                 (0.09) (0.01) (0.01)  (0.11)  (0.04)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted Results (Note 1)                                                   
Revenue                                 3,283  3,228  2,907   9,857   8,981 
Non-interest expense                   (2,041)(1,988)(1,888) (6,066) (5,541)
----------------------------------------------------------------------------
Pre-provision, pre-tax earnings         1,242  1,240  1,019   3,791   3,440 
Provision for credit losses              (174)  (187)  (214)   (609)   (796)
Provision for income taxes               (207)  (231)  (108)   (697)   (494)
Non-controlling interest in                                                 
 subsidiaries                             (18)   (18)   (19)    (54)    (56)
----------------------------------------------------------------------------
Net Income                                843    804    678   2,431   2,094 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted Measures (Note 1)                                                  
EPS ($)                                  1.36   1.35   1.14    4.02    3.55 
Net income growth (%)                    24.4    6.9   11.1    16.1    30.2 
EPS growth (%)                           19.0    5.5    8.7    13.3    25.2 
Revenue growth (%)                       12.9    5.9   (2.6)    9.7     5.1 
Non-interest expense growth (%)           8.0    9.2    1.5     9.5    (0.5)
Productivity ratio (%)                   62.2   61.6   65.0    61.5    61.7 
Operating leverage (%)                    4.9   (3.3)  (4.1)    0.2     5.6 
Return on equity (%)                     15.6   16.8   13.9    16.1    14.9 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Note 1: Adjusted results and measures are non-GAAP. All of the above        
adjusting items are charged to Corporate Services, except the amortization  
of acquisition-related intangible assets which applies to all groups.       

Non-GAAP Measures

Results and measures in the MD&A are presented on a GAAP basis. They are also presented on an adjusted basis that excludes the impact of certain items as set out above. Management assesses performance on both a reported and adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases provides readers with an enhanced understanding of how management views results. It also permits readers to assess the impact of the specified items on results for the periods presented and to better assess results excluding those items if they consider the items to not be reflective of ongoing results. As such, the presentation may facilitate readers' analysis of trends as well as comparisons with our competitors. Adjusted results and measures are non-GAAP and as such do not have standardized meaning under GAAP. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from or as a substitute for GAAP results.

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials

Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our 2010 annual report, this quarterly news release, presentation materials and a supplementary financial information package online.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly conference call on Tuesday, August 23, 2011, at 2:00 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 Monday, December 5, 2011, by calling             905-694-9451       (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, December 5, 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      
Michael Chase, Director, michael.chase@bmo.com,             416-867-5452      
Andrew Chin, Senior Manager, andrew.chin@bmo.com,             416-867-7019      

Chief Financial Officer
Tom Flynn, Executive Vice-President and CFO
tom.flynn@bmo.com,             416-867-4689      

Corporate Secretary
Blair Morrison, Senior Vice-President, Deputy General Counsel,
Corporate Affairs and Corporate Secretary
corp.secretary@bmo.com,             416-867-6785      

---------------------------------------------------------------------------
Shareholder Dividend Reinvestment      For other shareholder information, 
 and Share Purchase Plan               please contact
Average market price                   Bank of Montreal
May 2011 $61.79                        Shareholder Services
June 2011 $60.09                       Corporate Secretary's Department
July 2011 $61.50                       One First Canadian Place, 21st Floor
                                       Toronto, Ontario M5X 1A1
For dividend information, change       Telephone:             (416) 867-6785      
in shareholder address or to           Fax: (416) 867-6793
advise of duplicate mailings,          E-mail: corp.secretary@bmo.com
please contact                        
Computershare Trust Company of Canada  For further information on this 
100 University Avenue, 9th Floor       report, please contact 
Toronto, Ontario M5J 2Y1               Bank of Montreal 
Telephone:             1-800-340-5021                    Investor Relations Department
(Canada and the United States)         P.O. Box 1, One First Canadian 
Telephone:             (514) 982-7800                    Place, 18th Floor
(international)                        Toronto, Ontario M5X 1A1
Fax: 1-888-453-0330 
(Canada and the United States)         To review financial results online,
Fax: (416) 263-9394                    please visit our website at
 (international)                       www.bmo.com
E-mail: service@computershare.com
---------------------------------------------------------------------------

(R) Registered trademark of Bank of Montreal

Annual Meeting 2012

The next Annual Meeting of Shareholders will be held on Tuesday, March 20, 2012, in Halifax, Nova Scotia.

Financial Highlights

(Unaudited)                                                                
 (Canadian $
 in millions,                                                             
 except as                                                                 
 noted)                          For the three months ended                
---------------------------------------------------------------------------
                                                                    Change 
                                                                      from 
                     July     April   January   October      July     July 
                 31, 2011  30, 2011  31, 2011  31, 2010  31, 2010 31, 2010 
---------------------------------------------------------------------------
Income
 Statement                                                           
 Highlights                                                                
Total revenue    $  3,274  $  3,217  $  3,346  $  3,229  $  2,907     12.6%
Provision for                                                             
 credit losses        174       145       248       253       214    (18.7)
Non-interest                                                              
 expense            2,111     2,023     2,046     2,023     1,898     11.1 
Net income            793       800       776       739       669     18.5 
Adjusted net                                                              
 income               843       804       784       748       678     24.4 
---------------------------------------------------------------------------
Net Income by                                                              
 Operating Segment        
Personal &                                                                 
 Commercial                                                                
 Banking Canada  $    432  $    402  $    443  $    418  $    424      1.8%
Personal &                                                                 
 Commercial                                                                
 Banking U.S.          92        53        54        46        52     78.6 
Private Client                                                             
 Group                120       101       153       129       105     14.0 
BMO Capital                                                                
 Markets              279       235       257       214       130     +100 
Corporate                                                                  
 Services(a)         (130)        9      (131)      (68)      (42)   (+100)
---------------------------------------------------------------------------
Common Share                                                               
 Data ($)                                                                  
Diluted
 earnings                                                           
 per share       $   1.27  $   1.34  $   1.30  $   1.24  $   1.13  $  0.14 
Diluted
 adjusted                                                           
 earnings per                                                              
 share(b)            1.36      1.35      1.32      1.26      1.14     0.22 
Dividends                                                                  
 declared
 per share           0.70      0.70      0.70      0.70      0.70        - 
Book value
 per share          37.89     34.22     34.21     34.09     33.13     4.76 
Closing share                                                              
 price              60.03     62.14     57.78     60.23     62.87    (2.84)
Total market                                                               
 value of
 common shares
 ($ billions)        38.3      35.4      32.8      34.1      35.4      2.9 
---------------------------------------------------------------------------



                    For the nine months ended   
----------------------------------------------
                                       Change 
                                         from 
                     July      July      July
                 31, 2011  31, 2010  31, 2010 
----------------------------------------------
Income
 Statement                              
 Highlights                                   
Total revenue    $  9,837  $  8,981       9.5%
Provision for                                 
 credit losses        567       796     (28.8)
Non-interest                                  
 expense            6,180     5,567      11.0 
Net income          2,369     2,071      14.4 
Adjusted net                                  
 income             2,431     2,094      16.1 
----------------------------------------------
Net Income by                                 
 Operating Segment                           
Personal &                                    
 Commercial                                   
 Banking Canada  $  1,277  $  1,222       4.5%
Personal &                                    
 Commercial                                   
 Banking U.S.         199       168      18.6 
Private Client                                
 Group                374       331      12.7 
BMO Capital                                   
 Markets              771       602      28.2 
Corporate                                     
 Services(a)         (252)     (252)      0.2 

----------------------------------------------
Common Share                                  
 Data ($)                                     
Diluted earnings                              
 per share       $   3.91  $   3.51  $   0.40 
Diluted adjusted                              
 earnings per                                 
 share(b)            4.02      3.55      0.47 
Dividends                                     
 declared
 per share           2.10      2.10         - 
Book value
 per share          37.89     33.13      4.76 
Closing share                                 
 price              60.03     62.87     (2.84)
Total market                                  
 value of
 common shares
 ($ billions)        38.3      35.4       2.9 
----------------------------------------------



                                            As at                          
---------------------------------------------------------------------------
                                                                    Change 
                                                                      from 
                     July     April   January   October      July     July 
                 31, 2011  30, 2011  31, 2011  31, 2010  31, 2010 31, 2010 
---------------------------------------------------------------------------
Balance Sheet
 Highlights                                                   
Assets           $476,557  $413,228  $413,244  $411,640  $397,386     19.9%
Net loans and                                                              
 acceptances      205,441   174,696   176,914   176,643   173,555     18.4 
Deposits          291,412   253,387   251,600   249,251   242,791     20.0 
Common                                                                     
 shareholders'                                                             
 equity            24,148    19,494    19,422    19,309    18,646     29.5 
---------------------------------------------------------------------------



                            For the three months ended          
------------------------------------------------------------------
                     July     April   January   October      July  
                 31, 2011  30, 2011  31, 2011  31, 2010  31, 2010 
------------------------------------------------------------------
Financial
 Measures and
 Ratios
 (% except
 as noted)(c)                                                            
Average annual
 five year total                                                     
 shareholder
 return               3.9       4.4       1.7       5.9       5.6  
Diluted earnings                                                
 per share growth    12.4       6.3      16.1      11.7      16.5  
Diluted adjusted                                                
 earnings per
 share growth(b)     19.0       5.5      16.4       6.9       8.7  
Return on equity     14.7      16.7      15.7      15.1      13.7  
Adjusted return
 on equity(b)        15.6      16.8      15.9      15.3      13.9  
Net economic
 profit 
 ($ millions)(b)      226       293       255       225       158  
Net economic
 profit (NEP)
 growth(b)           43.0      11.3      48.6      40.8      +100  
Operating leverage    1.5      (5.0)     (0.7)     (5.7)     (3.8) 
Adjusted operating                                              
 leverage(b)          4.9      (3.3)     (0.7)     (7.4)     (4.1) 
Revenue growth       12.6       5.5      10.6       8.0      (2.4) 
Adjusted revenue                                                
 growth(b)           12.9       5.9      10.6       6.3      (2.6) 
Non-interest                                                    
 expense growth      11.1      10.5      11.3      13.7       1.4  
Adjusted
 non-interest
 expense growth(b)    8.0       9.2      11.3      13.7       1.5  
Non-interest                                                    
 expense-to-revenue                                             
 ratio               64.5      62.9      61.2      62.6      65.3  
Adjusted 
 non-interest
 expense-to-revenue
 ratio(b)            62.2      61.6      60.9      62.3      65.0  
Provision for                                                   
 credit losses-to
 -average loans
 and acceptances                                                    
 (annualized)        0.39      0.36      0.58      0.58      0.50  
Effective tax rate  18.03     22.02     24.51     20.56     13.44  
Gross impaired                                                  
 loans and                                                      
 acceptances-to-                                                
 equity and                                                     
 allowance for                                                  
 credit losses       7.97     10.22     11.47     12.18     12.15  
Cash and                                                        
 securities-to-                                                 
 total assets
 ratio               34.6      35.9      35.6      35.0      34.6  
Common equity
 ratio               9.11     10.67     10.15     10.26     10.27  
Tier 1 capital                                                  
 ratio              11.48     13.82     13.02     13.45     13.55  
Total capital
 ratio              14.21     17.03     15.17     15.91     16.10  
Credit rating(d)                                               
 DBRS                  AA        AA        AA        AA        AA  
 Fitch                 AA-       AA-       AA-       AA-       AA-  
 Moody's               Aa2       Aa2       Aa2       Aa2       Aa2  
 Standard & Poor's     A+        A+        A+        A+        A+  
Twelve month total                                              
 shareholder return   0.0       3.2      16.6      26.4      22.4  
Dividend yield       4.66      4.51      4.85      4.65      4.45  
Price-to-earnings                                               
 ratio (times)       11.7      12.4      11.7      12.7      13.6  
Market-to-book                                                  
 value (times)       1.58      1.82      1.69      1.77      1.90  
Return on average                                               
 assets              0.71      0.80      0.74      0.72      0.67  
Net interest margin                                             
 on average earning                                             
 assets              1.78      1.89      1.82      1.89      1.88  
Non-interest                                                    
 revenue-to-total                                               
 revenue             48.3      49.6      51.4      50.2      46.0  
Equity-to-assets                                                
 ratio                5.7       5.4       5.3       5.3       5.3  
------------------------------------------------------------------
------------------------------------------------------------------




------------------------------------
                       For the nine 
                       months ended 
------------------------------------
                     July      July 
                 31, 2011  31, 2010 
------------------------------------
Financial
 Measures and
 Ratios
 (% except
 as noted)(c)                                
Average annual
 five year total                         
 shareholder
 return               3.9       5.6 
Diluted earnings                    
 per share growth    11.4      78.2 
Diluted adjusted                    
 earnings per
 share growth(b)     13.3      25.2 
Return on equity     15.7      14.8 
Adjusted return
 on equity(b)        16.1      14.9 
Net economic
 profit
 ($ millions)(b)      774       593 
Net economic
 profit (NEP)
 growth(b)           30.5      +100 
Operating leverage   (1.5)     11.8 
Adjusted operating                  
 leverage(b)          0.2       5.6 
Revenue growth        9.5      11.2 
Adjusted revenue                    
 growth(b)            9.7       5.1 
Non-interest                        
 expense growth      11.0      (0.6)
Adjusted
 non-interest
 expense growth(b)    9.5      (0.5)
Non-interest                        
 expense-to-revenue                 
 ratio               62.8      62.0 
Adjusted 
 non-interest
 expense-to-revenue
 ratio(b)            61.5      61.7 
Provision for                       
 credit losses-to
 -average loans
 and acceptances                        
 (annualized)        0.44      0.63 
Effective tax rate  21.59     18.77 
Gross impaired                      
 loans and                          
 acceptances-to
 -equity and                         
 allowance for                      
 credit losses       7.97     12.15 
Cash and                            
 securities-to
 -total assets
 ratio               34.6      34.6 
Common equity
 ratio               9.11     10.27 
Tier 1 capital                      
 ratio              11.48     13.55 
Total capital
 ratio              14.21     16.10 
Credit rating(d)                   
 DBRS                  AA        AA 
 Fitch                AA-       AA- 
 Moody's              Aa2       Aa2 
 Standard & Poor's     A+        A+ 
Twelve month total                  
 shareholder return   0.0      22.4 
Dividend yield       4.66      4.45 
Price-to-earnings                   
 ratio (times)       11.7      13.6 
Market-to-book                      
 value (times)       1.58      1.90 
Return on average                   
 assets              0.75      0.70 
Net interest margin                 
 on average earning                 
 assets              1.83      1.87 
Non-interest                        
 revenue-to-total                   
 revenue             49.8      48.5 
Equity-to-assets                    
 ratio                5.7       5.3 
------------------------------------
------------------------------------
All ratios in this report are based on unrounded numbers.                  
(a)  Corporate Services includes Technology and Operations.                
(b)  These are non-GAAP measures. Refer to the Non-GAAP Measures section at
     the end of Management's Discussion and Analysis for an explanation of 
     the use and limitations of Non-GAAP measures and detail on the items  
     that have been excluded from results in the determination of adjusted 
     measures. NEP, a non-GAAP measure, is explained in the Other Value    
     Measures section in the MD&A. Earnings and other measures adjusted to
     a basis other than generally accepted accounting principles (GAAP) do
     not have standardized meanings under GAAP and are unlikely to be
     comparable to similar measures used by other companies.           
(c)  For the period ended, or as at, as appropriate.                       
(d)  For a discussion of the significance of these credit ratings, see     
     "Credit Rating" on p.15 of Management's Discussion and Analysis.      

