Financial Results Highlights:
Third Quarter 2016 Compared with Third Quarter 2015:
- Net income of f1,245 million, up 4%; adjusted net income1 of f1,295 million, up 5%
- EPS2 of f1.86, up 3%; adjusted EPS1, 2 of f1.94, up 4%
- ROE of 13.0%, compared with 13.6%; adjusted ROE1 of 13.5%, compared with 14.0%
- Provisions for credit losses of f257 million, compared with f160 million
- Basel III Common Equity Tier 1 Ratio of 10.5%
Year-to-Date 2016 Compared with Year-to-Date 2015:
- Net income of f3,286 million, up 3%; adjusted net income1 of f3,625 million, up 6%
- EPS2 of f4.90, up 3%; adjusted EPS1, 2 of f5.42, up 6%
- ROE of 11.4%, compared with 12.3%; adjusted ROE1 of 12.6%, compared with 13.2%
- Provisions for credit losses of f641 million, compared with f484 million
TORONTO, ONTARIO--Marketwired - Aug 23, 2016 - For the third quarter ended July 31, 2016, BMO Financial Group TSX: BMO NYSE: BMO reported net income of f1,245 million or f1.86 per share on a reported basis and net income of f1,295 million or f1.94 per share on an adjusted basis.
"BMO delivered strong results in the third quarter, reflecting the benefits of our consistent execution to deliver an exceptional customer experience," said Bill Downe, Chief Executive Officer, BMO Financial Group.
"Adjusted net income was f1.3 billion, up 5% from last year, and adjusted earnings per share were f1.94, up 4%.
"We had good performance across our operating groups, particularly in Personal & Commercial Banking and BMO Capital Markets. Adjusted operating leverage was very good at 3.8% and the capital position is strong with a Common Equity Tier 1 ratio of 10.5%.
"Our performance year to date reflects our focus on the customer and strong operating discipline. We are confident that our strategy and diversification across businesses, customer segments and geographies will continue to deliver good growth and long-term value to our shareholders," concluded Mr. Downe.
Concurrent with the release of results, BMO announced a fourth quarter 2016 dividend of f0.86 per common share, unchanged from the preceding quarter and up f0.04 per share or 5% from a year ago, equivalent to an annual dividend of f3.44 per common share.
Our complete Third Quarter 2016 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended July 31, 2016, is available online at www.bmo.com/investorrelations and at www.sedar.com.
1 Results and measures in this document are presented on a GAAP basis.
They are also presented on an adjusted basis that excludes the impact
of certain items. Adjusted results and measures are non-GAAP and are
detailed for all reported periods in the Non-GAAP Measures section,
where such non-GAAP measures and their closest GAAP counterparts are
disclosed.
2 All Earnings per Share EPS measures in this document refer to diluted
EPS unless specified otherwise. EPS is calculated using net income
after deductions for net income attributable to non-controlling
interest in subsidiaries and preferred share dividends.
Note: All ratios and percentage changes in this document are based on unrounded numbers.
Total Bank Overview
Net income was f1,245 million for the third quarter of 2016, up 4% from the prior year. EPS was f1.86, up 3% from the prior year.
Adjusted net income was f1,295 million, up f65 million or 5% from the prior year. Adjusted EPS of f1.94 was up 4% year over year, reflecting a good contribution from P&C banking, which benefited from organic growth and the acquired BMO Transportation Finance business, and BMO Capital Markets. Wealth Management results declined marginally primarily due to unfavourable market movements. Return on equity was 13.0% and adjusted return on equity was 13.5%. Book value per share increased 5% from the prior year to f58.06 per share. The Basel III Common Equity Tier 1 Ratio was strong at 10.5%.
Operating Segment Overview
Canadian P&C
Net income of f561 million was up f5 million or 1% from a year ago, with pre-provision, pre-tax earnings up 6%. Revenue was up f73 million or 4% from the prior year due to higher balances across most products. Expenses were up f19 million or 2% reflecting continued disciplined expense management. Operating leverage was positive 2.1%. Year-over-year loan growth was 6% and deposit growth was 8%. Provision for credit losses increased by f43 million to f152 million due to higher provisions in the commercial portfolio and below-trend consumer provisions in the prior year.
