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News Releases

BMO Financial Group Reports Fourth Quarter and Fiscal 2021 Results

Fourth Quarter 2021 Earnings Release

BMO's 2021 audited annual consolidated financial statements and accompanying Management Discussion and Analysis (MD&A) are available online at www.bmo.com/investorrelations and at www.sedar.com .

Financial Results Highlights

Fourth Quarter 2021 Compared With Fourth Quarter 2020:

  • Net income of $2,159 million, an increase of 36%; adjusted net income1 of $2,226 million, an increase of 38%
  • Reported earnings per share (EPS)2 of $3.23, an increase of 36%; adjusted EPS1,2 of $3.33, an increase of 38%
  • Recovery of the provision for credit losses of $126 million, compared with a provision for credit losses of $432 million 
  • Return on equity (ROE) of 16.0%, an increase from 12.4%; adjusted ROE1 of 16.5%, an increase from 12.6%
  • Common Equity Tier 1 Ratio3 of 13.7%, an increase from 11.9%
  • Dividend of $1.33, an increase of $0.27 or 25%

Fiscal 2021 Compared With Fiscal 2020:

  • Net income of $7,754 million, an increase of 52%; adjusted net income1 of $8,651 million, an increase of 66%
  • Reported EPS2 of $11.58, an increase of 53%; adjusted EPS1,2 of $12.96, an increase of 68%
  • Provision for credit losses of $20 million, compared with $2,953 million
  • ROE of 14.9%, an increase from 10.1%; adjusted ROE1 of 16.7%, an increase from 10.3%

TORONTO, Dec. 3, 2021 /CNW/ - For the fourth quarter ended October 31, 2021, BMO Financial Group (TSX: BMO) (NYSE: BMO) recorded net income of $2,159 million or $3.23 per share on a reported basis, and net income of $2,226 million or $3.33 per share on an adjusted basis.

"We delivered another quarter of strong performance with positive operating leverage in each of our diversified businesses, contributing to strong earnings for fiscal 2021. This year, we significantly advanced our strategy to build a digitally-enabled, future-ready bank, underpinned by our Purpose and a winning culture. We've taken action to improve our competitive position through a disciplined approach to expense management, capital allocation and investment in future growth, while meaningfully improving our efficiency ratio and return on equity over the last several years," said Darryl White, Chief Executive Officer, BMO Financial Group.

"Strong, consistent financial performance enables us to continue to invest in improving the well-being of our employees, customers and communities. We continue to be recognized as a global leader in sustainability as one of only five Canadian companies included in the Dow Jones Sustainability World Index – a confirmation of the progress we're making on our bold commitments for a thriving economy, a sustainable future and an inclusive society. We will continue to act as a catalyst for positive change, including serving as our clients' lead partner in the transition to a net zero world."

"Looking ahead to 2022, we will continue to position BMO for growth with the ensuing economic recovery. We are making targeted investments in technology and talent to drive enhanced customer experiences and deliver market-leading advice to help them make real financial progress. Today we announced a 25% dividend increase and our intention to repurchase up to 22.5 million shares, reflecting the strength of our capital position and confidence in delivering sustained, long-term performance for our shareholders," concluded Mr. White.

Concurrent with the release of results, BMO announced a first quarter 2022 dividend of $1.33 per common share, an increase of $0.27 or 25% from the prior quarter and the prior year. The quarterly dividend of $1.33 per common share is equivalent to an annual dividend of $5.32 per common share.

The foregoing section contains forward-looking statements. Refer to the Caution Regarding Forward-Looking Statements.

(1)

Results and measures in this document are presented on a GAAP basis. They are also presented on an adjusted basis that excluded the impact of certain specified items from reported results. Adjusted results and measures are non-GAAP and are detailed for all reported periods in the Non-GAAP and Other Financial Measures section.

(2)

All Earnings Per Share (EPS) measures in this document refer to diluted EPS, unless specified otherwise. EPS is calculated using net income after deducting total dividends on preferred shares and distributions payable on other equity instruments.

(3)

The Common Equity Tier 1 (CET1) Ratio is disclosed in accordance with OSFI's Capital Adequacy Requirements (CAR) Guideline.



Note: All ratios and percentage changes in this document are based on unrounded numbers.

Fourth Quarter Performance Review

The order in which the impact on net income is discussed in this section, follows the order of revenue, expenses and provision for credit losses, regardless of their relative impact.

Adjusted results and ratios, and U.S. dollar amounts and ratios in this Fourth Quarter Performance Review section are on a non-GAAP basis and discussed in the Non-GAAP and Other Financial Measures section.

Reported and adjusted net income increased from the prior year, driven by revenue growth, an increase in expenses, and a recovery of the provision for credit losses. Net income increased across all operating groups. Adjusted results in the current quarter excluded expenses of $52 million ($62 million pre-tax) from the impact of divestitures related to the sale of our EMEA Asset Management business and the sale of our Private Banking business in Hong Kong and Singapore. Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior years. 

Canadian P&C
Reported net income was $921 million, an increase of $274 million or 42% and adjusted net income was $921 million, an increase of $273 million or 42% from the prior year. Results were driven by a 13% increase in revenue, with higher net interest income and non-interest revenue, higher expenses, and a recovery of the provision for credit losses compared with a provision in the prior year.

U.S. P&C
Reported net income was $512 million, an increase of $188 million or 58% from the prior year and adjusted net income was $518 million, an increase of $185 million or 55%.The impact of the weaker U.S. dollar reduced net income growth by 8%, revenue growth by 6% and expense growth by 5%.

On a U.S. dollar basis, reported net income was US$408 million, an increase of US$162 million or 66% from the prior year, and adjusted net income was US$412 million, an increase of US$158 million or 63%. Reported and adjusted results were driven by a 9% increase in revenue, with higher net interest income and non-interest revenue, higher expenses and a recovery of the provision for credit losses compared with a provision in the prior year.

BMO Wealth Management
Reported net income was $369 million, an increase of $49 million or 15% from the prior year and adjusted net income was $373 million, an increase of $45 million or 14%. Results were driven by higher revenue, partially offset by an increase in expenses. Traditional Wealth reported net income was $318 million, an increase of $65 million or 26% and adjusted net income was $322 million, an increase of $61 million or 24%, driven by higher revenue, primarily from growth in client assets, including stronger global markets, partially offset by higher expenses. Insurance net income was $51 million, a decrease from $67 million in the prior year, primarily due to prior-year benefits from changes in investments to improve asset-liability management.

BMO Capital Markets
Reported net income was $536 million, an increase of $157 million or 41% from the prior year, and adjusted net income was $541 million, an increase of $154 million or 40%. Reported and adjusted results were driven by continued strong revenue performance, with higher Investment and Corporate Banking revenue partially offset by lower Global Markets revenue, expenses relatively unchanged from the prior year and a recovery of credit losses compared with a provision in the prior year.

Corporate Services
Reported net loss was $179 million and adjusted net loss was $127 million, compared with a reported and adjusted net loss of $86 million in the prior year. Reported and adjusted results decreased due to lower revenue, driven by treasury-related activities, higher expenses, and the impact of a more favourable tax rate in the prior year.

Capital
BMO's Common Equity Tier 1 (CET1) Ratio was 13.7% as at October 31, 2021, an increase from 13.4% at the end of the third quarter of fiscal 2021, driven by retained earnings growth, partially offset by higher source currency risk-weighted assets.

Credit Quality
Total recovery of the provision for credit losses was $126 million, compared with a provision for credit losses of $432 million in the prior year. The total recovery of credit losses as a percentage of average net loans and acceptances ratio was 11 basis points, compared with a provision for credit losses ratio of 37 basis points in the prior year. The provision for credit losses on impaired loans was $84 million, a decrease of $255 million from $339 million in the prior year. The provision for credit losses on impaired loans as a percentage of average net loans and acceptances ratio was 7 basis points, compared with 29 basis points in the prior year. There was a $210 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $93 million provision in the prior year. The $210 million recovery in the current quarter largely reflected an improving economic outlook and positive credit migration, partially offset by growth in loan balances, while the $93 million provision in the prior year reflected a more severe adverse scenario, partially offset by an improving economic outlook and reduced balances.

Refer to the Accounting Policies and Critical Accounting Estimates section of BMO's 2021 Annual MD&A and Note 4 of our audited annual consolidated financial statements for further information on the allowance for credit losses as at October 31, 2021.

Supporting a Sustainable and Inclusive Recovery
At BMO, we have a long-standing commitment to support a thriving economy, a sustainable future and an inclusive society, and we are acting with purpose. In support of our customers, communities and employees, BMO recently:

  • Ranked among the most sustainable companies on the Dow Jones Sustainability Indices (DJSI) – one of only five companies in Canada included in the DJSI World Index, earning the highest score in Corporate Governance, Customer Relationship Management, Financial Inclusion, Environmental Reporting and Social Reporting.
  • Announced it is joining the United Nations-convened Net-Zero Banking Alliance as part of a global industry-led initiative to accelerate and support efforts to address climate change.
  • Helped clients achieve environmental, social and governance (ESG) goals with sustainability-linked loans, as part of its commitment to deploy $300 billion in sustainable lending and underwriting to companies pursuing sustainable outcomes.
  • As part of BMO's five-year, $5 billion EMpowerTM commitment, launched the new BMO Women in Business Credit Program through BMO Harris Bank and expanded our Black and Latinx Small Business Program across our U.S. footprint, increasing access to capital, educational resources and meaningful partnerships.
  • Released Wîcihitowin ᐑᒋᐦᐃᑐᐏᐣ, BMO's first annual Indigenous Partnerships and Progress report, highlighting the partnership with Indigenous communities and BMO's Indigenous Advisory Council to further education, employment and economic empowerment.
  • Was recognized by Forbes magazine as BMO Harris Bank was named one of the World's Best Employers for 2021.

Regulatory Filings
BMO's continuous disclosure materials, including interim filings, annual Management's Discussion and Analysis and audited annual 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 U.S. Securities and Exchange Commission's website at www.sec.gov. Information contained in or otherwise accessible through our website (www.bmo.com), or any third party websites mentioned herein, does not form part of this document.

Caution
The extent to which the COVID-19 pandemic impacts BMO's business, results of operations, reputation, financial performance and condition, including the potential for credit, counterparty and mark-to-market losses, its credit ratings and regulatory capital and liquidity ratios, as well as impacts to its customers and competitors will depend on future developments. Such developments are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by third parties, governments, and governmental and regulatory authorities, which could vary by country and region. The COVID-19 pandemic may also impact the bank's ability to achieve, or the timing to achieve, certain previously announced targets, goals and objectives.

For additional information, refer to the Risks That May Affect Future Results section of BMO's 2021 Annual MD&A.


 

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.

 


Financial Review

Management's Discussion and Analysis (MD&A) commentary is as at December 3, 2021. The material that precedes this section comprises part of this MD&A. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended October 31, 2021, included in this document, as well as the audited annual consolidated financial statements for the year ended October 31, 2021, and the MD&A for fiscal 2021, contained in BMO's 2021 Annual Report.

BMO's 2021 Annual MD&A includes a comprehensive discussion of its businesses, strategies and objectives, and 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.

Bank of Montreal's management, under the supervision of the CEO and CFO, has evaluated the effectiveness, as at October 31, 2021, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the U.S. Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended October 31, 2021, which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.

As in prior quarters, Bank of Montreal's Audit and Conduct Review Committee reviewed this document and Bank of Montreal's Board of Directors approved the document prior to its release.

Caution Regarding Forward-Looking Statements

As noted in the following Caution Regarding Forward-Looking Statements, all forward-looking statements and information, by their nature, are subject to inherent risks and uncertainties, both general and specific, which may cause actual results to differ materially from the expectations expressed in any forward-looking statement. The Enterprise-Wide Risk Management section of BMO's 2021 Annual MD&A describes a number of risks, including credit and counterparty, market, insurance, liquidity and funding, operational non-financial, legal and regulatory, strategic, environmental and social, and reputation risk. Should our risk management framework prove ineffective, there could be a material adverse impact on our financial position and results.

Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2022 and beyond, our strategies or future actions, our targets and commitments (including with respect to net zero emissions), expectations for our financial condition, capital position or share price, the regulatory environment in which we operate, the results of, or outlook for, our operations or for the Canadian, U.S. and international economies, and the COVID-19 pandemic, and include statements made by our management. Forward-looking statements are typically identified by words such as "will", "would", "should", "believe", "expect", "anticipate", "project", "intend", "estimate", "plan", "goal", "commit", "target", "may", "might", "schedule", "forecast" and "could" or negative or grammatical variations thereof.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. 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. The uncertainty created by the COVID-19 pandemic has heightened this risk, given the increased challenge in making assumptions, 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 – many of which are beyond our control and the effects of which can be difficult to predict – 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, including labour challenges; the severity, duration and spread of the COVID-19 pandemic, and possibly other outbreaks of disease or illness, and its impact on local, national or international economies, as well as its heightening of certain risks that may affect our future results; information, privacy and cyber security, including the threat of data breaches, hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption; benchmark interest rate reforms; technological changes and technology resiliency; political conditions, including changes relating to, or affecting, economic or trade matters; climate change and other environmental and social risk; the Canadian housing market and consumer leverage; inflationary pressures; global supply-chain disruptions; changes in monetary, fiscal, or economic policy; changes in laws, including tax legislation and interpretation, or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; weak, volatile or illiquid capital or credit markets; the level of competition in the geographic and business areas in which we operate; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to us; our ability to execute our strategic plans and to complete proposed acquisitions or dispositions, including obtaining regulatory approvals; critical accounting estimates and the effects of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; changes to our credit ratings; global capital markets activities; the possible effects on our business of war or terrorist activities; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please refer to the discussion in the Risks That May Affect Future Results section, and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational non-financial, legal and regulatory, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section of BMO's 2021 Annual MD&A, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do 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 shareholders and analysts in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the Economic Developments and Outlook section of BMO's 2021 Annual MD&A, as well as in the Allowance for Credit Losses section of BMO's 2021 Annual MD&A. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, we primarily consider historical economic data, past relationships between economic and financial variables, changes in government policies, and the risks to the domestic and global economy.

