Bank of Montreal 2002 Annual Report Download - page 42

Download and view the complete annual report

Please find page 42 of the 2002 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 102

  • 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

38 BMO FINANCIAL GROUP ANNUAL REPORT
2002
Financial Results
Personal and Commercial Client Group net income rose 22% to
$968 million. Branch sales generated non-recurring revenue of
$12 million ($9 million after tax) in 2001. The commentary that
follows excludes those non-recurring items.
Revenue increased $310 million or 7%, driven by significant
volume growth in both Canadian and U.S. operations. Strong
volume growth in Canada continued the trend from the latter
half of 2001, as the expanded front-line sales staff was assimi-
lated over that period. Volume growth was also spurred by the
low interest rate environment and high demand for residential
mortgages and personal loans. Personal deposits also rose, driven
by depositors’ ready acceptance of our premium rate savings
product, as well as economic uncertainty and weak equity
markets. The favourable effects of the volume growth were
partially offset by lower net interest margins, which reflected
continuation of the trend from the summer of 2001 of spread
compression in the low interest rate environment, and the effect
of the highly competitive lending conditions. In the United
States, revenue rose 26%, driven by strong loan and deposit
growth and by the acquisition of Joliet at the end of the third
quarter of 2001. Average net interest margins in the United
States were virtually unchanged. Chicagoland Banking repre-
sented slightly less than 20% of Personal and Commercial Client
Group’s operations in 2002.
Non-interest expenses rose $70 million or 3%. In Canada,
they were virtually unchanged due to particularly successful
expense management. Expenses rose in the United States due
to system conversion and integration costs for Joliet, robust
business volume growth, expansion initiatives and currency
translation. The group’s expense-to-revenue ratio improved by
269 basis points, as both Canada and the United States enjoyed
productivity gains.
A more favourable tax rate and the discontinuance of goodwill
amortization also contributed to higher earnings.
2001 Compared with 2000
Net income decreased $119 million to $794 million in 2001.
Excluding non-recurring after-tax gains on sales of branches
in 2001 and gains on the sales of Partners First and branches in
fiscal 2000, net income decreased $37 million to $785 million.
Excluding non-recurring items, revenue increased $145 million
or 4%, driven by volume growth and higher gains on securiti-
zations, partially offset by lower gains on sales of securities.
Volumes improved in the second half of the year as the expanded
sales force was assimilated, but the favourable impact was offset
by spread compression in the declining interest rate environment.
Expenses were $196 million higher due to strategic initiative
spending and investment in front-line staffing.
Personal and Commercial Client Group ($ millions, except as noted)
Reported (As at or for the year ended October 31) 2002 2001 2000
Net interest income (teb) 3,309 3,054 2,928
Non-interest revenue 1,299 1,256 1,377
Total revenues (teb) 4,608 4,310 4,305
Provision for credit losses 281 267 235
Non-interest expense 2,763 2,693 2,497
Income before provision for income taxes,
non-controlling interest in subsidiaries
and goodwill amortization 1,564 1,350 1,573
Income taxes (teb) 594 533 643
Non-controlling interest 2
–
(1)
Amortization of goodwill, net of
applicable income taxes
–
23 18
Net income 968 794 913
Net economic profit 566 476 582
Cash return on equity (%) 25.5 25.8 30.8
Average net interest margin (%) 3.13 3.18 3.19
Non-interest expense-to-revenue ratio (%) 60.0 62.5 58.0
Average common equity 3,785 3,100 2,929
Average assets 105,806 96,145 91,913
Total risk-weighted assets 67,322 61,818 58,421
Average current loans 95,906 87,407 84,053
Average deposits 54,160 45,521 42,451
Assets under administration 14,452 15,504 13,423
Assets under management 371 486
–
Full-time equivalent staff 18,043 17,446 18,057
Excluding non-recurring items
Total revenues (teb) 4,608 4,298 4,153
Net income 968 785 822
Cash return on equity (%) 25.5 25.5 27.7
Non-interest expense-to-revenue ratio (%) 60.0 62.7 60.1
MANAGEMENT’S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
Personal Market Share (%)
Sep
2002
Oct
2001
Oct
2000
Oct
1999
13.69
13.29
13.46
14.42
Small Business Market Share 
($0–$5 million loans) (%)
Jun
2002
Dec
2001
Dec
2000
Dec
1999
19.48
19.04
18.7218.73
Customer Loyalty
–
Secure Customer Index (%)
22.0
24.4
26.9
27.6
23.4
26.0
28.0
29.0
Personal Small Business
2002200120001999
Employee Professionalism 
Index (%)
35.0 35.9
41.1
43.6
30.0
35.1
36.6
39.7
Personal Small Business
2002200120001999
Note: Graphs reflect Canada only.