Certain comparative figures have been reclassified to conform with the
current period's presentation.



Interim Consolidated Financial Statements

Consolidated Statement of Income

(Unaudited)
 (Canadian $
 in millions,
 except as
 noted)                              For the three months ended
---------------------------------------------------------------------------
                     July 31,  April 30, January 31, October 31,   July 31,
                        2011       2011        2011        2010       2010
---------------------------------------------------------------------------
Interest, Dividend
 and Fee Income
Loans             $    1,990  $   1,907  $    1,932  $    1,925  $   1,845
Securities               633        597         634         563        543
Deposits with
 banks                    35         34          21          23         18
---------------------------------------------------------------------------
                       2,658      2,538       2,587       2,511      2,406
---------------------------------------------------------------------------
Interest Expense
Deposits                 660        639         679         666        610
Subordinated debt         44         38          33          32         30
Capital trust
 securities                7          6          12          14         18
Other liabilities        255        235         236         189        177
---------------------------------------------------------------------------
                         966        918         960         901        835
---------------------------------------------------------------------------
Net Interest
 Income                1,692      1,620       1,627       1,610      1,571
Provision for
 credit losses (Note 2)  174        145         248         253        214
---------------------------------------------------------------------------
Net Interest
 Income After
 Provision for
 Credit Losses         1,518      1,475       1,379       1,357      1,357
---------------------------------------------------------------------------
Non-Interest Revenue
Securities
 commissions and
 fees                    290        309         302         266        258
Deposit and
 payment service
 charges                 205        188         195         199        206
Trading revenues
 (losses)                141        137         208         166         (1)
Lending fees             141        138         149         144        148
Card fees                 20         50          45          65         67
Investment
 management and
 custodial fees          128         95          92          91         90
Mutual fund
 revenues                164        158         154         144        139
Securitization
 revenues                211        179         167         188        167
Underwriting and
 advisory fees           141        143         152         135         91
Securities gains,
 other than
 trading                  32         48          32          40          9
Foreign exchange,
 other than
 trading                  22         33          23          22         22
Insurance income          47         40         122          83         70
Other                     40         79          78          76         70
---------------------------------------------------------------------------
                       1,582      1,597       1,719       1,619      1,336
---------------------------------------------------------------------------
Net Interest
 Income and Non-
 Interest Revenue      3,100      3,072       3,098       2,976      2,693
---------------------------------------------------------------------------
Non-Interest Expense
Employee
 compensation
 (Note 8)              1,207      1,131       1,210       1,120      1,062
Premises and
 equipment               386        376         343         379        337
Amortization of
 intangible
 assets                   58         42          50          46         52
Travel and
 business
 development             100         90          86         109         85
Communications            63         61          60          60         61
Business and
 capital taxes            12         14          11          10         19
Professional fees        132        130          99         118         98
Other                    153        179         187         181        184
---------------------------------------------------------------------------
                       2,111      2,023       2,046       2,023      1,898
---------------------------------------------------------------------------
Income Before
 Provision for
 Income Taxes and
 Non-Controlling
 Interest in
 Subsidiaries            989      1,049       1,052         953        795
Provision for
 income taxes            178        231         258         196        107
---------------------------------------------------------------------------
                         811        818         794         757        688
Non-controlling
 interest in
 subsidiaries             18         18          18          18         19
---------------------------------------------------------------------------
Net Income        $      793  $     800  $      776  $      739  $     669
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Preferred share
 dividends        $       39  $      34  $       34  $       34  $      33
Net income
 available to
 common
 shareholders     $      754  $     766  $      742  $      705  $     636
Average common
 shares (in
 thousands)          589,849    568,829     567,301     565,088    561,839
Average diluted
 common shares
 (in thousands)      592,146    571,407     569,938     568,083    565,196
---------------------------------------------------------------------------
Earnings Per Share
 (Canadian $)
 (Note 12)
Basic             $     1.28  $    1.35  $     1.31  $     1.25  $    1.13
Diluted                 1.27       1.34        1.30        1.24       1.13
Dividends
 Declared Per
 Common Share           0.70       0.70        0.70        0.70       0.70
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(Unaudited)
 (Canadian $
 in millions,
 except as    
 noted)       For the nine months ended
----------------------------------------
                     July 31,   July 31,
                        2011       2010
----------------------------------------
Interest, Dividend
 and Fee Income
Loans             $    5,829  $   5,345
Securities             1,864      1,571
Deposits with
 banks                    90         51
----------------------------------------
                       7,783      6,967
----------------------------------------
Interest Expense
Deposits               1,978      1,696
Subordinated debt        115         87
Capital trust
 securities               25         57
Other liabilities        726        502
----------------------------------------
                       2,844      2,342
----------------------------------------
Net Interest
 Income                4,939      4,625
Provision for
 credit losses
 (Note 2)                567        796
----------------------------------------
Net Interest
 Income After
 Provision for
 Credit Losses         4,372      3,829
----------------------------------------
Non-Interest Revenue
Securities
 commissions and
 fees                    901        782
Deposit and
 payment service
 charges                 588        603
Trading revenues
 (losses)                486        338
Lending fees             428        428
Card fees                115        168
Investment
 management and
 custodial fees          315        264
Mutual fund
 revenues                476        406
Securitization
 revenues                557        490
Underwriting and
 advisory fees           436        310
Securities gains,
 other than
 trading                 112        110
Foreign exchange,
 other than
 trading                  78         71
Insurance income         209        238
Other                    197        148
----------------------------------------
                       4,898      4,356
----------------------------------------
Net Interest
 Income and Non-
 Interest Revenue      9,270      8,185
----------------------------------------
Non-Interest Expense
Employee
 compensation
 (Note 8)              3,548      3,244
Premises and
 equipment             1,105        964
Amortization of
 intangible
 assets                  150        157
Travel and
 business
 development             276        234
Communications           184        169
Business and
 capital taxes            37         42
Professional fees        361        254
Other                    519        503
----------------------------------------
                       6,180      5,567
----------------------------------------
Income Before
 Provision for
 Income Taxes and
 Non-Controlling
 Interest in
 Subsidiaries          3,090      2,618
Provision for
 income taxes            667        491
----------------------------------------
                       2,423      2,127
Non-controlling
 interest in
 subsidiaries             54         56
----------------------------------------
Net Income        $    2,369  $   2,071
----------------------------------------
----------------------------------------
Preferred share
 dividends        $      107  $     102
Net income
 available to
 common
 shareholders     $    2,262  $   1,969
Average common
 shares (in
 thousands)          575,398    558,047
Average diluted
 common shares
 (in thousands)      577,901    561,454
----------------------------------------
Earnings Per Share
 (Canadian $)
 (Note 12)
Basic             $     3.93  $    3.53
Diluted                 3.91       3.51
Dividends
 Declared Per
 Common Share           2.10       2.10
----------------------------------------
----------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.



Interim Consolidated Financial Statements

Consolidated Balance Sheet

(Unaudited) 
(Canadian $
 in millions)                                  As at
---------------------------------------------------------------------------
                     July 31,  April 30, January 31, October 31,   July 31,
                        2011       2011        2011        2010       2010
---------------------------------------------------------------------------
Assets
Cash and Cash
 Equivalents      $   33,026  $  24,415  $   20,717  $   17,368  $  15,083
---------------------------------------------------------------------------
Interest Bearing
 Deposits with
 Banks                 5,035      3,336       3,522       3,186      3,121
---------------------------------------------------------------------------
Securities
Trading               73,882     73,215      74,377      71,710     66,300
Available-for-
 sale                 51,954     46,276      47,367      50,543     51,899
Other                  1,079      1,093       1,137       1,146      1,151
---------------------------------------------------------------------------
                     126,915    120,584     122,881     123,399    119,350
---------------------------------------------------------------------------
Securities
 Borrowed or
 Purchased Under
 Resale
 Agreements           38,301     33,040      35,887      28,102     24,317
---------------------------------------------------------------------------
Loans
Residential
 mortgages            54,493     49,560      50,294      48,715     47,097
Consumer
 instalment and
 other personal       58,035     52,189      51,751      51,159     49,741
Credit cards           2,239      1,936       3,221       3,308      3,304
Businesses and
 governments          85,363     66,127      66,334      68,338     68,407
---------------------------------------------------------------------------
                     200,130    169,812     171,600     171,520    168,549
Customers'
 liability under
 acceptances           7,000      6,620       7,194       7,001      6,885
Allowance for
 credit losses
 (Note 2)             (1,689)    (1,736)     (1,880)     (1,878)    (1,879)
---------------------------------------------------------------------------
                     205,441    174,696     176,914     176,643    173,555
---------------------------------------------------------------------------
Other Assets
Derivative
 instruments          47,767     44,268      39,354      49,759     47,947
Premises and
 equipment             1,977      1,519       1,537       1,560      1,565
Goodwill               3,374      1,584       1,598       1,619      1,627
Intangible
 assets                1,511        848         822         812        748
Other                 13,210      8,938      10,012       9,192     10,073
---------------------------------------------------------------------------
                      67,839     57,157      53,323      62,942     61,960
---------------------------------------------------------------------------
Total Assets     $   476,557  $ 413,228  $  413,244  $  411,640  $ 397,386
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Liabilities and
 Shareholders'
 Equity
 Deposits
 (Note 10)
Banks            $    22,983  $  18,957  $   19,882  $   19,435  $  19,262
Businesses and
 governments         148,180    135,233     133,084     130,773    123,882
Individuals          120,249     99,197      98,634      99,043     99,647
---------------------------------------------------------------------------
                     291,412    253,387     251,600     249,251    242,791
---------------------------------------------------------------------------
Other Liabilities
Derivative
 instruments          43,890     41,145      37,393      47,970     45,110
Acceptances            7,000      6,620       7,194       7,001      6,885
Securities sold
 but not yet
 purchased            25,412     23,631      22,152      16,438     18,424
Securities lent
 or sold under
 repurchase
 agreements           53,893     43,912      52,143      47,110     42,237
Other                 22,257     16,570      16,656      17,414     16,175
---------------------------------------------------------------------------
                     152,452    131,878     135,538     135,933    128,831
---------------------------------------------------------------------------
Subordinated
 Debt (Note 9)         5,284      5,208       3,713       3,776      3,747
---------------------------------------------------------------------------
Capital Trust
 Securities
 (Note 10)               400        400         400         800        800
---------------------------------------------------------------------------
Shareholders'
 Equity
Share capital
 (Note 11)            13,972      9,951       9,572       9,498      9,311
Contributed
 surplus                 112        102         102          92         90
Retained
 earnings             13,863     13,556      13,192      12,848     12,539
Accumulated
 other
 comprehensive
 loss                   (938)    (1,254)       (873)       (558)      (723)
---------------------------------------------------------------------------
                      27,009     22,355      21,993      21,880     21,217
---------------------------------------------------------------------------
Total
 Liabilities and
 Shareholders'
 Equity          $   476,557  $ 413,228  $  413,244  $  411,640  $ 397,386
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.



Interim Consolidated Financial Statements

Consolidated Statement of Comprehensive Income


(Unaudited) (Canadian $        For the three months   For the nine months
 in millions)                          ended                  ended
---------------------------------------------------------------------------
                                July 31,    July 31,    July 31,   July 31,
                                   2011        2010        2011       2010
---------------------------------------------------------------------------
Net income                    $     793  $      669  $    2,369  $   2,071
Other Comprehensive Income
 Net change in unrealized
  gains (losses) on
  available-for-sale
  securities                         49          39         (66)       (64)
 Net change in unrealized
  gains (losses) on cash
  flow hedges                       228         217          78        (54)
 Net gain (loss) on
  translation of net
  foreign operations                 39          54        (392)      (206)
---------------------------------------------------------------------------
Total Comprehensive Income    $   1,109  $      979  $    1,989  $   1,747
---------------------------------------------------------------------------
---------------------------------------------------------------------------