In our personal banking business, year-over-year loan and deposit growth was 4% and 9%, respectively. During the quarter, we introduced a new mobile capability that allows customers to open an account in minutes using their smartphone. This new service is the first of its kind from a major Canadian financial institution and demonstrates another way we are using digital capabilities to empower our customers and simplify their lives.
In our commercial banking business, loan and deposit growth was 10% and 5%, respectively. During the quarter, World Finance Magazine named BMO the Best Commercial Bank in Canada for the second consecutive year in their 2016 Banking Awards. The World Finance awards celebrate achievement and innovation in the financial industry, and BMO was recognized as a result of our commitment to building customer relationships, innovative solutions and strong regional and industry focus, particularly in Aboriginal Banking and Women in Business.
U.S. P&C
Net income of f277 million increased f55 million or 24% and adjusted net income of f289 million increased f54 million or 22% from the prior year. All amounts in the remainder of this section are on a U.S. dollar basis.
Net income of f212 million increased f37 million or 21% from a year ago and adjusted net income of f221 million increased f35 million or 19%, including the benefit of BMO Transportation Finance.
Revenue of f896 million increased f169 million or 23%, due to the benefit of BMO Transportation Finance, higher loan and deposit volumes and increased deposit spreads, net of loan spread compression. Adjusted non-interest expense of f530 million increased f66 million or 14%, due to the acquisition of BMO Transportation Finance. Provisions for credit losses of f58 million increased f43 million from the below-trend level in the prior year due to higher provisions in the commercial portfolio and the addition of BMO Transportation Finance. Adjusted operating leverage was positive 9.3%.
Loans grew f10.3 billion or 17%, benefiting from the acquisition of BMO Transportation Finance and organic commercial loan growth.
During the quarter, BMO Harris Bank was presented with the Civic Federation''s Addams-Palmer Award for Exemplary Civic Involvement by a Chicago Institution. The award recognizes the bank''s dedication to volunteerism, corporate responsibility, and its support of diversity.
BMO Wealth Management
Net income was f201 million compared to f210 million a year ago and adjusted net income of f227 million decreased f6 million from a year ago. Traditional wealth adjusted net income was f173 million compared to f177 million a year ago as operating growth across most of our businesses was more than offset by the impact of lower equity markets on average compared to a year ago. Adjusted net income in insurance was f54 million, down f2 million from a year ago as the current quarter was negatively impacted by unfavourable market movements, primarily offset by above-trend results in the underlying business.
Assets under management and administration declined f16 billion or 2% from a year ago to f863 billion, including the impact of unfavourable foreign exchange movements.
For the fourth consecutive year, BMO Private Bank has been named Best Domestic Private Bank, U.S. by Global Financial Market Review. Our business was selected for excellence in client service, high-quality wealth advisors, and innovative solutions.
The BMO Pyrford Global Absolute Return Fund received a Morningstar Analyst Rating™ of "Silver", recognizing the Fund for its long track record of consistent performance derived from a straightforward approach to multi-asset investing.
BMO Capital Markets
Net income of f321 million increased f49 million or 18% from the prior year as strong revenue growth offset higher provisions for credit losses. Revenue increased f87 million or 9%. Excluding the impact of the stronger U.S. dollar, revenue increased f77 million or 8%. There was higher client activity in Trading Products, and in Investment and Corporate Banking there was higher corporate banking revenue, partially offset by lower advisory revenue. There were lower net securities gains in both businesses. Provisions for credit losses of f37 million increased by f23 million, primarily due to higher oil and gas provisions. Non-interest expenses were well-controlled, down f7 million or 1%, excluding the impact of the stronger U.S. dollar, and operating leverage was positive 8.9%.
BMO Capital Markets was named a 2016 Greenwich Share Leader in Canadian Equity Trading Share and in Canadian Equity Research/Advisory Vote Share, as well as a 2016 Greenwich Quality Leader in Canadian Equity Research Product and Analyst Service Quality and in Canadian Equity Sales and Corporate Access Quality.
