Bank of Montreal 1998 Annual Report Download - page 41

33
BANK OF MONTREAL GROUP OF COMPANIES
FINANCIAL RESULTS
Net income for PCFS was $649 million, up 19.7% from 1997.
Total revenue growth of 5.8% was generated by loan volume growth, driven by product
and channel initiatives coupled with continued customer demand in response to favourable
economic conditions. However, the impact of increased assets was partially offset by narrower
spreads in the Canadian retail market. Although spreads experienced a steady improvement
throughout 1998, the average for the year was still below the 1997 average due to a signifi-
cantly flatter yield curve in 1998 relative to 1997. Other income increased 6.8% due to
mutual fund commissions, higher estate and trust income and activity fees.
A second factor driving growth in profitability was continued expense management which
kept expenses at the 1997 level despite the increase in business volume. The migration of
customers to lower-cost channels, the enhancement of knowledge management tools and
the streamlining of our lending decision processes all helped to contain costs.
The provision for credit losses decreased from $104 million to $85 million in 1998 largely
due to lower loan losses in the commercial portfolio.
Expense management and revenue growth resulted in an improved expense-to-revenue
ratio of 56.3% for 1998, compared with 60.2% in 1997.
On a comparative basis, in 1997 business volume growth and strong expense control,
partially offset by lower year-over-year margins, drove net income of $542 million. Revenue
growth of 3.7% was made possible by strong loan volume, fee and other commissions growth,
partially offset by narrower margins. Expense growth of 5.7% in 1997 reflected several key
investment and capacity creation initiatives, such as branch rationalization, organizational
streamlining, workflow innovation, automation of commercial and personal lending decisions,
and migration of transactions to automated channels.
PERSONAL AND COMMERCIAL FINANCIAL SERVICES ($ millions except as noted)
As at or for the year ended October 31 1998 1997*1996*1995*1994*
Net interest income 2,242 2,123 2,082 2,087 2,020
Other income 559 524 470 480 450
Provision for credit losses 85 104 77 52 78
Non-interest expense 1,578 1,592 1,506 1,524 1,477
Income before taxes 1,138 951 969 991 915
Income taxes 489 409 412 425 402
Net income 649 542 557 566 513
Average assets 63,447 58,716 55,266 52,397 48,939
Average current loans 60,175 54,720 50,266 47,134 42,953
Average deposits 57,694 56,425 52,539 50,711 47,882
Full-time equivalent staff (a) 12,580 13,303 NA NA NA
Expense-to-revenue ratio (%) 56.3 60.2 59.0 59.3 59.8
*Restated to give effect to the revised 1998 organization structure
(a) As at October 31
NA – Not available
9897969594
RESIDENTIAL MORTGAGES
35.0
30.4
26.6
23.9
21.4
15.5
15.2
14.4
13.2
13.7
Volumes originated in
Canada ($ billions)*
Market Share (%)†
989796
LOANS TO SMALL AND
MEDIUM-SIZED BUSINESSES
Volumes originated in
Canada ($ billions)
8.9
8.7
8.2
18.9
18.7
18.6
Market Share (%)†
989796
9897969594
TOTAL PERSONAL
DEPOSITS
Volumes originated in
Canada ($ billions)
Market Share (%)†
14.4
13.8
13.613.6
43.3
43.8
44.2
41.9
39.5
14.3
9897969594
■Offered small and medium-sized enterprises a special
financing program with a choice of discounted loan
options to assist in achieving year 2000 compliance.
■Established Competix, a joint venture with American
Management Systems and EmfisysTM , part of Corporate
Support, to provide personal and small business loan
processing services to small and medium-sized U.S.
financial institutions.
■
Formed Corporate Finance Teams in Toronto, Vancouver
and Montreal to deliver leading edge financial engineering
solutions,capital market alternatives and loan syndications.
■Developed the Private Client Service Promise, a service
branding initiative undertaken by PCFS Personal Trust
and Investment Assets Services aimed at being recognized
as the premier supplier of banking, trust and investment
services to high net worth individuals in the Canadian
marketplace.
■Introduced a market-indexed GIC/RIC with a return
linked to market indices, allowing customers to partici-
pate in the stock market without the inherent risk of
loss of principal.
TM Emfisys is a trade mark of Bank of Montreal.
†CBA
: 1998 as at March 31; 1996 - 97 as at Sept. 30;
1994
- 95 – NA
†CBA
: as at October 31
* Including those sold to securitization vehicles
†Based on Canadian Bankers Association (CBA)
statistics: 1998 – August 31; 1994 - 97 – October 31;
includes all residential mortgages
administered
in Canada, including those sold to securitization
vehicles or owned by third
parties.