All Releases
Subscribe
Subscribe to BMO Financial Group

29.05.2019 – 13:58

BMO Financial Group

BMO Financial Group Reports Second Quarter 2019 Results

Toronto (ots/PRNewswire)

Financial Results Highlights

Second Quarter 2019 Compared With Second Quarter 2018:

- Net income of $1,497 million, up 20%; adjusted net income1 of 
  $1,522 million, up 4% 
- EPS2 of $2.26, up 22%; adjusted EPS1, 2 of $2.30, up 5% 
- Net revenue3 of $5,652 million, up 8% 
- ROE of 13.6%, up from 12.6%; adjusted ROE1 of 13.9% compared with 
  14.9% 
- Provision for credit losses (PCL) of $176 million compared with 
  $160 million in the prior year 
- Common Equity Tier 1 Ratio of 11.3% 
- Dividend increased $0.03 from the prior quarter to $1.03, up 7% 
  from the prior year  

Year-to-Date 2019 Compared With Year-to-Date 2018:

- Net income of $3,007 million, up 35%; adjusted net income1,4,5 of 
  $3,060 million, up 6% 
- EPS2 of $4.54, up 38%; adjusted EPS1,2 of $4.62, up 7% 
- Net revenue3 of $11,243 million, up 7% 
- ROE of 13.6%, up from 11.0%; adjusted ROE1 of 13.9% compared with 
  14.4% 
- Provision for credit losses of $313 million compared with $301 
  million in the prior year  

For the second quarter ended April 30, 2019, BMO Financial Group (TSX: BMO) (NYSE: BMO) recorded net income of $1,497 million or $2.26 per share on a reported basis, and net income of $1,522 million or $2.30 per share on an adjusted basis.

"BMO's continued strong performance this quarter is highlighted by good momentum across our U.S. platform and in our North American Commercial Banking business, reflecting our differentiated approach to growing customer relationships. For the first half of the year, adjusted earnings per share are up 7% and our U.S. segment contributed 35% to BMO's adjusted earnings," said Darryl White, Chief Executive Officer, BMO Financial Group.

"This growth is supported by our strong capital position, a stable credit environment, and the continued resiliency of the Canadian and U.S. economies. We are taking disciplined actions to grow each of our businesses, including optimizing our teams and developing innovative solutions that enhance customer experience. These actions are deepening loyalty and trust and position the bank for long-term growth," concluded Mr. White.

Return on equity (ROE) was 13.6%, up from 12.6% in the prior year, and adjusted ROE was 13.9% compared with 14.9%. Return on tangible common equity (ROTCE) was 16.4%, up from 15.6% in the prior year and adjusted ROTCE was 16.4% compared with 18.0% in the prior year.

Concurrent with the release of results, BMO announced a third quarter 2019 dividend of $1.03 per common share, up $0.03 or 3% from the preceding quarter and up $0.07 per share or 7%from the prior year. The quarterly dividend of $1.03 per common share is equivalent to an annual dividend of $4.12 per common share.

(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 
           deducting    
           total        
           preferred    
           share        
           dividends.   
(3)        Net revenue  
           is reported  
           on a basis   
           that nets    
           insurance    
           claims,      
           commissions  
           and changes  
           in policy    
           benefit      
           liabilities  
           (CCPB)       
           against      
           insurance    
           revenue.     
(4)        Reported net 
           income in the
           first quarter
           of 2018      
           included a   
           $425 million 
           (US$339      
           million)     
           charge due to
           the          
           revaluation  
           of our U.S.  
           net deferred 
           tax asset as 
           a result of  
           the enactment
           of the U.S.  
           Tax Cuts and 
           Jobs Act.    
(5)        Reported net 
           income in the
           second       
           quarter of   
           2018 included
           a $192       
           million      
           after-tax    
           ($260 million
           pre-tax)     
           restructuring
           charge,      
           primarily    
           related to   
           severance, as
           a result of  
           an ongoing   
           bank-wide    
           initiative to
           simplify how 
           we work,     
           drive        
           increased    
           efficiency,  
           and invest in
           technology to
           move our     
           business     
           forward.     
           Restructuring
           cost is      
           included in  
           non-interest 
           expense in   
           Corporate    
           Services.    
Note: All 
ratios and
percentage
changes in
this      
document  
are based 
on        
unrounded 
numbers.   