During the quarter we also entered into a definitive agreement to acquire the business of Greene Holcomb Fisher, a boutique U.S. mergers and acquisitions advisory firm. The transaction closed on August 1, 2016.
Corporate Services
Corporate Services net loss for the quarter was f115 million compared with a net loss of f68 million a year ago. Corporate Services adjusted net loss for the quarter was f105 million, compared with an adjusted net loss of f68 million a year ago.
Adjusted results in these Total Bank Overview and Operating Segment Overview sections are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.
Capital
BMO''s Basel III Common Equity Tier 1 CET1 Ratio was strong at 10.5% at July 31, 2016. The CET1 Ratio increased from 10.0% at the end of the second quarter as higher capital more than offset higher risk-weighted assets.
Provision for Credit Losses
The total provision for credit losses was f257 million, an increase of f97 million from the prior year due to higher provisions in Canadian and U.S. P&C and BMO Capital Markets.
Caution
The foregoing sections contain forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.
Regulatory Filings
Our continuous disclosure materials, including our interim filings, annual Management''s Discussion and Analysis and audited consolidated financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders and Proxy Circular are available on our website at www.bmo.com/investorrelations, on the Canadian Securities Administrators'' website at www.sedar.com and on the EDGAR section of the SEC''s website at www.sec.gov.
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.
Non-GAAP Measures
Results and measures in this MD&A are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with International Financial Reporting Standards IFRS. References to GAAP mean IFRS. They are also presented on an adjusted basis that excludes the impact of certain items as set out in the table below. Results and measures that exclude the impact of Canadian/U.S. dollar exchange rate movements on our U.S. segment are non-GAAP measures please see the Foreign Exchange section for a discussion of the effects of changes in exchange rates on our results. Management assesses performance on a reported basis and on an adjusted basis and considers both to be useful in assessing underlying ongoing business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. It also permits readers to assess the impact of certain specified items on results for the periods presented and to better assess results excluding those items if they consider the items to not be reflective of ongoing results. As such, the presentation may facilitate readers'' analysis of trends, as well as comparisons with our competitors. Adjusted results and measures are non-GAAP and as such do not have standardized meaning under GAAP. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from or as a substitute for GAAP results.
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Non-GAAP Measures
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Canadian f in millions, except as Q3- Q2- Q3- YTD- YTD-
noted 2016 2016 2015 2016 2015
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Reported Results
Revenue 5,633 5,101 4,826 15,809 14,407
Insurance claims, commissions and
changes in policy benefit
liabilities CCPB 691 407 218 1,464 989
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Revenue, net of CCPB 4,942 4,694 4,608 14,345 13,418
Provision for credit losses 257 201 160 641 484
Non-interest expense 3,092 3,312 2,971 9,674 9,089
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Income before income taxes 1,593 1,181 1,477 4,030 3,845
Provision for income taxes 348 208 285 744 654
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Net Income 1,245 973 1,192 3,286 3,191
EPS f 1.86 1.45 1.80 4.90 4.75
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Adjusting Items Pre-tax
Amortization of acquisition-
related intangible assets 1 40 40 40 123 120
Acquisition integration costs 2 27 24 9 73 33
Cumulative accounting adjustment
3 - - - 85 -
Restructuring cost 4 - 188 - 188 149
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Adjusting items included in
reported pre-tax income 67 252 49 469 302
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Adjusting Items After tax
Amortization of acquisition-
related intangible assets 1 31 31 32 95 94
Acquisition integration costs 2 19 16 6 50 26
Cumulative accounting adjustment
3 - - - 62 -
Restructuring cost 4 - 132 - 132 106
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Adjusting items included in
reported net income after tax 50 179 38 339 226
Impact on EPS f 0.08 0.28 0.06 0.52 0.35
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Adjusted Results
Revenue 5,633 5,101 4,826 15,893 14,407
Insurance claims, commissions and
changes in policy benefit
liabilities CCPB 691 407 218 1,464 989
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Revenue, net of CCPB 4,942 4,694 4,608 14,429 13,418
Provision for credit losses 257 201 160 641 484
Non-interest expense 3,025 3,060 2,922 9,289 8,787
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Income before income taxes 1,660 1,433 1,526 4,499 4,147
Provision for income taxes 365 281 296 874 730
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Net income 1,295 1,152 1,230 3,625 3,417
EPS f 1.94 1.73 1.86 5.42 5.10
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Adjusted results and measures in this table are non-GAAP amounts or non-GAAP measures.