Financial Highlights

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Summary Income Statement (1)






Net interest income

3,756

3,521

3,530

14,310

13,971

Non-interest revenue

2,817

4,041

2,456

12,876

11,215

Revenue

6,573

7,562

5,986

27,186

25,186

Insurance claims, commissions and changes in policy benefit liabilities (CCPB)

97

984

-

1,399

1,708

Revenue, net of CCPB (2)

6,476

6,578

5,986

25,787

23,478

Provision for credit losses on impaired loans

84

71

339

525

1,522

Provision for (recovery of) credit losses on performing loans

(210)

(141)

93

(505)

1,431

Total provision for (recovery of) credit losses

(126)

(70)

432

20

2,953

Non-interest expense

3,803

3,684

3,548

15,509

14,177

Provision for income taxes

640

689

422

2,504

1,251

Net income attributable to equity holders of the bank

2,159

2,275

1,584

7,754

5,097

Adjusted net income

2,226

2,292

1,610

8,651

5,201

Common Share Data ($, except as noted) (1)






Basic Earnings per share

3.24

3.42

2.37

11.60

7.56

Diluted earnings per share

3.23

3.41

2.37

11.58

7.55

Adjusted diluted earnings per share

3.33

3.44

2.41

12.96

7.71

Dividends declared per share

1.06

1.06

1.06

4.24

4.24

Book value per share

80.18

80.00

77.40

80.18

77.40

Closing share price

134.37

123.53

79.33

134.37

79.33

Number of common shares outstanding (in millions)






End of period

648.1

648.1

645.9

648.1

645.9

Average basic

648.2

647.2

645.3

647.2

641.4

Average diluted

650.1

649.0

645.8

648.7

642.1

Market capitalization ($ billions)

87.1

80.1

51.2

87.1

51.2

Dividend yield (%)

3.2

3.4

5.3

3.2

5.3

Dividend payout ratio (%)

32.7

31.0

44.6

36.5

56.1

Adjusted dividend payout ratio (%)

31.7

30.7

43.9

32.6

54.9

Financial Measures and Ratios (%) (1)






Return on equity

16.0

17.5

12.4

14.9

10.1

Adjusted return on equity

16.5

17.6

12.6

16.7

10.3

Return on tangible common equity

18.0

19.8

14.5

17.0

11.9

Adjusted return on tangible common equity

18.5

19.8

14.5

18.9

11.9

Efficiency ratio, net of CCPB

58.7

56.0

59.3

60.1

60.4

Adjusted efficiency ratio, net of CCPB

57.4

55.7

58.7

56.5

59.8

Operating leverage, net of CCPB

1.0

2.6

15.1

0.4

6.2

Adjusted operating leverage, net of CCPB

2.4

2.1

2.1

6.1

2.7

Net interest margin on average earning assets

1.62

1.57

1.60

1.59

1.64

Effective tax rate

22.9

23.2

21.1

24.4

19.7

Adjusted effective tax rate

22.7

23.2

21.1

22.7

19.8

Total PCL-to-average net loans and acceptances (annualized)

(0.11)

(0.06)

0.37

0.00

0.63

PCL on impaired loans-to-average net loans and acceptances (annualized)

0.07

0.06

0.29

0.11

0.33

Liquidity coverage ratio (LCR) (3)

125

125

131

125

131

Net stable funding ratio (NSFR) (3)

118

118

na

118

na

Balance Sheet and other information (as at, $ millions, except as noted)






Assets

988,175

971,358

949,261

988,175

949,261

Average earning assets

918,255

887,231

876,328

897,302

853,336

Gross loans and acceptances

474,847

472,703

464,216

474,847

464,216

Net loans and acceptances

472,283

469,879

460,913

472,283

460,913

Deposits

685,631

680,553

659,034

685,631

659,034

Common shareholders' equity

51,965

51,848

49,995

51,965

49,995

Total risk-weighted assets (4)

325,433

322,529

336,607

325,433

336,607

Assets under administration

634,713

658,612

653,319

634,713

653,319

Assets under management

523,270

526,542

482,554

523,270

482,554

Capital ratios (%) (4)






Common Equity Tier 1 Ratio

13.7

13.4

11.9

13.7

11.9

Tier 1 Capital Ratio

15.4

15.1

13.6

15.4

13.6

Total Capital Ratio

17.6

17.4

16.2

17.6

16.2

Leverage Ratio

5.1

5.0

4.8

5.1

4.8

Foreign Exchange Rates ($)






As at Canadian/U.S. dollar

1.2376

1.2479

1.3319

1.2376

1.3319

Average Canadian/U.S. dollar

1.2546

1.2316

1.3217

1.2554

1.3441

(1)

Adjusted results remove certain items from reported results and are used to calculate our adjusted measures as presented in the above table. Management assesses performance on a reported basis and an adjusted basis, and considers both to be useful. Revenue, net of CCPB, and adjusted results, measures and ratios in this table are non-GAAP. For further information, refer to the Non-GAAP and Other Financial Measures section and for a composition of non-GAAP amounts, measures and ratios, as well as supplementary financial measures, refer to the Glossary of Financial Terms in BMO's 2021 Annual Report.

(2)

We present revenue, efficiency ratio and operating leverage on a basis that is net of CCPB, which reduces the variability in insurance revenue from changes in fair value that are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in CCPB.

(3)

LCR and NSFR are disclosed in accordance with OSFI's Liquidity Adequacy Requirements (LAR) Guideline, as applicable.

(4)

Capital ratios and risk-weighted assets are disclosed in accordance with OSFI's Capital Adequacy Requirements (CAR) Guideline, as applicable.

 na – not applicable

Non-GAAP and Other Financial Measures

Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. We use a number of financial measures to assess our performance, as well as the performance of our operating businesses, including measures and ratios that are presented on a non-GAAP basis, as described below. We believe that these non-GAAP amounts, measures and ratios, read together with our GAAP results, provide readers with a better understanding of how management assesses results.

Non-GAAP amounts, measures and ratios do not have standardized meanings 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.

Certain information contained in BMO's Management's Discussion and Analysis as at October 31, 2021 (2021 Annual MD&A) is incorporated by reference into this document. Further information regarding the composition of our non-GAAP and other financial measures, including supplementary financial measures, is provided in the Glossary of Financial Terms in BMO's 2021 Annual MD&A and available online at www.bmo.com/investorrelations and at www.sedar.com.

Our non-GAAP measures broadly fall into the following categories:

Adjusted measures and ratios
Management considers both reported and adjusted results and measures useful in assessing underlying ongoing business performance. Adjusted results and measures remove certain specified items from revenue, non-interest expense and income taxes, as detailed in the following table. Adjusted results and measures presented in this document are non-GAAP. Presenting results on both a reported basis and an adjusted basis permits readers to assess the impact of certain items on results for the periods presented, and to better assess results excluding those items that may not be reflective of ongoing business performance. As such, the presentation may facilitate readers' analysis of trends. Except as otherwise noted, management's discussion of changes in reported results in this document applies equally to changes in the corresponding adjusted results.

Measures net of insurance claims, commissions and changes in policy benefit liabilities (CCPB)
We also present reported and adjusted revenue on a basis that is net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and our efficiency ratio and operating leverage are calculated on a similar basis, as reconciled in the Revenue section. Measures and ratios presented on a basis net of CCPB are non-GAAP. Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets, caused by movements in interest rates and equity markets. The investments that support policy benefit liabilities are predominantly fixed income assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in CCPB. The presentation and discussion of revenue, efficiency ratios and operating leverage on a net basis reduces this variability, which allows for a better assessment of operating results. For more information refer to the Insurance Claims, Commissions and Changes in Policy Benefit Liabilities section.

Presenting results on a taxable equivalent basis (teb)
We analyze consolidated revenue on a reported basis. In addition, we analyze revenue on a taxable equivalent basis (teb) at the operating group level, consistent with the Canadian peer group. Revenue and the provision for income taxes in BMO Capital Markets and U.S. P&C are increased on tax-exempt securities to an equivalent pre-tax basis. These adjustments are offset in Corporate Services. Presenting results on a teb basis reflects how our operating groups manage their business and is useful to facilitate comparisons of income between taxable and tax-exempt sources. The effective tax rate is also analyzed on a teb basis for consistency of approach, with the offset to operating segment adjustments recorded in Corporate Services.

Tangible common equity and return on tangible common equity
Tangible common equity is calculated as common shareholders' equity less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities. Return on tangible common equity is commonly used in the North American banking industry and is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed organically.

Presenting results on a U.S. dollar basis
Results and measures that exclude the impact of Canadian/U.S. dollar exchange rate movements on BMO's U.S. segment are non-GAAP. Refer to the Foreign Exchange section for a discussion of the effects of changes in exchange rates on our results.

We present our U.S. P&C business results, as well as select U.S. segment information for the bank, BMO Wealth Management, BMO Capital Markets and Corporate Services, on a U.S. dollar basis. Presenting these results on a U.S. dollar basis is useful in assessing the underlying performance without the variability caused by changes in foreign exchange rates.

Non-GAAP and Other Financial Measures

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Reported Results






Revenue

6,573

7,562

5,986

27,186

25,186

Insurance claims, commissions and changes in policy benefit liabilities (CCPB)

(97)

(984)

-

(1,399)

(1,708)

Revenue, net of CCPB

6,476

6,578

5,986

25,787

23,478

Total provision for (recovery of) credit losses

126

70

(432)

(20)

(2,953)

Non-interest expense

(3,803)

(3,684)

(3,548)

(15,509)

(14,177)

Income before income taxes

2,799

2,964

2,006

10,258

6,348

Provision for income taxes

(640)

(689)

(422)

(2,504)

(1,251)

Net income

2,159

2,275

1,584

7,754

5,097

Diluted EPS ($)

3.23

3.41

2.37

11.58

7.55

Adjusting Items Impacting Revenue (Pre-tax)






Impact of divestitures (1)

-

-

-

29

-

Adjusting Items Impacting Non-Interest Expense (Pre-tax)






Acquisition integration costs (2)

(1)

(3)

(3)

(9)

(14)

Amortization of acquisition-related intangible assets (3)

(20)

(19)

(30)

(88)

(121)

Impact of divestitures (1)

(62)

(24)

-

(886)

-

Restructuring (costs) reversals (4)

-

24

-

24

-

Impact of adjusting items on non-interest expense (pre-tax)

(83)

(22)

(33)

(959)

(135)

Impact of adjusting items on reported pre-tax income

(83)

(22)

(33)

(930)

(135)

Adjusting Items Impacting Revenue (After-tax)






Impact of divestitures (1)

-

-

-

22

-

Adjusting Items Impacting Non-Interest Expense (After-tax)






Acquisition integration costs (2)

(1)

(2)

(3)

(7)

(11)

Amortization of acquisition-related intangible assets (3)

(14)

(15)

(23)

(66)

(93)

Impact of divestitures (1)

(52)

(18)

-

(864)

-

Restructuring (costs) reversals (4)

-

18

-

18

-

Impact of adjusting items on non-interest expense (after-tax)

(67)

(17)

(26)

(919)

(104)

Impact of adjusting items on reported net income (after-tax)

(67)

(17)

(26)

(897)

(104)

Impact on diluted EPS ($)

(0.10)

(0.03)

(0.04)

(1.38)

(0.16)

Adjusted Results






Revenue

6,573

7,562

5,986

27,157

25,186

Insurance claims, commissions and changes in policy benefit liabilities (CCPB)

(97)

(984)

-

(1,399)

(1,708)

Revenue, net of CCPB

6,476

6,578

5,986

25,758

23,478

Total provision for credit losses

126

70

(432)

(20)

(2,953)

Non-interest expense

(3,720)

(3,662)

(3,515)

(14,550)

(14,042)

Income before income taxes

2,882

2,986

2,039

11,188

6,483

Provision for income taxes

(656)

(694)

(429)

(2,537)

(1,282)

Net income

2,226

2,292

1,610

8,651

5,201

Diluted EPS ($)

3.33

3.44

2.41

12.96

7.71

(1)

Q2-2021 reported net income included the impact of divestitures, comprising a $747 million pre-tax and after-tax write-down of goodwill related to the sale of our EMEA Asset Management business recorded in non-interest expense, a $22 million ($29 million pre-tax) net gain on the sale of our Private Banking business in Hong Kong and Singapore recorded in non-interest revenue, and $47 million ($53 million pre-tax) of divestiture-related costs for both transactions recorded in non-interest expense. Q3-2021 reported net income included the impact of divestitures related to these transactions of $18 million after-tax ($24 million pre-tax). Q4-2021 reported net income included the impact of divestitures related to these transactions of $52 million ($62 million pre-tax). These amounts were recorded in non-interest expense in Corporate Services.

(2)

Acquisition integration costs related to KGS-Alpha and Clearpool are recorded in non-interest expense in BMO Capital Markets. Acquisition integration costs are $1 million ($1 million after-tax) in Q4-2021 and $3 million ($2 million after-tax) in Q3-2021; and $9 million ($7 million after-tax) in fiscal 2021 and $14 million ($11 million after-tax) in fiscal 2020.

(3)

Amortization of acquisition-related intangible assets is recorded in non-interest expense in the related operating group and was $20 million ($14 million after-tax) in Q4-2021 and $19 million ($15 million after-tax) in Q3-2021; and $88 million ($66 million after-tax) in fiscal 2021 and $121 million ($93 million after-tax) in fiscal 2020.

(4)

Q3-2021 included a partial reversal of a previously recorded restructuring charge related to severance of $18 million ($24 million pre-tax). The restructuring reversal was recorded in non-interest expense in Corporate Services.


