BMO Financial Group Reports Strong Net Income of $4.2 billion for 2012, Driving Strong EPS Growth
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BMO Financial Group Reports Strong Net Income of $4.2 billion for 2012, Driving Strong EPS Growth - JCN Newswire
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BMO Financial Group Reports Strong Net Income of $4.2 billion for 2012, Driving Strong EPS Growth

TORONTO, ONTARIO, Dec 5, 2012 - (JCN Newswire) - BMO Financial Group (TSX:BMO)(NYSE:BMO) and BMO Bank of Montreal -

Financial Results Highlights(1):

Fiscal 2012 Compared with Fiscal 2011:
-- Net income of $4,189 million, up $1,075 million or 35%
-- Adjusted net income(2) of $4,092 million, up $817 million or 25%
-- EPS(3) of $6.15, up 27%
-- Adjusted EPS(2)(3) of $6.00, up 18%
-- Provisions for credit losses of $765 million; adjusted provisions of $471 million, down $637 million
-- Common Equity Ratio increases to 10.5% using a Basel II approach

Fourth Quarter 2012 Compared with Fourth Quarter 2011:
-- Net income of $1,082 million, up $314 million or 41%
-- Adjusted net income(2) of $1,125 million, up $293 million or 35%
-- EPS(3) of $1.59, up 43%
-- Adjusted EPS(2)(3) of $1.65, up 38%
-- ROE of 15.6%, compared with 12.7%
-- Adjusted ROE(2) of 16.3%, compared with 13.9%
-- Provisions for credit losses of $192 million; adjusted provisions of $113 million, down $168 million

For the fourth quarter ended October 31, 2012, BMO Financial Group reported strong net income of $1,082 million or $1.59 per share. On an adjusted basis, net income was $1,125 million or $1.65 per share. For fiscal 2012, net income was $4,189 million and EPS was $6.15. Adjusted net income was $4,092 million and adjusted EPS was $6.00.

(1) Effective the first quarter of 2012, BMO's consolidated financial statements and the accompanying Interim Management's Discussion and Analysis (MD&A) or Financial Review are prepared in accordance with International Financial Reporting Standards (IFRS), as described in Note 1 to the audited consolidated financial statements for the year ended October 31, 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 fourth quarter 2012 results in the determination of adjusted results totalled a charge of $43 million after tax, comprised of a $35 million after tax net benefit of credit-related items in respect of the acquired Marshall & Ilsley Corporation (M&I) performing loan portfolio; costs of $153 million ($95 million after tax) for the integration of the acquired business; a $34 million ($24 million after tax) charge for amortization of acquisition-related intangible assets on all acquisitions; a benefit on run-off structured credit activities of $67 million ($67 million after tax); a restructuring charge of $74 million ($53 million after tax) to align our cost structure for the current and future business environment; and a decrease in the collective allowance for credit losses of $49 million ($27 million after tax). 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 Financial Review, 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 dividends.

Note: All ratios and percentage changes in this report are based on unrounded numbers.

"BMO's fourth quarter results mark a strong finish to a pivotal year for the bank," said Bill Downe, President and Chief Executive Officer, BMO Financial Group. "In the quarter we successfully completed the conversion of the core banking platform in the U.S. and turned the page on the purchase of M&I, announced 24 months ago. Since the fourth quarter of 2010, we have generated reported earnings of $7.3 billion and increased BMO''s book value from $19.3 billion to $26.2 billion - an increase of 18%. During the year we increased the dividend and grew net loans and acceptances by 7.4% and deposits by 7.1%. A concerted focus on efficiency was reflected in a reduction of 700 full-time employees.

"P&C Canada experienced good quarter-over-quarter balance sheet growth - with loans and deposits up. We continue to see growth in residential mortgage market share, and believe the changes to Canada''s mortgage market announced earlier this year, which are aligned with BMO''s risk practices and ongoing efforts to encourage Canadians to borrow smartly, are having the desired moderating effect on housing prices in most markets.

"Over the past two years, with the acquisition of Marshall & Ilsley Corporation, we have fundamentally transformed the bank, changed its growth trajectory, and enhanced long-term value for shareholders. BMO Harris Bank has strong deposit market share positions in our core Midwest markets, and our U.S. footprint has doubled in size.

"During the year over 600 U.S. bank branches have been refreshed; high visibility BMO signage and promotion have been put in place; and 1,370 bank machines were raised to a new standard. Our reputation as a consistent commercial lender continues to grow. The core commercial and industrial portfolio in the U.S. has now increased in four sequential quarters - up 15 per cent from a year ago.

"Our efforts to attract new client assets in our wealth businesses have been effective. Of note, our U.S. wealth segment, which has an advantaged private banking and asset management platform, delivered over $100 million in adjusted earnings in 2012. In Canada, we continue to innovate as a leader in the ETF market and BMO InvestorLine''s introduction of adviceDirect means that even if you are a do-it-yourself investor, you can get specific investment recommendations to help you manage your portfolio so you don''t have to feel like you''re on your own.

"BMO Capital Markets continues to deliver very good earnings with strong ROE. Our reputation as experienced advisors who help clients navigate emerging opportunities continues to grow.