Consolidated Statement of Changes in Shareholders' Equity

(Unaudited) (Canadian $         For the three months   For the nine months
 in millions)                            ended                  ended
---------------------------------------------------------------------------
                                July 31,    July 31,    July 31,   July 31,
                                   2011        2010        2011       2010
---------------------------------------------------------------------------
Preferred Shares
Balance at beginning of
 period                       $   2,861  $    2,571  $    2,571  $   2,571
Issued during the period
 (Note 11)                            -           -         290          -
---------------------------------------------------------------------------
Balance at End of Period          2,861       2,571       2,861      2,571
---------------------------------------------------------------------------
Common Shares
Balance at beginning of
 period                           7,090       6,590       6,927      6,198
Issued during the period
 (Notes 7 and 11)                 3,961           -       3,961          -
Issued under the
 Shareholder Dividend
 Reinvestment and Share
 Purchase Plan                       43         124         135        381
Issued under the Stock
 Option Plan                         17          26          88        161
---------------------------------------------------------------------------
Balance at End of Period         11,111       6,740      11,111      6,740
---------------------------------------------------------------------------
Contributed Surplus
Balance at beginning of
 period                             102          88          92         79
Stock option
 expense/exercised                   10           2          20         11
---------------------------------------------------------------------------
Balance at End of Period            112          90         112         90
---------------------------------------------------------------------------
Retained Earnings
Balance at beginning of
 period                          13,556      12,299      12,848     11,748
Net income                          793         669       2,369      2,071
Dividends - Preferred
             shares                 (39)        (33)       (107)      (102)
          - Common shares          (446)       (393)     (1,242)    (1,175)
Share issue expense                  (1)         (3)         (5)        (3)
---------------------------------------------------------------------------
Balance at End of Period         13,863      12,539      13,863     12,539
---------------------------------------------------------------------------
Accumulated Other
 Comprehensive Income on
 Available-for-Sale
 Securities
Balance at beginning of
 period                             400         377         515        480
Unrealized gains (losses)
 on available-for-sale
 securities arising
 during the period (net
 of income tax (provision)
 recovery of $(33), $(19),
 $17 and $7)                         54          36         (44)       (12)
Reclassification to
 earnings of (gains)
 losses in the period
 (net of income tax
 (provision)
 recovery of $nil,
 $(1), $9 and $23)                   (5)          3         (22)       (52)
---------------------------------------------------------------------------
Balance at End of Period            449         416         449        416
---------------------------------------------------------------------------
Accumulated Other
 Comprehensive Income
 (Loss) on Cash Flow
 Hedges
Balance at beginning of
 period                             (88)       (257)         62         14
Gains on cash flow hedges
 arising during the
 period (net of income
 tax provision of $(92),
 $(124), $(39) and $(15))           228         261          75         29
Reclassification to
 earnings of (gains)
 losses on cash flow
 hedges (net of income
 tax recovery of $nil,
 $20, less than $1 and $38)           -         (44)          3        (83)
---------------------------------------------------------------------------
Balance at End of Period            140         (40)        140        (40)
---------------------------------------------------------------------------
Accumulated Other
 Comprehensive Loss on
 Translation of Net Foreign
 Operations
Balance at beginning of
 period                          (1,566)     (1,153)     (1,135)      (893)
Unrealized gain (loss) on
 translation of net
 foreign operations                  62         157        (832)      (628)
Impact of hedging
 unrealized gain (loss)
 on translation of net
 foreign operations (net
 of income tax
 (provision) recovery of
 $10, $45, $(170) and
 $(175))                            (23)       (103)        440        422
---------------------------------------------------------------------------
Balance at End of Period         (1,527)     (1,099)     (1,527)    (1,099)
---------------------------------------------------------------------------
Total Accumulated Other
 Comprehensive Loss                (938)       (723)       (938)      (723)
---------------------------------------------------------------------------
Total Shareholders' Equity    $  27,009  $   21,217  $   27,009  $  21,217
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.



Interim Consolidated Financial Statements

Consolidated Statement of Cash Flows

(Unaudited) (Canadian $         For the three months   For the nine months
 in millions)                            ended                  ended
---------------------------------------------------------------------------
                                July 31,    July 31,    July 31,   July 31,
                                   2011        2010        2011       2010
---------------------------------------------------------------------------
Cash Flows from Operating
 Activities
Net income                    $     793  $      669  $    2,369  $   2,071
Adjustments to determine net
 cash flows provided by (used
 in) operating activities
 Impairment write-down
  of securities, other than
  trading                             1           8           2         36
 Net (gain) on
  securities, other than
  trading                           (33)        (17)       (114)      (146)
 Net (increase)
  decrease in trading
  securities                       (356)      4,926      (3,525)    (8,140)
 Provision for credit
  losses                            174         214         567        796
 (Gain) on sale of
  securitized loans (Note 3)       (158)       (127)       (424)      (374)
 Change in derivative
  instruments
   - (increase) decrease in
      derivative asset           (3,571)     (6,738)      1,710     (1,266)
   - Increase (decrease) in
      derivative liability        2,672       5,509      (3,107)     1,976
 Amortization of
  premises and equipment             73          66         216        195
 Amortization of
  intangible assets                  58          52         150        157
 Net (increase) decrease
  in future income taxes             48         (93)        (56)         1
 Net (increase) decrease
  in current income taxes          (107)        225          (6)      (838)
 Change in accrued interest
  - decrease in interest
     receivable                     167         124         159         73
  - increase (decrease) in
     interest payable                 -          33         (48)      (176)
 Changes in other items
  and accruals, net               2,964       1,259         998        167
 (Gain) on sale of land
  and buildings                       -           -          (1)        (4)
---------------------------------------------------------------------------
Net Cash Provided by (Used
 in) Operating Activities         2,725       6,110      (1,110)    (5,472)
---------------------------------------------------------------------------
Cash Flows from Financing
 Activities
Net increase in deposits          3,404       2,644      13,218      9,957
Net increase in securities
 sold but not yet purchased       1,764       1,877       9,373      6,608
Net increase (decrease) in
 securities lent or sold
 under repurchase agreements      9,812      (4,226)      8,293     (2,895)
Net increase (decrease) in
 liabilities of subsidiaries     (2,201)         25      (2,201)        25
Proceeds from issuance of
 Covered Bonds (Note 10)              -           -       1,500          -
Proceeds from issuance of
 subordinated debt (Note 9)           -           -       1,500          -
Repayment of subordinated
 debt                                 -           -           -       (500)
Proceeds from issuance of
 preferred shares (Note 11)           -           -         290          -
Redemption of Capital Trust
 Securities (Note 10)                 -        (350)       (400)      (350)
Share issue expense                  (1)         (3)         (5)        (3)
Proceeds from issuance of
 common shares                       19          27          93        165
Cash dividends paid                (444)       (303)     (1,219)      (900)
---------------------------------------------------------------------------
Net Cash Provided by (Used
 in) Financing Activities        12,353        (309)     30,442     12,107
---------------------------------------------------------------------------
Cash Flows from Investing
 Activities
Net (increase) decrease in
 interest bearing deposits
 with banks                         348        (206)       (190)       477
Purchases of securities,
 other than trading              (4,589)     (6,308)    (13,733)   (21,716)
Maturities of securities,
 other than trading               2,659       1,698      11,391      6,300
Proceeds from sales of
 securities, other than
 trading                          3,154       4,421       8,114     14,554
Net (increase) in loans          (3,076)     (6,303)     (9,746)   (13,387)
Proceeds from securitization
 of loans (Note 3)                  995       1,691       4,331      3,534
Net (increase) decrease in
 securities borrowed or
 purchased under resale
 agreements                      (5,106)        805     (11,413)    10,549
Proceeds from sales of land
 and buildings                        -           -           1          5
Premises and equipment -
 net purchases                     (137)        (70)       (247)      (140)
Purchased and developed
 software - net purchases           (69)        (42)       (187)      (162)
Purchase of Troubled Asset Relief
 Program preferred shares and
 warrants                        (1,642)          -      (1,642)         -
Acquisitions (Note 7)               789        (107)        683     (1,029)
---------------------------------------------------------------------------
Net Cash (Used in)
 Investing Activities            (6,674)     (4,421)    (12,638)    (1,015)
---------------------------------------------------------------------------
Effect of Exchange Rate
 Changes on Cash and Cash
 Equivalents                        207          80      (1,036)      (492)
---------------------------------------------------------------------------
Net Increase in Cash and
 Cash Equivalents                 8,611       1,460      15,658      5,128
Cash and Cash Equivalents at
 Beginning of Period             24,415      13,623      17,368      9,955
---------------------------------------------------------------------------
Cash and Cash Equivalents at
 End of Period                $  33,026  $   15,083  $   33,026  $  15,083
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Represented by:
Cash and non-interest
 bearing deposits with Bank
 of Canada and other banks    $  31,584  $   14,102  $   31,584  $  14,102
Cheques and other items in
 transit, net                     1,442         981       1,442        981
---------------------------------------------------------------------------
                              $  33,026  $   15,083  $   33,026  $  15,083
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Supplemental Disclosure of
 Cash Flow Information
Amount of interest paid in
 the period                   $     966  $      803  $    2,899  $   2,529
Amount of income taxes paid
 in the period                $     283  $       85  $      558  $   1,153
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The accompanying notes are an integral part of these interim consolidated
financial statements.

Certain comparative figures have been reclassified to conform with the
current period's presentation.



Notes to Consolidated Financial Statements

July 31, 2011 (Unaudited)
---------------------------------------------------------------------------

Note 1: Basis of Presentation

These interim consolidated financial statements should be read in conjunction with the notes to our annual consolidated financial statements for the year ended October 31, 2010 as set out on pages 114 to 168 of our 2010 Annual Report. These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") using the same accounting policies and methods of computation as were used for our annual consolidated financial statements for the year ended October 31, 2010 and include all normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for the periods presented.

Note 2: Loans and Allowance for Credit Losses

The allowance for credit losses recorded in our Consolidated Balance Sheet is maintained at a level that we consider adequate to absorb credit-related losses on our loans, customers' liability under acceptances and other credit instruments. The portion related to other credit instruments is recorded in other liabilities in our Consolidated Balance Sheet. As at July 31, 2011, there was a $42 million ($nil as at July 31, 2010) allowance for credit losses related to other credit instruments included in other liabilities.

A continuity of our allowance for credit losses is as follows:

(Canadian $ in millions)
---------------------------------------------------------------------------
                                        Credit card,
                                          consumer
                                       instalment and
                     Residential           other            Business and
                      mortgages        personal loans     government loans
---------------------------------------------------------------------------
For the three    July 31,  July 31,  July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010      2011      2010
---------------------------------------------------------------------------
Specific
 Allowance at
 beginning of
 period               68        39        59        54       427       491
Provision for
 credit losses        15        19       107       127        52        68
Recoveries             1         2        34        31        26        12
Write-offs           (22)      (22)     (142)     (165)     (123)      (93)
Foreign exchange
 and other             5         -         7         -         6         4
---------------------------------------------------------------------------
Specific
 Allowance at end
 of period            67        38        65        47       388       482
---------------------------------------------------------------------------

General Allowance
 at beginning of
 period               30        20       354       314       783       912
Provision for
 credit losses        (1)        2        17        24       (14)      (21)
Foreign exchange
 and other             -         -         -         -         6        11
---------------------------------------------------------------------------
General Allowance
 at end of period     29        22       371       338       775       902
---------------------------------------------------------------------------
Total Allowance       96        60       436       385     1,163     1,384
---------------------------------------------------------------------------
Comprised of:
 Loans                96        60       436       385     1,121     1,384
 Other credit
  instruments          -         -         -         -        42         -
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(Canadian $ in millions)
-------------------------------------------------------
                         Customers'
                          liability
                            under
                         acceptances          Total
-------------------------------------------------------
For the three    July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010
--------------------------------------------------------
Specific
 Allowance at
 beginning of
 period                -        10       554       594
Provision for
 credit losses         -         -       174       214
Recoveries             -         -        61        45
Write-offs             -         -      (287)     (280)
Foreign exchange
 and other             -         -        18         4
--------------------------------------------------------
Specific
 Allowance at end
 of period             -        10       520       577
--------------------------------------------------------
General Allowance
 at beginning of
 period               38        45     1,205     1,291
Provision for
 credit losses        (2)       (5)        -         -
Foreign exchange
 and other             -         -         6        11
--------------------------------------------------------
General Allowance
 at end of period     36        40     1,211     1,302
--------------------------------------------------------
Total Allowance       36        50     1,731     1,879
--------------------------------------------------------
Comprised of:
 Loans                36        50     1,689     1,879
 Other credit
  instruments          -         -        42         -
--------------------------------------------------------
--------------------------------------------------------


---------------------------------------------------------------------------
                                        Credit card,
                                          consumer
                                       instalment and
                     Residential           other            Business and
                      mortgages        personal loans     government loans
---------------------------------------------------------------------------
For the nine     July 31,  July 31,  July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010      2011      2010
---------------------------------------------------------------------------
Specific
 Allowance at
 beginning of
 period               52        33        47        51       481       507
Provision for
 credit losses        66        69       341       416       212       306
Recoveries             4         7        93        89        72        35
Write-offs           (64)      (71)     (426)     (509)     (368)     (344)
Foreign exchange
 and other             9         -        10         -        (9)      (22)
---------------------------------------------------------------------------
Specific
 Allowance at end
 of period            67        38        65        47       388       482
---------------------------------------------------------------------------
General Allowance
 at beginning
 of period            22        18       340       266       891       968
Provision for
 credit losses         7         4        31        48       (72)      (38)
Foreign exchange
 and other             -         -         -        24       (44)      (28)
---------------------------------------------------------------------------
General Allowance
 at end of period     29        22       371       338       775       902
---------------------------------------------------------------------------
Total Allowance       96        60       436       385     1,163     1,384
---------------------------------------------------------------------------
Comprised of:
 Loans                96        60       436       385     1,121     1,384
 Other credit
  instruments          -         -         -         -        42         -
---------------------------------------------------------------------------
---------------------------------------------------------------------------

-------------------------------------------------------
                       Customers'
                        liability
                    under acceptances       Total
-------------------------------------------------------
For the nine     July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010
-------------------------------------------------------
Specific
 Allowance at
 beginning of
 period               10         5       590       596
Provision for
 credit losses       (10)        5       609       796
Recoveries             -         -       169       131
Write-offs             -         -      (858)     (924)
Foreign exchange
 and other             -         -        10       (22)
-------------------------------------------------------
Specific
 Allowance at end
 of period             -        10       520       577
-------------------------------------------------------
General Allowance
 at beginning of
 period               44        54     1,297     1,306
Provision for
 credit losses        (8)      (14)      (42)        -
Foreign exchange
 and other             -         -       (44)       (4)
-------------------------------------------------------
General Allowance
 at end of period     36        40     1,211     1,302
-------------------------------------------------------
Total Allowance       36        50     1,731     1,879
-------------------------------------------------------
Comprised of:
 Loans                36        50     1,689     1,879
 Other credit
  instruments         -         -        42         -
-------------------------------------------------------
-------------------------------------------------------
Certain comparative figures have been reclassified to conform with the
current period's presentation.

Purchased Loans

We record loans that we purchase at fair value on the day that we acquire the loans, which includes an estimate of expected future credit losses on the acquisition date. As a result, no allowance for credit losses is recorded in our Consolidated Balance Sheet on the day we acquire the loans. Fair value is determined by estimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. We estimate cash flows expected to be collected based on specific loan reviews for commercial loans. For retail loans, we use models that incorporate management's best estimate of current key assumptions such as default rates, loss severity, timing of prepayments and collateral. Subsequent to the acquisition date, we will periodically re-evaluate what we expect to collect on the purchased loans. Decreases in expected cash flows will result in a charge to the provision for credit losses and an increase to the allowance for credit losses. Increases in expected cash flows will result in a recovery in the provision for credit losses and either a reduction in any previously recorded allowance for credit losses or if no allowance exists, an increase in the current carrying value of the purchased loans. Because purchased loans are recorded at fair value at acquisition based on the amount expected to be collectible, none of the purchased loans are considered to be impaired as long as expected cash flows continue to equal or exceed the amounts expected at acquisition. Loans purchased as part of our acquisition of Marshall & Ilsley Corporation ("M&I"), had a fair value of $29,240 million as at July 5, 2011. Included in the fair value of these loans is a write-down for estimated future losses of $3,306 million.

