Bank of Montreal 1997 Annual Report Download - page 38

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Bank of Montreal 180th Annual Report 199732
Financial Results
Business volume growth and strong expense control partly offset by lower margins resulted
in income in 1997 of $539 million. Revenue growth was 2.9% and is attributed to strong
loan volume growth of 8.9% as well as increases in fees and other commissions, partly
offset by narrower margins. The decline in margins is primarily due to two factors. First,
due to the declining interest rate environment, PCFS experienced rate compression as a
result of price floors. Second, PCFS experienced a higher rate of growth in their lower-
earning assets, namely mortgages, than other asset categories. Expense growth of 3.5%
reflects several key investment and capacity creation initiatives such as branch rationaliza-
tion, organizational streamlining, workflow innovation, automation of commercial and
personal lending decisions, and migration of transactions to automated channels. These
initiatives, in addition to focused investment spending, have enabled PCFS to reduce
resources dedicated to Community Banking at year end by 7.2% to 13,278 FTE while con-
currently increasing market share in key lines of business. Specific provisions for loan
losses were $104 million, up 34.2% from last year; however, the loan loss provisioning
ratio of 0.19% remains well below industry norms and is reflective of the continued strong
growth in low-risk residential mortgages and prudent lending policies.
In 1996, net income increased 3.2%, driven by business volume growth and strong
expense control. Revenue growth of 0.8% in 1996 was the result of an increase in average
loans of 6.6%, partly offset by lower margins. Expenses declined in 1996 by 1.9% as a
result of effective cost management in addition to a $30 million accrual made in 1995 for
business process improvements.
9796959493
12.4
23.9
21.4
26.6
30.4
19.4
13.1
12.9
13.8
14.7
Volumes
($ billions)
Residential Mortgages
Market Share
(%)
9796959493
15.4
4.6
15.2
4.7 4.8
3.8
15.8
4.2
16.2 16.2
Volumes
($ billions)
Small- and
Medium-Sized Businesses*
Market Share
(%)
*
Excludes agriculture and mortgage loans.
1997 market share as at April 30.
1993–96 market share as at September 30.
9796959493
38.4
41.9
39.5
43.8
13.3 13.613.6 13.8
14.4
Volumes
($ billions)
Total Personal Deposits
Market Share
(%)
44.2
Personal and Commercial Financial Services
($ millions except as noted)
As at or for the year ended October 31
1997 1996* 1995* 1994* 1993*
Net interest income 2,119 2,079 2,078 2,010 1,792
Other income 483 450 431 408 401
Provision for credit losses 104 77 52 78 103
Non-interest expense 1,552 1,499 1,528 1,482 1,384
Income before taxes 946 953 929 858 706
Income taxes 407 406 399 377 304
Net income 539 547 530 481 402
Average assets 58,711 55,253 52,259 48,786 47,233
Average current loans 54,720 50,266 47,134 42,953 40,724
Average deposits 56,425 52,539 50,711 47,882 46,484
Full-time equivalent staff
(a)
13,278 14,303 NA NA NA
Expense-to-revenue ratio
(%)
59.7 59.3 60.9 61.3 63.1
*Restated to give effect to the current year’s organization structure.
(a) As at October 31.
NA – Not available.
Personal and Commercial Financial Services Continued