Summary

  • Bank of Montreal is a leading bank has more then 200 years old history.
  • In Canada the bank has a network of almost 900 branches, contact centres, digital banking platforms and over 3,200 automated teller machines.
  • In USA the bank has a network of more than 525 branches, dedicated contact centres, digital banking platforms, and nationwide access to more than 40,000 automated teller machines.

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Company Overview

Bank of Montreal (NYSE:BMO, TSX:BMO) is a leading bank driven by a single purpose: to Boldly Grow the Good in business and life. Everywhere the company do business, we’re focused on building, investing and transforming how the company work to drive performance and continue growing the good.1

In 1817, the Montreal Bank became Canada’s first bank, and went on to play a critical role in the building of a nation, its financial systems, and the prosperity of its people. The bank recently celebrate its 200 yeas of establishment.

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Business Segments

Canadian Personal and Commercial Banking

Canadian Personal and Commercial Banking provides financial products and services to eight million customers. Personal Banking helps customers make real financial progress through a network of almost 900 branches, contact centres, digital banking platforms and over 3,200 automated teller machines. Commercial Banking serves clients across Canada and commercial bankers are trusted advisors and partners to their clients, delivering sector and industry expertise, local presence and a full suite of commercial products and services.2

Personal Banking provides customers with a wide range of products and services, including chequing and savings accounts, credit cards, mortgages, personal loans and everyday financial and investment advice, with an overall focus on providing customers with an exceptional experience in every interaction, and helping them make real financial progress

Commercial Banking provides clients with a comprehensive range of commercial products and services, including multiple financing options and treasury and payment solutions, as well as risk management products. Commercial bankers partner with clients, anticipating their financial needs, and sharing expertise and knowledge to help them grow and manage their businesses.

U.S. Personal and Commercial Banking

U.S. Personal and Commercial Banking serves more than two million customers by providing a banking experience with a human touch, while delivering a broad range of financial services. Personal Banking serves customers seamlessly across an extensive network of more than 525 branches, dedicated contact centres, digital banking platforms, and nationwide access to more than 40,000 automated teller machines. Commercial Banking serves clients across the United States and commercial bankers are trusted advisors and partners to their clients, delivering sector and industry expertise, local presence and a full suite of commercial products and services.

Personal Banking offers a variety of products and services, including deposits, home lending, consumer credit, small business lending, credit cards and other banking services; with an overall focus on providing customers with an exceptional experience in every interaction and helping them make real financial progress.

Commercial Banking provides clients with a comprehensive range of commercial products and services, including multiple financing options and treasury and payment solutions, as well as risk management products. Commercial bankers partner with clients, anticipating their financial needs and sharing expertise and knowledge to help them grow and manage their businesses.

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BMO Wealth Management

BMO Wealth Management serves a full range of clients from individuals and families to business owners and institutions. It offers a wide spectrum of asset, wealth management and insurance products and services aimed at helping clients plan, grow, protect and transition their wealth. The asset management business is focused on making a positive impact and delivering innovative client solutions.

BMO Private Wealth provides full-service investing and wealth advisory services to high net worth and ultra-high net worth clients, leveraging strong financial planning and advice-based solutions such as investment management, business succession planning, trust and estate services, and philanthropy.

BMO InvestorLine is a digital investing service that offers clients three ways to invest: a top-ranked self-directed online trading platform, which allows clients to take control of their investments; adviceDirect™, which combines the freedom of self-directed investing with personalized advice and support; and SmartFolio™, a digital solution that matches a portfolio to the client’s goals while a professional investment team handles day-to-day investment management.

BMO Wealth Management U.S. offers financial solutions to mass affluent, high net worth and ultra-high net worth families and businesses.

BMO Global Asset Management provides investment management and trust and custody services to institutional, retail and high net worth investors around the world. BMO Mutual Funds and BMO Exchange Traded Funds offer clients innovative investment solutions across a range of channels.

BMO Insurance is a diversified insurance and wealth solutions provider and a leader in pension de-risking solutions. It manufactures individual life, critical illness and annuity products as well as segregated funds. It also offers group creditor and travel insurance to bank customers in Canada.

BMO Capital Markets

BMO Capital Markets is a North American-based financial services provider offering a complete range of products and services to corporate, institutional and government clients. BMO Capital Markets has approximately 2,700 professionals in 35 locations around the world, including 22 offices in North America.

