Bank of Montreal 1999 Annual Report Download - page 35

Revenue Growth
Bank of Montreal Group of Companies 1999 Annual Report 29
Volume Growth Drives Revenue Growth
Total revenues increased 9.0% in 1999 to $7,928 million, compared to $7,270 million
in 1998. Before the one-time charge for distressed securities, described on page 27,
revenue rose 9.8% to $7,983 million.
The rise of 9.0% in total revenue resulted from a $393 million (12.6%) increase
in other income as well as a $265 million (6.4%) increase in net interest income. As
described on page 27, revenues increased $89 million due to the inclusion of an addi-
tional month of revenues from Nesbitt Burns as a result of the change in year end.
Total Revenue ($ millions)
For the year ended October 31 1999 1998 1997 1996 1995
Net interest income (TEB)†4,417 4,152 4,186 3,711 3,564
Year-over-year growth (%) 6.4 (0.8) 12.8 4.1 7.2
Other income 3,511 3,118 2,981 2,516 2,102
Year-over-year growth (%) 12.6 4.6 18.5 19.7 12.3
Total revenue 7,928 7,270 7,167 6,227 5,666
Year-over-year growth (%) 9.0 1.4 15.1 9.9 9.0
Net Interest Income Growth of 6.4%
Net interest income is comprised of interest and dividend revenue earned on total
assets, less interest expenses paid on total liabilities. It is the difference between what
the Bank earns on assets such as loans and securities, and what it pays on liabilities
such as deposits. Average net interest margin is the ratio of net interest income to
average assets.
Change in Net Interest Income, Average Assets and Average Net Interest Margin
Net interest income ($ millions) Average assets ($ billions) Average net interest margin (bps)
For the year ended October 31 1999 1998 % change 1999 1998 % change 1999 1998 % change
Personal and Commercial
Client Group
Canada 2,700 2,666 1.3 77,971 72,861 7.0 346 366 (20)
Harris Regional
Banking 815 761 7.1 33,706 29,598 13.9 242 257 (15)
Bancomer 119 29 311.1 730 722 1.1 1,629 401 nm
3,634 3,456 5.2 112,407 103,181 8.9 323 335 (12)
Private Client Group 176 207 (14.7) 3,537 4,013 (11.9) 498 515 (17)
Investment Banking Group 877 669 31.0 115,512 123,264 (6.2) 76 54 22
Corporate Support (270) (180) (51.5) (4,742) (3,008) (57.6) 572 595 (23)
Total Bank 4,417 4,152 6.4 226,714 227,450 (0.3) 195 183 12
nm
– not meaningful
Net interest income on a taxable equivalent basis (TEB) rose $265 million, or 6.4%,
from $4,152 million to $4,417 million during 1999. Average assets were essentially
unchanged
compared to the prior year while net interest margin rose 0.12% to 1.95%.
The flat asset growth and increased margin both reflected increased volumes in higher
spread retail and commercial businesses, higher volumes and spreads in corporate
lending and decreased volumes in lower spread securities.
In the Bank’s retail and commercial businesses, increased net interest income was
driven by volume growth largely offset by a reduction in net interest margin. The
reduction in margin was primarily the result of competitive forces, a flatter yield
curve in Canada and, in the United States, the higher cost of additional funding to sup-
port
continued growth in new business.
Net interest income was also positively impacted by an increase of $90 million in
the contribution from the Bank’s investment in Bancomer due to business growth and
improved market conditions in Mexico.
Within the Bank’s institutional businesses, net interest income was up over last year,
principally due to increased volumes and spreads in the corporate lending portfolio
and improved spreads in securities portfolios.
Measure:
Revenue growth is defined
as percentage change in total
year-over-year revenue on
a tax equivalent basis and is our
primary measure of revenue
growth.Totalrevenueconsists
of net interest income and
other income.
†Defined in the glossary on page 104.
Other income ($ millions)
Net interest income (TEB)
($ millions)
Year-over-year growth (%)
7, 2 70
7,167
6,227
5,666
7,92 8
Revenue and
Annual Growth
9998979695
1.4
15.1
9.9
9.0 9.0