Bank of Montreal 2002 Annual Report Download - page 52

48 BMO FINANCIAL GROUP ANNUAL REPORT 2002
2001 Compared with 2000
Net income for 2001 was $79 million, up $14 million from fiscal
2000. Excluding non-recurring items, the net loss was $110 mil-
lion, which was $81 million higher than in fiscal 2000. The dete-
rioration was attributable to a $54 million reduction in earnings
recognized on BMO’s investment in Bancomer because of a
change to cost accounting, and to higher provisions for credit
losses. Results in 2001 benefited from tax initiatives and the
resolution of issues with taxation authorities.
CORPORATE SUPPORT, INCLUDING
TECHNOLOGY AND SOLUTIONS
Group Description
Corporate Support includes the corporate units that provide
expertise and governance support for BMO Financial Group in
areas such as strategic planning, law, finance, internal audit,
risk management, corporate communications, human resources
and learning. It also includes revenues and expenses associated
with certain securitization activities, the hedging of foreign
source revenues, the debenture and former equity invest-
ments in Bancomer, and activities related to the management
of certain balance sheet positions and BMO’s overall asset/
liability structure.
The operating results of Technology and Solutions (T&S) are
included with Corporate Support for reporting purposes. Costs of
T&S services are transferred to the client groups (P&C, PCG and
IBG) and only relatively minor variance amounts are retained in
T&S results. As such, results in this section are largely reflective
of Corporate Support activities, not T&S activities.
Financial Results
Corporate Support, including T&S incurred a net loss of $239 mil-
lion in 2002, a deterioration of $318 million from 2001. Results of
a year ago included a $321 million gain on sale of the investment
in Bancomer, a $100 million general provision for credit losses
and an adjustment of future tax assets, which were classified
as non-recurring items for reporting purposes. Excluding non-
recurring items, net income declined $129 million from 2001.
Results for 2002 reflect a significantly higher provision for credit
losses. However, provisions charged to Corporate Support in
2002 are not comparable to provisions charged in 2001 because
of differences in allocation methodology, as discussed below.
Revenue growth of $91 million, excluding non-recurring items,
benefited from recognition of revenue from BMO’s corporate loan
securitization and other corporate revenues. Expense growth of
$121 million was reflective of higher pension and corporate costs,
including Corporate Support’s share of severance costs.
Provisions for credit losses totalled $311 million for the year.
I n 2001, excluding non-recurring items, provisions totalled
$66 million. In 2002, the provision for credit losses charged
to each of the client groups was based on its expected credit
losses over an economic cycle. Corporate Support is charged
for differences between the periodic provisions charged to the
client groups and BMO’s provision required under GAAP. In
2001, the provision for credit losses charged to IBG was based
on this expected loss methodology for most operations, but
included the required GAAP provisions for some operations,
including Harris Bank. Accordingly, provisions charged to
Corporate Support should be considered in conjunction with
provisions charged to IBG for comparative purposes.
Corporate Support
Corporate Support, including Technology and Solutions
($ millions, except as noted)
Reported (As at or for the year ended October 31) 2002 2001 2000
Net interest income (teb) (405) (450) (423)
Non-interest revenue 425 700 513
Total revenues (teb) 20 250 90
Provision for credit losses 311 166 (34)
Non-interest expense 312 191 133
Income before provision for income taxes,
non-controlling interest in subsidiaries
and goodwill amortization (603) (107) (9)
Income taxes (teb) (424) (244) (110)
Non-controlling interest 60 42 20
Amortization of goodwill, net of
applicable income taxes – 16 16
Net income (239) 79 65
Full-time equivalent staff 8,309 9,111 8,272
Excluding non-recurring items
Total revenues (teb) 20 (71) 16
Provision for credit losses 311 66 8
Non-interest expense 312 191 176
Net income (239) (110) (29)