FDIC Covered Loans

Loans acquired as part of our acquisition of AMCORE Bank are subject to a loss share agreement with the Federal Deposit Insurance Corporation ("FDIC"). Under this agreement, the FDIC reimburses us for 80% of the net losses we incur on these loans.

We recorded new provisions for (recoveries of) credit losses of $5 million and $(10) million, respectively, for the three and nine months ended July 31, 2011 ($nil and $nil million, respectively, for the three and nine months ended July 31, 2010) related to loans covered by the FDIC loss share agreement. These amounts are net of the amounts expected to be reimbursed by the FDIC.

Note 3: Securitization

The following tables summarize our securitization activity related to our assets and its impact on our Consolidated Statement of Income for the three and nine months ended July 31, 2011 and 2010:

(Canadian $ in millions)
---------------------------------------------------------------------------
                    Residential
                      mortgages     Credit card loans          Total
---------------------------------------------------------------------------
For the three    July 31,  July 31,  July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010      2011      2010
---------------------------------------------------------------------------
Net cash
 proceeds(1)         992     1,677         -         -       992     1,677
Investment in
 securitization
 vehicle(2)            -         -        34         -        34         -
Deferred
 purchase price       35        51         1         -        36        51
Servicing
 liability            (6)      (11)        -         -        (6)      (11)
---------------------------------------------------------------------------
                   1,021     1,717        35         -     1,056     1,717
Loans sold         1,003     1,697        35         -     1,038     1,697
---------------------------------------------------------------------------
Gain on sale of
 loans from new
 securitizations      18        20         -         -        18        20
---------------------------------------------------------------------------
Gain on sale of
 loans sold to
 revolving
 securitization
 vehicles             14        14       126        93       140       107
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                    Residential
                      mortgages     Credit card loans          Total
---------------------------------------------------------------------------
For the nine     July 31,  July 31,  July 31,  July 31,  July 31,  July 31,
 months ended       2011      2010      2011      2010      2011      2010
---------------------------------------------------------------------------
Net cash
 proceeds(1)       3,114     3,500     1,200         -     4,314     3,500
Investment in
 securitization
 vehicle(2)            -         -       115         -       115         -
Deferred
 purchase price      103       135        37         -       140       135
Servicing
 liability           (18)      (25)       (5)        -       (23)      (25)
---------------------------------------------------------------------------
                   3,199     3,610     1,347         -     4,546     3,610
Loans sold         3,156     3,554     1,319         -     4,475     3,554
---------------------------------------------------------------------------
Gain on sale of
 loans from new
 securitizations      43        56        28         -        71        56
---------------------------------------------------------------------------
Gain on sale of
 loans sold to
 revolving
 securitization
 vehicles             36        44       317       274       353       318
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Net cash proceeds represent cash proceeds less issuance costs.
(2) Includes credit card securities retained on-balance sheet by the bank.

The key weighted-average assumptions used to value the deferred purchase price for securitizations were as follows:

---------------------------------------------------------------------------
                               Residential mortgages     Credit card loans
---------------------------------------------------------------------------
                                  July 31,   July 31,   July 31,   July 31,
For the three months ended           2011       2010       2011       2010
---------------------------------------------------------------------------
Weighted-average life (years)        4.19       4.16       0.87       1.00
Prepayment rate (%)                 18.37      18.70      37.64      35.58
Interest rate (%)                    3.82       3.85      21.73      21.39
Expected credit losses (%)(1)           -          -       5.52       4.40
Discount rate (%)                    2.43       2.42       9.45       9.49
---------------------------------------------------------------------------
---------------------------------------------------------------------------



                               Residential mortgages     Credit card loans
---------------------------------------------------------------------------
                                  July 31,   July 31,   July 31,   July 31,
For the nine months ended            2011       2010       2011       2010
---------------------------------------------------------------------------
Weighted-average life (years)        3.99       4.47       0.91       1.00
Prepayment rate (%)                 21.09      17.21      36.98      35.42
Interest rate (%)                    3.81       4.01      21.65      21.35
Expected credit losses (%)(1)           -          -       5.52       4.40
Discount rate (%)                    2.30       2.61       9.36       9.27
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) As the residential mortgages are fully insured, there are no expected
    credit losses.

Note 4: Variable Interest Entities

Total assets in our Variable Interest Entities ("VIEs") and our maximum exposure to losses are summarized in the following table. For additional information on our VIEs, refer to Note 9 on pages 128 to 130 of our 2010 Annual Report.

(Canadian $ in millions)                                     July 31, 2011
---------------------------------------------------------------------------
                                                                     Total
                                      Exposure to loss              assets
                        ---------------------------------------------------
                                    Drawn
                               facilities   Secur-   Deriv-
                    Undrawn     and loans    ities    ative
               facilities(1)   provided(2)    held   assets   Total
---------------------------------------------------------------------------
Unconsolidated
 VIEs in which
 we have a
 significant
 variable
 interest
Canadian
 customer
 securitization
 vehicles(3)          2,283             -      132        4   2,419  1,991
U.S. customer
 securitization
 vehicle              3,766           123        -        4   3,893  3,352
Bank
 securitization
 vehicles(3)          5,100             -      720       69   5,889 10,787
Credit
 protection
 vehicle -
 Apex(4)(5)           1,030             -    1,270      400   2,700  2,213
Structured
 investment
 vehicles(6)             89         3,090        -       23   3,202  3,255
Structured
 finance
 vehicles                na            na    7,918        -   7,918 11,756
Capital and
 funding
 trusts                  43            12        2        -      57  1,280
---------------------------------------------------------------------------
Total                12,311         3,225   10,042      500  26,078 34,634
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Consolidated
 VIEs
Canadian
 customer
 securitization
 vehicles(3)(7)          25             -       25        -      50     25
Capital and
 funding
 trusts               3,513         7,487    1,160       85  12,245  9,940
Structured
 finance
 vehicles                 -             -       26        -      26     26
---------------------------------------------------------------------------
Total                 3,538         7,487    1,211       85  12,321  9,991
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(Canadian $ in millions)                                  October 31, 2010
---------------------------------------------------------------------------
                                                                     Total
                                      Exposure to loss              assets
                        ---------------------------------------------------
                                    Drawn
                               facilities   Secur-   Deriv-
                    Undrawn     and loans    ities    ative
               facilities(1)   provided(2)    held   assets   Total
---------------------------------------------------------------------------
Unconsolidated
 VIEs in which
 we have a
 significant
 variable
 interest
Canadian
 customer
 securitization
 vehicles(3)          2,958             -      113       14   3,085  2,976
U.S. customer
 securitization
 vehicle              3,905           251        -        2   4,158  4,074
Bank
 securitization
 vehicles(3)          5,100             -      637      100   5,837  9,469
Credit
 protection
 vehicle -
 Apex(4)(5)           1,030             -    1,128      669   2,827  2,208
Structured
 investment
 vehicles(6)            171         5,097        -       30   5,298  5,225
Structured
 finance
 vehicles                na            na    4,745        -   4,745  5,330
Capital and
 funding
 trusts                  43            12        2        -      57  1,277
---------------------------------------------------------------------------
Total                13,207         5,360    6,625      815  26,007 30,559
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Consolidated
 VIEs
Canadian
 customer
 securitization
 vehicles(3)(7)         200             -      196        -     396    196
Capital and
 funding
 trusts               4,081         6,919      740       76  11,816  9,673
Structured
 finance
 vehicles                 -             -       27        -      27     27
---------------------------------------------------------------------------
Total                 4,281         6,919      963       76  12,239  9,896
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) These facilities include senior funding facilities provided to our
    credit protection vehicle and structured investment vehicles as well as
    backstop liquidity facilities provided to our bank securitization
    vehicles, our Canadian customer securitization vehicles and our U.S.
    customer securitization vehicle. None of the backstop liquidity
    facilities provided to our Canadian customer securitization vehicles
    related to credit support as at July 31, 2011 and October 31, 2010.
    Backstop liquidity facilities provided to our U.S. customer
    securitization vehicle include credit support and are discussed in Note
    6.
(2) Amounts outstanding from backstop liquidity facilities and senior
    funding facilities are classified as Loans - Businesses and governments.
(3) Securities held in our bank securitization vehicles are comprised of
    $61 million of asset-backed commercial paper classified as trading
    securities ($105 million in 2010), $268 million of deferred purchase
    price ($261 million in 2010) and $391 million of asset-backed
    securities ($271 million in 2010) classified as available-for-sale
    securities. Securities held in our Canadian customer securitization
    vehicles are comprised of asset-backed commercial paper and are
    classified as trading securities. Assets held by all these vehicles
    relate to assets in Canada.
(4) Derivatives held with this vehicle are classified as trading
    instruments. Changes in the fair value of these derivatives are offset
    by derivatives held with third-party counterparties that are also
    classified as trading instruments.
(5) Securities held are classified as trading securities and have a face
    value of $1,415 million. Our exposure to these securities has been
    hedged through derivatives.
(6) Securities held are comprised of capital notes, classified as
    available-for-sale securities. We have written these notes down to $nil
    as at July 31, 2011 and October 31, 2010.
(7) Total assets held as at July 31, 2011 are comprised of a loan of $nil
    million ($135 million as at October 31, 2010) and $25 million of other
    assets ($61 million as at October 31, 2010).

na - not applicable

Note 5: Financial Instruments

Change in Accounting Policy

On August 1, 2008, we elected to transfer from trading to available-for-sale those securities for which we had a change in intent to hold the securities for the foreseeable future rather than to exit or trade them in the short term due to market circumstances at that time.

A continuity of the transferred securities is as follows:

(Canadian $ in millions)
---------------------------------------------------------------------------
For the three       July 31,  April 30,  January 31,  October 31,  July 31,
 months ended          2011       2011         2011         2011      2010
---------------------------------------------------------------------------
Fair value of
 securities at
 beginning of period    307        387          435          606       791
Net sales/maturities    (48)       (82)         (41)        (175)     (183)
Fair value change
 recorded in other
 comprehensive
 income                   9          3           (3)          (2)       (5)
Other than temporary
 impairment recorded
 in income                -          -            -            -         -
Impact of foreign
 exchange                (1)        (1)          (4)           6         3
---------------------------------------------------------------------------
Fair value of
 securities at end
 of period              267        307          387          435       606
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------
For the nine        July 31,   July 31,
 months ended          2011       2010
---------------------------------------
Fair value of
 securities at
 beginning of period    435      1,378
Net sales/maturities   (171)      (753)
Fair value change
 recorded in Other
 Comprehensive
 Income                   9         57
Other than temporary
 impairment recorded
 in income                -        (17)
Impact of foreign
 exchange                (6)       (59)
---------------------------------------
Fair value of
 securities at end
 of period              267        606
---------------------------------------
---------------------------------------

Book Value and Fair Value of Financial Instruments

Set out in the following table are the amounts that would be reported if all of our financial instrument assets and liabilities were reported at their fair values. Refer to the notes to our annual consolidated financial statements on pages 117, 132 and 160 to 161 in our 2010 Annual Report for further discussion on the determination of fair value.

(Canadian $ in millions)        July 31, 2011             October 31, 2010
---------------------------------------------------------------------------
                                         Fair                         Fair
                                        value                        value
                                         over                         over
                                       (under)                      (under)
                      Book      Fair     book      Book      Fair     book
                     value     value    value     value     value    value
---------------------------------------------------------------------------
Assets
Cash and cash
 equivalents        33,026    33,026        -    17,368    17,368        -
Interest bearing
 deposits with
 banks               5,035     5,035        -     3,186     3,186        -
Securities         126,915   127,028      113   123,399   123,433       34
Securities
 borrowed or
 purchased under
 resale
 agreements         38,301    38,301        -    28,102    28,102        -
Loans
 Residential
  mortgages         54,493    55,123      630    48,715    49,531      816
 Consumer
  instalment and
  other personal    58,035    58,144      109    51,159    51,223       64
 Credit cards        2,239     2,239        -     3,308     3,308        -
 Businesses and
  governments       85,363    85,089     (274)   68,338    68,084     (254)
---------------------------------------------------------------------------
                   200,130   200,595      465   171,520   172,146      626
Customers'
 liability under
 acceptances         7,000     7,000        -     7,001     6,998       (3)
Allowance for
 credit losses      (1,689)   (1,689)       -    (1,878)   (1,878)       -
---------------------------------------------------------------------------
Total loans and
 customers'
 liability under
 acceptances,
 net of allowance
 for credit
 losses            205,441   205,906      465   176,643   177,266      623
Derivative
 instruments        47,767    47,767        -    49,759    49,759        -
Premises and
 equipment           1,977     1,977        -     1,560     1,560        -
Goodwill             3,374     3,374        -     1,619     1,619        -
Intangible
 assets              1,511     1,511        -       812       812        -
Other assets        13,210    13,210        -     9,192     9,192        -
---------------------------------------------------------------------------
                   476,557   477,135      578   411,640   412,297      657
---------------------------------------------------------------------------
Liabilities
Deposits           291,412   291,568      156   249,251   249,544      293
Derivative
 instruments        43,890    43,890        -    47,970    47,970        -
Acceptances          7,000     7,000        -     7,001     7,001        -
Securities sold
 but not yet
 purchased          25,412    25,412        -    16,438    16,438        -
Securities lent
 or sold under
 repurchase
 agreements         53,893    53,893        -    47,110    47,110        -
Other
 liabilities        22,257    22,345       88    17,414    17,504       90
Subordinated
 debt                5,284     5,505      221     3,776     3,947      171
Capital trust
 securities            400       407        7       800       823       23
Shareholders'
 equity             27,009    27,009        -    21,880    21,880        -
---------------------------------------------------------------------------
                   476,557   477,029      472   411,640   412,217      577
---------------------------------------------------------------------------
Total fair
 value
 adjustment                               106                           80
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Certain comparative figures have been reclassified to conform with the
current period's presentation.