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

Summary of Reported and Adjusted Results by Operating Group





BMO Wealth

       BMO Capital

Corporate


U.S. Segment (1)

(Canadian $ in millions)

    Canadian P&C

U.S. P&C

Total P&C

Management

            Markets

Services

Total Bank

(US $ in millions)

Q4-2021









Reported net income (loss)

921

512

1,433

369

536

(179)

2,159

618

Acquisition integration costs (2)

-

-

-

-

1

-

1

2

Amortization of acquisition-related intangible assets (3)

-

6

6

4

4

-

14

9

Impact of divestitures (4)

-

-

-

-

-

52

52

4

Adjusted net income (loss)

921

518

1,439

373

541

(127)

2,226

633

Q3-2021









Reported net income (loss)

815

553

1,368

401

558

(52)

2,275

707

Acquisition integration costs (2)

-

-

-

-

2

-

2

1

Amortization of acquisition-related intangible assets (3)

-

6

6

5

4

-

15

9

Impact of divestitures (4)

-

-

-

-

-

18

18

3

Restructuring costs (reversals) (5)

-

-

-

-

-

(18)

(18)

(13)

Adjusted net income (loss)

815

559

1,374

406

564

(52)

2,292

707

Q4-2020









Reported net income (loss)

647

324

971

320

379

(86)

1,584

337

Acquisition integration costs (2)

-

-

-

-

3

-

3

2

Amortization of acquisition-related intangible assets (3)

1

9

10

8

5

-

23

13

Adjusted net income (loss)

648

333

981

328

387

(86)

1,610

352

Fiscal 2021









Reported net income (loss)

3,237

2,189

5,426

1,474

2,140

(1,286)

7,754

2,593

Acquisition integration costs (2)

-

-

-

-

7

-

7

6

Amortization of acquisition-related intangible assets (3)

1

24

25

24

17

-

66

37

Impact of divestitures (4)

-

-

-

-

-

842

842

27

Restructuring costs (reversals) (5)

-

-

-

-

-

(18)

(18)

(13)

Adjusted net income (loss)

3,238

2,213

5,451

1,498

2,164

(462)

8,651

2,650

Fiscal 2020









Reported net income (loss)

2,027

1,277

3,304

1,096

1,087

(390)

5,097

1,163

Acquisition integration costs (2)

-

-

-

-

11

-

11

8

Amortization of acquisition-related intangible assets (3)

2

39

41

34

18

-

93

49

Adjusted net income (loss)

2,029

1,316

3,345

1,130

1,116

(390)

5,201

1,220

(1)

U.S. segment results presented in U.S. dollars are non-GAAP amounts.

(2)

KGS-Alpha and Clearpool pre-tax acquisition integration costs of $1 million in Q4-2021 and $3 million in both Q3-2021 and Q4-2020; and $9 million in fiscal 2021 and $14 million in fiscal 2020 are recorded in non-interest expense in BMO Capital Markets.

(3)

Amortization of acquisition-related intangible assets is recorded in non-interest expense in the related operating group. Canadian P&C pre-tax amounts of $nil in Q4-2021 and $1 million in both Q3-2021 and Q4-2020; $2 million in both fiscal 2021 and fiscal 2020. U.S. P&C pre-tax amounts of $9 million in Q4-2021, $8 million in Q3-2021, and $13 million in Q4-2020; $33 million in fiscal 2021 and $53 million in fiscal 2020. BMO Wealth Management pre-tax amounts of $6 million in Q4-2021, $5 million in Q3-2021, and $10 million in Q4-2020; $31 million in fiscal 2021 and $43 million in fiscal 2020. BMO Capital Markets pre-tax amounts of $5 million in both Q4-2021 and Q3-2021, and $6 million in Q4-2020; $22 million in fiscal 2021 and $23 million in fiscal 2020.

(4)

Q2-2021 reported net income included the impact of divestitures, comprising a $747 million pre-tax and after-tax write-down of goodwill related to the sale of our EMEA Asset Management business recorded in non-interest expense, a $22 million ($29 million pre-tax) net gain on the sale of our Private Banking business in Hong Kong and Singapore recorded in non-interest revenue, and $47 million ($53 million pre-tax) of divestiture-related costs for both transactions recorded in non-interest expense. Q3-2021 reported net income included the impact of divestitures related to these transactions of $18 million after-tax ($24 million pre-tax). Q4-2021 reported net income included the impact of divestitures related to these transactions of $52 million ($62 million pre-tax). These amounts were recorded in non-interest expense in Corporate Services.

(5)

Q3-2021 and fiscal 2021 reported income included a partial reversal of a previously recorded restructuring charge related to severance of $18 million ($24 million pre-tax). The restructuring reversal was recorded in non-interest expense in Corporate Services.

Net Revenue, Efficiency Ratio and Operating Leverage

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Reported






Revenue

6,573

7,562

5,986

27,186

25,186

CCPB

97

984

-

1,399

1,708

Revenue, net of CCPB

6,476

6,578

5,986

25,787

23,478

Non-interest expense

3,803

3,684

3,548

15,509

14,177

Efficiency ratio (%)

57.9

48.7

59.3

57.0

56.3

Efficiency ratio, net of CCPB (%)

58.7

56.0

59.3

60.1

60.4

Revenue growth (%)

9.8

5.2

(1.7)

7.9

(1.2)

Revenue growth, net of CCPB (%)

8.2

9.6

4.1

9.8

3.1

Non-interest expense growth (%)

7.2

7.0

(11.0)

9.4

(3.1)

Operating Leverage (%)

2.6

(1.8)

9.3

(1.5)

1.9

Operating Leverage, net of CCPB (%)

1.0

2.6

15.1

0.4

6.2

Adjusted (1)






Revenue

6,573

7,562

5,986

27,157

25,186

Impact of adjusting items on revenue

-

-

-

(29)

-

CCPB

97

984

-

1,399

1,708

Revenue, net of CCPB

6,476

6,578

5,986

25,758

23,478

Impact of adjusting items on non-interest expense

(83)

(22)

(33)

(959)

(135)

Non-interest expense

3,720

3,662

3,515

14,550

14,042

Efficiency ratio (%)

56.6

48.4

58.7

53.6

55.8

Efficiency ratio, net of CCPB (%)

57.4

55.7

58.7

56.5

59.8

Revenue growth, net of CCPB (%)

8.2

9.6

3.6

9.7

3.0

Non-interest expense growth (%)

5.8

7.5

1.5

3.6

0.3

Operating Leverage, net of CCPB (%)

2.4

2.1

2.1

6.1

2.7

(1)      Refer to footnotes (1) to (4) in the Non-GAAP and Other Financial Measures table for adjusting items.

Return on Equity and Return on Tangible Common Equity

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Reported net income

2,159

2,275

1,584

7,754

5,097

Dividends on preferred shares and distributions on other equity instruments

(59)

(61)

(52)

(244)

(247)

Net income available to common shareholders (A)

2,100

2,214

1,532

7,510

4,850

After-tax amortization of acquisition-related intangible assets

14

15

23

66

93

Net income available to common shareholders after adjusting for amortization of acquisition-related intangible assets (B)

2,114

2,229

1,555

7,576

4,943

After-tax impact of other adjusting items (1)

53

2

3

831

11

Adjusted net income available to common shareholders (C)

2,167

2,231

1,558

8,407

4,954

Average common shareholders' equity (D) (2)

52,113

50,208

49,320

50,451

48,235

Return on equity (%) (= A/D)

16.0

17.5

12.4

14.9

10.1

Adjusted return on equity (%) (= C/D)

16.5

17.6

12.6

16.7

10.3

Average tangible common equity (E)

46,580

44,720

42,635

44,505

41,484

Return on tangible common equity (%) (= B/E)

18.0

19.8

14.5

17.0

11.9

Adjusted return on tangible common equity (%) (= C/E)

18.5

19.8

14.5

18.9

11.9

(1)

Refer to footnotes (1) to (4) in the Non-GAAP and Other Financial Measures table above.

(2)

Common shareholders' equity (D above) adjusted for goodwill of $5,455 million in Q4-2021, $5,393 million in Q3-2021 and $6,509 million in Q4-2020, and $5,836 million in fiscal 2021 ($6,530 million in fiscal 2020); and acquisition-related intangible assets of $349 million in Q4-2021, $367 million in Q3-2021 and $448 million in Q4-2020, and $381 million in fiscal 2021 ($495 million in fiscal 2020); net of related deferred tax liabilities of $271 million in Q4-2021, $272 million in Q3-2021 and $272 million in Q4-2020, and 271 million in fiscal 2021 ($274 million in fiscal 2020).

Capital is allocated to the operating segments based on the amount of regulatory capital required to support business activities. Unallocated capital is reported in Corporate Services. Capital allocation methodologies are reviewed annually.

Return on Equity by Operating Segment


Q4-2021


Q3-2021

Q4-2020





 BMO Wealth

BMO Capital

Corporate





(Canadian $ in millions, except as noted)

Canadian P&C

    U.S. P&C

  Total P&C

Management

    Markets

Services

Total Bank


Total Bank

Total Bank

Reported











Net income available to common shareholders

911

502

1,413

367

526

(206)

2,100


2,214

1,532

Total average common equity

11,162

13,391

24,553

5,640

10,782

11,138

52,113


50,208

49,320

Return on equity (%)

32.4

14.9

22.8

25.8

19.4

na

16.0


17.5

12.4

Adjusted











Net income available to common shareholders

911

508

1,419

371

531

(154)

2,167


2,231

1,558

Total average common equity

11,162

13,391

24,553

5,640

10,782

11,138

52,113


50,208

49,320

Return on equity (%)

32.4

15.0

22.9

26.1

19.6

na

16.5


17.6

12.6


Fiscal 2021



Fiscal 2020





 BMO Wealth

BMO Capital

Corporate





(Canadian $ in millions, except as noted)

Canadian P&C

    U.S. P&C

  Total P&C

Management

    Markets

Services

Total Bank



Total Bank

Reported











Net income available to common shareholders

3,195

2,150

5,345

1,466

2,101

(1,402)

7,510



4,850

Total average common equity

11,147

13,522

24,669

5,899

10,913

8,970

50,451



48,235

Return on equity (%)

28.7

15.9

21.7

24.9

19.2

na

14.9



10.1

Adjusted












Net income available to common shareholders

3,196

2,174

5,370

1,490

2,125

(578)

8,407



4,954

Total average common equity

11,147

13,522

24,669

5,899

10,913

8,970

50,451



48,235

Return on equity (%)

28.7

16.1

21.8

25.3

19.5

na

16.7



10.3













Foreign Exchange

The Canadian dollar equivalents of BMO's U.S. segment results that are denominated in U.S. dollars decreased relative to 2020 due to changes in the Canadian/U.S. dollar exchange rate. The table below indicates the relevant average Canadian/U.S. dollar exchange rates and the impact of changes in those rates on BMO's U.S. segment results. References in this document to the impact of the U.S. dollar do not include U.S. dollar-denominated amounts recorded outside of BMO's U.S. segment.

Economically, our U.S. dollar income stream was not hedged against the risk of changes in foreign exchange rates during 2021 and 2020. We regularly determine whether to enter into hedging transactions in order to mitigate the impact of foreign exchange rate movements on our net income. Changes in exchange rates will affect future results measured in Canadian dollars, and the impact on those results is a function of the periods in which revenue, expenses, provisions for (recoveries of) credit losses and income taxes arise.

Refer to the Enterprise-Wide Capital Management section of BMO's 2021 Annual MD&A for a discussion of the impact that changes in foreign exchange rates can have on BMO's capital position.

Effects of Changes in Exchange Rates on BMO's U.S. Segment Reported and Adjusted Results


Q4-2021

(Canadian $ in millions, except as noted)

vs. Q4-2020

vs. Q3-2021

Canadian/U.S. dollar exchange rate (average)



Current period

1.2546

1.2546

Prior period

1.3217

1.2316

Effects on U.S. segment reported results



Increased (Decreased) net interest income

(71)

26

Increased (Decreased) non-interest revenue

(37)

17

Increased (Decreased) revenues

(108)

43

Decreased (Increased) provision for credit losses

13

2

Decreased (Increased) expenses

68

(24)

Decreased (Increased) income taxes

4

(5)

Increased (Decreased) reported net income

(23)

16

Impact on earnings per share ($)

(0.03)

0.02

Effects on U.S. segment adjusted results



Increased (Decreased) net interest income

(71)

26

Increased (Decreased) non-interest revenue

(37)

17

Increased (Decreased) revenues

(108)

43

Decreased (Increased) provision for credit losses

13

2

Decreased (Increased) expenses

67

(24)

Decreased (Increased) income taxes

4

(5)

Increased (Decreased) adjusted net income

(24)

16

Impact on adjusted earnings per share ($)

(0.04)

0.02

Adjusted results in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

Net Income

Q4 2021 vs. Q4 2020

Reported net income was $2,159 million, an increase of $575 million or 36% from the prior year, and adjusted net income was $2,226 million, an increase of $616 million or 38%. Adjusted results in the current quarter excluded expenses of $52 million ($62 million pre-tax) from the impact of divestitures related to the sale of our EMEA Asset Management business and the sale of our Private Banking business in Hong Kong and Singapore. Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior years. Reported EPS was $3.23, an increase of $0.86 from the prior year, and adjusted EPS was $3.33, an increase of $0.92.

Results were driven by strong revenue growth and the impact of lower provisions for credit losses, partially offset by an increase in expenses. All operating groups recorded higher net income, while Corporate Services recorded a higher net loss.

Q4 2021 vs. Q3 2021

Reported net income was $2,159 million, a decrease of $116 million or 5% from the prior quarter, and adjusted net income was $2,226 million, a decrease of $66 million or 3%. Adjusted results excluded the impact of divestitures of $52 million ($62 million pre-tax) in the current quarter and $18 million ($24 million pre-tax) in the prior quarter. Adjusted results in the prior quarter excluded a partial reversal of previously recorded restructuring charges related to severance of $18 million ($24 million pre-tax). Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior quarters. Reported EPS decreased $0.18 or 5% from the prior quarter, and adjusted EPS decreased $0.11 or 3%.

Results were primarily driven by lower revenue and an increase in expenses, partially offset by the impact of a larger recovery of the provision for credit losses. Net income increased in Canadian P&C and was partially offset by decreases in U.S. P&C, BMO Wealth Management and BMO Capital Markets. Corporate Services recorded a higher net loss.

For further information on non-GAAP amounts, measures and ratios in this Net Income section, refer to the Non-GAAP and Other Financial Measures section.

Revenue

Q4 2021 vs. Q4 2020

Reported revenue was $6,573 million, an increase of $587 million or 10% from the prior year. On a basis that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue (net revenue), revenue was $6,476 million, an increase of $490 million or 8% from the prior year.

Revenue increased in Canadian P&C due to higher net interest income and higher non-interest revenue, in BMO Wealth Management, largely from growth in client assets, including stronger global markets, partially offset by lower insurance revenue, in BMO Capital Markets due to higher Investment and Corporate Banking revenue, partially offset by lower Global Markets revenue, and in U.S. P&C due to higher net interest income and higher non-interest revenue. Corporate Services revenue decreased from the prior year. The impact of the weaker U.S. dollar reduced total revenue by 2%.