1 These expenses were charged to the non-interest expense of the
operating groups. Before and after-tax amounts for each operating group
are provided on pages 17, 18, 19, 21 and 23 of our Third Quarter 2016
Report to Shareholders.
2 Acquisition integration costs related to F&C are charged to Wealth
Management. Acquisition integration costs related to BMO Transportation
Finance are charged to Corporate Services, since the acquisition
impacts both Canadian and U.S. P&C businesses. Acquisition costs are
primarily recorded in non-interest expense.
3 Cumulative accounting adjustment recognized in other non-interest
revenue related to foreign currency translation, largely impacting
prior periods.
4 Restructuring charge in Q2-2016, as we accelerate the use of technology
to enhance customer experience and focus on driving operational
efficiencies. Restructuring charge in YTD-2015, primarily due to
restructuring to drive operational efficiencies. Restructuring cost is
recorded in non-interest expense.
Caution Regarding Forward-Looking Statements
Bank of Montreal''s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2016 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian, U.S. and international economies.
By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.
The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, tax or economic policy; the level of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks; changes to our credit ratings; general political conditions; global capital markets activities; the possible effects on our business of war or terrorist activities; outbreaks of disease or illness that affect local, national or international economies; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; and our ability to anticipate and effectively manage risks associated with 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 see the Enterprise-Wide Risk Management section on pages 86 to 117 of BMO''s 2015 Annual Report, which outlines certain key factors and risks that may affect Bank of Montreal''s future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.
Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on 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, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies. See the Economic Review and Outlook section of our Third Quarter 2016 Report to Shareholders.
INVESTOR AND MEDIA PRESENTATION
Investor Presentation Materials
Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our 2015 Annual Report, this quarterly news release, presentation materials and supplementary financial information package online.
Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on Tuesday, August 23, 2016, at 2:00 p.m. EDT. At that time, senior BMO executives will comment on results for the quarter and respond to questions from the investor community. The call may be accessed by telephone at 416-695-9753 from within Toronto or 1-888-789-0089 toll-free outside Toronto. A replay of the conference call can be accessed until Monday, December 5, 2016, by calling 905-694-9451 from within Toronto or 1-800-408-3053 toll-free outside Toronto and entering passcode 5740558.
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 site.
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Shareholder Dividend Reinvestment and For other shareholder information,
Share Purchase Plan the Plan including the notice for our normal
Average market price as defined under course issuer bid, please contact
the Plan Bank of Montreal
May 2016: f83.00 Shareholder Services
June 2016: f81.84 Corporate Secretary''s Department
July 2016: f84.41 One First Canadian Place, 21st Floor
Toronto, Ontario M5X 1A1
For dividend information, change in Telephone: 416 867-6785
shareholder address or to advise of Fax: 416 867-6793
duplicate mailings, please contact E-mail: corp.secretary@bmo.com
Computershare Trust Company of Canada
100 University Avenue, 9th Floor For further information on this
Toronto, Ontario M5J 2Y1 report, please contact
Telephone: 1-800-340-5021 Canada and Bank of Montreal
the United States Investor Relations Department
Telephone: 514 982-7800 P.O. Box 1, One First Canadian Place,
international 10th Floor
Fax: 1-888-453-0330 Canada and the Toronto, Ontario M5X 1A1
United States
Fax: 416 263-9394 international To review financial results online,
E-mail: service@computershare.com please visit our website at
http://www.bmo.com/. To review
regulatory filings and disclosures
online, please visit our website at
www.bmo.com/investorrelations.
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Our 2015 annual MD&A, audited annual consolidated financial statements 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 2015 audited financial statements are available free of charge upon request at 416-867-6785 or corp.secretary@bmo.com.
® Registered trademark of Bank of Montreal
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Annual Meeting 2017
The next Annual Meeting of Shareholders will be held on
Tuesday, April 4, 2017, in Toronto, Ontario.
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