Financial Instruments Designated as Held for Trading

A portion of our structured note liabilities has been designated as trading under the fair value option and are accounted for at fair value, which better aligns the accounting result with the way the portfolio is managed. The change in fair value of these structured notes was a decrease of $76 million and $30 million in non-interest revenue, trading revenues, respectively, for the three and nine months ended July 31, 2011 (decrease of $74 million and $70 million, respectively, for the three and nine months ended July 31, 2010). This includes an increase of $6 million and a decrease of $1 million, respectively, for the three and nine months ended July 31, 2011 attributable to changes in our credit spread (increase of $4 million and $15 million, respectively, for the three and nine months ended July 31, 2010). We recognized offsetting amounts on derivatives and other financial instrument contracts that are held to hedge changes in the fair value of these structured notes.

The change in fair value related to changes in our credit spread that has been recognized since they were designated as held for trading to July 31, 2011 was an unrealized loss of $30 million. Starting in 2009, we hedged the exposure to changes in our credit spreads.

The fair value and amount due at contractual maturity of these structured notes accounted for as held for trading as at July 31, 2011 were $4,355 million and $4,462 million, respectively ($3,976 million and $4,084 million, respectively, as at October 31, 2010).

We designate certain insurance investments as trading under the fair value option since the actuarial calculation of insurance liabilities is based on the fair value of the investments supporting them. Electing the fair value option for these investments better aligns the accounting result with the way the portfolio is managed. The fair value of these securities as at July 31, 2011 was $4,676 million ($4,153 million as at October 31, 2010). The impact of recording these as trading securities was an increase of $107 million and $82 million in non-interest revenue, insurance income, respectively, for the three and nine months ended July 31, 2011 (increase of $46 million and $174 million, respectively, for the three and nine months ended July 31, 2010). Changes in the insurance liability balances are also recorded in non-interest revenue, insurance income.

Fair Value Measurement

We use a fair value hierarchy to categorize the inputs we use in valuation techniques to measure fair value. The extent of our use of quoted market prices (Level 1), internal models using observable market information as inputs (Level 2) and internal models without observable market information as inputs (Level 3) in the valuation of securities, fair value liabilities, derivative assets and derivative liabilities was as follows:

(Canadian $ in millions)                                     July 31, 2011
---------------------------------------------------------------------------
                                                   Valued           Valued
                                             using models     using models
                          Valued using              (with         (without
                         quoted market         observable       observable
                                prices             inputs)          inputs)
---------------------------------------------------------------------------
Trading Securities                                                         
 Issued or                                                                 
  guaranteed by:                                                           
  Canadian federal                                                         
   government                   17,942                  -                -
  Canadian                                                                 
   provincial and                                                          
   municipal                                                               
   governments                   5,556                108                -
  U.S. federal                                                             
   government                    5,296                  -                -
  U.S. states,                                                             
   municipalities                                                          
   and agencies                    315                128                -
  Other governments              1,783                  -                -
 Mortgage-backed                                                           
  securities and                                                           
  collateralized                                                           
  mortgage                                                                 
  obligations                      717                199                -
 Corporate debt                  8,237              3,484            1,232
 Corporate equity               26,232              2,653                -
---------------------------------------------------------------------------
                                66,078              6,572            1,232
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Available-for-Sale                                                         
 Securities                                                                
 Issued or                                                                 
  guaranteed by:                                                           
  Canadian federal                                                         
   government                   14,275                  -                -
  Canadian                                                                 
   provincial and                                                          
   municipal                                                               
   governments                   1,318                268                -
  U.S. federal                                                             
   government                    4,778                  -                -
  U.S. states,                                                             
   municipalities                                                          
   and agencies                    555              2,736               35
  Other governments              8,251                748                -
 Mortgage-backed                                                           
  securities and                                                           
  collateralized                                                           
  mortgage                                                                 
  obligations                    4,826              8,178                -
 Corporate debt                  3,450                223            1,411
 Corporate equity                  190                183              529
---------------------------------------------------------------------------
                                37,643             12,336            1,975
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Fair Value                                                                 
 Liabilities                                                               
 Securities sold but                                                       
  not yet purchased             25,412                  -                -
 Structured note                                                           
  liabilities                        -              4,355                -
---------------------------------------------------------------------------
                                25,412              4,355                -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative Assets                                                          
 Interest rate                                                             
  contracts                         17             29,798              125
 Foreign exchange                                                          
  contracts                         23             11,441                -
 Commodity contracts             1,492                235                -
 Equity contracts                2,732              1,047                4
 Credit default                                                            
  swaps                              -                710              143
---------------------------------------------------------------------------
                                 4,264             43,231              272
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative                                                                 
 Liabilities                                                               
 Interest rate                                                             
  contracts                         27             28,459               41
 Foreign exchange                                                          
  contracts                         16             10,566                -
 Commodity contracts             1,325                253                -
 Equity contracts                  113              2,428               66
 Credit default                                                            
  swaps                              -                594                2
---------------------------------------------------------------------------
                                 1,481             42,300              109
---------------------------------------------------------------------------
---------------------------------------------------------------------------




(Canadian $ in millions)                                  October 31, 2010
---------------------------------------------------------------------------
                                                   Valued           Valued
                                             using models     using models
                          Valued using              (with         (without
                         quoted market         observable       observable
                                prices             inputs)          inputs)
---------------------------------------------------------------------------
Trading Securities                                                     
 Issued or                                                             
  guaranteed by:                                                       
  Canadian federal                                                     
   government                   15,932                 72                -
  Canadian                                                             
   provincial and                                                      
   municipal                                                           
   governments                   3,910                 5                 -
  U.S. federal                                                         
   government                    8,060                 -                 -
  U.S. states,                                                         
   municipalities                                                      
   and agencies                    849               205                 -
  Other governments              1,365                 -                 -
 Mortgage-backed                                                       
  securities and                                                       
  collateralized                                                       
  mortgage                                                             
  obligations                      859                 -               211
 Corporate debt                  7,419             3,595             1,358
 Corporate equity               27,267               603                 -
---------------------------------------------------------------------------
                                65,661             4,480             1,569
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Available-for-Sale                                                     
 Securities                                                            
 Issued or                                                             
  guaranteed by:                                                       
  Canadian federal                                                     
   government                   14,701                 -                 -
  Canadian                                                             
   provincial and                                                      
   municipal                                                           
   governments                   1,442               253                 -
  U.S. federal                                                         
   government                    5,658                 -                 -
  U.S. states,                                                         
   municipalities                                                      
   and agencies                      -             4,237                20
  Other governments              9,455               587                 -
 Mortgage-backed                                                       
  securities and                                                       
  collateralized                                                       
  mortgage                                                             
  obligations                      688             8,204                20
 Corporate debt                  2,959               133             1,500
Corporate equity                   139               178               369
---------------------------------------------------------------------------
                                35,042            13,592             1,909
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Fair Value                                                             
 Liabilities                                                           
 Securities sold but                                                   
  not yet purchased             16,438                 -                 -
 Structured note                                                       
  liabilities                        -             3,976                 -
---------------------------------------------------------------------------
                                16,438             3,976                 -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative Assets                                                      
 Interest rate                                                         
  contracts                         24            33,862               217
 Foreign exchange                                                      
  contracts                         45            10,089                 -
 Commodity contracts             2,207               382                 -
 Equity contracts                1,028               617                 8
 Credit default                                                        
  swaps                              -             1,120               160
---------------------------------------------------------------------------
                                 3,304            46,070               385
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative                                                             
 Liabilities                                                           
 Interest rate                                                         
  contracts                         38            32,593                48
 Foreign exchange                                                     
  contracts                         20             9,517                 -
 Commodity contracts             2,087               501                 -
 Equity contracts                   53             2,109                71
 Credit default                                                        
  swaps                              -               930                 3
 --------------------------------------------------------------------------
                                 2,198            45,650               122
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Valuation Techniques and Significant Inputs

We determine the fair value of publicly traded fixed maturity and equity securities using quoted market prices in active markets (Level 1) when these are available. When quoted prices in active markets are not available, we determine the fair value of financial instruments using models such as discounted cash flows with observable market data for inputs such as yield and prepayment rates or broker quotes and other third-party vendor quotes (Level 2). Fair value may also be determined using models where the significant market inputs are unobservable due to inactive or minimal market activity (Level 3). We maximize the use of market inputs to the extent possible.

Our Level 2 trading securities are primarily valued using discounted cash flow models with observable spreads or based on broker quotes. The fair value of Level 2 available-for-sale securities is determined using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry standard models and observable market information.

Sensitivity analysis at July 31, 2011 for the most significant Level 3 instruments is provided below.

Within Level 3 trading securities is corporate debt of $1,208 million that relates to securities that are hedged with total return swaps and credit default swaps that are also considered a Level 3 instrument. The sensitivity analysis for the structured product is performed on an aggregate basis and is described as part of the discussion on derivatives below.

Within Level 3 available-for-sale corporate debt securities is the deferred purchase price of $599 million related to our off-balance sheet securitization activities. We have determined the valuation of the deferred purchase price (excess spread) based on expected future cash flows. The significant inputs for the valuation model include interest rate, weighted-average prepayment rate, weighted-average maturity, expected credit losses and weighted-average discount rate. The determination of interest rates has the most significant impact on the valuation of the deferred purchase price. The impact of assuming a 10 percent increase or decrease in the interest rate would result in a change in fair value of $83 million and $(83) million, respectively.

Within derivative assets and derivative liabilities as at July 31, 2011 was $267 million and $43 million, respectively, related to the mark-to-market of credit default swaps and total return swaps on structured products. We have determined the valuation of these derivatives and the related securities based on estimates of current market spreads for similar structured products. The impact of assuming a 10 basis point increase or decrease in that spread would result in a change in fair value of $(3) million and $3 million, respectively.

Significant Transfers

Transfers are made between the various fair value hierarchy levels due to changes in the availability of quoted market prices or observable market inputs due to changing market conditions. The following is a discussion of the significant transfers between Level 1, Level 2 and Level 3 balances for the three and nine months ended July 31, 2011.

During the quarter ended July 31, 2011, no significant transfers were made into or out of Level 3. Securities purchased as part of the M&I acquisition that are classified as Level 3 totalled $326 million, of which $124 million were sold in the quarter. These securities held as at July 31, 2011 are primarily private equity investments for which fair values are determined based on the net assets of the entities.

During the nine months ended July 31, 2011, $139 million of corporate debt securities within trading securities were transferred from Level 3 to Level 2 as values for these securities are now obtained through a third-party vendor and are based on market prices.

During the nine months ended July 31, 2011, $207 million and $20 million of mortgage-backed securities and collateralized mortgage obligations were transferred from Level 3 to Level 2 within trading securities and available-for-sale securities, respectively, as values for these securities are now obtained through a third-party vendor and are based on a larger volume of market prices.

During the nine months ended July 31, 2011, derivative assets of $6 million and derivative liabilities of $9 million were transferred from Level 3 to Level 2 as market information became available for certain over-the-counter equity contracts.

During the year ended October 31, 2010, a portion of the asset-backed commercial paper issued by the conduits known as the Montreal Accord were transferred from Level 3 to Level 2 within corporate debt trading securities because we are now valuing the notes based on broker quotes rather than internal models due to increased broker/dealer trading of these securities, resulting in improved liquidity. In addition, certain available-for-sale corporate debt securities that were previously valued using observable market information were transferred from Level 2 to Level 1 as values for these securities became available in active markets.

Changes in Level 3 Fair Value Measurements

The tables on the following page present a reconciliation of all changes in Level 3 financial instruments during the three and nine months ended July 31, 2011, including realized and unrealized gains (losses) included in earnings and other comprehensive income.

(Canadian $ in millions)                                
---------------------------------------------------------------------------
                                    Change in Fair Value                   
                             ---------------------------                   
                                             Included in                   
For the three        Balance,                      other                   
 months ended       April 30,  Included in comprehensive                   
 July 31, 2011          2011      earnings        income Purchases   Sales
---------------------------------------------------------------------------
Trading                                                                   
 Securities                                                               
Corporate debt         1,199            35             -         -       -
---------------------------------------------------------------------------
Total trading                                                              
 securities            1,199            35             -         -       -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Available-for-                                                             
 Sale Securities                                                           
Issued or                                                                  
 guaranteed by:                                                            
 U.S. states,                                                              
  municipalities                                                           
  and agencies            12             -             -        23       -
Corporate debt         1,547           (26)           (1)       45    (124)
Corporate equity         342            (2)            6       312    (129)
---------------------------------------------------------------------------
Total available-                                                           
 for-sale                                                                  
 securities            1,901          (28)             5       380    (253)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative                                                                 
 Assets                                                                    
Interest rate                                                              
 contracts               136          (19)             -         8       -
Equity contracts           3            4              -         -       -
Credit default                                                             
 swaps                   147           (4)             -         -       -
---------------------------------------------------------------------------
Total derivative                                                           
 assets                  286          (19)             -         8       -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative                                                                 
 Liabilities                                                               
Interest rate                                                              
 contracts                42            -              -         -       -
Equity contracts          74           (8)             -         3       -
Credit default                                                             
 swaps                     2            -              -         -       -
---------------------------------------------------------------------------
Total derivative                                                           
 liabilities             118           (8)             -         3       -
---------------------------------------------------------------------------
---------------------------------------------------------------------------




(Canadian $ in millions)                                
-------------------------------------------------------------------

                                                           Unreal-
                                              Fair Value      ized
For the three                    Transfers         as at     Gains
 months ended      Maturities       out of       July 31,  (losses)
 July 31, 2011             (1)     Level 3          2011        (2)
-------------------------------------------------------------------
Trading                                                             
 Securities                                                         
Corporate debt             (2)           -         1,232        35
-------------------------------------------------------------------
Total trading                                                       
 securities                (2)           -         1,232        35
-------------------------------------------------------------------
-------------------------------------------------------------------
Available-for-                                                      
 Sale Securities                                                    
Issued or                                                           
 guaranteed by:                                                     
 U.S. states,                                                       
  municipalities                                                    
  and agencies              -            -            35         -
Corporate debt            (30)           -         1,411         2
Corporate equity            -            -           529         6
-------------------------------------------------------------------
Total available-                                                    
 for-sale                                                           
 securities               (30)           -         1,975         8
-------------------------------------------------------------------
-------------------------------------------------------------------
Derivative                                                          
 Assets                                                             
Interest rate                                                       
 contracts                  -            -           125       (18)
Equity contracts           (3)           -             4         4
Credit default                                                      
 swaps                      -            -           143        (4)
-------------------------------------------------------------------
Total derivative                                                    
 assets                    (3)           -           272       (18)
-------------------------------------------------------------------
-------------------------------------------------------------------
Derivative                                                          
 Liabilities                                                        
Interest rate                                                       
 contracts                 (1)           -            41         -
Equity contracts           (3)           -            66         7
Credit default                                                      
 swaps                      -            -             2         -
-------------------------------------------------------------------
Total derivative                                                  
 liabilities               (4)           -           109         7
-------------------------------------------------------------------
-------------------------------------------------------------------
(1) Includes cash settlement of derivative assets and derivative
    liabilities.

