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Bank of Montreal 180th Annual Report 1997 49
As secondary measures, we monitor the Total Capital
Ratio, defined by OSFI as the ratio of total capital to risk-
weighted assets, and the assets to capital multiple, which
is defined by OSFI to be the multiple of adjusted assets (as
at assets including guarantees and letters of credit) to total
capital. Our Total Capital Ratio was 9.66% as at October 31,
1997. This was up from 9.11% at the end of 1996, a level
which included a $300 million issue of subordinated deben-
tures
that settled on November 1, 1996. The increase in the
Total Capital Ratio was due primarily to the strengthening
of our Tier 1 ratio mentioned above, the issue of $700 mil-
lion in new subordinated debt, and the inclusion with OSFI
approval of $775 million in general allowances for credit
losses into our total capital base. These factors served to
more than offset the redemption of two existing series of
debentures, while providing support for the increased
value of our Bancomer investment and our participation in
a collateralized bond obligation pool we manage on behalf
of outside investors.
In 1996, our Tier 1 ratio decreased to 6.71% from 7.02%
in 1995. The reduction in the ratio resulted primarily from
the impact of $192 million in goodwill assumed with
the purchase of Household Bank’s Illinois branch network
during the year. Also in 1996, we repurchased five million
common shares under our 1996 Share Repurchase Program,
cancelling approximately 1.9% of the outstanding shares at
that time.
Capital Management
($ millions except as noted)
As at October 31
1997 1996 1995 1994 1993
Canadian Basis
Tier 1
Common shareholders’ equity 7,629 6,729 6,174 5,678 4,834
Non-cumulative
preferred shares 1,274 857 858 860 852
Non-controlling interest
in subsidiaries 80 101 121 144 66
Goodwill (521) (557) (411) (450) (159)
Total Tier 1 capital 8,462 7,130 6,742 6,232 5,593
Tier 2
Cumulative preferred shares 00 0 0 0
Subordinated debt 3,582 3,179 2,268 1,999 2,248
General allowance for
credit losses
(a)
775 0 0 0 0
Total Tier 2 capital 4,357 3,179 2,268 1,999 2,248
Less: Junior note – CBO program 113 0 0 0 0
Investment in non-
consolidated subsidiaries/
substantial investments 697 625 0 0 0
Total capital 12,009 9,684 9,010 8,231 7,841
Risk-weighted assets 124,348 106,267 96,075 86,589 76,074
Risk-weighted capital ratios
(%)
Tier 1 6.80 6.71 7.02 7.20 7.35
Total* 9.66 9.11 9.38 9.51 10.31
U.S. basis Tier 1 6.35 6.26 6.82 6.91 7.13
Total U.S. basis* 9.92 9.81 9.97 10.07 11.14
Assets to capital multiple 18.0 19.0 17.6 17.7 15.6
Equity to assets
(%)
4.4 4.6 4.7 4.8 4.9
*The October 31, 1996 total capital ratio and Tier 2 capital reflects the inclusion of the
$300 million in subordinated debentures issued November 1, 1996. Excluding this issue,
the total capital ratio would be 8.83%, and 9.53% on a U.S. basis.
(a) General allowance included with the approval of OSFI beginning in 1997.