Bank of Montreal 1998 Annual Report Download - page 18

14
BANK OF MONTREAL GROUP OF COMPANIES
of our proposed merger with Royal Bank of
Canada on January 23, and major investments
of time and resources in preparation for the
Year 2000 and the impending European Economic
and Monetary Union (see page 53).
Employees carried on creatively through out
the year, however, working to implement these
and other initiatives designed with one overrid-
ing goal in mind: the long-term maximization
of shareholder value.
One of our most significant ongoing priori-
ties is the line-of-business management approach
that we are adopting as part of our move to
generate greater shareholder returns in light of
increased domestic and global competition.
Whilepresentingaunifiedfacetocus-
tomers, this approach will require each line of
business to develop its own strategies and com-
pete with all the other lines of business for its
share of capital. This will enable us to evaluate
each line of business on its contribution to the
creation of shareholder value.
There will be no cross-subsidization and
there will be a decided bias toward high returns
– and therefore high-growth lines of business.
Defending and investing in the most profitable
lines of business, while turning around or
divesting the unprofitable ones, will use our
shareholders’ capital more productively.
By playing a leadership role in the inte-
grated and cost-effective deployment of people,
technology and process across all the lines of
business, EmfisysTM, the new technology and
process division launched at the beginning of
the fiscal year, will also contribute substantially
to the maximization of shareholder value.
ADVANCING RISK MANAGEMENT
Among the most important, and most effective,
of
our ongoing initiatives is our embrace of risk
management sciences, a platform for sustaining
profitability and stable earnings even in times
of economic downturn.
We set out 10 years ago to achieve a core
competency in controlling credit risk through
scientifically based portfolio management
policies and practices and we subsequently
applied the same rigour to liquidity, market and
operational risk (see pages 43 to 48). In 1998
our core competency in credit risk produced
our best-ever asset quality in two decades, with
a provisioning ratio (the annual provision for
credit losses as a
percentage of average loans
and acceptances) of 0.09%, an improvement
from 0.23% the previous year.
We also won the recognition of our peers
in a survey of North American banks that
ranked Bank of Montreal among the top three
on the continent when it came to employing
portfolio management techniques to control
corporate credit risk.
More important, we have set aside suffi-
cient loan loss reserves to absorb the impact
of a moderate downturn, and we have strategi-
cally minimized our vulnerability to troubled
economies. We suffered no material losses in
Asia last year, for example, and the same was
true for Eastern Europe.
INCREASING FACE-TO-FACE SERVICE
Carrying on creatively in 1998 also meant
increasing and improving both face-to-face
and electronic customer access opportuni-
ties as part of our overall strategy to reinvent
retail banking.
We increased and improved face-to-face
ser
vice in Canada by opening 10 in-store
branches and we reached an agreement with
The Great
Atlantic and Pacific Company of
Canada Limited
(A&P) and Canada Safeway
Limited to place
additional branches in super-
markets across the country. Along with on-site
expertsinpersonalfinancialservices,these
locations also feature
enhanced automated
banking machines (ABMs),
interactive kiosks
with NetBanking facilities, on-line access to AIR
MILES®2reward miles balances, and financial
planning tools.
While in-store banking was new to us in
1998, we already had some in-mall experience:
through our chain of investores,wherewe
market a complete range of money manage-
ment products and services in a retail setting;
95%Customer
satisfaction
mbanx achieved a customer
satisfaction rating of 95% – a
reflection of our ability to meet
and exceed customer expectations.
We continued to redefine traditional
branch banking in 1998 by
opening branches in supermarkets,
providing greater convenience
and access for our customers.