Bank of Montreal 1999 Annual Report Download - page 32

Earnings per Share Growth
26 Bank of Montreal Group of Companies 1999 Annual Report
Ten Years of Growth in Earnings per Share
In 1999, our fully diluted earnings per share (EPS) was $4.72, an increase of 1.3% from
$4.66in1998.Wedidnotattainourfinancialobjectiveofatleast10%EPSgrowth;
however, we continue to maintain this as our objective going forward. Before the
one-timechargesdescribedon page 27,EPSandEPSgrowthwere$5.14and 10.3%
respectively .
Earnings Growth
For the year ended October 31 1999 1998 1997 1996 1995
Net income ($ millions) 1,382 1,350 1,305 1,168 986
Year-over-year growth (%) 2.4 3.5 11.7 18.4 19.5
Fully diluted earnings per share ($) 4.72 4.66 4.62 4.13 3.38
Year-over-year growth (%) 1.3 0.9 11.9 22.2 13.8
Note: for more information see Table 2 on page 59.
Earnings of $1,382 million were $32 million, or 2.4% higher than 1998. Earnings
before the one-time charges were $1,495 million, an increase of $145 million or 10.8%
from the prior year. The increase of 2.4% reflected business growth and improved
capitalmarketconditions,offsetinpartbyareturntoahigher,morenormallevelofpro-
vision
for credit losses and by one-time charges described on page 27. Business growth
was driven by increased volumes with resulting growth in both revenues and expenses.
Revenues of $7,928 million were up $658 million or 9.0%, driven primarily by vol-
ume growth, which was widespread across most lines of business including mortgage
originations, commercial loans and corporate lending. In addition, volume growth
occurred in credit card operations and other fee-related services, partly driven by
product and distribution initiatives. The impact of volume growth was partly offset
by narrower spreads in our retail and commercial businesses. We also experienced a
return to more normal capital market conditions following the unusual trading losses
in the fourth quarter of 1998, which together with improved performance resulted
in higher revenues from our trading portfolios. Both business growth and improved
market conditions contributed to higher earnings from Bancomer. For additional infor-
mation on revenue growth, refer to page 29.
The provision for credit losses increased $190 million to $320 million in 1999, from
$130 million in 1998, which was unusually low as a result of non-recurring benefits
related to collection activity on commercial real estate loans. The provision included
a specific provision of $235 million and an $85 million general provision, bringing the
total general allowance to $970 million. For further discussion on credit risk,
refer to
page 33.
Expense growth of 10.5% was driven by ongoing business operations, continued
spending on strategic initiatives such as mbanx
®
Direct, higher revenue-driven com-
pensation, and the restructuring charge referred to on page 27. Refer to the expense
growth discussion on page 32 for further details.
Measure:
Year-over-year percentage
change in fully diluted
earnings per share (EPS) is
our primary measure of earn-
ings growth. It is calculated by
dividing earnings available
to common shareholders for the
year by the daily average
number of fully diluted common
shares. Fully diluted common
shares represent the common
shares that would have been
outstanding assuming conver-
sion at the beginning of the year,
or at the date of issuance, of
all securities that are convertible
into or redeemable for com-
mon shares and that are consid-
ered dilutive.
Objective:
Our 1999 objective was to achieve
EPS growth of at least 10%.
4.66
4.62
4.13
3.38
13.8
22.2
4.72
Fully Diluted EPS
and Annual Growth
0.9
11.9
1.3
Fully diluted EPS ($)
Objective (minimum of at least 10%)
Year-over-year growth (%)
9998979695
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