TORONTO, ONTARIO--Marketwire - August 28, 2012 -
BMO Financial Group TSX: BMONYSE: BMO and BMO Bank of Montreal - Third Quarter 2012 Report to Shareholders BMO Financial Group Reports Strong Quarterly Results, Increasing Net Income by 37% Year Over Year to f970 Million, and Increases Dividend by 3% Financial Results Highlights1: Third Quarter 2012 Compared with Third Quarter 2011:
-- Net income of f970 million, up f262 million or 37%
-- Adjusted net income2 of f1,013 million, up f157 million or 18%
-- Reported EPS3 of f1.42, up 30%
-- Adjusted EPS23 of f1.49, up 11%
-- Reported ROE of 14.5%, compared with 13.3%
-- Adjusted ROE2 of 15.2%, compared with 16.4%
-- Reported provisions for credit losses of f237 million; adjusted provisions of f116 million, down f129 million
-- Common Equity Ratio strengthens to 10.31%, using a Basel II approach
-- Announced a f0.72 pidend per common share for the fourth quarter, up f0.02 or 3%
Year-to-Date 2012 Compared with Year-to-Date 2011:
-- Net income of f3,107 million, up f761 million or 32%
-- Adjusted net income2 of f2,967 million, up f524 million or 21%
-- Reported EPS3 of f4.56, up 22%
-- Adjusted EPS23 of f4.35, up 11%
-- Reported provisions for credit losses of f573 million; adjusted provisions of f358 million, down f469 million
For the third quarter ended July 31, 2012, BMO Financial Group reported strong net income of f970 million or f1.42 per share. On an adjusted basis, net income was f1,013 million or f1.49 per share.
"BMO has reported strong quarterly financial results," said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "Our business continues to deliver consistent and attractive profitability within a sound risk framework and the growth we are experiencing remains consistent with our strategy. "We increased the pidend, reflecting our strong capital position and our confidence in our continued ability to generate sustained earnings growth. We also moved the target payout range to 40 to 50 per cent, which gives us more flexibility to grow the bank.
"Our core franchise, P&C Canada, experienced good volume growth across most product lines, including residential mortgages; we are attracting new customers and steadily increasing the amount of business existing customers are choosing to entrust to us. The recent changes to Canadas mortgage market announced by the Minister of Finance were prudent, responsible and timely; they align with BMOs risk practices and ongoing efforts to encourage Canadians to borrow smartly.
"Consistent with the confidence we expressed throughout our U.S. investor day in June, this quarters earnings reflect strong performance from our U.S. businesses. The U.S. P&C business continues to generate healthy organic growth in commercial loans and is executing against its plans.
"Earnings in our wealth business were up quarter over quarter when adjusted to exclude the unfavourable impact of movements in long-term interest rates on the banks insurance business.
"BMO Capital Markets delivered good performance with higher revenue and net income than last quarter. These results reflect the benefits of the persified revenue mix of our capital markets business.
"Across BMO, our sharp focus on improving efficiency will ensure we are investing in what our customers value most. Mobile PayPass, North American mobile banking and e-statements, BMO alerts that send account updates to customers mobile devices and online appointment booking are just a few examples of the type of functionality weve rolled out for customers in the past twelve months - this in addition to a complete refresh of retail online banking in Canada that gained high approval ratings from customers and industry analysts alike.
"Overall, each of our businesses is delivering against a high standard of customer experience and is on track to finish the year with strong performance in a highly competitive environment," concluded Mr. Downe.
Concurrent with the release of results, BMO announced a fourth quarter pidend of f0.72 per common share, a two cents per share increase from the preceding quarter and equivalent to an annual pidend of f2.88 per common share.
1 Effective the first quarter of 2012, BMOs consolidated financial statements and the accompanying Interim Managements Discussion and Analysis MD&A are prepared in accordance with International Financial Reporting Standards IFRS, as described in Note 1 to the unaudited interim consolidated financial statements for the quarter ended April 30, 2012. Amounts in respect of comparative periods for 2011 have been restated to conform to the current presentation. References to GAAP mean IFRS, unless indicated otherwise.