Net interest income was $3,756 million, an increase of $226 million from the prior year. Non-trading net interest income was $3,217 million, an increase of $199 million or 7%, primarily driven by higher net interest income in Canadian P&C. Higher source currency net interest income in U.S. P&C was partially offset by the impact of the weaker U.S. dollar. Trading-related net interest income was $539 million, an increase of $27 million or 5%.

Average earning assets were $918.3 billion, an increase of $41.9 billion or 5%, primarily due to loan growth, higher cash and higher securities balances, partially offset by the impact of the weaker U.S. dollar.

BMO's overall net interest margin of 1.62% increased 2 basis points from the prior year. On a basis that excludes trading-related interest income and earning assets, net interest margin of 1.66% increased 6 basis points, primarily driven by higher margins in our P&C businesses and lower balances of low-yielding assets in BMO Capital Markets.

Non-interest revenue, net of CCPB, was $2,720 million, an increase of $264 million or 11% from the prior year, with increases across most categories, including higher securities gains, other than trading, and higher revenue from underwriting and advisory fees, mutual funds, investment management and custodial fees and card fees, partially offset by lower trading revenue and the impact of the weaker U.S. dollar.

Gross insurance revenue increased $80 million from the prior year, primarily due to changes in the fair value of investments and business growth. Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets caused by movements in interest rates and equity markets. The investments that support policy benefit liabilities are predominantly fixed income and equity assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. The impact of these fair value changes was largely offset by changes in policy benefit liabilities, which are discussed in the Insurance Claims, Commissions and Changes in Policy Benefits section.

Q4 2021 vs. Q3 2021

Revenue was $6,573 million, a decrease of $989 million or 13% from the prior quarter. Revenue, net of CCPB, was $6,476 million, a decrease of $102 million or 2%.

Revenue increased in Canadian P&C due to higher net interest income and non-interest revenue and in U.S. P&C, primarily due to the stronger U.S. dollar. Revenue decreased in BMO Capital Markets with lower revenue in both Global Markets and Investment and Corporate Banking. Revenue was relatively unchanged in BMO Wealth Management, as higher revenue in Traditional Wealth was offset by lower insurance revenue. Corporate Services revenue decreased from the prior quarter.

Net interest income increased $235 million or 7% from the prior quarter. Non-trading net interest income increased $83 million or 3%, primarily in our P&C businesses. Higher net interest income in U.S. P&C was primarily due to the impact of the stronger U.S. dollar. Trading-related net interest income increased $152 million or 39%.

Average earning assets increased $31.0 billion, primarily due to loan growth, higher securities and cash balances, and the impact of the stronger U.S. dollar.

BMO's overall net interest margin increased 5 basis points, primarily due to higher trading-related interest income. On a basis that excludes trading-related interest income and earning assets, net interest margin decreased 1 basis point.

Non-interest revenue, net of CCPB, decreased $337 million or 11% from the prior quarter, largely due to lower revenue from trading , underwriting and advisory fees, and securities gains, other than trading, partially offset by the impact of the stronger U.S. dollar.

Gross insurance revenue decreased $914 million from the prior quarter, primarily due to changes in the fair value of investments. The decrease in insurance revenue was largely offset by changes in CCPB, as discussed in the Insurance Claims, Commissions and Changes in Policy Benefits section.

Net interest income and non-interest revenue are detailed in the unaudited interim consolidated financial statements.

For further information on non-GAAP amounts, measures and ratios, and results presented on a net revenue basis in this Revenue section, refer to the Non-GAAP and Other Financial Measures section.

Change in Net Interest Income, Average Earning Assets and Net Interest Margin







(Canadian $ in millions, except as noted)

Net interest income (teb) (1)


Average earning assets (2)


Net interest margin (in basis points)

Q4-2021

Q3-2021

Q4-2020


Q4-2021

Q3-2021

Q4-2020


Q4-2021

Q3-2021

Q4-2020

Canadian P&C

1,712

1,660

1,544


258,074

250,980

236,550


263

262

260

U.S. P&C

1,074

1,048

1,058


123,154

119,129

125,892


346

349

334

Personal and Commercial Banking (P&C)

2,786

2,708

2,602


381,228

370,109

362,442


290

290

286

All other operating groups and Corporate Services (3)

970

813

928


537,027

517,122

513,886


na

na

na

Total reported

3,756

3,521

3,530


918,255

887,231

876,328


162

157

160

Trading net interest income and earning assets

539

387

512


149,620

143,282

126,054


na

na

na

Total excluding trading net interest income and earning assets

3,217

3,134

3,018


768,635

743,949

750,274


166

167

160

U.S. P&C (US$ in millions)

856

851

800


98,169

96,730

95,255


346

349

334

(1)

Operating group revenue is presented on a taxable equivalent basis (teb) in net interest income and is non-GAAP. For further information, refer to the Non-GAAP and Other Financial Measures and How BMO Reports Operating Group Results sections.

(2)

Average earning assets represents the daily average balance of deposits with central banks, deposits with other banks, securities borrowed or purchased under resale agreements, securities, and loans, over a one-year period.

(3)

For further information on net interest income for these other operating groups and Corporate Services, refer to the Review of Operating Groups' Performance section.

na – not applicable

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

For further information, refer to the Non-GAAP and Other Financial Measures section.

Total Provision for Credit Losses

Q4 2021 vs. Q4 2020

Total recovery of the provision for credit losses was $126 million, compared with a provision for credit losses of $432 million in the prior year. The total recovery of credit losses as a percentage of average net loans and acceptances ratio was 11 basis points, compared with a provision for credit losses ratio of 37 basis points in the prior year. The provision for credit losses on impaired loans was $84 million, a decrease of $255 million from $339 million in the prior year. The provision for credit losses on impaired loans as a percentage of average net loans and acceptances ratio was 7 basis points, compared with 29 basis points in the prior year. There was a $210 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $93 million provision in the prior year. The $210 million recovery in the current quarter largely reflected an improving economic outlook and positive credit migration, partially offset by growth in loan balances, while the $93 million provision in the prior year reflected a more severe adverse scenario, partially offset by an improving economic outlook and reduced balances.

Q4 2021 vs. Q3 2021

Total recovery of the provision for credit losses was $126 million, compared with a recovery of $70 million in the prior quarter. The total recovery of credit losses as a percentage of average net loans and acceptances ratio was 11 basis points, compared with 6 basis points in the prior quarter. The provision for credit losses on impaired loans increased $13 million from the prior quarter, largely due to lower recoveries of provisions in U.S. P&C and BMO Capital Markets. The provision for credit losses on impaired loans as a percentage of average net loans and acceptances ratio was 7 basis points, compared with 6 basis points in the prior quarter. There was a $210 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $141 million recovery in the prior quarter. The recovery in the current quarter largely reflected an improving economic outlook and positive credit migration, partially offset by growth in loan balances, while the prior quarter reflected an improving economic outlook and positive credit migration, partially offset by the impact of the uncertain economic environment on future credit conditions, as well as growth in loan balances.

Provision for Credit Losses by Operating Group





BMO Wealth

BMO Capital

Corporate


(Canadian $ in millions)

Canadian P&C

U.S. P&C

Total P&C

Management

Markets

 Services

Total Bank

Q4-2021








Provision for (recovery of) credit losses on impaired loans

89

5

94

1

(9)

(2)

84

Provision for (recovery of) credit losses on performing loans

(94)

(33)

(127)

(6)

(79)

2

(210)

Total provision for (recovery of) credit losses

(5)

(28)

(33)

(5)

(88)

-

(126)

Q3-2021








Provision for (recovery of) credit losses on impaired loans

101

(9)

92

-

(19)

(2)

71

Provision for (recovery of) credit losses on performing loans

(7)

(53)

(60)

(2)

(75)

(4)

(141)

Total provision for (recovery of) credit losses

94

(62)

32

(2)

(94)

(6)

(70)

Q4-2020








Provision for (recovery of) credit losses on impaired loans

180

53

233

-

105

1

339

Provision for (recovery of) credit losses on performing loans

11

126

137

5

(41)

(8)

93

Total provision for (recovery of) credit losses

191

179

370

5

64

(7)

432









Fiscal 2021








Provision for (recovery of) credit losses on impaired loans

493

22

515

4

11

(5)

525

Provision for (recovery of) credit losses on performing loans

(116)

(166)

(282)

(16)

(205)

(2)

(505)

Total provision for (recovery of) credit losses

377

(144)

233

(12)

(194)

(7)

20

Fiscal 2020








Provision for (recovery of) credit losses on impaired loans

787

418

1,205

4

310

3

1,522

Provision for (recovery of) credit losses on performing loans

623

441

1,064

18

349

-

1,431

Total provision for (recovery of) credit losses

1,410

859

2,269

22

659

3

2,953

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

Provision for Credit Losses Performance Ratios


Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Total PCL-to-average net loans and acceptances (annualized) (%)

(0.11)

(0.06)

0.37

-

0.63

PCL on impaired loans-to-average net loans and acceptances (annualized) (%)

0.07

0.06

0.29

0.11

0.33

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

Impaired Loans

Total gross impaired loans (GIL) were $2,169 million, compared with $3,638 million in the prior year, with the largest decrease in impaired loans attributable to the oil and gas industry. GIL decreased $261 million from $2,430 million in the prior quarter.

Factors contributing to the change in GIL are outlined in the table below. Loans classified as impaired during the quarter totalled $295 million, compared with $662 million in the prior year, and $390 million in the prior quarter.

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

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

GIL, beginning of period

2,430

3,000

4,413

3,638

2,629

Classified as impaired during the period

295

390

662

1,775

4,649

Transferred to not impaired during the period

(153)

(293)

(295)

(821)

(719)

Net repayments

(269)

(488)

(723)

(1,618)

(1,728)

Amounts written-off

(106)

(159)

(274)

(584)

(1,047)

Recoveries of loans and advances previously written-off

-

-

-

-

-

Disposals of loans

(18)

(47)

(130)

(79)

(147)

Foreign exchange and other movements

(10)

27

(15)

(142)

1

GIL, end of period

2,169

2,430

3,638

2,169

3,638

GIL to gross loans and acceptances (%)

0.46

0.51

0.78

0.46

0.78

(1) GIL excluded purchased credit impaired loans.

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

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities

Insurance claims, commissions and changes in policy benefit liabilities (CCPB) were $97 million, compared with $nil in the prior year. Results increased, largely due to changes in the fair value of policy benefit liabilities. CCPB decreased $887 million from the prior quarter due to changes in the fair value of policy benefit liabilities. The changes were largely offset in revenue.

Non-Interest Expense

Reported non-interest expense was $3,803million, an increase of $255 million or 7% from the prior year, including $62 million of expenses from the impact of divestitures in the current year. Adjusted non-interest expense was $3,720 million, an increase of $205 million or 6%. The increase in expenses was primarily due to higher employee-related costs, including performance-based costs, travel and business development costs, computer and equipment costs, and professional fees, partially offset by the impact of the weaker U.S. dollar that reduced expenses by 2%.

Reported non-interest expense increased $119 million or 3% from the prior quarter. Adjusted non-interest expense increased $58 million or 2%. The increase in reported and adjusted expenses was primarily due to higher computer and equipment costs, professional fees and travel and business development costs, partially offset by lower employee-related costs. The impact of the stronger U.S. dollar increased expenses by 1%.

The reported gross efficiency ratio was 57.9%, compared with 59.3% in the prior year. On a net revenue basis, reported efficiency ratio was 58.7%, compared with 59.3% in the prior year, and the adjusted efficiency ratio was 57.4%, compared with 58.7% in the prior year.

Reported gross operating leverage was positive 2.6%. On a net revenue basis, reported operating leverage was positive 1.0% and adjusted operating leverage was positive 2.4%.

Non-interest expense is detailed in the unaudited condensed consolidated financial statements.

For further information on non-GAAP amounts, measures and ratios in this Non-Interest Expense section, refer to the Non-GAAP and Other Financial Measures section.

Provision for Income Taxes

The provision for income taxes was $640 million, an increase of $218 million from the fourth quarter of 2020, and a decrease of $49 million from the third quarter of 2021. The effective tax rate for the current quarter was 22.9%, compared with 21.1% in the fourth quarter of 2020, and 23.2% in the third quarter of 2021.

The adjusted provision for income taxes was $656 million, an increase of $227 million from the fourth quarter of 2020, and a decrease of $38 million from the third quarter of 2021. The adjusted effective tax rate was 22.7% in the current quarter, compared with 21.1% in the fourth quarter of 2020, and 23.2% in the third quarter of 2021. The effective tax rate and adjusted effective tax rate were lower in the prior year primarily due to earnings mix, including the impact of lower pre-tax income in the prior year. 

For further information on non-GAAP amounts, measures and ratios in this Provision for Income Taxes and Other Taxes section, refer to the Non-GAAP and Other Financial Measures section.

Capital Management

BMO continues to manage its capital within the framework described in the Enterprise-Wide Capital Management section of BMO's 2021 Annual MD&A.

Fourth Quarter 2021 Regulatory Capital Review

BMO's Common Equity Tier 1 (CET1) Ratio was 13.7% as at October 31, 2021, an increase from 13.4% at the end of the third quarter of fiscal 2021, driven by retained earnings growth, partially offset by higher source currency risk-weighted assets (RWA).

CET1 Capital was $44.5 billion as at October 31, 2021, an increase from $43.3 billion as at July 31, 2021, primarily due to retained earnings growth.

RWA were $325.4 billion as at October 31, 2021, an increase from $322.5 billion as at July 31, 2021, primarily due to increased asset size and to a lesser extent, higher market risk, partially offset by changes in asset quality.

Our Tier 1 and Total Capital Ratios were 15.4% and 17.6%, respectively, as at October 31, 2021, compared with 15.1% and 17.4%, respectively, as at July 31, 2021. The Tier 1 and Total Capital Ratios were higher than the prior quarter, due to the factors affecting the CET1 Ratio.

The impact of foreign exchange movements on capital ratios was largely offset. BMO's investments in foreign operations are primarily denominated in U.S. dollars, and the foreign exchange impact of U.S.-dollar-denominated RWA and capital deductions may result in variability in the capital ratios. We may manage the impact of foreign exchange movements on our capital ratios and did so during the current quarter. Any such activities could also impact our book value and return on equity.

BMO's Leverage Ratio was 5.1% as at October 31, 2021, an increase from 5.0% as at July 31, 2021, as higher Tier 1 Capital was partially offset by higher leverage exposures.

