Bank of Montreal 1999 Annual Report Download - page 37

Download and view the complete annual report

Please find page 37 of the 1999 Bank of Montreal annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 112

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112

Bank of Montreal Group of Companies 1999 Annual Report 31
Investment securities gains/losses decreased $182 million to a loss of $85 million,
reflecting the one-time charge of $55 million for distressed securities, discussed in
more detail on page 27. In addition, earlier write-downs in these portfolios in the first
three quarters of the year totalled $22 million. During 1998 a $35 million
gain was
realized on the disposition of a collateralized mortgage obligation portfolio.
Other fees and commissions increased $84 million to $388 million due most signifi-
cantly to the $27 million gain on sale of the Global Custody business. In addition, other
fees and commissions increased, including foreign exchange fees.
Trading Revenue
Total trading revenue includes the net interest and other income earned from on- and
off-balance sheet positions, which are considered by management to be undertaken
for trading purposes. This includes interest income from on-balance sheet amounts,
and gains/losses from off-balance sheet interest rate, foreign exchange (including
spot positions), commodity and equity contracts.
Total revenue from trading-related activities increased $279 million, from $133 mil-
lion to $412 million. This growth reflects improved performance and a return to more
normal capital market conditions relative to the abnormal trading conditions in the
fourth quarter of 1998.
Interest and Non-Interest Trading Revenue ($ millions)
For the year ended October 31 1999 1998 1997
Capital markets 279 94 191
Equities 48 374
Other 85 36 47
Total 412 133 312
Reported as:
Net interest income 117 93 36
Other income
–
trading revenue 295 40 276
Total 412 133 312
1998 Compared to 1997
During 1998, total revenue grew 1.4%, from $7,167 million to $7,270 million. This
increase was due to growth in other income of 4.6% to $3,118 million and a
decline
in net interest income of 0.8% to $4,152 million. The increase in other income was
due to higher investment management and custodial fees, other fees and commis-
sions, deposits and payment service charges, lending fees, mutual fund revenues
and securitization revenues, which were partially offset by reduced trading revenue,
capital market fees and card services fees. The increased investment management
fees, custodial fees and mutual fund revenues resulted from an increase in assets
under management and administration. The decline in net interest income reflected
lower revenues from equities and bonds of lesser-developed countries, lower cash
collections on impaired loans, lower revenues from U.S. card operations, the reduced
equity contribution from our investment in Bancomer and lower margins due to a
flattening of the yield curve.
Outlook
We expect revenue growth to be lower in 2000, as 1999 benefited from a return to normal capital
market conditions relative to 1998. Future revenue growth is expected to result from a combination
of continued growth in volume, disciplined balance sheet management and continued pressure
on spreads.