BMO Financial Group Reports Solid Results for the Second Quarter of 2013

JCN Newswire / 2013年5月30日 12時43分

TORONTO, ONTARIO, May 30, 2013 - (JCN Newswire) - BMO Financial Group (TSX:BMO)(NYSE:BMO) and Bank of Montreal -

Financial Results Highlights:

Second Quarter 2013 Compared with Second Quarter 2012:
-- Net income of $975 million, down 5%; adjusted net income1 of $997 million, up 2%
-- EPS2 of $1.42, down 6%; adjusted EPS1,2 of $1.46, up 1%
-- ROE of 14.2%, compared with 16.2%; adjusted ROE1 of 14.5%, compared with 15.4%
-- Provisions for credit losses of $145 million, compared with $195 million; adjusted provisions for credit losses1 of $110 million, compared with $151 million
-- Basel III Common Equity Ratio is strong at 9.7%

Year-to-Date 2013 Compared with Year-to-Date 2012:
-- Net income of $2,023 million, down 5%; adjusted net income1 of $2,038 million, up 4%
-- EPS2 of $2.95, down 6%; adjusted EPS1,2 of $2.97, up 4%
-- ROE of 14.6%, compared with 16.7%; adjusted ROE1 of 14.7%, compared with 15.2%
-- Provisions for credit losses of $323 million, compared with $336 million; adjusted provisions for credit losses1 of $206 million, compared with $242 million

For the second quarter ended April 30, 2013, BMO Financial Group reported net income of $975 million or $1.42 per share on a reported basis and net income of $997 million or $1.46 per share on an adjusted basis.

"BMO's second quarter reflects solid operating performance," said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "Our wealth, capital markets, and U.S. personal and commercial banking businesses each had a good quarter. We saw continuing volume growth in Canadian personal and commercial lending as a result of new business opened. P&C Canada is taking share and is confident in its ability to convert new customers into multi-product relationships.

"We continue to have strong performance in commercial banking. The core U.S. commercial and industrial portfolio is up 17 per cent year over year, marking the sixth quarter of sequential growth. In Canada, where we have the number two market share in small and medium-sized commercial loans, both commercial loan and deposit balances increased 12 per cent year over year.

"Management's focus on organizational efficiency is a multi-year commitment. Our first priority is sustainable revenue growth - and the disciplined management of expense is an ongoing dimension of profitable growth. Our strong capital position continues to give us flexibility. During the quarter, our Basel III Common Equity Tier 1 Ratio increased, while we also purchased four million shares under our normal course issuer bid.

"Looking forward, we have an advantaged business mix and are well-positioned for the current environment given our footprint in an improving U.S. Midwest economy, combined with our strength in commercial banking, capital markets and wealth. These are important differentiators. At the same time, we continue to focus on what's necessary to support future growth, and are confident that the value we create for customers will translate into financial performance for the bank," concluded Mr. Downe.

(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 in the Adjusted Net Income section, and (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.

Concurrent with the release of results, BMO announced a third quarter 2013 dividend of $0.74 per common share, unchanged from the preceding quarter and up $0.04 per share from a year ago, equivalent to an annual dividend of $2.96 per common share.

Our strong capital ratios enabled us to initiate a normal course issuer bid. During the second quarter, we repurchased four million common shares under our share repurchase program.

Our complete Second Quarter 2013 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended April 30, 2013, is available online at www.bmo.com/investorrelations and at www.sedar.com .

Operating Segment Overview

P&C Canada

Net income was $430 million, little changed from $433 million a year ago. Revenue was consistent with the prior year as the effects of strong volume growth across most products were offset by the impact of lower net interest margin. Expenses were up 3% due to continued investment in the business, including higher employee-related costs with increases in front-line resources across a number of roles. We expanded our branch network by opening or upgrading 18 locations across the country.

The successful execution of our strategy is resulting in strong loan growth and commercial deposit growth, positioning us well for revenue growth in an improving interest rate environment. This, combined with our continued focus on reducing costs through process simplification, will drive future net income growth.

Our focus on making money make sense for our customers, and offering simplified and innovative products and exceptional customer service has resulted in customer loyalty scores that continue to be top-tier, as measured by net promoter score. These strong customer loyalty scores are being translated into strong balance sheet growth with year-over-year loan growth of 10% and deposit growth of 7%. We have also seen an increase in the average number of products held by our customers.