(2) Unrealized gains or losses on trading securities, derivative assets and
    derivative liabilities still held on July 31, 2011 are included in
    earnings in the period. For available-for-sale securities, the
    unrealized gains or losses on securities still held on July 31, 2011
    are included in Accumulated Other Comprehensive Income.



(Canadian $ in millions)
---------------------------------------------------------------------------
                                    Change in Fair Value                   
                             ---------------------------                   
                                             Included in                   
For the nine         Balance,                      other                   
 months ended     October 31,  Included in comprehensive                   
 July 31, 2011          2010      earnings        income Purchases   Sales
---------------------------------------------------------------------------
Trading Securities                                                         
Mortgage-backed                                                            
 securities and                                                            
 collateralized                                                            
 mortgage
 obligations             211           (4)             -         -       -
Corporate debt         1,358          (24)             -        42      (1)
---------------------------------------------------------------------------
Total trading                                                              
 securities            1,569          (28)             -        42      (1)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Available-for-Sale                                                         
 Securities                                                                
Issued or
 guaranteed by:                                                            
 U.S. states,                                                              
  municipalities and                                                       
  agencies                20            1             (1)       23      (8)
Mortgage-backed                                                            
 securities and                                                            
 collateralized                                                            
 mortgage obligations     20            -              -         -       -
Corporate debt         1,500          (31)            19       169    (151)
Corporate equity         369           (8)           (19)      320    (133)
---------------------------------------------------------------------------
Total available-for-                                                       
 sale securities       1,909          (38)            (1)      512    (292)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative Assets                                                          
Interest rate                                                              
 contracts               217          (32)             -         8       -
Equity contracts           8            5              -         -       -
Credit default swaps     160          (11)             -         3       -
---------------------------------------------------------------------------
Total derivative                                                           
 assets                  385          (38)             -        11       -
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Derivative                                                                 
 Liabilities                                                               
Interest rate                                                              
 contracts                48            -              -         3       -
Equity contracts          71            6              -         3       -
Credit default swaps       3            -              -         -       -
---------------------------------------------------------------------------
Total derivative                                                           
 liabilities             122            6              -         6       -
---------------------------------------------------------------------------
---------------------------------------------------------------------------


(Canadian $ in millions)                                
-------------------------------------------------------------------

                                                           Unreal-
                                              Fair Value      ized
For the nine                     Transfers         as at     Gains
 months ended      Maturities       out of       July 31,  (losses)
 July 31, 2011             (1)     Level 3          2011        (2)
-------------------------------------------------------------------
Trading Securities                                                       
Mortgage-backed                                                          
 securities and                                                          
 collateralized                                                          
 mortgage obligations       -         (207)            -         -
Corporate debt             (4)        (139)        1,232       (30)
-------------------------------------------------------------------
Total trading                                                            
 securities                (4)        (346)        1,232       (30)
-------------------------------------------------------------------
-------------------------------------------------------------------
Available-for-Sale                                                       
 Securities                                                              
Issued or
 guaranteed by:                             
 U.S. states,                                                            
  municipalities and                                                     
  agencies                  -            -            35        (1)
Mortgage-backed                                                          
 securities and                                                          
 collateralized                                                          
 mortgage obligations       -          (20)            -         -
Corporate debt            (95)           -         1,411        22
Corporate equity            -            -           529       (19)
-------------------------------------------------------------------
Total available-for-                                                     
 sale securities          (95)         (20)        1,975         2
-------------------------------------------------------------------
-------------------------------------------------------------------
Derivative Assets                                                        
Interest rate                                                            
 contracts                (68)           -           125       118
Equity contracts           (3)          (6)            4         7
Credit default swaps       (9)           -           143       143
-------------------------------------------------------------------
Total derivative                                                  
 assets                   (80)          (6)          272       268
-------------------------------------------------------------------
-------------------------------------------------------------------
Derivative                                                               
 Liabilities                                                             
Interest rate                                                            
 contracts                (10)           -            41       (42)
Equity contracts           (5)          (9)           66       (67)
Credit default swaps       (1)           -             2        (2)
-------------------------------------------------------------------
Total derivative                                                         
 liabilities              (16)          (9)          109      (111)
-------------------------------------------------------------------
-------------------------------------------------------------------
(1) Includes cash settlement of derivative assets and derivative
    liabilities.
(2) Unrealized gains or losses on trading securities, derivative assets and
    derivative liabilities still held on July 31, 2011 are included in
    earnings in the period. For available-for-sale securities, the
    unrealized gains or losses on securities still held on July 31, 2011
    are included in Accumulated Other Comprehensive Income.

Other Items Measured at Fair Value

Certain assets such as foreclosed assets are measured at fair value at initial recognition but are not required to be measured at fair value on an ongoing basis.

As at July 31, 2011, the bank held $182 million of foreclosed assets measured at fair value at inception, all of which were classified as Level 2. For the nine months ended July 31, 2011, we recorded write-downs of $36 million on these assets.

Note 6: Guarantees

In the normal course of business we enter into a variety of guarantees. The most significant guarantees are as follows:

Standby Letters of Credit and Guarantees

Standby letters of credit and guarantees represent our obligation to make payments to third parties on behalf of another party if that party is unable to make the required payments or meet other contractual requirements. The maximum amount payable under standby letters of credit and guarantees totalled $12,117 million as at July 31, 2011 ($10,163 million as at October 31, 2010). None of the standby letters of credit or guarantees had an investment rating as at July 31, 2011 or October 31, 2010. The majority have a term of one year or less. Collateral requirements for standby letters of credit and guarantees are consistent with our collateral requirements for loans. A large majority of these commitments expire without being drawn upon. As a result, the total contractual amounts may not be representative of the funding likely to be required for these commitments.

As at July 31, 2011, $42 million ($9 million as at October 31, 2010) was included in other liabilities related to guaranteed parties that were unable to meet their obligation to third parties (See Note 2). No other amount was included in our Consolidated Balance Sheet as at July 31, 2011 and October 31, 2010 related to those standby letters of credit and guarantees.

Backstop and Other Liquidity Facilities

Backstop liquidity facilities are provided to asset-backed commercial paper ("ABCP") programs administered by either us or third parties as an alternative source of financing in the event that such programs are unable to access ABCP markets or when predetermined performance measures of the financial assets owned by these programs are not met. The terms of the backstop liquidity facilities do not require us to advance money to these programs in the event of bankruptcy of the borrower. The facilities' terms are generally no longer than one year, but can be several years.

The maximum amount payable under these backstop and other liquidity facilities totalled $13,065 million as at July 31, 2011 ($14,009 million as at October 31, 2010), of which $11,403 million relates to facilities that are investment grade, $622 million that are non-investment grade and $1,040 million that are not rated ($11,036 million, $625 million and $2,348 million, respectively, as at October 31, 2010). As at July 31, 2011, $172 million was outstanding from facilities drawn in accordance with the terms of the backstop liquidity facilities ($292 million as at October 31, 2010), of which $123 million (US$129 million) ($251 million or US$246 million as at October 31, 2010) related to the U.S. customer securitization vehicle discussed in Note 4.

Credit Enhancement Facilities

Where warranted, we provide partial credit enhancement facilities to transactions within ABCP programs administered by either us or third parties. Credit enhancement facilities are included in backstop liquidity facilities. These facilities include amounts that relate to our U.S. customer securitization vehicle discussed in Note 4.

Senior Funding Facilities

We also provide senior funding support to our structured investment vehicles ("SIVs") and our credit protection vehicle. As at July 31, 2011, $3,090 million had been drawn ($5,097 million as at October 31, 2010) in accordance with the terms of the funding facilities related to the SIVs. As at July 31, 2011 and October 31, 2010, no amounts had been drawn down in accordance with the terms of the funding facility provided to our credit protection vehicle (See Note 4).

In addition to our investment in the notes subject to the Montreal Accord, we have provided a senior loan facility of $300 million. No amounts were drawn as at July 31, 2011 or October 31, 2010.

Derivatives

Certain of our derivative instruments meet the accounting definition of a guarantee when we believe they are related to an asset, liability or equity security held by the guaranteed party at the inception of a contract. In order to reduce our exposure to these derivatives, we enter into contracts that hedge the related risks.

Written credit default swaps require us to compensate a counterparty following the occurrence of a credit event in relation to a specified reference obligation, such as a bond or a loan. The maximum amount payable under credit default swaps is equal to their notional amount of $36,288 million as at July 31, 2011 ($40,650 million as at October 31, 2010), of which $34,261 million relates to swaps that are investment grade, $1,824 million are non-investment grade swaps and $203 million are not rated ($37,764 million, $2,622 million and $264 million, respectively, as at October 31, 2010). The terms of these contracts range from less than one month to seven years. The fair value of the related derivative liabilities included in derivative instruments in our Consolidated Balance Sheet was $596 million as at July 31, 2011 ($933 million as at October 31, 2010).

Written options include contractual agreements that convey to the purchaser the right, but not the obligation, to require us to buy a specific amount of a currency, commodity, debt or equity instrument at a fixed price, either at a fixed future date or at any time within a fixed future period. The maximum amount payable under these written options cannot be reasonably estimated due to the nature of these contracts. The terms of these contracts range from one day to eight years. The fair value of the related derivative liabilities included in derivative instruments in our Consolidated Balance Sheet was $415 million as at July 31, 2011 ($599 million as at October 31, 2010), none of which had an investment rating (none of which had an investment rating as at October 31, 2010).

Written options also include contractual agreements where we agree to pay the purchaser, based on a specified notional amount, the difference between a market price or rate and the strike price or rate of the underlying instrument. The maximum amount payable under these contracts is not determinable due to their nature. The terms of these contracts range from two months to 25 years. The fair value of the related derivative liabilities included in derivative instruments in our Consolidated Balance Sheet was $85 million as at July 31, 2011 ($87 million as at October 31, 2010), none of which had an investment rating (none of which had an investment rating as at October 31, 2010).

Indemnification Agreements

In the normal course of operations, we enter into various agreements that provide general indemnifications. These indemnifications typically occur in connection with sales of assets, securities offerings, service contracts, membership agreements, clearing arrangements, derivatives contracts and leasing transactions. As part of the acquisition of M&I, we acquired a securities lending business that lends securities owned by clients to borrowers who have been evaluated for credit risk using the same credit risk process that is applied to loans and other credit assets. In connection with these activities, we provide an indemnification to lenders against losses resulting from the failure of the borrower to return loaned securities when due. All borrowings are fully collateralized with cash or marketable securities. As securities are loaned, collateral is maintained at a minimum of 100% of the fair value of the securities and the collateral is revalued on a daily basis. The amount of securities loaned subject to indemnification was $4,778 million as at July 31, 2011. No amount was included in our consolidated balance sheet as at July 31, 2011 related to these indemnifications.

Note 7: Acquisitions

We account for acquisitions of businesses using the purchase method. This involves allocating the purchase price paid for a business to the assets acquired, including identifiable intangible assets and the liabilities assumed based on their fair values at the date of acquisition. Any excess is then recorded as goodwill. The results of operations of acquired businesses are included in our consolidated financial statements beginning on the date of acquisition.

Marshall & Ilsley Corporation ("M&I")

On July 5, 2011, we completed the acquisition of Milwaukee-based Marshall & Ilsley Corporation for consideration of approximately $4.0 billion (US $4.2 billion) paid in common shares, with fractional entitlements to our common shares paid in cash. Each common share of M&I was exchanged for 0.1257 of a common share, resulting in the issuance of approximately 67 million common shares. The value of our common shares was arrived at using the average of our common share price prevailing during the five day period before and after December 17, 2010, the day the terms of the business combination were agreed to and announced. In addition, immediately prior to the completion of the transaction, we purchased M&I's Troubled Asset Relief Program preferred shares and warrants from the U.S. Treasury for $1.6 billion (US $1.7 billion). The acquisition of M&I allows us to strengthen our competitive position in the U.S. Midwest markets. As part of this acquisition, we acquired a core deposit intangible asset that is being amortized on an accelerated basis over a period of 10 years, a customer relationship intangible asset which is being amortized on an accelerated basis over a period of 15 years, a credit card portfolio intangible asset which is being amortized on an accelerated basis over a period of 15 years, and a trade name intangible asset which is being amortized on an accelerated basis over a period of five years. Goodwill related to this acquisition is not deductible for tax purposes. M&I is part of our Personal and Commercial Banking U.S., Private Client Group, BMO Capital Markets and Corporate reporting segments. Goodwill was allocated to these segments except for Corporate.

Lloyd George Management ("LGM")

On April 28, 2011, we completed the acquisition of all outstanding voting shares of Hong Kong-based Lloyd George Management, for cash consideration of $89 million subject to a post-closing adjustment based on working capital, plus contingent consideration based on meeting certain revenue thresholds over three years. Contingent consideration of approximately $13 million is expected to be paid in future years related to this acquisition. During the quarter ended July 31, 2011, we increased the purchased price by $2 million to $89 million based on a revaluation of net assets acquired. The acquisition of LGM allows us to expand our investment management capabilities in Asia and emerging markets to meet clients' growing demand for global investment strategies. As part of this acquisition, we acquired a customer relationship intangible asset which is being amortized on a straight-line basis over a period of 15 years. Goodwill related to this acquisition is not deductible for tax purposes. LGM is part of our Private Client Group reporting segment.

AMCORE Bank, N.A. ("AMCORE")

On April 23, 2010, we completed the acquisition of certain assets and liabilities of AMCORE from the FDIC for total consideration of $253 million, subject to a post-closing adjustment based on net assets. During the year ended October 31, 2010, we reduced the purchase price by $28 million based on a revaluation of the net assets acquired. As part of the acquisition, we had the option to purchase certain AMCORE branches after the close of the transaction. During the quarter ended January 31, 2011, we increased the purchase price by $20 million to $245 million as a result of the purchase of certain of these branches. The acquired assets and liabilities are included in our Personal and Commercial Banking U.S. reporting segment.