"We are confident that each of our U.S. businesses - personal and commercial, wealth, and capital markets - has the scale to compete for new customers. We are well-positioned to leverage the investments we have made in each of these businesses and focus on organic growth.

"I would like to thank our customers for the trust they place in the bank and in particular acknowledge the customers who were part of the conversion of the core banking platform in the U.S. for their continuing loyalty. We recognize that critical to the bank''s success is our ability to serve customers exceptionally well and help them succeed. The bank''s employees are at the heart of our differentiation strategy; they continuously drive forward our vision to define great customer experience and I would like to acknowledge them for their hard work and the great improvements being made in the way work gets done more efficiently for our customers.

"As we look ahead to 2013, we are confident that each of our businesses is positioned to deliver high quality sustained earnings growth against a high standard of customer experience," concluded Mr. Downe.

Concurrent with the release of results, BMO announced a first quarter 2013 dividend of $0.72 per common share, unchanged from the preceding quarter and equivalent to an annual dividend of $2.88 per common share. BMO''s capital position is strong. We announced our intention, subject to the approval of OSFI and the Toronto Stock Exchange (TSX), to initiate a normal course issuer bid for up to 15,000,000 of the bank's own common shares.

BMO's 2012 audited annual consolidated financial statements and accompanying management''s discussion & analysis (MD&A) will be available today at www.bmo.com, along with the supplementary financial information report.

Operating Segment Overview

P&C Canada

Net income was $439 million in the fourth quarter, unchanged from a year ago. Reported results reflect provisions for credit losses in BMO's operating groups on an expected loss basis. On a basis that adjusts reported results to reflect provisions on an actual loss basis, P&C Canada''s net income was up $26 million or 6.2%. Results reflect the combination of higher volumes across most products and lower net interest margin. Expense growth of 0.7% year over year reflects good expense management with investments for growth.

We are focused on making money make sense for our customers while making it easier for them to use our products and services. Our distribution network continues to expand, with 51 branch locations opened or upgraded across the country, and the addition of more than 350 cash dispensing ABMs in 2012. Enhancements to online capabilities continue to provide customers with easy and quick access to our services, and more and more customers are using online and mobile features including email alerts and Mobile PayPass functionality.

In personal banking, with the success and momentum of our home financing campaign, we have established many new customer relationships while expanding existing ones through increased cross-selling of our products. In addition, our online appointment booking capabilities and leads management engine are enabling our sales force to work with customers to meet their needs and make money make sense for them. We are confident in the continued success of our business.

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. Our award winning Online Banking for Business platform is helping customers manage their businesses better. We have seen positive early results following the recent launch of BMO Business Bundles, a product that provides flexible banking solutions that help make money make sense for business customers. We continue to rank #2 in Canadian business banking loan market share for small and medium sized loans.

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

Net income of $132 million decreased $21 million or 14% from $153 million in the fourth quarter a year ago. Adjusted net income was $147 million, down $24 million or 13% from strong results a year ago due to lower revenue, due primarily to a reduction in certain loan portfolios and regulatory changes that lowered interchange fees. Adjusted net income increased 2.9% from the third quarter.

The core commercial and industrial loan portfolio continues to grow, having now increased in four sequential quarters with growth of $2.6 billion or 15% from the fourth quarter a year ago.

In the Chicago area, BMO Harris Bank''s deposits market share improved to 11.6% and we maintained our second place ranking. We have good relationships in place with our customers, who see BMO Harris Bank as a strong and stable leader, and deepening those relationships is helping to drive growth in market share. Our Wisconsin deposits market share was even higher, at 15.8% with a second place ranking.

During the quarter, we completed the integration of the operating systems of Harris Bank and M&I, giving customers access to a much larger network of branches and ABMs. In conjunction with the completion of the integration, we unveiled new signage on a number of the branches and our complete network of 630 branches and more than 1,370 ABMs now displays BMO Harris Bank signage.

Private Client Group

Net income was $166 million, up $29 million or 21% from a year ago. Adjusted net income was $171 million, up $28 million or 20% from a year ago. Adjusted net income in Private Client Group (PCG), excluding Insurance, was $95 million, down $8 million or 7.1% from a year ago. These results reflect higher revenue across most businesses, offset by higher strategic initiative spending to drive future revenue growth. Adjusted net income in PCG Insurance was $76 million, up $36 million or 86% from a year ago. These results benefited from changes to our investment portfolio to improve asset-liability management and the annual review of actuarial assumptions. Lower interest rates reduced PCG Insurance adjusted net income by $7 million in the current quarter and by $19 million a year ago.

Assets under management and administration grew $40 billion from a year ago to $465 billion due to market appreciation and new client assets.

On September 10, 2012, BMO InvestorLine launched adviceDirect, an innovative and personalized service that provides investing advice to online investors. The first of its kind in Canada, adviceDirect puts investors in control by providing specific investment recommendations to help them manage their investment portfolios.