2 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. Items excluded from third quarter 2012 results in the determination of adjusted results totalled a charge of f43 million after tax, comprised of a f47 million after-tax net benefit of credit-related items in respect of the acquired Marshall & Ilsley Corporation M&I performing loan portfolio; costs of f105 million f65 million after tax for the integration of the acquired business; a f33 million f24 million after tax charge for amortization of acquisition-related intangible assets on all acquisitions; a loss on run-off structured credit activities of f15 million f15 million after tax; and a decrease in the collective allowance for credit losses of f15 million f14 million after tax. Items excluded from the year-to-date adjusted results totalled net income of f140 million after tax and consisted of a f216 million after-tax net benefit of credit-related items in respect of the acquired M&I performing loan portfolio; a f249 million f155 million after tax charge for the integration of the acquired business; a f100 million f72 million after tax charge for amortization of acquisition-related intangible assets; the benefit of run-off structured credit activities of f197 million f194 million after tax; restructuring charges of f99 million f69 million after tax to align our cost structure with the current and future business environment; and a decrease in the collective allowance for credit losses of f33 million f26 million after tax. All of the adjusting items are reflected in results of Corporate Services except for the amortization of acquisition-related intangible assets, which is charged across the operating groups. Management assesses performance on both a GAAP basis and adjusted basis and considers both bases to be useful in assessing underlying, ongoing business performance. Presenting results on both bases provides readers with an enhanced understanding of how management views results and may enhance readers analysis of performance. Adjusted results and measures are non-GAAP and are detailed in the Adjusted Net Income section, and for all reported periods in the Non-GAAP Measures section of the MD&A, where such non-GAAP measures and their closest GAAP counterparts are disclosed.
3 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 pidends. Note: All ratios and percentage changes in this report are based on unrounded numbers. Operating Segment Overview
P&C Canada Net income was f453 million, up f10 million or 2.4% from a year ago. Reported results reflect provisions for credit losses in BMOs operating groups on an expected loss basis. On a basis that adjusts reported results to reflect provisions on an actual loss basis, P&C Canadas net income was up f20 million or 4.6%. Results reflect higher revenues from increased volume across most products, partially offset by lower net interest margins. The volume growth was achieved while managing expenses prudently and continuing to invest in our business. There was good quarter-over-quarter growth, with loans increasing 2.9% and deposits up 1.6%, as well as improvements in market share for these products.
We are focused on our customers and helping them make money make sense. Our continued investment in our branches, automated banking machines ABMs and online and mobile banking platforms are making it easier for more customers to access our products and services. This year we have opened or upgraded 28 locations across the country. Our ABM network continues to grow as we have added more than 300 cash dispensing ABMs so far this year. More and more of our customers are using our online and mobile banking services including Tap & Go and email notice features. In addition, cross-selling of products to both personal and commercial customers continues to grow, while customer loyalty, as measured by net promoter score, continues to improve in both our personal and commercial businesses.
In personal banking our award winning mortgage product continues to help customers become mortgage free faster, pay less interest and protect themselves against rising interest rates. With the success of this product, we have also seen improved customer retention and the foundation for new and expanded long-term relationships. We are confident that we are well positioned for future growth.
In commercial banking, our goal is to become the bank of choice for businesses across Canada by providing the knowledge, advice and guidance that customers value. BMO was the only Canadian bank to receive the prestigious 2012 Model Bank Award from the research group Celent, for our Online Banking for Business Platform. This annual award program identifies model banks and recognizes them for their achievements in the strategic development, effective deployment, and improvements to business and customer experience with banking technology. We continue to rank #2 in Canadian business banking loan market share.
P&C U.S. all amounts in USf Net income of f127 million increased f32 million or 34% from f95 million in the third quarter a year ago. Adjusted net income was f143 million, up f40 million or 37% from a year ago as a result of the acquisition of Marshall & Ilsley Corporation in July 2011. Adjusted net income increased 4.1% from the second quarter. The core commercial loan portfolio continues to grow, having now increased in three sequential quarters. BMO Harris Bank recently launched a free mobile application for iPhone and Google Android devices. Our retail customers can now check account balances, transfer funds, locate branches, pay bills, and use remote cheque deposit with this application. We registered more than 41,500 new users in the first month of the offering in July.