Regulatory Capital

Regulatory capital requirements for BMO are determined in accordance with the Capital Adequacy Requirements (CAR) Guideline and the Leverage Requirements (LR) Guideline issued by the Office of the Superintendent of Financial Institutions (OSFI), which is based on the capital standards developed by the Basel Committee on Banking Supervision. For more information refer to the Enterprise-Wide Capital Management section of BMO's 2021 Annual MD&A.

OSFI's capital requirements are summarized in the following table.

(% of risk-weighted assets or leverage exposures)

Minimum capital
requirements

Total Pillar 1 Capital
Buffer (1)

Domestic Stability
Buffer (2)

OSFI capital
requirements
including capital
buffers

BMO Capital and
Leverage Ratios as at
October 31, 2021

Common Equity Tier 1 Ratio

4.5%

3.5%

2.5%

10.5%

13.7%

Tier 1 Capital Ratio

6.0%

3.5%

2.5%

12.0%

15.4%

Total Capital Ratio

8.0%

3.5%

2.5%

14.0%

17.6%

Leverage Ratio

3.0%

na

na

3.0%

5.1%

(1)

The minimum 4.5% CET1 Ratio requirement is augmented by the 3.5% Total Pillar 1 Capital Buffers, which can absorb losses during periods of stress. The Pillar 1 Capital Buffers include a 2.5% Capital Conservation Buffer, a 1.0% Common Equity Surcharge for domestic systemically important banks (D-SIBs) and a Countercyclical Buffer, as prescribed by OSFI (immaterial for the fourth quarter of 2021). If a bank's capital ratios fall within the range of this combined buffer, restrictions on discretionary distributions of earnings (such as dividends, share repurchases and discretionary compensation) would ensue, with the degree of such restrictions varying according to the position of the bank's ratios within the buffer range.

(2)

OSFI requires all D-SIBs to maintain a Domestic Stability Buffer (DSB) against Pillar 2 risks associated with systemic vulnerabilities.The DSB can range from 0% to 2.5% of total RWA and was set at 2.5% as at October 31, 2021. Breaches of the DSB do not result in a bank being subject to automatic constraints on capital distributions.

na – not applicable

Under Canada's Bank Recapitalization (Bail-In) Regime, eligible senior debt issued on or after September 23, 2018, is subject to statutory conversion requirements. Canada Deposit Insurance Corporation has the power to trigger the conversion of bail-in debt into common shares in certain circumstances. This statutory conversion supplements non-viable contingent capital (NVCC) instruments, which must be converted in full, prior to the conversion of bail-in debt. The minimum Total Loss Absorbing Capacity (TLAC) requirements set by OSFI are a risk-based TLAC ratio of 24.0% of RWA, including a 2.5% DSB, and a TLAC leverage ratio of 6.75%, effective November 1, 2021. As at October 31, 2021, our TLAC ratio was 27.8% and our TLAC leverage ratio was 9.3%, disclosed in accordance with OSFI's Guideline.

If an NVCC trigger event were to occur, our NVCC instruments would be converted into BMO common shares pursuant to automatic conversion formulas, with a conversion price based on the greater of: (i) a floor price of $5.00; and (ii) the current market price of our common shares at the time of the trigger event (calculated using a 10-day weighted average). Based on a floor price of $5.00, these NVCC capital instruments would be converted into approximately 3.2 billion BMO common shares, assuming no accrued interest and no declared and unpaid dividends.

Regulatory Capital Position (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Gross common equity (2)

51,965

51,848

49,995

Regulatory adjustments applied to common equity

(7,474)

(8,499)

(9,918)

Common Equity Tier 1 Capital (CET1)

44,491

43,349

40,077

Additional Tier 1 Eligible Capital (3)

5,558

5,558

5,848

Regulatory adjustments applied to Tier 1

(83)

(81)

(85)

Additional Tier 1 Capital (AT1)

5,475

5,477

5,763

Tier 1 Capital (T1 = CET1 + AT1)

49,966

48,826

45,840

Tier 2 Eligible Capital (4)

7,286

7,428

8,874

Regulatory adjustments applied to Tier 2

(51)

(51)

(53)

Tier 2 Capital (T2)

7,235

7,377

8,821

Total Capital (TC = T1 + T2)

57,201

56,203

54,661

Risk-Weighted Assets (5)

325,433

322,529

336,607

Leverage Ratio Exposures

976,690

969,824

953,640

Capital ratios (%)




CET1 Ratio

13.7

13.4

11.9

Tier 1 Capital Ratio

15.4

15.1

13.6

Total Capital Ratio

17.6

17.4

16.2

Leverage Ratio

5.1

5.0

4.8

(1)

Disclosed in accordance with OSFI's CAR Guideline and LR Guideline, as applicable.

(2)

Gross Common Equity includes issued qualifying common shares, retained earnings, accumulated other comprehensive income and eligible common share capital issued by subsidiaries.

(3)

Additional Tier 1 Eligible Capital includes directly and indirectly issued qualifying Additional Tier 1 instruments.

(4)

Tier 2 Eligible Capital includes subordinated debentures and may include a portion of expected credit loss provisions.

(5)

For institutions using advanced approaches for credit risk or operational risk, there is a capital floor as prescribed in OSFI's CAR Guideline.

Other Capital Developments

During the quarter, 1.6 million common shares were issued through the exercise of stock options.

OSFI's expectation that federally regulated financial institutions should not increase dividends or undertake share repurchases, set in March 2020, remained in effect until November 4, 2021.

On December 3, 2021, we announced our intention, subject to the approval of OSFI and the Toronto Stock Exchange, to establish a new normal course issuer bid (NCIB) for up to 22.5 million common shares. The NCIB is a regular part of our capital management strategy. Once approvals are obtained, the share repurchase program will permit us to purchase BMO common shares for the purpose of cancellation. The timing and amount of purchases under the NCIB are subject to regulatory approvals and to management discretion based on factors, such as market conditions and capital levels. We will consult with OSFI before making purchases under the NCIB.

Dividends

On December 3, 2021, BMO announced that the Board of Directors had declared a quarterly dividend on common shares of $1.33 per share, an increase of $0.27 per share or 25% from the prior quarter and the prior year. The dividend is payable on February 28, 2022 to shareholders of record on February 1, 2022. Common shareholders may elect to have their cash dividends reinvested in common shares of BMO, in accordance with the Shareholder Dividend Reinvestment and Share Purchase Plan. Until further notice, such additional common shares will be purchased on the open market.

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.

Caution

The foregoing Capital Management section contains forward-looking statements. Refer to the Caution Regarding Forward-Looking Statements.

Review of Operating Groups' Performance

How BMO Reports Operating Group Results

BMO reports financial results for its three operating groups, one of which comprises two operating segments, all of which are supported by Corporate Units and Technology and Operations within Corporate Services. Operating group results include treasury-related allocations in revenue, non-interest expense allocations from Corporate Units and Technology and Operations (T&O) and allocated capital.

BMO employs funds transfer pricing and liquidity transfer pricing between Treasury and the operating groups to assign the appropriate cost and credit to funds for the appropriate pricing of loans and deposits, and to help assess the profitability performance of each line of business. These practices also capture the cost of holding supplemental liquid assets to meet contingent liquidity requirements and facilitate the management of interest rate risk and liquidity risk within our risk appetite framework and regulatory requirements. We review our transfer pricing methodologies at least annually, to align with our interest rate, liquidity and funding risk management practices.

The costs of Corporate Units and Technology and Operations services are largely allocated to the four operating segments, with any remaining amounts retained in Corporate Services. Costs directly incurred to support a specific operating group are generally allocated to that operating group. Other costs that are not directly attributable to a specific operating group are allocated across the operating groups, reasonably reflective of the level of support provided to each operating group. Cost allocation methodologies are reviewed annually.

Capital is allocated to the operating segments based on the amount of regulatory capital required to support business activities. Unallocated capital is reported in Corporate Services. Capital allocation methodologies are reviewed annually.

Periodically, certain lines of business and units within our organizational structure are realigned to support our strategic priorities. In addition, allocations of revenue, provisions for credit losses, expenses and capital are updated periodically to better align with current experience.

We analyze revenue at the consolidated level based on GAAP revenue as reported in the audited annual consolidated financial statements, rather than on a taxable equivalent basis (teb), which is consistent with our Canadian banking peer group. Like many banks, BMO analyzes revenue on a teb basis at the operating group level. Revenue and the provision for income taxes are increased on tax-exempt securities to an equivalent pre-tax basis in order to facilitate comparisons of income between taxable and tax-exempt sources. The offset to the group teb adjustments is reflected in Corporate Services revenue and provision for income taxes.

Personal and Commercial Banking (P&C) (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income (teb) (2)

2,786

2,708

2,602

10,829

10,450

Non-interest revenue

900

885

761

3,468

3,116

Total revenue (teb)

3,686

3,593

3,363

14,297

13,566

Provision for credit losses on impaired loans

94

92

233

515

1,205

Provision for (recovery of) credit losses on performing loans

(127)

(60)

137

(282)

1,064

Total provision for (recovery of) credit losses

(33)

32

370

233

2,269

Non-interest expense

1,808

1,735

1,713

6,834

6,967

Income before income taxes

1,911

1,826

1,280

7,230

4,330

Provision for income taxes (teb)

478

458

309

1,804

1,026

Reported net income

1,433

1,368

971

5,426

3,304

Amortization of acquisition-related intangible assets (3)

6

6

10

25

41

Adjusted net income

1,439

1,374

981

5,451

3,345

(1)

Adjusted results and teb amounts in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

(2)

Taxable equivalent basis amounts of $6 million in both Q4-2021 and Q3-2021, and $7 million in Q4-2020; and $24 million in fiscal 2021 and $28 million in fiscal 2020 are recorded in net interest income.

(3)

Total P&C pre-tax amounts of $9 million in both Q4-2021 and Q3-2021, $14 million in Q4-2020; and $35 million in fiscal 2021 and $55 million in fiscal 2020 are recorded in non-interest expense.

The Personal and Commercial Banking (P&C) operating group represents the sum of our two retail and commercial operating segments, Canadian Personal and Commercial Banking (Canadian P&C) and U.S. Personal and Commercial Banking (U.S. P&C). The P&C banking business reported net income was $1,433 million, an increase of $462 million or 48% from the prior year. These operating segments are reviewed separately in the sections that follow.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

Canadian Personal and Commercial Banking (Canadian P&C) (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income

1,712

1,660

1,544

6,561

6,105

Non-interest revenue

592

581

487

2,225

1,930

Total revenue

2,304

2,241

2,031

8,786

8,035

Provision for credit losses on impaired loans

89

101

180

493

787

Provision for (recovery of) credit losses on performing loans

(94)

(7)

11

(116)

623

Total provision for (recovery of) credit losses

(5)

94

191

377

1,410

Non-interest expense

1,065

1,046

968

4,037

3,892

Income before income taxes

1,244

1,101

872

4,372

2,733

Provision for income taxes

323

286

225

1,135

706

Reported net income

921

815

647

3,237

2,027

Amortization of acquisition-related intangible assets (2)

-

-

1

1

2

Adjusted net income

921

815

648

3,238

2,029

Adjusted non-interest expense

1,065

1,045

967

4,035

3,890

Personal revenue

1,390

1,343

1,253

5,325

4,986

Commercial revenue

914

898

778

3,461

3,049

Net income growth (%)

42.5

154.7

(8.8)

59.7

(22.7)

Revenue growth (%)

13.4

14.2

(2.2)

9.4

0.6

Non-interest expense growth (%)

10.1

8.8

(0.8)

3.7

1.4

Adjusted non-interest expense growth (%)

10.1

8.8

(0.8)

3.7

1.5

Return on equity (%) (3)

32.4

28.6

22.7

28.7

18.1

Adjusted return on equity (%) (3)

32.4

28.6

22.7

28.7

18.1

Operating leverage (%)

3.3

5.4

(1.4)

5.7

(0.8)

Adjusted operating leverage (%)

3.3

5.4

(1.4)

5.7

(0.9)

Efficiency ratio (%)

46.2

46.7

47.6

45.9

48.4

Net interest margin on average earning assets (%)

2.63

2.62

2.60

2.64

2.60

Average earning assets

258,074

250,980

236,550

248,215

234,953

Average gross loans and acceptances

271,108

264,585

251,042

261,869

250,223

Average net loans and acceptances

269,633

263,063

249,500

260,359

248,972

Average deposits

232,359

227,029

217,927

225,555

204,942

(1)

Adjusted results and ratios in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

(2)

Amortization of acquisition-related intangible assets pre-tax amounts of $nil in Q4-2021, $1 million in both Q3-2021 and Q4-2020; and $2 million in both fiscal 2021 and fiscal 2020 are recorded in non-interest expense.

(3)

Return on equity is based on allocated capital. For further information, refer to the Non-GAAP and Other Financial Measures section.

Q4 2021 vs. Q4 2020

Canadian P&C reported net income was $921 million, increasing $274 million or 42% from the prior year.

Total revenue was $2,304 million, an increase of $273 million or 13% from the prior year. Net interest income increased $168 million or 11%, due to higher deposit and loan balances and higher loan margins, partially offset by lower deposit margins. Non-interest revenue increased $105 million or 22%across most categories, including higher card-related revenue and gains on investments in our commercial business. Net interest margin of 2.63% increased 3 basis points, primarily driven by higher loan margins, partially offset by lower deposit margins that reflect the impact of the lower interest rate environment.

Personal revenue increased $137 million or 11%, and commercial revenue increased $136 million or 17%, both due to higher net interest income and higher non-interest revenue.

Total recovery of the provision for credit losses was $5 million, compared with a provision for credit losses of $191 million in the prior year. The provision for credit losses on impaired loans was $89 million, a decrease of $91 million due to lower commercial and consumer provisions. There was a $94 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $11 million provision in the prior year.

Non-interest expense was $1,065 million, an increase of $97 million or 10% from the prior year, reflecting investments in the business, including employee-related costs, as well as technology and marketing costs.

Average gross loans and acceptances increased $20.1 billion or 8% from the prior year to $271.1 billion. Personal loan balances increased 9%, commercial loan balances increased 6% and credit card balances increased 2%. Average deposits increased $14.4 billion or 7% to $232.4 billion. Commercial deposits increased 16%, while personal deposits were relatively unchanged, with strong growth in chequing and savings account deposits, largely offset by a decline in term deposits.