The estimated fair values of the assets acquired and the liabilities assumed at the date of acquisition are as follows:

(Canadian $ in millions)
---------------------------------------------------------------------------
                                  M&I               LGM             AMCORE
---------------------------------------------------------------------------
Cash resources (1)              2,838                 3                420
Securities                      5,975                 3                 10
Loans                          29,240                 -              1,551
Premises and equipment            390                 -                 20
Goodwill                        1,770                59                 86
Intangible assets                 649                31                 24
Deferred tax asset              2,421                 -                  -
Other assets                    2,292                 -                494
---------------------------------------------------------------------------
Total assets                   45,575                96              2,605
---------------------------------------------------------------------------
Deposits                       33,860                 -              2,207
Other liabilities               7,726                 7                153
---------------------------------------------------------------------------
Total liabilities              41,586                 7              2,360
---------------------------------------------------------------------------
Purchase price                  3,989                89                245
---------------------------------------------------------------------------
---------------------------------------------------------------------------
The allocation of the purchase price for M&I and LGM is subject to
refinement as we complete the valuation of the assets acquired and
liabilities assumed.

(1) Cash resources, acquired through the M&I and AMCORE acquisitions
    include cash and cash equivalents and interest bearing deposits.

Note 8: Employee Compensation

Stock Options

During the three months ended July 31, 2011, we granted a total of 3,676,632 stock options (nil during the three months ended July 31, 2010). All grants relate to the stock options granted as part of the M&I acquisition. The weighted-average fair value of options granted during the three months ended July 31, 2011 was $2.22 per option ($nil per option for the three months ended July 31, 2010). The following weighted-average assumptions were used to determine the fair value of options on the date of grant for the three months ended July 31, 2011:

For stock options granted during                          July 31, July 31,
 the three months ended                                       2011     2010
---------------------------------------------------------------------------
Expected dividend yield                                       5.5%       na
Expected share price volatility                              18.7%       na
Risk-free rate of return                                      1.8%       na
Expected period until exercise (in years)                      4.6       na
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Changes to the input assumptions can result in different fair value
estimates.

na - not applicable

Pension and Other Employee Future Benefit Expenses

Pension and other employee future benefit expenses are determined as follows:

(Canadian $ in millions)
---------------------------------------------------------------------------
                                                                     Other
                                             Pension       employee future
                                       benefit plans         benefit plans
---------------------------------------------------------------------------
                                  July 31,   July 31,   July 31,   July 31,
For the three months ended           2011       2010       2011       2010
---------------------------------------------------------------------------
Benefits earned by employees           41         32          5          5
Interest cost on accrued
 benefit liability                     63         63         14         15
Actuarial loss recognized
 in expense                            23         18          1          -
Amortization of plan
 amendment costs                        5          4         (1)        (2)
Expected return on plan
 assets                               (81)       (73)        (1)        (2)
---------------------------------------------------------------------------
Benefits expense                       51         44         18         16
Canada and Quebec pension
 plan expense                          15         17          -          -
Defined contribution expense            2          2          -          -
---------------------------------------------------------------------------
Total pension and other
 employee future benefit
 expenses                              68         63         18         16
---------------------------------------------------------------------------
---------------------------------------------------------------------------



---------------------------------------------------------------------------
                                                                      Other
                                             Pension       employee future
                                       benefit plans         benefit plans
---------------------------------------------------------------------------
                                  July 31,   July 31,   July 31,   July 31,
For the nine months ended            2011       2010       2011       2010
---------------------------------------------------------------------------
Benefits earned by employees          118         96         16         15
Interest cost on accrued
 benefit liability                    189        191         40         43
Actuarial loss recognized
 in expense                            67         55          4          2
Amortization of plan
 amendment costs                       12         12         (5)        (5)
Expected return on plan
 assets                              (243)      (218)        (3)        (4)
---------------------------------------------------------------------------
Benefits expense                      143        136         52         51
Canada and Quebec pension
 plan expense                          53         49          -          -
Defined contribution expense            7          7          -          -
---------------------------------------------------------------------------
Total pension and other
 employee future benefit
 expenses                             203        192         52         51
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Note 9: Subordinated Debt

During the quarter ended April 30, 2011, we issued $1.5 billion of subordinated debt under our Canadian Medium-Term Note Program. The issue, Series G Medium-Term Notes, First Tranche, is due July 8, 2021. Interest on this issue is payable semi-annually at a fixed rate of 3.979% until July 8, 2016, and at a floating rate equal to the rate on three month Bankers' Acceptances plus 1.09%, paid quarterly, thereafter to maturity. This issue is redeemable at our option with the prior approval of the Office of Superintendent of Financial Institutions of Canada ("OSFI") at par commencing July 8, 2016.

During the quarter ended January 31, 2010, we redeemed all of our 4.00% Series C Medium-Term Notes, First Tranche, due 2015, totalling $500 million. The notes were redeemed at a redemption price of 100 percent of the principal amount plus unpaid accrued interest to the redemption date.

Note 10: Deposits and Capital Trust Securities

Deposits

During the quarter ended January 31, 2011, we issued US$1.5 billion Covered Bonds - Series 3. This deposit pays interest of 2.625% and matures on January 25, 2016.

Capital Trust Securities

During the quarter ended January 31, 2011, we redeemed all of our BMO Capital Trust Securities - Series B ("BMO BOaTs - Series B") at a redemption amount equal to $1,000, for an aggregate redemption of $400 million, plus unpaid distributions.

During the quarter ended July, 31, 2010, we redeemed all of our Capital Trust Securities - Series A ("BMO BOaTS") at a redemption amount equal to $1,000 plus unpaid indicated distributions, representing an aggregate redemption of $350 million.

Note 11: Share Capital

During the quarter ended July 31, 2011 and 2010, we did not issue or redeem any preferred shares.

During the quarter ended July 31, 2011, we issued 66,519,673 common shares to M&I shareholders as consideration for the acquisition of M&I.

During the quarter ended April 30, 2011, we issued 11,600,000 3.9% Non-Cumulative 5-year Rate Reset Class B Preferred Shares, Series 25, at a price of $25.00 per share, representing an aggregate issue price of $290 million.

On December 13, 2010, we announced the renewal of our normal course issuer bid, which allows us to repurchase for cancellation up to 15,000,000 of our common shares during the period from December 16, 2010 to December 15, 2011.

We did not repurchase any common shares under the existing normal course issuer bid. We did not repurchase any common shares under our previous normal course issuer bid, which expired on December 1, 2010.

Share Capital Outstanding (1)

(Canadian $
 in millions,
 except as noted)  July 31, 2011     October 31, 2010
---------------------------------------------------------------------------
                   Number of         Number of 
                      shares Amount     shares Amount  Convertible into...
---------------------------------------------------------------------------
Preferred Shares
 - Classified as
   Equity
   Class B -
    Series 5       8,000,000    200    8,000,000   200 -
   Class B -
    Series 10 (2) 12,000,000    396   12,000,000   396 common shares (3)
   Class B -
    Series 13     14,000,000    350   14,000,000   350 -
   Class B -
    Series 14     10,000,000    250   10,000,000   250 -
   Class B -
    Series 15     10,000,000    250   10,000,000   250 -
   Class B -                                           preferred shares -
    Series 16     12,000,000    300   12,000,000   300 class B-series 17 (4)
   Class B -                                           preferred shares -
    Series 18      6,000,000    150    6,000,000   150 class B-series 19 (4)
   Class B -                                           preferred shares -
    Series 21     11,000,000    275   11,000,000   275 class B-series 22 (4)
   Class B -                                           preferred shares -
    Series 23     16,000,000    400   16,000,000   400 class B-series 24 (4)
   Class B -                                           preferred shares -
    Series 25     11,600,000    290            -    -  class B-series 26 (4)
---------------------------------------------------------------------------
                               2,861             2,571
Common Shares    637,353,972  11,111 566,468,440 6,927
---------------------------------------------------------------------------
Share Capital                 13,972             9,498
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) For additional information refer to Notes 20 and 22 to our consolidated
    financial statements for the year ended October 31, 2010 on pages 145
    to 149 of our 2010 Annual Report.
(2) Face value is US$300 million.
(3) The number of shares issuable on conversion is not determinable until
    the date of conversion.
(4) If converted, the holders have the option to convert back to the
    original preferred shares on subsequent redemption dates.
(5) The stock options issued under stock option plan are convertible into
    17,969,488 common shares as at July 31, 2011 (15,232,139 common shares
    as at October 31, 2010).

Note 12: Earnings Per Share

The following tables present the bank's basic and diluted earnings per share:

Basic earnings per share

(Canadian $ in                   For the three months   For the nine months
 millions, except as noted)              ended                  ended
---------------------------------------------------------------------------
                                July 31,    July 31,    July 31,   July 31,
                                   2011        2010        2011       2010
---------------------------------------------------------------------------
Net income                          793         669       2,369      2,071
Dividends on
 preferred shares                   (39)        (33)       (107)      (102)
---------------------------------------------------------------------------
Net income available
 to common
 shareholders                       754         636        2,262      1,969
---------------------------------------------------------------------------
Average number of
 common shares
 outstanding (in
 thousands)                     589,849     561,839      575,398    558,047
---------------------------------------------------------------------------
Basic earnings
 per share (Canadian $)            1.28        1.13         3.93       3.53
---------------------------------------------------------------------------
---------------------------------------------------------------------------



Diluted earnings per share

(Canadian $ in                   For the three months   For the nine months
 millions, except as noted)              ended                  ended
---------------------------------------------------------------------------
                                July 31,    July 31,    July 31,   July 31,
                                   2011        2010        2011       2010
---------------------------------------------------------------------------
Net income available
 to common
 shareholders
 adjusted for
 dilution effect                    754         636       2,262      1,970
---------------------------------------------------------------------------
Average number of
 common shares
 outstanding (in
 thousands)                     589,849     561,839     575,398    558,047
---------------------------------------------------------------------------
Convertible shares                  248         252         248        252
Stock options
 potentially
 exercisable(1)                   9,970      11,073      10,266     11,060
Common shares
 potentially
 repurchased                     (7,921)     (7,968)     (8,011)    (7,905)
---------------------------------------------------------------------------
Average diluted
 number of common
 shares outstanding
 (in thousands)                 592,146     565,196     577,901    561,454
---------------------------------------------------------------------------
Diluted earnings
 per share (Canadian $)            1.27        1.13        3.91       3.51
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) In computing diluted earnings per share we excluded average stock
    options outstanding of 2,291,209 and 1,774,297, with a weighed-average
    exercise price of $139.93 and $97.41, respectively, for the three
    months and nine months ended July 31, 2011 (1,207,385 and 2,484,804
    with a weighted-average exercise price of $65.80 and $60.93,
    respectively, for the three months and nine months ended July 31, 2010)
    as the average share price for the period did not exceed the exercise
    price.

Note 13: Capital Management

Our objective is to maintain a strong capital position in a cost-effective structure that: meets our target regulatory capital ratios and internal assessment of risk-based capital; is consistent with our targeted credit ratings; underpins our operating groups' business strategies; and builds depositor confidence and long-term shareholder value.

We have met OSFI's stated minimum capital ratios requirement as at July 31, 2011. Our capital position as at July 31, 2011 is detailed in the Capital Management section on page 14 of Management's Discussion and Analysis of the Third Quarter Report to Shareholders.

Note 14: Risk Management

We have an enterprise-wide approach to the identification, measurement, monitoring and management of risks faced across the organization. The key financial instrument risks are classified as credit and counterparty, market, liquidity and funding risk.

Credit and Counterparty Risk

We are exposed to credit risk from the possibility that counterparties may default on their financial obligations to us. Credit risk arises predominantly with respect to loans, over-the-counter derivatives and other credit instruments. This is the most significant measurable risk that we face.

Market Risk

Market risk is the potential for a negative impact on the balance sheet and/or statement of income resulting from adverse changes in the value of financial instruments as a result of changes in certain market variables. These variables include interest rates, foreign exchange rates, equity and commodity prices and their implied volatilities, as well as credit spreads, credit migration and default. We incur market risk in our trading and underwriting activities and structural banking activities.

Liquidity and Funding Risk

Liquidity and funding risk is the potential for loss if we are unable to meet financial commitments in a timely manner at reasonable prices as they fall due. It is our policy to ensure that sufficient liquid assets and funding capacity are available to meet financial commitments, including liabilities to depositors and suppliers, and lending, investment and pledging commitments, even in times of stress. Managing liquidity and funding risk is essential to maintaining both depositor confidence and stability in earnings.

Key measures as at July 31, 2011 are outlined in the Risk Management section on page 10 of Management's Discussion and Analysis of the Third Quarter Report to Shareholders.

Note 15: Contingent Liabilities

BMO Capital Markets Corp. (previously Harris Nesbitt Corp.) and Bank of Montreal were named defendants in an action brought by investors in securities of Adelphia Communications Corporation ("Adelphia"). During the quarter ended July 31, 2011, we settled this action, which resolves all outstanding litigation related to Adelphia.

Note 16: Operating and Geographic Segmentation

Operating Groups

We conduct our business through three operating groups, each of which has a distinct mandate. We determine our operating groups based on our management structure and therefore these groups, and results attributed to them, may not be comparable with those of other financial services companies. We evaluate the performance of our groups using measures such as net income, revenue growth, return on equity, net economic profit and non-interest expense-to-revenue (productivity) ratio, as well as adjusted operating leverage.

Personal and Commercial Banking

Personal and Commercial Banking ("P&C") is comprised of two operating segments: Personal and Commercial Banking Canada and Personal and Commercial Banking U.S.

Personal and Commercial Banking Canada

Personal and Commercial Banking Canada ("P&C Canada") offers a full range of consumer and business products and services, including everyday banking, financing, investing and credit cards, as well as a full suite of commercial and capital market products and financial advisory services, through a network of branches, telephone banking, online banking, mortgage specialists and automated banking machines.

Personal and Commercial Banking U.S.

Personal and Commercial Banking U.S. ("P&C U.S.") offers a full range of products and services to personal and business clients in select U.S. Midwest markets through branches and direct banking channels such as telephone banking, online banking and a network of automated banking machines.

Private Client Group

Private Client Group ("PCG"), our group of wealth management businesses, serves a full range of client segments, from mainstream to ultra-high net worth, as well as select institutional markets, with a broad offering of wealth management products and solutions. PCG operates in both Canada and the United States, as well as in China and the United Kingdom.