Investment and Corporate Banking offers debt and equity capital-raising services to clients, as well as loan origination and syndication, balance sheet management solutions and treasury management services. The division also provides strategic advice on mergers and acquisitions (M&A), restructurings and recapitalizations, as well as valuation and fairness opinions. Investment and Corporate Banking also offers trade finance and risk mitigation services to support the international business activities of clients, and provides a wide range of banking and other operating services tailored to North American and international financial institutions.

Global Markets offers research and access to financial markets for institutional, corporate and retail clients through an integrated suite of sales and trading solutions that include debt, foreign exchange, interest rate, credit, equity, securitization and commodities. New product development and origination services are also offered, as well as risk management advice and services to hedge against fluctuations in a variety of key inputs, including interest rates and commodities prices. In addition, Global Markets provides funding and liquidity management to clients.

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Financial Highlights

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BMO Third Quarter 2021 Results

For the third quarter ended July 31, 2021, BMO Financial Group recorded net income of $2,275 million or $3.41 per share on a reported basis, and net income of $2,292 million or $3.44 per share on an adjusted basis.3

“Operating momentum across its diversified businesses continues to drive strong financial performance. The company recorded third quarter adjusted earnings per share of $3.44, with strong pre-provision pre-tax earnings of $2.9 billion, up 12% year-over-year, driven by revenue growth of 10%,” said Darryl White, Chief Executive Officer, BMO Financial Group.

“BMO is executing strategies and investing in its businesses to deliver strong returns and efficiency improvements, which this quarter, delivered positive operating leverage of 2.1%, an efficiency ratio of 55.7%, a 110 basis point improvement from last year, and return on equity of 17.6%. The company's leadership in risk and balance sheet management remains a key differentiator and contributed to continued strong credit metrics and a robust capital position with a CET1 ratio of 13.4%.”

“The company's consistent financial performance enables it to deliver on its vision for a sustainable future. This quarter, the company continued to advance its work to address the impact of climate change and champion inclusivity, and made a long-term pledge to supporting the development of affordable housing. With the economic recovery continuing to take hold, and as communities adapt to the most recent pandemic developments, BMO is committed to helping its clients make real financial progress and supporting their growth ambitions.” concluded Mr. White.

Adjusted results in the current quarter excluded the impact of divestitures and a partial reversal of restructuring charges recorded in the fourth quarter of 2019, related to severance. Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior years. Reported and adjusted net income increased from the prior year, driven by net revenue growth of 10%, higher expenses, including higher performance-based compensation reflective of strong revenue, and the impact of lower provisions for credit losses. Net income increased across all operating groups.

Return on equity (ROE) was 17.5%, an increase from 9.4% in the prior year, and adjusted ROE was 17.6%, an increase from 9.6%. Reported and adjusted return on tangible common equity (ROTCE) were both 19.8% in the current quarter, an increase from 11.1% on both a reported and an adjusted basis in the prior year.

Concurrent with the release of results, BMO announced a fourth quarter 2021 dividend of $1.06 per common share, unchanged from the prior quarter and the prior year. The quarterly dividend of $1.06 per common share is equivalent to an annual dividend of $4.24 per common share.

Canadian P&C

Reported and adjusted net income were $815 million, both increasing $496 million from the prior year. Results were driven by a 14% increase in revenue with higher net interest income and non-interest revenue, higher expenses and a decrease in the provision for credit losses.

During the quarter, the company were named Best Commercial Bank in Canada by World Finance magazine for the seventh consecutive year, recognized for its innovative and client-centric approach, commitment to digital transformation and experience, and holistic understanding of market trends and changing client needs – especially during the COVID-19 pandemic. This award speaks to its continued focus and commitment to its clients, and its expertise across industries to meet clients’ evolving and unique needs. In addition, to help its business clients through the challenging times brought on by the pandemic, the company extended its Lifeworks Wellness Assistance Program to Canadian Business Banking clients across Canada, at no additional cost.

U.S. P&C

Reported net income was $553 million, an increase of $290 million from the prior year, and adjusted net income was $559 million, an increase of $286 million.

Reported net income was US$448 million, an increase of US$256 million from the prior year, and adjusted net income was US$453 million, an increase of US$254 million. Results were driven by a 7% increase in revenue with higher net interest income and non-interest revenue, modestly higher expenses and a decrease in the provision for credit losses.