Q4 2021 vs. Q3 2021

Reported net income was $921 million, an increase of $106 million or 13% from the prior quarter.

Total revenue was $2,304 million, an increase of $63 million or 3% from the prior quarter. Net interest income increased $52 million or 3%, due to higher loan and deposit balances. Non-interest revenue increased $11 million or 2%, with increases across most categories, including higher card-related revenue, partially offset by lower gains on investments in our commercial business. Net interest margin of 2.63% increased 1 basis point from the prior quarter.

Personal revenue increased $47 million or 4%, due to higher net interest income and higher non-interest revenue. Commercial revenue increased $16 million or 2%, due to higher net interest income, partially offset by lower non-interest revenue.

Total recovery of the provision for credit losses was $5 million, compared with a provision for credit losses of $94 million in the prior quarter. The provision for credit losses on impaired loans decreased $12 million due to lower consumer provisions, partially offset by higher commercial provisions. There was a $94 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $7 million recovery in the prior quarter.

Non-interest expense was $1,065 million, an increase of $19 million or 2% from the prior quarter, reflecting continued investments in the business, including employee-related and other costs.

Average gross loans and acceptances increased $6.5 billion or 2% from the prior quarter. Personal loan balances increased 2%, commercial loan balances increased 2% and credit card balances increased 5%. Average deposits increased $5.3 billion or 2%, with 4% growth in commercial deposits and an increase of 1% in personal deposits, as continued strong growth in chequing and savings account deposits was partially offset by a decline in term deposits.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

U.S. Personal and Commercial Banking (U.S. P&C) (1)

(Canadian $ equivalent in millions)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income (teb) (2)

1,074

1,048

1,058

4,268

4,345

Non-interest revenue

308

304

274

1,243

1,186

Total revenue (teb)

1,382

1,352

1,332

5,511

5,531

Provision for (recovery of) credit losses on impaired loans

5

(9)

53

22

418

Provision for (recovery of) credit losses on performing loans

(33)

(53)

126

(166)

441

Total provision for (recovery of) credit losses

(28)

(62)

179

(144)

859

Non-interest expense

743

689

745

2,797

3,075

Income before income taxes

667

725

408

2,858

1,597

Provision for income taxes (teb)

155

172

84

669

320

Reported net income

512

553

324

2,189

1,277

Amortization of acquisition-related intangible assets (3)

6

6

9

24

39

Adjusted net income

518

559

333

2,213

1,316

Adjusted non-interest expense

734

681

732

2,764

3,022

Net income growth (%)

57.8

110.5

(17.5)

71.4

(20.7)

Adjusted net income growth (%)

55.1

105.0

(17.3)

68.1

(20.4)

Revenue growth (%)

3.7

(3.4)

(2.2)

(0.4)

2.8

Non-interest expense growth (%)

(0.3)

(8.4)

(5.7)

(9.0)

(1.9)

Adjusted non-interest expense growth (%)

0.3

(7.8)

(5.6)

(8.6)

(1.8)

Average earning assets

123,154

119,129

125,892

122,166

130,190

Average gross loans and acceptances

117,008

113,005

119,495

116,039

123,953

Average net loans and acceptances

116,092

112,030

118,357

115,025

123,002

Average deposits

142,770

137,556

140,047

139,197

132,041







(US$ in millions, except as noted)






Net interest income (teb) (4)

856

851

800

3,400

3,231

Non-interest revenue

245

247

207

990

882

Total revenue (teb)

1,101

1,098

1,007

4,390

4,113

Provision for (recovery of) credit losses on impaired loans

2

(6)

40

15

310

Provision for (recovery of) credit losses on performing loans

(26)

(43)

95

(132)

328

Total provision for (recovery of) credit losses

(24)

(49)

135

(117)

638

Non-interest expense

593

559

564

2,229

2,287

Income before income taxes

532

588

308

2,278

1,188

Provision for income taxes (teb)

124

140

62

534

237

Reported net income

408

448

246

1,744

951

     Amortization of acquisition-related intangible assets (5)

4

5

8

19

30

Adjusted net income

412

453

254

1,763

981

Adjusted non-interest expense

587

552

554

2,203

2,248

Key Performance Metrics and Drivers (US$ basis)






Personal revenue

324

328

320

1,313

1,293

Commercial revenue

777

770

687

3,077

2,820

Net income growth (%)

66.1

133.2

(17.3)

83.5

(21.6)

Adjusted net income growth (%)

63.3

127.1

(17.1)

80.0

(21.2)

Revenue growth (%)

9.3

6.5

(2.0)

6.7

1.6

Non-interest expense growth (%)

5.1

1.1

(5.6)

(2.5)

(3.1)

Adjusted non-interest expense growth (%)

5.7

1.7

(5.5)

(2.0)

(3.0)

Return on equity (%) (6)

14.9

16.3

8.6

15.9

8.3

Adjusted return on equity (%) (6)

15.1

16.5

8.8

16.1

8.5

Operating leverage (teb) (%)

4.2

5.4

3.6

9.2

4.7

Adjusted operating leverage (teb) (%)

3.6

4.8

3.5

8.7

4.6

Efficiency ratio (teb) (%)

53.8

50.9

56.0

50.8

55.6

Adjusted efficiency ratio (teb) (%)

53.2

50.3

55.0

50.2

54.6

Net interest margin on average earning assets (teb) (%)

3.46

3.49

3.34

3.49

3.34

Average earning assets

98,169

96,730

95,255

97,321

96,810

Average gross loans and acceptances

93,270

91,758

90,415

92,439

92,170

Average net loans and acceptances

92,540

90,965

89,554

91,631

91,462

Average deposits

113,806

111,693

105,964

110,910

98,203

(1)

Adjusted results and ratios, teb amounts and U.S. dollar amounts and ratios in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

(2)

Taxable equivalent basis amounts of $6 million in both Q4-2021 and Q3-2021, and $7 million in Q4-2020; and $24 million in fiscal 2021 and $28 million in fiscal 2020 are recorded in net interest income.

(3)

Amortization of acquisition-related intangible assets pre-tax amounts of $9 million in Q4-2021, $8 million in Q3-2021, and $13 million in Q4-2020; and $33 million in fiscal 2021 and $53 million in fiscal 2020 are recorded in non-interest expense.

(4)

Taxable equivalent basis amounts of US$5 million in each of Q4-2021, Q3-2021 and Q4-2020; and US$20 million in fiscal 2021 and US$21 million in fiscal 2020 are recorded in net interest income.

(5)

Amortization of acquisition-related intangible assets pre-tax amounts of US$6 million in Q4-2021, US$7 million in Q3-2021, and US$10 million in Q4-2020; and US$26 million in fiscal 2021 and US$39 million in fiscal 2020 are recorded in non-interest expense.

(6)

Return on equity is based on allocated capital. For further information, refer to the Non-GAAP and Other Financial Measures section.

Q4 2021 vs. Q4 2020

U.S. P&C reported net income was $512 million, an increase of $188 million or 58% from the prior year. The impact of the weaker U.S. dollar reduced net income by 8%, revenue by 6% and expenses by 5%. All amounts in the remainder of this section are on a U.S. dollar basis.

Reported net income was $408 million, an increase of $162 million or 66% from the prior year.

Total revenue was $1,101 million, an increase of $94 million or 9% from the prior year. Net interest income increased $56 million or 7% due to higher loan margins, higher loan and deposit balances and Paycheck Protection Program (PPP)(1) revenue resulting from loan forgiveness, partially offset by lower deposit margins. Non-interest revenue increased $38 million or 18%, including higher lending fee revenue and advisory fee revenue. Net interest margin of 3.46% increased 12 basis points, primarily due to higher loan margins, accelerated PPP revenue receipts from loan forgiveness, partially offset by lower deposit margins reflecting the impact of the lower interest rate environment.

Personal revenue increased $4 million or 1%, due to higher net interest income, partially offset by lower non-interest revenue. Commercial revenue increased $90 million or 13%, due to higher non-interest revenue and higher net interest income.

Total recovery of the provision for credit losses was $24 million, compared with a provision for credit losses of $135 million in the prior year. The provision for credit losses on impaired loans was $2 million, a decrease of $38 million, largely due to lower commercial provisions. There was a $26 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $95 million provision in the prior year.

Reported non-interest expense was $593 million, an increase of $29 million or 5% from the prior year, reflecting higher employee-related and marketing costs.

Average gross loans and acceptances increased $2.9 billion or 3% from the prior year to $93.3 billion. The reduction in PPP loans reduced loan growth by 4%. Commercial loan balances increased 4% and personal loan balances were relatively unchanged. Average deposits increased $7.8 billion or 7% to $113.8 billion, reflecting the higher levels of liquidity retained by customers. Commercial deposits increased 16%, while personal deposits decreased 3%, as continued growth in chequing and savings account deposits was more than offset by lower term deposits.

Q4 2021 vs. Q3 2021

Reported net income was $512 million, a decrease of $41 million or 8% from the prior quarter.The impact of the stronger U.S. dollar increased net income, revenue and expenses by 2%, respectively. All amounts in the remainder of this section are on a U.S. dollar basis.

Reported net income was $408 million, a decrease of $40 million or 9% from the prior quarter.

Total revenue was $1,101 million, an increase of $3 million from the prior quarter. Net interest income increased $5 million or 1%, due to higher loan and deposit balances, partially offset by lower PPP-related revenue. Non-interest revenue decreased $2 million or 1% from the prior quarter. Net interest margin of 3.46% decreased 3 basis points from the prior quarter, driven by changes in balance sheet mix.

Personal revenue decreased $4 million, due to lower non-interest revenue, partially offset by higher net interest income. Commercial revenue increased $7 million, primarily due to higher non-interest revenue.

Total recovery of the provision for credit losses was $24 million, compared with a $49 million recovery in the prior quarter. The provision for credit losses on impaired loans was $2 million, compared with a $6 million recovery in the prior quarter, primarily due to higher consumer provisions. There was a $26 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $43 million recovery in the prior quarter.

Reported non-interest expense was $593 million, an increase of $34 million or 6%, primarily driven by higher employee-related costs and marketing costs.

Average gross loans and acceptances increased $1.5 billion or 2% from the prior quarter. Commercial loan balances increased 2%. The reduction in PPP loans reduced loan growth by 2%. Personal loan balances increased 1%. Average deposits increased $2.1 billion or 2% to $113.8 billion. Commercial deposits increased 3%, while personal deposits were relatively unchanged.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

(1)

The U.S. Small Business Administration Payback Protection Program is a government relief program to support businesses facing economic hardship caused by the COVID-19 pandemic.

BMO Wealth Management (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income

259

247

228

982

900

Non-interest revenue

1,276

2,179

1,081

6,071

5,808

Total revenue

1,535

2,426

1,309

7,053

6,708

Insurance claims, commissions and changes in policy benefit liabilities (CCPB)

97

984

-

1,399

1,708

Revenue, net of CCPB

1,438

1,442

1,309

5,654

5,000

Provision for credit losses on impaired loans

1

-

-

4

4

Provision for (recovery of) credit losses on performing loans

(6)

(2)

5

(16)

18

Total provision for (recovery of) credit losses

(5)

(2)

5

(12)

22

Non-interest expense

956

913

882

3,716

3,519

Income before income taxes

487

531

422

1,950

1,459

Provision for income taxes

118

130

102

476

363

Reported net income

369

401

320

1,474

1,096

Amortization of acquisition-related intangible assets (2)

4

5

8

24

34

Adjusted net income

373

406

328

1,498

1,130

Adjusted non-interest expense

950

908

872

3,685

3,476

Traditional Wealth businesses reported net income

318

328

253

1,228

893

Traditional Wealth businesses adjusted net income

322

333

261

1,252

927

Insurance reported net income (loss)

51

73

67

246

203

Insurance adjusted net income (loss)

51

73

67

246

203

Net income growth (%)

15.2

17.6

20.0

34.4

3.5

Adjusted net income growth (%)

13.6

16.0

9.3

32.5

0.8

Revenue growth (%) 

17.2

(2.4)

(16.4)

5.1

(12.4)

Revenue growth, net of CCPB (%)

9.8

11.1

6.3

13.1

1.0

Adjusted CCPB

97

984

-

1,399

1,708

Revenue growth, net of adjusted CCPB (%)

9.8

11.1

4.2

13.1

0.5

Non-interest expense growth (%)

8.5

9.0

2.5

5.6

(0.1)

Adjusted non-interest expense growth (%)

9.2

9.8

2.6

6.1

-

Return on equity (%) (3)

25.8

28.6

20.1

24.9

17.1

Adjusted return on equity (%) (3)

26.1

28.9

20.6

25.3

17.7

Operating leverage, net of CCPB (%)

1.3

2.1

3.8

7.5

1.1

Adjusted operating leverage, net of CCPB (%)

0.6

1.3

1.6

7.0

0.5

Reported efficiency ratio (%)

62.3

37.6

67.3

52.7

52.4

Reported efficiency ratio, net of CCPB (%)

66.5

63.3

67.3

65.7

70.4

Adjusted efficiency ratio (%)

62.0

37.4

66.5

52.3

51.8

Adjusted efficiency ratio, net of CCPB (%)

66.1

63.0

66.5

65.2

69.5

Assets under management

523,270

526,542

482,554

523,270

482,554

Assets under administration (4)

427,446

457,964

411,959

427,446

411,959

Average assets

49,629

48,053

46,583

48,232

45,573

Average gross loans and acceptances

30,351

29,040

27,339

28,920

26,585

Average net loans and acceptances

30,316

29,002

27,296

28,880

26,547

Average deposits

53,300

50,054

46,858

51,030

43,660

U.S. Business Select Financial Data (US$ in millions)






Total revenue

162

154

146

625

583

Non-interest expense

122

122

126

489

504

Reported net income

30

25

17

104

61

Adjusted non-interest expense

120

121

124

482

495

Adjusted net income

32

26

19

109

68

Average net loans and acceptances

5,140

4,967

4,676

4,878

4,540

Average deposits

7,537

6,995

6,672

7,321

6,471

(1)

Revenue measures, net of CCPB, adjusted results and ratios, and U.S. dollar amounts in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

(2)

Amortization of acquisition-related intangible assets pre-tax amounts of $6 million in Q4-2021, $5 million in Q3-2021, and $10 million in Q4-2020; and $31 million in fiscal 2021 and $43 million in fiscal 2020 are recorded in non-interest expense.

