Bank of Montreal 1999 Annual Report Download - page 56

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In 1998, net income for P&C Canada was $714 million, an increase of $24 million or
3.5% from 1997. Revenue growth of 0.7% was driven by strong loan volume and fee
growth, offset in part by narrower spreads and forgone revenue following the sale of
our U.S. card business. The card business sale also resulted in a lower provision for
credit losses. The increase in expenses of 3.2% was primarily due to investment in
our technology-related businesses.
Personal and Commercial Client Group
–
Canada ($ millions except as noted)
As at or for the year ended October 31 1999 1998* 1997*
Net interest income 2,700 2,666 2,701
Other income 1,136 1,056 994
Total Revenue 3,836 3,722 3,695
Provision for credit losses 159 159 241
Non-interest expense 2,435 2,346 2,273
Income before taxes and goodwill 1,242 1,217 1,181
Income taxes 508 503 491
Goodwill, net of applicable tax 000
Net Income 734 714 690
Average assets 77,971 72,861 65,649
Average current loans 72,326 67,414 60,239
Average deposits 64,953 66,700 63,327
Full-time equivalent staff 16,045 16,183 16,886
Expense-to-revenue ratio (%) 63.5 63.0 61.5
*Restated to give effect to the current year’s organization structure and presentation changes
Personal and Commercial Client Group
–
Harris Regional Banking
Harris Regional Banking contributed net income of $258 million, up 24.5% over 1998.
The growth in net income was driven by higher revenues and partially offset by an
increase in non-interest expense and higher provisions.
Harris Regional Banking experienced revenue growth of 12.5% due to increased loan
and deposit volumes. Community Banking contributed to the revenue
growth with
service charges, and Mid-Market Corporate Banking contributed with an increase in
syndication, investment banking and other financing fees.
Non-interest expense growth of 6.9% was driven by a general increase in business
volume and Year 2000 related expenses. This was partially offset by expense reductions
from improved operating efficiencies in the Community Banking network and initia-
tives to provide clients with alternative delivery channels.
Net income of $207 million in 1998 rose 22.7% over 1997. This increase was driven
by
revenuegrowthof24.0%duetoincreasedloanvolumesinMid-MarketCorporate
Banking a
nd Community Banking and growth in syndication fees and income from
other client services. Non-interest expense increased $125 million or 23.1% in 1998 as
a result of expanding banking operations and the resulting business growth.
Both revenues and expenses are affected by the U.S./Canadian dollar exchange rate
because virtually all of Harris’ business transactions are in U.S. dollars. These amounts
are converted from U.S. dollars to Canadian dollars for reporting purposes. As a result,
the movement in the exchange rate from an average rate of $1.38 in 1997 to an average
rate of $1.47 for 1998 affects the comparison of 1998 results to those of 1997. If we
Outlook
Inflation, interest and unemployment rates are expected to remain low into 2000, thereby maintain-
ing client demand for loans. However, the yield curve is expected to continue to flatten as
a result of an expected rise in short-term interest rates, putting further pressure on net interest
margin. In the year 2000, competition in Canada is expected to continue to increase, putting
additional pressure on net interest margin. Despite these conditions, P&C Canada expects to
retain
profitable volume growth through the launch of product and distribution initiatives aimed at meet-
ing the changing needs of its clients.
Personal and Commercial Client Group
50 Bank of Montreal Group of Companies 1999 Annual Report
*Represents volumes in Small Business and
Commercial Mid-Market lines of business within
P&C – Canada.
999897
17.5
12.2
16.5
10.9
15.1 13.4
P&C
–
Canada
Commercial Portfolio*
($ billions)
Average commercial loans
Average commercial deposits
99
9897
666
26
59
86
381
983
P&C
–
Canada
Telephone and
Online Banking
Clients (in thousands, at October 31)
Telephone and online
banking transactions (millions)
9998
97
207
169
258
P&C
–
Harris
Regional Banking
Net Income
22.5 24.6
Net income ($ millions)
Year-over-year growth (%)
9998
97
63.0
65.6
59.9
P&C
–
Harris
Regional Banking
Expense-to-
Revenue Ratio
(%)