During the quarter, BMO Harris Bank and Lively, Inc. (Lively), creators of the modern Health Savings Account (HSA), announced that they will bring a modern HSA experience to eligible individual BMO customers and commercial banking clients. Beginning this fall, new HSAs will be delivered by Lively, providing BMO customers with a more engaging HSA experience, designed to help them make real financial progress through more powerful health savings tools.

BMO Wealth Management

Reported net income was $401 million, an increase of $60 million or 18% from the prior year, and adjusted net income was $406 million, an increase of $57 million or 16%. Results were driven by an 11% increase in net revenue, partially offset by higher expenses. Traditional Wealth reported net income was $328 million, an increase of $57 million or 21%, and adjusted net income was $333 million, an increase of $54 million or 19%, driven by higher revenue, primarily from growth in client assets, including stronger global markets, partially offset by higher expenses. Insurance net income was $73 million, relatively unchanged from the prior year.

BMO has been recognized as the Best Private Bank by World Finance magazine for the eleventh consecutive year. This award speaks to BMO Private Wealth’s dedicated support to its clients and their families, as they navigate the complexity of managing their wealth during times of uncertainty. In addition, BMO Global Asset Management (BMO GAM) Canada was recognized at the Responsible Investment Association's 2021 Leadership Awards, receiving top honours in the Stewardship and Market Education categories. BMO GAM won the Stewardship Award for its work to accelerate Canadian diversity and inclusion beyond gender, and the Market Education Award for the development and launch of the MyESGTM analytics tool, a first-of-its-kind self-assessment tool that enables financial advisors to better achieve its clients’ ESG objectives.

BMO Capital Markets

Reported net income was $558 million, an increase of $132 million or 31% from the prior year, and adjusted net income was $564 million, an increase of $129 million or 30%. Results were driven by continued strong revenue performance, with higher Investment and Corporate Banking revenue partially offset by lower Global Markets revenue, higher expenses driven by increased performance-based compensation, and a recovery of credit losses, compared with elevated levels of provisions in the prior year.

During the quarter, BMO Capital Markets announced it is establishing a dedicated Energy Transition Group to support its clients in their pursuit of energy transition opportunities. This new group is expected to accelerate BMO Capital Markets' participation in the economy's energy transition by providing knowledge, tools and support its industry groups as the company engage with clients on their energy transition endeavors. The company also continue to leverage its deep industry expertise and insights across different sectors to support its clients, and acted as left lead arranger and left lead bookrunner to support OMERS’ buyout of Gastro Health.

Corporate Services

Reported and adjusted net loss for the quarter were $52 million, compared with a reported and adjusted net loss of $117 million in the prior year. Adjusted results increased due to higher revenue, driven by higher securities gains and treasury-related activities, partially offset by higher expenses. Adjusted results in this Third Quarter Performance Review section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.

Capital

BMO’s Common Equity Tier 1 (CET1) Ratio was 13.4% as at July 31, 2021, an increase from 13.0% at the end of the second quarter of fiscal 2021, driven by retained earnings growth.

Credit Quality

Total recovery of credit losses was $70 million, compared with a provision for credit losses of $1,054 million in the prior year. The total recovery of credit losses ratio was 6 basis points, compared with a provision for credit losses ratio of 89 basis points in the prior year. The provision for credit losses on impaired loans was $71 million, a decrease of $375 million from $446 million in the prior year, largely due to lower commercial provisions in its P&C businesses, and in BMO Capital Markets. The provision for credit losses on impaired loans ratio was 6 basis points, compared with 38 basis points in the prior year. There was a $141 million recovery of credit losses on performing loans in the current quarter, compared with a $608 million provision in the prior year. The $141 million recovery of credit losses in the current 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 balance growth, while the $608 million provision in the prior year reflected the impact of the extraordinary and highly uncertain environment on credit conditions, the economy and scenario weights.

References

  1. ^ https://www.bmo.com/main/about-bmo/
  2. ^ https://www.bmo.com/ir/archive/en/bmo_ar2020.pdf
  3. ^ https://www.bmo.com/ir/qtrinfo/1/2021-q3/Q321_EarningsRelease.pdf
Tags: US:BMO CA:BMO
Created by Asif Farooqui on 2021/10/25 10:22
     

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