Bank of Montreal 1999 Annual Report Download - page 36

Revenue Growth
30 Bank of Montreal Group of Companies 1999 Annual Report
In addition, the majority of our portfolio of bonds of lesser-developed countries was
sold during the year as favourable market conditions emerged. These sales, which are
recorded in Corporate Support, contributed to net interest income growth. Lower asset
l evels and decreased net interest income in Corporate Support were the result of an
increase in securitizations undertaken by the Bank, which are described in the sidebar.
Other Income Growth of 12.6%
Other income comprises all revenue other than net interest income, as detailed in the
table below.
Other income increased $393 million to $3,511 million in 1999 and comprised 44.3%
of total revenue, an increase from 42.9% in 1998. Before the one-time charge for dis-
tressedsecuritieswrite-downdescribedonpage27,otherincomewas$3,566million,an
increase of 14.4% from 1998. The most significant contributor to growth was trading
revenue,asdescribedonpage31.Thechangesinothercomponentsarediscussedbelow.
Components of Other Income ($ millions)
For the year ended October 31 1999 1998 1997 1996 1995
Deposits and payment service charges 616 558 508 473 451
Lending fees 329 290 240 194 186
Capital market and other fees 841 869 919 760 495
Card services fees 205 196 251 234 230
Investment management and custodial fees 419 407 299 221 240
Mutual fund revenues 207 199 155 87 53
Trading revenue 295 40 276 277 225
Securitization revenues 296 158 32 0 0
Investment securities gains (losses) (85) 97 52 71 46
Other fees and commissions 388 304 249 199 176
Total 3,511 3,118 2,981 2,516 2,102
Deposits and payment service charges rose $58 million to $616 million. These fees
represent income earned on both retail and commercial deposit accounts, and other
payment services. The increase reflects continued growth in activity and growth from
productinitiatives,includingourrecentlyimplementedinitiativetomoreappropriately
price services to our clients, based on both transaction frequency and the differentiated
cost of distribution channels.
Lending fees increased $39 million to $329 million as a result of the growth in
our corporate lending business. These fees are associated with the structuring and
management of our credit facilities.
Capital market revenue and other fees declined $28 million to $841 million. These
fees relate to investment banking and capital market transactions. Although 1999 saw
significant investment banking activity, transaction levels were lower than 1998, when
new issues and mergers and acquisitions activity were at unusually high levels.
Card services fees increased $9 million to $205 million as a result of the increased
volume of credit and debit card transactions, and increased numbers of merchant dis-
count devices.
Investment management and custodial fees were $12 million higher than a year ago,
reflecting volume growth in estate and trust assets and accounts.
Mutual fund revenues rose $8 million due to the increased volume of assets under
management in our First Canadian
®
Funds and Harris Insight Funds despite a shift in
client preference to lower-yielding assets.
Increased securitization revenues of $138 million can be attributed to the full-year
impact of our securitization of cards, mortgages and corporate loans compared to
partial-year impacts in 1998. This increase in securitization revenues in other income
offsets a similar reduction in net interest income, as discussed above.
Effect of Securitizations
The accounting treatment of
securitizations impacts both net
interest income and other
income as explained in more
detail on page 36.
If assets had not been secu-
ritized, net interest income,
other income and total revenue
would have been $4,651 million,
$3,313 million and $7,964 mil-
lion, respectively.
Other Income as a %
of Total Revenue
41.6
37.1
40.4
44.3
42.9
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