Bank of Montreal 1998 Annual Report Download - page 43

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BANK OF MONTREAL GROUP OF COMPANIES
FINANCIAL RESULTS
Net income for the year was $64 million, comprised of
earnings from technology-related businesses of $40 million
and earnings from our equity investment in Bancomer of
$24 million.
EFS net income from technology-related businesses
decreased $40 million in 1998. This resulted from $16 mil-
lion in foregone income following the sale of our U.S.
card business to Partners First and the associated start-up
losses arising from our equity position in this venture.
The remaining decrease of $24 million was due to expense
growth of 17%, which more than offset revenue growth
of 8% in our technology-related businesses. This revenue
growth reflected strong volume growth in mbanx, and
higher non-interest revenues from the Canadian merchant
and retail card businesses, partly offset by narrower credit
card margins due to intense competition from new foreign
competitors. Corporate EFS benefited from higher foreign
exchange gains, strong growth in NACM and the success
of Cebra’s new product offerings. Higher expenses relate
to investments in people and technology to expand the
reach of alternate delivery channels and other initiatives
for growth, many of which have been highlighted in our
strategic accomplishments.
Net income and revenue from Bancomer declined $53 mil-
lion in 1998 primarily due to the unsettled global economic
conditions and slower growth in the Mexican economy.
EFS as a whole experienced reduced credit losses,
primarily due to the sale of the U.S. card business. EFS
expense-to-revenue ratio was 82.0%. Excluding Bancomer
and the U.S. card business, the ratio increased to 82.7%
from 76.1% last year due to continued spending on strate-
gic initiatives and increased competition in the Canadian
credit card market, which put pressure on revenues.
1997 net income of $157 million decreased by $14 mil-
lion from 1996 primarily because of major investments
in alternate banking channels. Revenue growth of 16.2%
was driven by an increased contribution from Bancomer
($31 million) and by revenues from the credit card and
corporate lines of business. Higher expenses reflected
investments in technology and personnel to support the
alternate delivery channels. The increased provision for
credit losses was in response to an increasing level of per-
sonal bankruptcies.
solutions include electronic payment, elimination of
invoices, customized electronic reporting, and electronic
integration to general and sub-ledgers for up to 70 top
tier Canadian organizations.
■The NACM Wholesale Lockbox Network operating in
Toronto and Chicago extended its reach to Atlanta and
Los Angeles (the latter opened in December 1998). This
expanded image-enabled network allows us to match
our clients’ optimum payment receipt patterns and
help them digitally integrate their back-office processes,
generating greater cost efficiencies.
Created Value through Strategic Alliances
■
An alliance was formed between NACM and CheckFree
®
Corporation, a recognized electronic commerce leader,
for automated clearing house processing. CheckFree
will support the back-office systems and technical com-
ponents of processing, while we continue to leverage
our expertise in product development and exceptional
customer service. The resulting economies of scale will
provide expanded functionality for our clients.
■Cebra partnered with Canada Post to provide a
secure
Electronic Post Office
TM
service, whereby Canadian busi-
nesses and consumers will be able to receive all types of
mail electronically and pay their bills over the Internet.
TM Electronic Post Office is a trade mark of Canada Post Corporation.
®CheckFree is a registered trade mark of CheckFree Corporation.
ELECTRONIC FINANCIAL SERVICES ($ millions except as noted)
As at or for the year ended October 31 1998 1997*1996*1995*1994*
Net interest income 428 574 495 375 331
Other income 498 471 404 378 372
Provision for credit losses 74 138 96 61 65
Non-interest expense 759 681 538 524 486
Income before taxes 93 226 265 168 152
Income taxes 29 69 94 69 64
Net income 64 157 171 99 88
Net income excluding Bancomer 40 80 125 99 88
Average assets 10,177 7,652 5,964 5,050 4,459
Average current loans 7,238 5,519 4,852 4,527 4,228
Average deposits 8,092 6,665 5,364 4,631 4,543
Assets under administration 179,750 169,743 149,287 130,012 120,748
Full-time equivalent staff (a) 3,603 3,583 NA NA NA
Expense-to-revenue ratio (%) 82.0 65.2 59.8 69.5 69.2
*Restated to give effect to the revised 1998 organization structure
(a) As at October 31
NA – Not available