BMO Capital Markets

BMO Capital Markets ("BMO CM") combines all of our businesses serving corporate, institutional and government clients. In Canada and the United States, these clients span a broad range of industry sectors. BMO CM also serves clients in the United Kingdom, Europe, Asia and Australia. It offers clients complete financial solutions, including equity and debt underwriting, corporate lending and project financing, mergers and acquisitions, advisory services, merchant banking, securitization, treasury and market risk management, debt and equity research and institutional sales and trading.

Corporate Services

Corporate Services includes the corporate units that provide expertise and governance support in areas such as Technology and Operations ("T&O"), strategic planning, law, finance, internal audit, risk management, corporate communications, economics, corporate marketing, human resources and learning. Operating results include revenues and expenses associated with certain securitization activities, the hedging of foreign-source earnings, and activities related to the management of certain balance sheet positions and our overall asset liability structure.

T&O manages, maintains and provides governance over our information technology, operations services, real estate and sourcing. T&O focuses on enterprise-wide priorities that improve quality and efficiency to deliver an excellent customer experience.

Operating results for T&O are included with Corporate Services for reporting purposes. However, costs of T&O services are transferred to the three operating groups. As such, results for Corporate Services largely reflect the activities outlined above.

Corporate Services also includes residual revenues and expenses representing the differences between actual amounts earned or incurred and the amounts allocated to operating groups.

Basis of Presentation

The results of these operating segments are based on our internal financial reporting systems. The accounting policies used in these segments are generally consistent with those followed in the preparation of our consolidated financial statements as disclosed in Note 1 and throughout the consolidated financial statements. Notable accounting measurement differences are the taxable equivalent basis adjustment and the provisions for credit losses, as described below.

Taxable Equivalent Basis

We analyze net interest income on a taxable equivalent basis ("teb") at the operating group level. This basis includes an adjustment which increases GAAP revenues and the GAAP provision for income taxes by an amount that would raise revenues on certain tax-exempt securities to a level that incurs tax at the statutory rate. The operating groups' teb adjustments are eliminated in Corporate Services.

During the year ended October 31, 2010, we changed the accounting for certain BMO CM transactions on a basis that reflects their teb. We believe these adjustments are useful and reflect how BMO CM manages its business, since it enhances the comparability of taxable revenues and tax-advantaged revenues. The change results in increases in net interest income and income taxes in BMO CM with offsetting amounts reflected in Corporate Services. There was no overall net income change in either of the two groups. Prior periods have been restated to reflect this reclassification.

Provisions for Credit Losses

Provisions for credit losses are generally allocated to each group based on expected losses for that group. Differences between expected loss provisions and provisions required under GAAP are included in Corporate Services.

Acquisition of Marshall & Ilsley Corporation

Commencing on July 5, 2011, our P&C U.S., PCG, BMO CM and Corporate Services segments include a portion of M&I's acquired business. Within Corporate Services we have included the fair value adjustments for future expected losses on the M&I loan portfolio and the valuation of loans and deposits at current market rates. Corporate Services results will include any changes in our estimate of future expected losses as well as adjustments to net interest income to reflect current market rates. The operating groups' results will reflect the provision for credit losses on an expected loss basis and net interest income based on the contractual rates for loans and deposits.

Securitization Accounting

During the year ended October 31, 2010, we changed the manner in which we report securitized assets in our segmented disclosure. Previously, certain securitized mortgage assets were not reported in P&C Canada's balance sheet. We now report all securitized mortgage assets in P&C Canada, with offsetting amounts in Corporate Services, and net interest income earned on all securitized mortgage assets is included in P&C Canada net interest income. Previously, net interest income earned on certain securitized mortgage assets was included in P&C Canada non-interest revenue. Prior periods have been restated to conform to this new presentation.

U.S. Mid-Market Client Accounts

Effective in the year ended October 31, 2010, we identified U.S. mid-market client accounts that would be better served by a commercial banking model and transferred their balances to P&C U.S. from BMO CM. Prior periods have been restated to reflect this reclassification.

Impaired Real Estate Secured Loans

During the quarter ended July 31, 2011, approximately $0.9 billion of impaired real estate secured loans comprised primarily of commercial real estate loans were transferred to Corporate Services from P&C U.S. to allow our businesses to focus on ongoing customer relationships and leverage our risk management expertise in our special assets management unit. Prior periods have been restated to reflect this transfer.

Inter-Group Allocations

Various estimates and allocation methodologies are used in the preparation of the operating groups' financial information. We allocate expenses directly related to earning revenue to the groups that earned the related revenue. Expenses not directly related to earning revenue, such as overhead expenses, are allocated to operating groups using allocation formulas applied on a consistent basis. Operating group net interest income reflects internal funding charges and credits on the groups' assets, liabilities and capital, at market rates, taking into account relevant terms and currency considerations. The offset of the net impact of these charges and credits is reflected in Corporate Services.

Geographic Information

We operate primarily in Canada and the United States but we also have operations in the United Kingdom, Europe, the Caribbean and Asia, which are grouped in Other countries. We allocated our results by geographic region based on the location of the unit responsible for managing the related assets, liabilities, revenues and expenses, except for the consolidated provision for credit losses, which is allocated based upon the country of ultimate risk.

Our results and average assets, grouped by operating segment, are as follows:

(Canadian $ in millions)
---------------------------------------------------------------------------
For the three                                                        Total
 months ended            P&C     P&C                   Corporate     (GAAP
 July 31, 2011 (2)    Canada     U.S.   PCG   BMO CM  Services(1)    basis)
---------------------------------------------------------------------------
Net interest income    1,103     397    111      318        (237)    1,692
Non-interest revenue     424      93    506      519          40     1,582
---------------------------------------------------------------------------
Total Revenue          1,527     490    617      837        (197)    3,274
Provision for credit
 losses                  137      52      2       30         (47)      174
Amortization              35      28     10        7          51       131
Non-interest expense     753     270    451      451          55     1,980
---------------------------------------------------------------------------
Income before taxes
 and non-controlling
 interest in
 subsidiaries            602     140    154      349        (256)      989
Income taxes             170      48     34       70        (144)      178
Non-controlling
 interest in
 subsidiaries              -       -      -        -          18        18
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income               432      92    120      279        (130)      793
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets       154,539  39,175 16,671  217,208      13,656   441,249
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)         120   2,336    736      180           2     3,374
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the three                                                        Total
 months ended            P&C     P&C                   Corporate     (GAAP
 July 31, 2010 (2)    Canada     U.S.   PCG   BMO CM  Services(1)    basis)
---------------------------------------------------------------------------
Net interest income    1,064     278     92      353        (216)    1,571
Non-interest revenue     425      86    452      326          47     1,336
---------------------------------------------------------------------------
Total Revenue          1,489     364    544      679        (169)    2,907
Provision for credit
 losses                  129      31      1       66         (13)      214
Amortization              34      17      9        9          49       118
Non-interest expense     731     235    395      413           6     1,780
---------------------------------------------------------------------------
Income before taxes
 and non-controlling
 interest in
 subsidiaries            595      81    139      191        (211)      795
Income taxes             171      29     34       61        (188)      107
Non-controlling
 interest in
 subsidiaries              -       -      -        -          19        19
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income               424      52    105      130         (42)      669
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets       147,194  31,759 14,424  197,636       6,604   397,617
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)         121   1,026    364      114           2     1,627
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the nine                                                         Total
 months ended            P&C     P&C                   Corporate     (GAAP
 July 31, 2011 (2)    Canada     U.S.   PCG   BMO CM  Services(1)    basis)
---------------------------------------------------------------------------
Net interest income    3,270     974    322      951        (578)    4,939
Non-interest revenue   1,260     226  1,538    1,685         189     4,898
---------------------------------------------------------------------------
Total Revenue          4,530   1,200  1,860    2,636        (389)    9,837
Provision for credit
 losses                  409     124      6       90         (62)      567
Amortization             105      64     27       21         149       366
Non-interest expense   2,235     706  1,330    1,398         145     5,814
---------------------------------------------------------------------------
Income before taxes
 and non-controlling
 interest in
 subsidiaries          1,781     306    497    1,127        (621)    3,090
Income taxes             504     107    123      356        (423)      667
Non-controlling
 interest in
 subsidiaries              -       -      -        -          54        54
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income             1,277     199    374      771        (252)    2,369
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets       152,841  32,752 15,723  210,569      11,852   423,737
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)         120   2,336    736      180           2     3,374
---------------------------------------------------------------------------
---------------------------------------------------------------------------


For the nine                                                         Total
 months ended            P&C     P&C                   Corporate     (GAAP
 July 31, 2010 (2)    Canada     U.S.   PCG   BMO CM  Services(1)    basis)
---------------------------------------------------------------------------
Net interest income    3,073     809    266    1,094        (617)    4,625
Non-interest revenue   1,237     245  1,386    1,348         140     4,356
---------------------------------------------------------------------------
Total Revenue          4,310   1,054  1,652    2,442        (477)    8,981
Provision for credit
 losses                  370      93      5      198         130       796
Amortization             101      48     28       26         149       352
Non-interest expense   2,096     657  1,180    1,336         (54)    5,215
---------------------------------------------------------------------------
Income before taxes
 and non-controlling
 interest in
 subsidiaries          1,743     256    439      882        (702)    2,618
Income taxes             521      88    108      280        (506)      491
Non-controlling
 interest in
 subsidiaries              -       -      -        -          56        56
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income             1,222     168    331      602        (252)    2,071
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets       144,068  31,703 14,037  199,414       5,651   394,873
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)         121   1,026    364      114           2     1,627
---------------------------------------------------------------------------
---------------------------------------------------------------------------
(1) Corporate Services includes Technology and Operations.
(2) Operating groups report on a taxable equivalent basis - see Basis of
    Presentation section.

Prior periods have been restated to give effect to the current period's
organizational structure and presentation changes.


Our results and average assets, allocated by geographic region, are as
follows:



(Canadian $ in millions)
---------------------------------------------------------------------------
                                                                     Total
For the three months                          United        Other    (GAAP
 ended July 31, 2011               Canada     States    countries    basis)
---------------------------------------------------------------------------
Net interest income                 1,263        404           25    1,692
Non-interest revenue                1,185        322           75    1,582
---------------------------------------------------------------------------
Total Revenue                       2,448        726          100    3,274
Provision for credit losses            94         80            -      174
Amortization                           90         40            1      131
Non-interest expense                1,353        583           44    1,980
---------------------------------------------------------------------------
Income before taxes and
 non-controlling interest
 in subsidiaries                      911         23           55      989
Income taxes                          185        (11)           4      178
Non-controlling interest
 in subsidiaries                       13          5            -       18
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income                            713         29           51      793
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets                    279,657    140,807       20,785  441,249
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)                      452      2,901           21    3,374
---------------------------------------------------------------------------
---------------------------------------------------------------------------

                                                                     Total
For the three months                          United        Other    (GAAP
 ended July 31, 2010               Canada     States    countries    basis)
---------------------------------------------------------------------------
Net interest income                 1,198        346           27    1,571
Non-interest revenue                1,004        281           51    1,336
---------------------------------------------------------------------------
Total Revenue                       2,202        627           78    2,907
Provision for credit losses           110        104            -      214
Amortization                           88         29            1      118
Non-interest expense                1,270        467           43    1,780
---------------------------------------------------------------------------
Income before taxes and
 non-controlling interest
 in subsidiaries                      734         27           34      795
Income taxes                          102          8           (3)     107
Non-controlling interest
 in subsidiaries                       15          4            -       19
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income                            617         15           37      669
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets                    252,642    116,854       28,121  397,617
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)                      448      1,158           21    1,627
---------------------------------------------------------------------------
---------------------------------------------------------------------------

                                                                     Total
For the nine months                           United        Other    (GAAP
 ended July 31, 2011               Canada     States    countries    basis)
---------------------------------------------------------------------------
Net interest income                 3,770      1,092           77    4,939
Non-interest revenue                3,772        926          200    4,898
---------------------------------------------------------------------------
Total Revenue                       7,542      2,018          277    9,837
Provision for credit losses           279        289           (1)     567
Amortization                          266         97            3      366
Non-interest expense                4,109      1,559          146    5,814
---------------------------------------------------------------------------
Income before taxes and
 non-controlling interest
 in subsidiaries                    2,888         73          129    3,090
Income taxes                          650          5           12      667
Non-controlling interest
 in subsidiaries                       40         14            -       54
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income                          2,198         54          117    2,369
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets                    275,764    126,691       21,282  423,737
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)                      452      2,901           21    3,374
---------------------------------------------------------------------------
---------------------------------------------------------------------------

                                                                     Total
For the nine months                           United        Other    (GAAP
 ended July 31, 2010               Canada     States    countries    basis)
---------------------------------------------------------------------------
Net interest income                 3,521      1,012           92    4,625
Non-interest revenue                3,238        944          174    4,356
---------------------------------------------------------------------------
Total Revenue                       6,759      1,956          266    8,981
Provision for credit losses           387        417           (8)     796
Amortization                          264         85            3      352
Non-interest expense                3,747      1,341          127    5,215
---------------------------------------------------------------------------
Income before taxes and
 non-controlling interest
 in subsidiaries                    2,361        113          144    2,618
Income taxes                          462         26            3      491
Non-controlling interest
 in subsidiaries                       42         14            -       56
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Net Income                          1,857         73          141    2,071
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Average Assets                    256,020    111,248       27,605  394,873
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Goodwill (As At)                      448      1,158           21    1,627
---------------------------------------------------------------------------
---------------------------------------------------------------------------

Prior periods have been restated to give effect to the current period's organizational structure and presentation changes.

For further information:

 

Media Relations Contacts
Ralph Marranca, Toronto
416-867-3996
ralph.marranca@bmo.com

Ronald Monet, Montreal
514-877-1873
ronald.monet@bmo.com

Investor Relations Contacts
Viki Lazaris, Senior Vice-President
416-867-6656
viki.lazaris@bmo.com

Michael Chase, Director
416-867-5452
michael.chase@bmo.com

Andrew Chin, Senior Manager
416-867-7019
andrew.chin@bmo.com

Chief Financial Officer
Tom Flynn, Executive Vice-President and CFO
416-867-4689
tom.flynn@bmo.com

Corporate Secretary
Blair Morrison, Senior Vice-President,
Deputy General Counsel, Corporate Affairs and
Corporate Secretary
416-867-6785
corp.secretary@bmo.com