(3)

Return on equity is based on allocated capital. For further information, refer to the Non-GAAP and Other Financial Measures section.

(4)

Certain assets under management that are also administered by the bank are included in assets under administration.

Q4 2021 vs. Q4 2020

BMO Wealth Management reported net income was $369 million, an increase of $49 million or 15% from the prior year. Traditional Wealth reported net income was $318 million, an increase of $65 million or 26%. Insurance net income was $51 million, compared with $67 million in the prior year.

Total revenue was $1,535 million, an increase of $226 million or 17%. Revenue, net of CCPB, was $1,438 million, an increase of $129 million or 10%. Revenue in Traditional Wealth was $1,332 million, an increase of $150 million or 13%, due to higher non-interest revenue from growth in client assets, including stronger global markets. Higher net interest income was driven by strong deposit and loan growth, partially offset by lower margins. Insurance revenue, net of CCPB, was $106 million, a decrease of $21 million from the prior year, primarily due to benefits from changes in investments to improve asset liability management in the prior year,and the unfavourable impact of actuarial assumption changes in the current quarter, partially offset by business growth.

Non-interest expense was $956 million, an increase of $74 million or 9% from the prior year, primarily due to higher revenue-based costs, technology-related investments and employee-related costs.

Assets under management increased $40.7 billion or 8%, and assets under administration increased $15.5 billion or 4% from the prior year, primarily due to higher client assets, including stronger global markets, partially offset by attrition of low-yielding assets and foreign exchange movements. Average gross loans increased 11% and average deposits increased 14%.

Q4 2021 vs. Q3 2021

Reported net income was $369 million, a decrease of $32 million or 8% from the prior quarter. Traditional Wealth reported net income was $318 million, a decrease of $10 million or 3%. Insurance net income was $51 million, a decrease of $22 million.

Total revenue was $1,535 million, a decrease of $891 million. Revenue, net of CCPB, of $1,438 million was relatively unchanged from the prior quarter. Traditional Wealth revenue was $1,332 million, an increase of $24 million or 2%, due to higher net interest income, as well as higher non-interest revenue from stronger global equity markets, partially offset by lower brokerage revenue. Insurance revenue, net of CCPB, was $106 million, a decrease of $28 million, driven by benefits from changes in investments to improve asset liability management in the prior quarter and the impact of unfavourable actuarial assumption changes in the current quarter.

Non-interest expense increased $43 million or 5%, primarily due to higher revenue-based costs and continued investment in the business, including investment in technology and marketing costs.

Assets under management decreased by $3.3 billion or 1%, and assets under administration decreased $30.5 billion or 7% from the prior quarter, as the benefit from stronger global markets was more than offset by the attrition of low-yielding assets and foreign exchange movements. Average gross loans increased 5%, and average deposits increased 6%.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

BMO Capital Markets (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income (teb) (2)

873

696

817

3,115

3,320

Non-interest revenue

557

888

561

3,011

2,006

Total revenue (teb)

1,430

1,584

1,378

6,126

5,326

Provision for (recovery of) credit losses on impaired loans

(9)

(19)

105

11

310

Provision for (recovery of) credit losses on performing loans

(79)

(75)

(41)

(205)

349

Total provision for (recovery of) credit losses

(88)

(94)

64

(194)

659

Non-interest expense

803

918

801

3,436

3,236

Income before income taxes

715

760

513

2,884

1,431

Provision for income taxes (teb)

179

202

134

744

344

Reported net income

536

558

379

2,140

1,087

Acquisition integration costs (3)

1

2

3

7

11

Amortization of acquisition-related intangible assets (4)

4

4

5

17

18

Adjusted net income

541

564

387

2,164

1,116

Adjusted non-interest expense

797

910

792

3,405

3,199

Global Markets revenue

774

881

854

3,605

3,222

Investment and Corporate Banking revenue

656

703

524

2,521

2,104

Net income growth (%)

41.4

31.0

40.2

96.9

(0.4)

Adjusted net income growth (%)

40.0

29.8

37.8

94.1

(0.2)

Revenue growth (%)

3.8

3.7

16.9

15.0

11.9

Non-interest expense growth (%)

0.2

11.4

1.1

6.2

(1.3)

Adjusted non-interest expense growth (%)

0.5

12.2

1.5

6.4

(1.4)

Return on equity (%) (5)

19.4

20.3

12.9

19.2

9.2

Adjusted return on equity (%) (5)

19.6

20.5

13.1

19.5

9.5

Operating leverage (teb) (%)

3.6

(7.7)

15.8

8.8

13.2

Adjusted operating leverage (teb) (%)

3.3

(8.5)

15.4

8.6

13.3

Efficiency ratio (teb) (%)

56.1

58.0

58.1

56.1

60.8

Adjusted efficiency ratio (teb) (%)

55.6

57.5

57.4

55.6

60.1

Average assets

376,714

367,900

367,001

372,475

369,518

Average gross loans and acceptances

58,845

56,981

66,371

59,385

68,698

Average net loans and acceptances

58,499

56,536

65,787

58,909

68,303

U.S. Business Select Financial Data (US$ in millions)






Total revenue

550

588

467

2,373

1,865

Non-interest expense

304

341

305

1,288

1,152

Reported net income

210

218

84

857

279

Adjusted non-interest expense

298

335

298

1,263

1,125

Adjusted net income

215

222

89

876

299

Average assets

137,739

127,851

117,763

127,619

116,307

Average net loans and acceptances

25,265

24,448

25,847

25,249

26,161

(1)

Adjusted results and ratios, teb amounts and U.S. dollar amounts in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures.

(2)

Taxable equivalent basis amounts of $72 million in Q4-2021, and $71 million in both Q3-2021 and Q4-2020; and $291 million in fiscal 2021 and $307 million in fiscal 2020 are recorded in net interest income.

(3)

KGS-Alpha and Clearpool acquisition pre-tax integration costs of $1 million in Q4-2021, and $3 million in both Q3-2021 and Q4-2020; and $9 million in fiscal 2021 and $14 million in fiscal 2020 are recorded in non-interest expense.

(4)

Amortization of acquisition-related intangible assets pre-tax amounts of $5 million in both Q4-2021 and Q3-2021, and $6 million in Q4-2020; and $22 million in fiscal 2021 and $23 million in fiscal 2020 are recorded in non-interest expense.

(5)

Return on equity is based on allocated capital. For further information, refer to the Non-GAAP and Other Financial Measures section.

Q4 2021 vs. Q4 2020

BMO Capital Markets reported net income was $536 million, an increase of $157 million or 41% from the prior year.

Total revenue was $1,430 million, an increase of $52 million or 4% from the prior year. Global Markets revenue decreased $80 million or 9% due to lower interest rate and commodities trading revenue and the impact of the weaker U.S. dollar, partially offset by higher equities and foreign exchange trading revenue. Investment and Corporate Banking revenue increased $132 million or 25%, primarily driven by higher underwriting and advisory revenue and net securities gains, partially offset by lower corporate banking-related revenue and the impact of the weaker U.S. dollar.

Total recovery of the provision for credit losses was $88 million, compared with a provision for credit losses of $64 million in the prior year. The recovery of credit losses on impaired loans was $9 million, compared with a $105 million provision in the prior year. There was a $79 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a recovery of $41 million in the prior year.

Non-interest expense was $803 million, an increase of $2 million from the prior year, as the impact of the weaker U.S. dollar and lower employee-related costs was offset by higher other operating costs.

Average gross loans and acceptances decreased $7.5 billion or 11% from the prior year to $58.8 billion, primarily due to the announced wind-down of our non-Canadian energy portfolio, the impact of the weaker U.S. dollar and lower loan utilizations.

Q4 2021 vs. Q3 2021

Reported net income was $536 million, a decrease of $22 million or 4% from the prior quarter.

Total revenue was $1,430 million, a decrease of $154 million or 10% from the prior quarter. Global Markets revenue decreased $107 million or 12%, due to lower equities and interest rate trading revenue. Investment and Corporate Banking revenue decreased $47 million or 7%, driven by lower underwriting revenue and corporate banking-related revenue, partially offset by higher advisory revenue and net securities gains.

Total recovery of the provision for credit losses was $88 million, compared with a recovery of $94 million in the prior quarter. The recovery of the provision for credit losses on impaired loans was $9 million, compared with a recovery of $19 million in the prior quarter. There was a $79 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a recovery of $75 million in the prior quarter.

Non-interest expense was $803 million, a decrease of $115 million or 13% from the prior quarter, primarily due to lower performance-based compensation.

Average gross loans and acceptances increased $1.9 billion or 3% from the prior year to $58.8 billion, due to higher loan utilization and the impact of the stronger U.S. dollar, partially offset by the announced wind-down of our non-Canadian energy portfolio.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

Corporate Services (1)

(Canadian $ in millions, except as noted)

Q4-2021

Q3-2021

Q4-2020

Fiscal 2021

Fiscal 2020

Net interest income before group teb offset

(84)

(53)

(39)

(301)

(364)

Group teb offset

(78)

(77)

(78)

(315)

(335)

Net interest income (teb)

(162)

(130)

(117)

(616)

(699)

Non-interest revenue

84

89

53

326

285

Total revenue (teb)

(78)

(41)

(64)

(290)

(414)

Provision for (recovery of) credit losses on impaired loans

(2)

(2)

1

(5)

3

Provision for (recovery of) credit losses on performing loans

2

(4)

(8)

(2)

-

Total provision for (recovery of) credit losses

-

(6)

(7)

(7)

3

Non-interest expense

236

118

152

1,523

455

Income (loss) before income taxes

(314)

(153)

(209)

(1,806)

(872)

Recovery of income taxes (teb)

(135)

(101)

(123)

(520)

(482)

Reported net loss

(179)

(52)

(86)

(1,286)

(390)

Impact of divestitures (2) (3) (4)

52

18

-

842

-

Restructuring costs (reversals) (3)

-

(18)

-

(18)

-

Adjusted net loss

(127)

(52)

(86)

(462)

(390)

Adjusted total revenue (teb) (5)

(78)

(41)

(64)

(319)

(414)

Adjusted non-interest expense (5)

174

118

152

661

455

U.S. Business Select Financial Data (US$ in millions)






Total revenue

(4)

19

(9)

(26)

(116)

Total provision for (recovery) of credit losses

-

(3)

-

(6)

3

Non-interest expense

45

13

18

182

97

Recovery of income taxes

(19)

(7)

(17)

(90)

(88)

Reported net income (loss)

(30)

16

(10)

(112)

(128)

Adjusted total revenue

(4)

19

(9)

(26)

(116)

Adjusted non-interest expense

40

27

18

164

97

Adjusted net income (loss)

(26)

6

(10)

(98)

(128)

(1)

Adjusted results and ratios, teb amounts and U.S. dollar amounts in this table are on a non-GAAP basis and are discussed in the Non-GAAP and Other Financial Measures section.

(2)

Q2-2021 reported net income included the impact of divestitures comprising a $747 million pre-tax and after-tax write-down of goodwill related to the sale of our EMEA Asset Management business, a $22 million ($29 million pre-tax) net gain on the sale of our Private Banking business in Hong Kong and Singapore, and $47 million ($53 million pre-tax) of divestiture-related costs for both transactions. The net gain on the sale was recorded in non-interest revenue, with the goodwill write-down and divestiture costs recorded in non-interest expense.

(3)

Q3-2021 reported net income included expenses of $18 million ($24 million pre-tax) from the impact of divestitures related to the sale of our EMEA Asset Management business and the sale of our Private Banking business in Hong Kong and Singapore, offset by a partial reversal of previously recorded restructuring charges related to severance of $18 million ($24 million pre-tax), all recorded in non-interest expense.

(4)

Q4-2021 reported net income included expenses of $52 million ($62 million pre-tax) from the impact of divestitures related to the sale of our EMEA Asset Management business and the sale of our Private Banking business in Hong Kong and Singapore, recorded in non-interest expense.

(5)

Adjusted results exclude the impact of the items described in footnotes (2) to (4).

Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise, governance and support in a variety of areas, including strategic planning, risk management, treasury, finance, legal and regulatory compliance, human resources, communications, marketing, real estate, and procurement. T&O develops, monitors, manages and maintains governance of information technology, including data and analytics, and also provides cyber security and operations services.

The costs of Corporate Units and T&O services are largely allocated to the four operating segments (Canadian P&C, U.S. P&C, BMO Wealth Management and BMO Capital Markets), with any remaining amounts retained in Corporate Services results. As such, Corporate Services results largely reflect the impact of residual treasury-related activities, the elimination of taxable equivalent adjustments, and residual unallocated expenses.

Q4 2021 vs. Q4 2020

Corporate Services reported net loss was $179 million and adjusted net loss was $127 million, compared with a reported and adjusted net loss of $86 million in the prior year. Adjusted results in the current quarter excluded expenses of $52 million ($62 million pre-tax) from the impact of divestitures. Reported and adjusted results decreased due to lower revenue, driven by treasury-related activities, higher expenses, and the impact of a more favourable tax rate in the prior year.

Q4 2021 vs. Q3 2021

Reported net loss was $179 million and adjusted net loss was $127 million, compared with a reported and adjusted net loss of $52 million in the prior quarter. Reported and adjusted results decreased due to lower revenue, driven by lower securities gains and treasury-related activities, and higher expenses.

For further information on non-GAAP amounts, measures and ratios in this Review of Operating Groups' Performance section, refer to the Non-GAAP and Other Financial Measures section.

Risk Management

Our risk management policies and processes to identify, assess, manage, monitor, mitigate and report our credit and counterparty, market, insurance, liquidity and funding, operational non-financial risk, including technology and cyber-related risks, legal and regulatory, strategic, environmental and social, and reputation risks are outlined in the Enterprise-Wide Risk Management section of BMO's 2021 Annual MD&A.