In personal banking, strong lending and deposit balance growth continues. Our investment campaign was a success with strong mutual fund growth and good growth in tax-free savings account balances. We are generating positive early results from the launch of our Spring Home Financing campaign.

In commercial banking, we continue to rank second in Canadian business banking loan market share for small and medium-sized loans due to our focus on offering the integrated products, services and advice that our diverse commercial customer base needs. Our commercial loan and deposit growth continues to show good momentum with year-over-year growth of 12%. Recently, BMO was awarded a seven-year contract to provide a corporate card travel, payment and expense management program for the Government of Canada. This quarter, we also completed the acquisition of the assets of Aver Media LP, a leading private Canadian-based film and TV media lending company.

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

Net income of $152 million increased $9 million or 6% from $143 million in the second quarter a year ago. Adjusted net income was $163 million, an increase of $5 million or 3% from a year ago due to reduced expenses and lower provisions for credit losses. Revenue was 4% lower as the effects of increased commercial lending fees and strong commercial loan growth were more than offset by reductions in certain loan portfolios, net interest margin and deposit fees.

Total loans continued to grow, with year-over-year and sequential increases in average loans, led by continued strong growth in the core commercial and industrial (C&I) loan portfolio. The core C&I portfolio increased by $3.3 billion or 17% from a year ago.

Deposits remained steady with minimal change on a sequential and year-over-year basis.

We continue to support increased home ownership of quality affordable housing in our local communities. During the quarter, we announced our Affordable Housing Grant Program to help put new home purchases or refinancings within reach of our customers. The program offers up to $2,000 to be used towards a down payment or the closing costs on the purchase or refinancing of a primary home.

Private Client Group

Net income was $141 million, down $6 million or 4% from a year ago. Adjusted net income was $148 million, down $5 million or 3% from a year ago. Adjusted net income in Private Client Group (PCG), excluding Insurance, was $114 million, up $13 million or 14% from a year ago. Results reflect higher revenue, driven by growth in new client assets and market appreciation, and a continued focus on productivity. Adjusted net income in Insurance was $34 million, down $18 million or 34% from a year ago. The decrease was due to the $34 million after-tax impact of a decline in long-term interest rates in the current quarter relative to a modest gain a year ago.

Assets under management and administration grew by $57 billion or 12% from a year ago to $522 billion, driven by growth in new client assets and market appreciation.
The BMO Funds U.S. was recently ranked among the Best U.S. Mutual Fund Families of 2012 according to Barron's annual survey. Our U.S. mutual fund family has now surpassed $10 billion in assets under management.

BMO Asset Management Inc. introduced seven new Exchange Traded Funds, increasing its fund line-up to 55 offerings. These innovative new ETFs are designed to help investors construct their portfolios more effectively and, with additional U.S. dollar offerings, investors now have more choice than ever before.

For the third consecutive year, Global Banking and Finance Review named BMO Harris Private Banking the Best Private Bank in Canada, citing its leadership in providing excellent wealth management solutions, access to comprehensive investment solutions and commitment to improved quality.

Harris myCFO won two awards, after being short-listed in four different categories, at the 2013 Private Asset Management Awards.

BMO Capital Markets

Net income was $275 million, up $42 million or 18% from the prior year. There was stronger revenue performance from our Trading Products business, most notably from interest rate activities. We also saw higher corporate banking revenue from our Investment and Corporate Banking business.

During the quarter we earned a number of awards, recognizing our commitment to focusing on clients. BMO Capital Markets was named Canada's Best Investment Bank for the third time and World's Best Metals and Mining Investment Bank for the fourth consecutive year by Global Finance.

BMO Capital Markets participated in 129 new issues in the quarter including 41 corporate debt deals, 28 government debt deals, 51 common equity transactions and nine issues of preferred shares, raising $52 billion.

Corporate Services

Corporate Services net loss for the quarter was $26 million, compared with net income of $73 million a year ago. On an adjusted basis, the net loss was $26 million, compared with net income of $3 million a year ago. The decrease in reported results was significantly larger than the decrease in adjusted results primarily due to high revenues from run-off structured credit activities in reported results a year ago. Adjusting items are detailed in the Adjusted Net Income section and in the Non-GAAP Measures section. Corporate Services adjusted results were lower than a year ago due to lower revenues, partially offset by reduced expenses.