Our complete Second Quarter 2019 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended April 30, 2019, is available online at www.bmo.com/investorrelations and at www.sedar.com.

Second Quarter Operating Segment Overview

Canadian P&C

Reported net income of $615 million increased $27 million or 5% and adjusted net income of $615 million increased $26 million or 5% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. Results reflect good revenue growth, partially offset by higher expenses and higher provisions for credit losses.

During the quarter, we won two Celent 2019 Model Bank Awards. The Celent Model Bank Award for Payment Services Hub Implementation recognizes delivery of our new BMO Payment Hub, a technology platform that integrates multiple payment services in one central location, which will enable us to deliver new products more quickly and cost-effectively. The Celent Model Bank Award for Innovation Enablement recognizes our BMO InnoV8 program, which tests and develops ideas to transform a customer's financial journey and is the foundation for multiple award-winning digital banking solutions and patent applications. These awards are a testament to our commitment to creating and investing in services to better support our customers.

U.S. P&C

Reported net income of $406 million increased $58 million or 17% and adjusted net income of $417 million increased $58 million or 16% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets.

Reported net income of US$306 million increased US$35 million or 13% and adjusted net income of US$314 million increased US$35 million or 12% from the prior year, largely due to good revenue growth and lower provisions for credit losses, partially offset by higher expenses.

For the third consecutive year, BMO Harris Bank was recognized as a Best Place to Work for LGBTQ Equality on the 2019 Corporate Equality Index (CEI), a U.S. national benchmarking survey and report on corporate policies and practices related to LGBTQ workplace equality, administered by the Human Rights Campaign Foundation. The 2019 CEI evaluates LGBTQ-related policies and practices including non-discrimination workplace protections, domestic partner benefits, transgender-inclusive healthcare benefits, competency programs and engagement with the LGTBQ community.

BMO Wealth Management

Reported net income of $305 million increased $9 million or 3% and adjusted net income of $315 million increased $8 million or 3% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. Traditional wealth reported net income of $226 million and adjusted net income of $236 million was relatively unchanged compared with the prior year as the impact of strong net interest income growth and improved equity markets were largely offset by targeted growth investments and lower performance fees in asset management. Insurance net income was $79 million, an increase of $10 million or 14%, primarily due to favourable market movements.

In the 2019 Brokerage Report Card, issued by Investment Executive, over 90% of BMO Nesbitt Burns advisors said they would recommend their firm.

BMO Capital Markets

Reported net income was $249 million and adjusted net income was $253 million compared with $286 million on both a reported and an adjusted basis in the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets and acquisition integration costs. Strong performance in Investment and Corporate Banking and higher Trading Products revenue were largely offset by a severance expense and higher provisions for credit losses.

BMO Capital Markets received the Lead Manager Sustainability Bond Award from Environmental Finance for our role in the supranational, sub-sovereign and agency (SSA) space and our industry-defining sustainable bonds. We were also named World's Best Metals and Mining Investment Bank for the tenth consecutive year by Global Finance.

Corporate Services

Reported and adjusted net loss for the quarter was $78 million compared with a reported net loss of $272 million and an adjusted net loss of $78 million in the prior year. Adjusted results in the prior year exclude a $192 million after-tax restructuring charge and acquisition integration costs. Adjusted results were unchanged, with lower expenses, offset by lower recoveries of credit losses.

Adjusted results in this Operating Segment Overview section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Capital

BMO's Common Equity Tier 1 (CET1) Ratio was 11.3% at April 30, 2019. The CET1 Ratio decreased from 11.4% at the end of the first quarter as retained earnings growth was more than offset by strong business growth and a small impact from other changes in CET1 Capital.

Provision for Credit Losses

Total provision for credit losses was $176 million, an increase of $16 million from the prior year. The provision for credit losses on impaired loans of $150 million decreased $22 million from $172 million in the prior year, primarily due to lower provisions in our U.S. P&C business, largely resulting from a recovery on a commercial loan. There was a provision for credit losses on performing loans of $26 million in the current quarter compared with a recovery of credit losses of $12 million in the prior year.

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 U.S. Securities and Exchange Commission'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 document 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 that may not be reflective of ongoing results. 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 corresponding adjusted results. 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.