Condensed Consolidated Financial Statements

Consolidated Statement of Income

(Unaudited) (Canadian $ in millions, except as noted)


For the three months ended


For the twelve months ended



October 31,


July 31,


October 31,


October 31,


October 31,



2021


2021


2020


2021


2020

Interest, Dividend and Fee Income











Loans

$

3,933

$

3,916

$

4,089

$

15,727

$

17,945

Securities


1,042


929


1,009


3,963


4,980

Deposits with banks


53


50


47


197


390



5,028


4,895


5,145


19,887


23,315

Interest Expense











Deposits


737


745


1,082


3,220


6,239

Subordinated debt


42


44


64


195


265

Other liabilities


493


585


469


2,162


2,840



1,272


1,374


1,615


5,577


9,344

Net Interest Income


3,756


3,521


3,530


14,310


13,971

Non-Interest Revenue











Securities commissions and fees


258


264


247


1,107


1,036

Deposit and payment service charges


313


319


305


1,243


1,221

Trading revenues


(98)


135


23


296


15

Lending fees


344


348


339


1,391


1,295

Card fees


126


113


94


442


358

Investment management and custodial fees


522


502


466


1,982


1,807

Mutual fund revenues


419


406


355


1,595


1,417

Underwriting and advisory fees


348


411


259


1,421


1,070

Securities gains, other than trading


180


198


40


591


124

Foreign exchange gains, other than trading


39


41


38


167


127

Insurance revenues


223


1,137


143


1,941


2,178

Investments in associates and joint ventures


65


67


49


248


161

Other


78


100


98


452


406



2,817


4,041


2,456


12,876


11,215

Total Revenue


6,573


7,562


5,986


27,186


25,186

Provision for Credit Losses


(126)


(70)


432


20


2,953

Insurance Claims, Commissions and Changes in Policy Benefit Liabilities


97


984


-


1,399


1,708

Non-Interest Expense











Employee compensation


2,059


2,102


1,950


8,322


7,944

Premises and equipment


900


829


854


3,396


3,202

Amortization of intangible assets


163


157


159


634


620

Travel and business development


133


101


88


397


384

Communications


65


63


71


264


304

Professional fees


184


140


159


607


555

Other


299


292


267


1,889


1,168



3,803


3,684


3,548


15,509


14,177

Income Before Provision for Income Taxes


2,799


2,964


2,006


10,258


6,348

Provision for income taxes


640


689


422


2,504


1,251

Net Income

$

2,159

$

2,275

$

1,584

$

7,754

$

5,097

Earnings Per Share (Canadian $)











Basic

$

3.24

$

3.42

$

2.37

$

11.60

$

7.56

Diluted


3.23


3.41


2.37


11.58


7.55

Dividends per common share


1.06


1.06


1.06


4.24


4.24

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

Consolidated Statement of Comprehensive Income

(Unaudited) (Canadian $ in millions)


For the three months ended


For the twelve months ended



October 31,


July 31,


October 31,


October 31,


October 31,



2021


2021


2020


2021


2020

Net Income

$

2,159

$

2,275

$

1,584

$

7,754

$

5,097

Other Comprehensive Income (Loss), net of taxes











Items that may subsequently be reclassified to net income











Net change in unrealized gains (losses) on fair value through OCI debt securities










Unrealized gains (losses) on fair value through OCI debt securities arising during the period (1)


(151)


22


(11)


(161)


410

Reclassification to earnings of (gains) in the period (2)


(10)


(5)


(7)


(43)


(81)



(161)


17


(18)


(204)


329

Net change in unrealized gains (losses) on cash flow hedges











Gains (losses) on derivatives designated as cash flow hedges arising during the period (3)


(988)


218


(160)


(1,380)


1,513

Reclassification to earnings of (gains) on derivatives designated as











cash flow hedges in the period (4)


(135)


(116)


(55)


(414)


(47)



(1,123)


102


(215)


(1,794)


1,466

Net gains (losses) on translation of net foreign operations











Unrealized gains (losses) on translation of net foreign operations


(293)


521


(143)


(2,207)


373

Unrealized gains (losses) on hedges of net foreign operations (5)


98


(139)


49


496


(96)



(195)


382


(94)


(1,711)


277

Items that will not be reclassified to net income











Unrealized gains on fair value through OCI equity securities arising during the period (6)


13


7


-


20


-

Gains (losses) on remeasurement of pension and other employee











future benefit plans (7)


158


54


(11)


923


(255)

Gains (losses) on remeasurement of own credit risk on financial











liabilities designated at fair value (8)


24


22


21


(196)


(28)



195


83


10


747


(283)

Other Comprehensive Income (Loss), net of taxes


(1,284)


584


(317)


(2,962)


1,789

Total Comprehensive Income (Loss)

$

875

$

2,859

$

1,267

$

4,792

$

6,886

(1) Net of income tax (provision) recovery of $54 million, $(7) million, $4 million for the three months ended, and $58 million, $(143) million for the twelve months ended, respectively.

(2) Net of income tax provision of $3 million, $2 million, $2 million for the three months ended, and $14 million, $25 million for the twelve months ended, respectively.

(3) Net of income tax (provision) recovery of $357 million, $(72) million, $59 million for the three months ended, and $504 million, $(541) million for the twelve months ended, respectively.

(4) Net of income tax provision (recovery) of $49 million, $41 million, $19 million for the three months ended, and $149 million, $16 million for the twelve months ended, respectively.

(5) Net of income tax (provision) recovery of $(35) million, $50 million, $(18) million for the three months ended, and $(180) million, $35 million for the twelve months ended, respectively.

(6) Net of income tax (provision) recovery of $(4) million, $(2) million, $nil million for the three months ended, and $(6) million, $nil million for the twelve months ended, respectively.

(7) Net of income tax (provision) recovery of $(58) million, $(26) million, $3 million for the three months ended, and $(341) million, $88 million for the twelve months ended, respectively.

(8) Net of income tax (provision) recovery of $(9) million, $(9) million, $(8)million for the three months ended, and $70 million, $10 million for the twelve months ended, respectively.

Consolidated Balance Sheet

(Unaudited) (Canadian $ in millions)




As at





October 31,


July 31,


October 31,



2021


2021


2020

Assets







Cash and Cash Equivalents

$

93,261

$

83,825

$

57,408

Interest Bearing Deposits with Banks


8,303


8,793


9,035

Securities







Trading


104,411


102,169


97,834

Fair value through profit or loss


14,210


14,239


13,568

Fair value through other comprehensive income


63,123


64,553


73,407

Debt securities at amortized cost


49,970


48,727


48,466

Investments in associates and joint ventures


1,135


1,088


985



232,849


230,776


234,260

Securities Borrowed or Purchased Under Resale Agreements


107,382


104,738


111,878

Loans







Residential mortgages


135,750


134,374


127,024

Consumer instalment and other personal


77,164


75,092


70,148

Credit cards


8,103


7,866


7,889

Business and government


239,809


241,108


245,662



460,826


458,440


450,723

Allowance for credit losses


(2,564)


(2,824)


(3,303)



458,262


455,616


447,420

Other Assets







Derivative instruments


36,713


36,331


36,815

Customers' liability under acceptances


14,021


14,263


13,493

Premises and equipment


4,454


4,266


4,183

Goodwill


5,378


5,450


6,535

Intangible assets


2,266


2,298


2,442

Current tax assets


1,588


1,145


1,260

Deferred tax assets


1,287


1,209


1,473

Other


22,411


22,648


23,059



88,118


87,610


89,260

Total Assets

$

988,175

$

971,358

$

949,261

Liabilities and Equity







Deposits

$

685,631

$

680,553

$

659,034

Other Liabilities







Derivative instruments


30,815


29,167


30,375

Acceptances


14,021


14,263


13,493

Securities sold but not yet purchased


32,073


28,497


29,376

Securities lent or sold under repurchase agreements


97,556


92,990


88,658

Securitization and structured entities' liabilities


25,486


23,927


26,889

Current tax liabilities


221


154


126

Deferred tax liabilities


192


188


108

Other


37,764


36,950


36,193



238,128


226,136


225,218

Subordinated Debt


6,893


6,973


8,416

Equity







Preferred shares and other equity instruments


5,558


5,848


6,598

Common shares


13,599


13,609


13,430

Contributed surplus


313


310


302

Retained earnings


35,497


34,089


30,745

Accumulated other comprehensive income


2,556


3,840


5,518

Total Equity


57,523


57,696


56,593

Total Liabilities and Equity

$

988,175

$

971,358

$

949,261

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

Consolidated Statement of Changes in Equity

(Unaudited) (Canadian $ in millions)


For the three months ended


For the twelve months ended



October 31,


October 31,


October 31,


October 31,



2021


2020


2021


2020

Preferred Shares and Other Equity Instruments









Balance at beginning of period

$

5,848

$

5,348

$

6,598

$

5,348

Issued during the year


-


1,250


-


1,250

Redeemed during the period


(290)


-


(1,040)


-

Balance at End of Period


5,558


6,598


5,558


6,598

Common Shares









Balance at beginning of period


13,609


13,200


13,430


12,971

Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan


-


257


-


471

Issued under the Stock Option Plan


23


10


122


40

Repurchased for cancellation and/or treasury shares sold/purchased


(33)


(37)


47


(52)

Balance at End of Period


13,599


13,430


13,599


13,430

Contributed Surplus









Balance at beginning of period


310


302


302


303

Stock option expense, net of options exercised


3


-


10


(1)

Other


-


-


1


-

Balance at End of Period


313


302


313


302

Retained Earnings









Balance at beginning of period


34,089


29,902


30,745


28,725

Impact from adopting IFRS 16


-


-


-


(59)

Net income


2,159


1,584


7,754


5,097

Dividends on preferred shares and distributions payable on other equity instruments


(59)


(52)


(244)


(247)

Dividends on common shares


(688)


(685)


(2,746)


(2,723)

Equity issue expense and premium paid on redemption of preferred shares


-


(3)


(6)


(3)

Net discount on sale of treasury shares


(4)


(1)


(6)


(45)

Balance at End of Period


35,497


30,745


35,497


30,745

Accumulated Other Comprehensive Income on Fair Value through OCI Securities, net of taxes








Balance at beginning of period


319


373


355


26

Unrealized gains (losses) on fair value through OCI debt securities arising during the period


(151)


(11)


(161)


410

Unrealized gains (losses) on fair value through OCI equity securities arising during the period


13


-


20


-

Reclassification to earnings of (gains) during the period


(10)


(7)


(43)


(81)

Balance at End of Period


171


355


171


355

Accumulated Other Comprehensive Income on Cash Flow Hedges, net of taxes









Balance at beginning of period


1,308


2,194


1,979


513

Gains (losses) on derivatives designated as cash flow hedges arising during the period


(988)


(160)


(1,380)


1,513

Reclassification to earnings of (gains) on derivatives designated as cash flow hedges in the period


(135)


(55)


(414)


(47)

Balance at End of Period


185


1,979


185


1,979

Accumulated Other Comprehensive Income on Translation









of Net Foreign Operations, net of taxes









Balance at beginning of period


2,464


4,074


3,980


3,703

Unrealized gains (losses) on translation of net foreign operations


(293)


(143)


(2,207)


373

Unrealized gains (losses) on hedges of net foreign operations


98


49


496


(96)

Balance at End of Period


2,269


3,980


2,269


3,980

Accumulated Other Comprehensive Income (Loss) on Pension and Other Employee









Future Benefit Plans, net of taxes









Balance at beginning of period


127


(627)


(638)


(383)

Gains (losses) on remeasurement of pension and other employee future benefit plans


158


(11)


923


(255)

Balance at End of Period


285


(638)


285


(638)

Accumulated Other Comprehensive (Loss) on Own Credit Risk on









Financial Liabilities Designated at Fair Value, net of taxes









Balance at beginning of period


(378)


(179)


(158)


(130)

Gains (losses) on remeasurement of own credit risk on financial liabilities designated at fair value

24


21


(196)


(28)

Balance at End of Period


(354)


(158)


(354)


(158)

Total Accumulated Other Comprehensive Income


2,556


5,518


2,556


5,518

Total Equity

$

57,523

$

56,593

$

57,523

$

56,593

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials

Interested parties are invited to visit BMO's website at www.bmo.com/investorrelations to review the 2021 Annual MD&A and audited annual consolidated financial statements, quarterly presentation materials and supplementary financial and regulatory information package.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly conference call on Friday, December 3, 2021, at 8.00 a.m. (ET). The call may be accessed by telephone at 416-406-0743 (from within Toronto) or 1-800-898-3989 (toll-free outside Toronto), entering Passcode: 1365804#. A replay of the conference call can be accessed until December 28, 2021, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering Passcode: 9195676#.

A live webcast of the call can be accessed on our website at www.bmo.com/investorrelations. A replay can also be accessed on the website.

 

Shareholder Dividend Reinvestment and Share Purchase

Plan (the Plan)

Average market price as defined under the Plan

August 2021: $129.02

September 2021: $129.33 

October 2021: $137.64

 

For dividend information, change in shareholder address

or to advise of duplicate mailings, please contact

Computershare Trust Company of Canada

100 University Avenue, 8th Floor

Toronto, Ontario M5J 2Y1

Telephone: 1-800-340-5021 (Canada and the United States)

Telephone: (514) 982-7800 (international)

Fax: 1-888-453-0330 (Canada and the United States)

Fax: (416) 263-9394 (international)

E-mail: service@computershare.com

 

 

For other shareholder information, please contact

Bank of Montreal

Shareholder Services

Corporate Secretary's Department

One First Canadian Place, 21st Floor

Toronto, Ontario M5X 1A1

Telephone: (416) 867-6785

Fax: (416) 867-6793

E-mail: corp.secretary@bmo.com

 

For further information on this document, please contact

Bank of Montreal

Investor Relations Department

P.O. Box 1, One First Canadian Place, 10th Floor

Toronto, Ontario M5X 1A1

 

To review financial results and regulatory filings and disclosures online, please visit BMO's website at
www.bmo.com/investorrelations.

 

 

BMO's 2021 Annual MD&A, audited consolidated financial statements, annual information form and annual report on Form 40-F (filed with the U.S. Securities and Exchange Commission) are available online at www.bmo.com/investorrelations and at www.sedar.com. Printed copies of the bank's complete 2021 audited consolidated financial statements are available free of charge upon request at 416-867-6785 or corp.secretary@bmo.com.

 

 

Annual Meeting 2022

The next Annual Meeting of Shareholders will be held on Wednesday, April 13, 2022, in Toronto, Ontario.

 

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SOURCE BMO Financial Group

For further information: Media Relations Contact: Paul Gammal, Toronto, paul.gammal@bmo.com, 416-867-6543; Investor Relations Contacts: Christine Viau, Head, Investor Relations, christine.viau@bmo.com, 416-867-6956; Bill Anderson, Director, Investor Relations, bill2.anderson@bmo.com, 416-867-7834