BMO Capital Markets

Net income for the quarter was $293 million, more than double the level of a year ago. Revenues in the current quarter were significantly higher, as the market environment improved from the weak conditions of the previous year. These conditions provided more business opportunities, driving solid improvement in our trading revenue, particularly in interest rate and equity trading and increased underwriting fees.

Within BMO Capital Markets we remain focused on our core clients and staying true to our North American strategy of consistently delivering a great client experience while evolving in response to the market.

During the quarter, BMO Capital Markets was named as the North America M&A Investment Bank Team of the Year, Americas, by Global M&A Network at the Americas M&A Atlas Awards for our quality of advice on a series of award winning deals. The awards honour outstanding firms, top deals and influential dealmakers from the North American and South American mergers, acquisitions, corporate and private equity deal communities.

BMO Capital Markets participated in 134 new issues in the quarter including 38 corporate debt deals, 29 government debt deals, 57 common equity transactions and 10 issues of preferred shares, raising $52 billion.

Corporate Services

Net income for the quarter was $54 million, an improvement of $160 million from a year ago. On an adjusted basis, net income was $74 million, an improvement of $141 million from a year ago. Adjusting items are detailed in the Adjusted Net Income section and in the Non-GAAP Measures section. Adjusted provisions for credit losses were $173 million lower than a year ago due in part to a $132 million ($82 million after tax) recovery of provisions for credit losses on the M&I purchased credit impaired loan portfolio, primarily due to the timing and amount of repayments of loans in excess of expectations at closing. The remaining decrease was attributable to lower provisions charged to Corporate Services under BMO''s expected loss provisioning methodology, which is explained in the Review of Operating Groups'' Performance section at the end of this document.

Acquisition of Marshall & Ilsley Corporation (M&I)

On July 5, 2011, BMO completed the acquisition of M&I. In this document, M&I is generally referred to as the ''acquired business'' and other acquisitions are specifically identified. Activities of the acquired business are primarily reflected in the P&C U.S., Private Client Group and Corporate Services segments, with a small amount included in BMO Capital Markets.

The acquired business contributed $90 million to reported net income and $169 million to adjusted net income for the quarter. It contributed $647 million to reported net income and $730 million to adjusted net income for the fiscal year. In 2011, it contributed $105 million to net income and $180 million to adjusted net income.

Adjusted Net Income

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 fourth quarter 2012 results in the determination of adjusted results reduced reported net income by $43 million or $0.06 per share and were comprised of:

-- the $35 million after tax net benefit for credit-related items in respect of the M&I purchased performing loan portfolio, including $185 million for the recognition in net interest income of a portion of the credit mark on the portfolio (including $69 million for the release of the credit mark related to early repayment of loans), net of a $128 million provision for credit losses (comprised of an increase in the collective allowance of $25 million and specific provisions of $103 million) and related income taxes of $22 million. These credit-related items in respect of the M&I purchased performing loan portfolio can significantly impact both net interest income and the provision for credit losses in different periods over the life of the portfolio;

-- costs of $153 million ($95 million after tax) for integration of the acquired business including amounts related to system conversions, restructuring and other employee-related charges, consulting fees and marketing costs in connection with customer communications and rebranding activities;

-- the $67 million before and after tax benefit from run-off structured credit activities (our credit protection vehicle and structured investment vehicle). These vehicles are consolidated on our balance sheet under IFRS and results primarily reflect valuation changes associated with these activities that have been included in trading revenue;

-- a decrease in the collective allowance for credit losses of $49 million ($27 million after tax) on loans other than the M&I purchased loan portfolio;

-- a restructuring charge of $74 million ($53 million after tax) to help align our cost structure for the current and future business environment. This action is part of the broader effort underway in the bank to improve productivity; and

-- the amortization of acquisition-related intangible assets of $34 million ($24 million after tax).

Adjusted net income was $1,125 million for the fourth quarter of 2012, up $293 million or 35% from a year ago. Adjusted earnings per share were $1.65, up 38% from $1.20 a year ago. 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.

Financial Highlights:
http://newsroom.bmo.com/press-releases/bmo-financial-group-reports-strong-net-income-of--tsx-bmo-201212040839281005

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 Tuesday, December 4, 2012, at 2:00 p.m. (EST). 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, February 25, 2013, by calling 905-694-9451 (from within Toronto) or +1-800-408-3053 (toll-free outside Toronto) and entering passcode 6850310.

A live webcast of the call can be accessed on our website at www.bmo.com/investorrelations. A replay can be accessed on the site until Monday, February 25, 2013.

For the full release, please see http://www.marketwire.com/press-release/bmo-financial-group-reports-strong-net-income-42-billion-2012-driving-strong-eps-growth-tsx-bmo-1733241.htm .

Media Relations Contacts
Ralph Marranca, Toronto, ralph.marranca@bmo.com, +1-416-867-3996
Valerie Doucet, Montreal, valerie.doucet@bmo.com, +1-514-877-8224

Investor Relations Contacts
Sharon Haward-Laird, Head, Investor Relations, sharon.hawardlaird@bmo.com, +1-416-867-6656
Andrew Chin, Senior Manager, 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

Dec 5, 2012
From the Japan Corporate News Network
http://www.japancorp.net
Topic: Earnings


 
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