Non-GAAP Measures

(Canadian $ in      Q2-2019 Q1-2019 Q2-2018 YTD-2019 YTD-2018
millions,except as                                           
noted)                                                       
Reported Results                                             
Revenue             6,213   6,517   5,580   12,730   11,218  
Insurance claims,   (561)   (926)   (332)   (1,487)  (693)   
commissions and                                              
changes in policy                                            
benefit liabilities                                          
(CCPB)                                                       
Revenue, net of     5,652   5,591   5,248   11,243   10,525  
CCPB                                                         
Total provision for (176)   (137)   (160)   (313)    (301)   
credit losses                                                
Non-interest        (3,595) (3,557) (3,525) (7,152)  (6,925) 
expense                                                      
Income before       1,881   1,897   1,563   3,778    3,299   
income taxes                                                 
Provision for       (384)   (387)   (317)   (771)    (1,080) 
income taxes                                                 
Net income          1,497   1,510   1,246   3,007    2,219   
EPS ($)             2.26    2.28    1.86    4.54     3.29    
Adjusting Items                                              
(Pre-tax) (1)                                                
Acquisition         (2)     (6)     (4)     (8)      (8)     
integration costs                                            
(2)                                                          
Amortization of     (30)    (31)    (29)    (61)     (57)    
acquisition-related                                          
intangible assets                                            
(3)                                                          
Restructuring costs -       -       (260)   -        (260)   
(4)                                                          
Adjusting items     (32)    (37)    (293)   (69)     (325)   
included in                                                  
reported pre-tax                                             
income                                                       
Adjusting Items                                              
(After tax) (1)                                              
Acquisition         (2)     (4)     (2)     (6)      (5)     
integration costs                                            
(2)                                                          
Amortization of     (23)    (24)    (23)    (47)     (44)    
acquisition-related                                          
intangible assets                                            
(3)                                                          
Restructuring costs -       -       (192)   -        (192)   
(4)                                                          
U.S. net deferred   -       -       -       -        (425)   
tax asset                                                    
revaluation (5)                                              
Adjusting items     (25)    (28)    (217)   (53)     (666)   
included in                                                  
reported net income                                          
after tax                                                    
Impact on EPS ($)   (0.04)  (0.04)  (0.34)  (0.08)   (1.03)  
Adjusted Results                                             
Revenue             6,213   6,517   5,580   12,730   11,218  
Insurance claims,   (561)   (926)   (332)   (1,487)  (693)   
commissions and                                              
changes in policy                                            
benefit liabilities                                          
(CCPB)                                                       
Revenue, net of     5,652   5,591   5,248   11,243   10,525  
CCPB                                                         
Total provision for (176)   (137)   (160)   (313)    (301)   
credit losses                                                
Non-interest        (3,563) (3,520) (3,232) (7,083)  (6,600) 
expense                                                      
Income before       1,913   1,934   1,856   3,847    3,624   
income taxes                                                 
Provision for       (391)   (396)   (393)   (787)    (739)   
income taxes                                                 
Net income          1,522   1,538   1,463   3,060    2,885   
EPS ($)             2.30    2.32    2.20    4.62     4.32     
(1)           Adjusting items are
              generally included 
              in Corporate       
              Services, with the 
              exception of the   
              amortization of    
              acquisition-related
              intangible assets  
              and certain        
              acquisition        
              integration costs, 
              which are charged  
              to the operating   
              groups.            
(2)           Acquisition        
              integration costs  
              related to the     
              acquired BMO       
              Transportation     
              Finance business   
              are charged to     
              Corporate Services,
              since the          
              acquisition impacts
              both Canadian and  
              U.S. P&C           
              businesses.        
              KGS-Alpha          
              acquisition        
              integration costs  
              are reported in BMO
              Capital Markets.   
              Acquisition        
              integration costs  
              are recorded in    
              non-interest       
              expense.           
(3)           These expenses were
              charged to the     
              non-interest       
              expense of the     
              operating groups.  
              Before-tax and     
              after-tax amounts  
              for each operating 
              group are provided 
              on pages 13, 14,   
              16, 18 and 20 of   
              our Second Quarter 
              2019 Report to     
              Shareholders.      
(4)           In Q2-2018, we     
              recorded a         
              restructuring      
              charge, primarily  
              related to         
              severance, as a    
              result of an       
              ongoing bank-wide  
              initiative to      
              simplify how we    
              work, drive        
              increased          
              efficiency and     
              invest in          
              technology to move 
              our business       
              forward.           
              Restructuring costs
              are included in    
              non-interest       
              expense in         
              Corporate Services.
(5)           Charge related to  
              the revaluation of 
              our U.S. net       
              deferred tax asset 
              as a result of the 
              enactment of the   
              U.S. Tax Cut and   
              Jobs Act. For more 
              information see the
              Critical Accounting
              Estimates - Income 
              Taxes and Deferred 
              Tax Assets section 
              on page 119 of     
              BMO's 2018 Annual  
              Report.            
Certain      
comparative  
figures have 
been         
reclassified 
to conform   
with the     
current      
period's     
presentation.
Adjusted     
results and  
measures in  
this table   
are non-GAAP 
amounts or   
non-GAAP     
measures.     