Adjusted Net Income

Adjusted net income was $997 million for the second quarter of 2013, up $15 million or 2% from a year ago. Adjusted earnings per share were $1.46, up 1% from $1.44 a year ago.

Management has designated certain amounts as adjusting items and has adjusted GAAP results so that we can discuss and present financial results without the effects of adjusting items to facilitate understanding of business performance and related trends. Management assesses performance on a GAAP basis and on an adjusted basis and considers both to be useful in the assessment of underlying business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. Adjusted results and measures are non-GAAP and, together with items excluded in determining adjusted results, are disclosed in more detail in the Non-GAAP Measures section, along with comments on the uses and limitations of such measures.

Items excluded from second quarter 2013 results in the determination of adjusted results totalled $22 million of net loss or $0.04 per share and were comprised of:

-- the $73 million after-tax net benefit for credit-related items in respect of the acquired Marshall & Ilsley (M&I) performing loan portfolio, consisting of $176 million for the recognition in net interest income of a portion of the credit mark on the portfolio (including $68 million for the release of the credit mark related to early repayment of loans), net of a $57 million provision for credit losses (comprised of specific provisions of $65 million and a decrease in the collective allowance of $8 million) and related income taxes of $46 million. These credit-related items in respect of the acquired M&I performing loan portfolio can significantly impact both net interest income and the provision for credit losses in different periods over the life of the acquired M&I performing loan portfolio;
-- costs of $50 million ($31 million after tax) for integration of M&I including amounts related to system conversions, restructuring and other employee-related charges, consulting fees and marketing costs related to rebranding activities;
-- a restructuring charge of $82 million ($59 million after tax) to align our cost structure with the current and future business environment. This action is a part of the broader effort underway to improve productivity in the bank;
-- a decrease in the collective allowance for credit losses of $22 million ($11 million after tax) on loans other than the M&I purchased loan portfolio;
-- the $6 million before and after-tax benefit from run-off structured credit activities; and
-- the amortization of acquisition-related intangible assets of $31 million ($22 million after tax).

All of the above adjusting items were recorded in Corporate Services except the amortization of acquisition-related intangible assets, which is charged to the operating groups.

The impact of adjusting items for comparative periods is summarized in the Non-GAAP Measures section.

Caution

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

The foregoing sections contain adjusted results and measures, which are non-GAAP. Please see the Non-GAAP Measures section.

Management's Discussion and Analysis

Management's Discussion and Analysis (MD&A) commentary is as of May 29, 2013. 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, unless indicated otherwise. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended April 30, 2013, as well as the audited consolidated financial statements for the year ended October 31, 2012, and Management's Discussion and Analysis for fiscal 2012. The material that precedes this section comprises part of this MD&A.

The annual MD&A includes a comprehensive discussion of our 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 April 30, 2013, of Bank of Montreal's disclosure controls and procedures (as defined in the rules of the Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective.

There were no changes in our internal control over financial reporting during the quarter ended April 30, 2013, that 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.

Regulatory Filings

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

Original release: http://mwne.ws/176vbiv

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials

Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our 2012 Annual Report, this quarterly news release, presentation materials and a supplementary financial information package online.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly conference call on Wednesday, May 29, 2013, 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, August 26, 2013, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering passcode 1254867.

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.

Media Relations Contacts
Ralph Marranca, Toronto, ralph.marranca@bmo.com , +1-416-867-3996
Ronald Monet, Montreal, ronald.monet@bmo.com , +1-514-877-1873

Investor Relations Contacts
Sharon Haward-Laird, Head, Investor Relations, sharon.hawardlaird@bmo.com , +1-416-867-6656
Andrew Chin, Director, andrew.chin@bmo.com , +1-416-867-7019

Chief Financial Officer
Tom Flynn, Executive Vice-President and CFO,
tom.flynn@bmo.com , +1-416-867-4689

Corporate Secretary
Barbara Muir, Senior Vice-President, Deputy General Counsel,
Corporate Affairs and Corporate Secretary
corp.secretary@bmo.com , +1-416-867-6423



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