Bank of Montreal 1997 Annual Report Download - page 42

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Bank of Montreal 180th Annual Report 199736
Financial Results
1997 net income for EFS of $181 million declined by $15 million from 1996 primarily due
to major investments in alternate banking channels. Revenue growth of 17.9% was driven
by an incremental contribution from Bancomer ($32 million) and revenues from the credit
card and corporate electronic financial services lines of business. Non-interest expenses
increased 28.4% reflecting investments in technology and increases in personnel in mbanx
and telephone banking. Credit card balances and mortgages contributed to the 25.4%
increase in average assets. Provision for loan losses increased $41 million or 42.7% in 1997,
reflecting growth in credit card balances and an increasing level of personal bankruptcies.
Net income for EFS in 1996 was $196 million, up $75 million or 61.9% from 1995, driven
by our equity investment in Bancomer ($50 million), and revenue growth from cards and
corporate electronic financial services. Non-interest expense increased 2.5% from 1995 to
1996, reflecting investment in telephone banking technology.
979695
15.5*
14.8
14.7
BMO Market Share of
Card Loans
(%)
*
Bank data as reported by Bank of Canada has
been adjusted for credit card securitization.
979695
6.7
21.1
11.7
Volume of Telephone
Banking Calls
(millions)
Electronic Financial Services
($ millions except as noted)
As at or for the year ended October 31
1997 1996* 1995* 1994* 1993*
Net interest income 583 503 384 335 309
Other income 532 443 413 401 400
Provision for credit losses 137 96 61 65 70
Non-interest expense 707 551 537 499 459
Income before taxes 271 299 199 172 180
Income taxes 90 103 78 73 75
Net income 181 196 121 99 105
Average assets 9,074 7,237 5,974 5,054 4,620
Average current loans 6,291 5,496 5,026 4,543 3,928
Average deposits 6,668 5,351 4,621 4,530 4,020
Assets under administration 167,743 149,287 130,012 120,748 98,000
Assets under management 2,000 0000
Full-time equivalent staff
(a)
3,630 2,212 NA NA NA
Expense-to-revenue ratio
(%)
63.4 58.2 67.4 67.8 64.7
*Restated to give effect to the current year’s organization structure.
(a) As at October 31.
NA – Not available.
Formed Strategic Alliances
•Established a new credit card company, Partners FirstTM,
through a joint venture with BankBoston of Boston,
Massachusetts and First Annapolis of Baltimore,
Maryland. We own 69% of the new company and it will
have over one million customers and over US$2 billion in
credit card receivables at inception. Sophisticated infor-
mation management techniques and innovative market-
ing will position the new credit cards uniquely in the
United States. Outsourcing the processing activities will
improve the cost structure. Partners First aims to be a
top 15 credit card company within the next few years.
•Joined the Mondex Canada consortium that enables us
to offer our customers the pre-eminent electronic cash
system in Canada, the smart card.
•Continued to develop our alliance with Grupo
Financiero Bancomer of Mexico. Several major corporate
finance transactions were negotiated in 1997 which
increased our presence in the Mexican corporate market
and enhanced Bancomer’s relationship with key clients.
Strengthened North American Scope
•Integrated the Canadian and U.S. Cash Management
businesses to permit better leveraging of these businesses.
The integrated business is a major player in the North
American cash management market and, together with
our Bancomer alliance, offers clients the only true
NAFTA capability and expertise.
Electronic Financial Services Continued