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 in this document may include, but are not limited to, statements with respect to our objectives and priorities for fiscal 2019 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, the regulatory environment in which we operate and the results of or outlook for our operations or for the Canadian, U.S. and international economies, and include statements of our management. Forward-looking statements are typically identified by words such as "will", "would", "should", "believe", "expect", "anticipate", "project", "intend", "estimate", "plan", "goal", "target", "may" and "could".

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. 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; the Canadian housing market; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; 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, and the effect of such changes on funding costs; 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 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, including with respect to reliance on third parties; changes to our credit ratings; political conditions, including changes relating to or affecting economic or trade matters; 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; information and cyber security, including the threat of 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; 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 see 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, model, legal and regulatory, business, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section which begin on page 78 of BMO's 2018 Annual Report, and the Risk Management section in this document, 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 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.

Material economic assumptions underlying the forward-looking statements contained in this document are set out in the 2018 Annual Report under the heading "Economic Developments and Outlook", as updated by the Economic Review and Outlook section set forth in this document. 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 governments, historical relationships between economic and financial variables, and the risks to the domestic and global economy. Please see the Economic Review and Outlook section of our Second Quarter 2019 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 2018 annual MD&A and audited annual consolidated financial statements, quarterly presentation materials and supplementary financial information package.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly conference call on Wednesday, May 29, 2019, at 8:00 a.m. (ET). The call may be accessed by telephone at 416-641-2144 (from within Toronto) or 1-888-789-9572 (toll-free outside Toronto), entering Passcode: 3792150#. A replay of the conference call can be accessed until Monday, August 26, 2019, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering Passcode: 9055681#.

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.

Shareholder Dividend      For other shareholder        
Reinvestment and Share    information, including the   
Purchase Plan (the Plan)  notice for our normal course 
Average market price as   issuer bid, please contact   
defined under the         Bank of MontrealShareholder  
PlanFebruary 2019:        ServicesCorporate Secretary's
$98.92March 2019:         DepartmentOne First Canadian 
$100.76April 2019:        Place, 21st FloorToronto,    
$105.72For dividend       Ontario M5X 1A1Telephone:    
information, change in    (416) 867-6785Fax: (416)     
shareholder address or to 867-6793E-mail:              
advise of duplicate    corp.secretary@bmo.comFor    
mailings, please contact  further information on this  
Computershare Trust       document, please contactBank 
Company of Canada100      of MontrealInvestor Relations
University Avenue, 8th    DepartmentP.O. Box 1, One    
FloorToronto, Ontario M5J First Canadian Place, 10th   
2Y1Telephone:             FloorToronto, Ontario M5X 1A1
1-800-340-5021 (Canada    To review financial results  
and the United            and regulatory filings and   
States)Telephone: (514)   disclosures online, please   
982-7800                  visit our website at         
(international)Fax:       www.bmo.com/investorrelations
1-888-453-0330 (Canada    .                            
and the United                                         
States)Fax: (416)                                      
263-9394                                               
(international)E-mail:                                 
service@computershare.com                            

Our 2018 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 2018 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

Media Relations Contacts: Paul Gammal, Toronto, paul.gammal@bmo.com, +1-416-867-6543; François Morin, Montreal, francois1.morin@bmo.com, +1-514-877-1873; Investor Relations Contacts: Jill Homenuk, Head, Investor Relations, jill.homenuk@bmo.com, +1-416-867-4770; Christine Viau, Director, Investor Relations, christine.viau@bmo.com, +1-416-867-6956

Original content of: BMO Financial Group, transmitted by news aktuell

Additional press releases: BMO Financial Group
Additional press releases: BMO Financial Group