Bank of Montreal 1997 Annual Report Download - page 52

Bank of Montreal 180th Annual Report 199746
Due to our continued
pursuit of loan diversifi-
cation and our thorough
portfolio management
discipline, the probability
of single large losses has
reduced. These method-
ologies effectively confine
larger credit exposures to
only the best-quality risks
and to short-term situations
such as syndicated loan
underwriting. There were
no material single-item
losses in 1997 and the
year was characterized by
ongoing recoveries on
larger problem loans that
originated several years ago.
The natural diversification in the consumer credit
portfolio largely accounts for our losses from that activity
following the general business cycle. However, both in
the United States and to a lesser extent in Canada, there
has been a measurable increase in personal bankruptcy
filings despite the stable or improving general economic
conditions. Credit standards have been re-validated against
current conditions to reflect this reality. Overall perfor-
mance of the consumer portfolios has remained strong.
During the year, we launched the first Canadian securi-
tization of a bank credit card portfolio. In part because of
the very high overall quality of our credit card assets, the
securitization was well received by investors. In the United
States, our strategic alliance with BankBoston and First
Annapolis, Partners First, should provide enhanced value
from its card franchise.
Asset Quality Management Continued
Asset Quality – Performance ($ millions except as noted)
As at or for the year ended October 31 1997 1996 1995 1994 1993
Specific provision 75 225 150 460 675
General provision 200 0 125 50 0
Provision for credit losses 275 225 275 510 675
Allocation of Specific Provision
Individuals 177 125 96 89 113
Diversified commercial, corporate and institutional (102) 100 54 372 563
Designated lesser developed countries 00 0 (1) (1)
Specific provision 75 225 150 460 675
Total general allowance 775 475 325 200 100
PCL as a % of average loans and acceptances 0.23 0.23 0.30 0.63 0.87
PCL as a % of average loans and acceptances
(a)
Individuals 0.36 0.28 0.24 0.25 0.35
Commercial, corporate and institutional (0.15) 0.18 0.11 0.83 1.28
Canada
(b) 0.43 0.23 0.27 0.51 0.83
United States (0.14) 0.22 0.38 0.98 1.03
Mexico 0.00 0.00 0.00 0.00 (1.08)
Other countries 0.00 0.00 0.00 (0.22) 0.00
(a) Segment PCL as a percentage of segment average loans
and acceptances. The ratio for commercial, corporate and
institutional excludes the general allowance.
(b) The ratio for Canada includes the general provision booked
in Canada. This provision may be applied against specific
loans in Canada, U.S., Mexico or other countries including
those of equity investments and securitization vehicles.
Note: For more information see Table 10 on page 58.
Diversification of Net Loans and Acceptances (%) (a)
As at October 31 1997 1996
By Market
Individuals 41.2 43.5
Commercial, corporate & institutional 58.6 56.3
Designated LDC 0.2 0.2
100.0 100.0
By Geography
(b)
Canada 63.8 67.5
United States 33.3 30.4
Mexico 0.4 0.5
Other countries 2.5 1.6
100.0 100.0
Individuals by Product
Residential mortgages 67.0 63.1
Cards 3.8 8.5
Other personal 29.2 28.4
100.0 100.0
Diversified Commercial by Industry
(c)
Financial institutions 16.8 19.4
Commercial mortgages 8.6 8.0
Construction (non-real estate) 1.9 2.1
Real estate 5.8 6.2
Manufacturing 17.6 16.2
Mining and energy 7.7 6.8
Service industries 12.1 12.8
Retail trade 5.2 5.2
Wholesale trade 6.5 6.2
Agriculture 3.9 3.9
Transportation/Utilities 6.1 5.3
Communications 4.4 5.3
Other 3.4 2.6
100.0 100.0
(a) Net of specific allowance for credit losses.
(b) Geographic location is based on the ultimate risk of the underlying asset.
(c) Excludes securities purchased under resale agreements.
Note: For more information see Table 9 on page 58.