Bank of Montreal 2003 Annual Report Download - page 27

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BMO Financial Group 186th Annual Report 2003 23
Net interest margin averaged 1.91% and was down 8 basis
points from a year earlier. Personal and Commercial Client Group
average net interest margin in Canada was slightly higher in 2003,
but net interest margin was declining in the latter part of 2003 due
to shifts in customer preferences. The low interest rate environ-
ment and the competitive retail environment continue to pressure
margin sustainability.In the United States, average net interest
margin declined year-over-year as interest rates fell, but margin
was increasing in the latter part of 2003 due to volume growth at
higher net interestmargins,supportedbypricingefforts.
Private Client Group net interest income rose due to growth in
fixed income products. The group’s net interest margin is higher
than other groups because its personal term deposits balances
are high relative to its loan balances.
Investment Banking Group net interest income fell because
of lower corporate lending volumes and compressed spreads
in capital markets businesses. The group’s net interest margin
declined due to a reduction in higher margin corporate lending
assets, higher low-margin capital markets assets and the nar-
rowing of spreads earned on capital markets assets in the flatter
yield curve environment.
Non-Interest Revenue
Non-interest revenue, which comprises all revenues other than
net interest income, increased $296 million or 8% from 2002.
The incremental effect of acquired businesses increased non-
interest revenue by $103 million,while the impact of the weaker
U.S. dollar reduced 2003 non-interest revenue by $128 million.
Securities commissions and fees rose $81 million. These fees
largely consist of full-service and self-directed retail broker-
age commissions within Private Client Group, which account for
about three-quarters of the balance, and institutional equity
trading commissions within Investment Banking Group. Fees
increased in both operating groups, benefiting from higher
equity market valuations and client trading volumes in the lat-
ter part of the year in Private Client Group and from Investment
Banking Group’s acquisition of Gerard Klauer Mattison.
Deposit and payment service charges, which represent income
earned on both retail and commercial deposit accounts, rose
$24 million. The increase related to pricing initiatives, account
management efficiency and volume growth in Canadian personal
and commercial banking.
Lending fees decreased $13 million, continuing the trend of
a year ago and indicative of weak market demand for corporate
loans in Investment Banking Group.
Card fees rose $30 million on higher levels of activity, driven
in part by the success of our Mosaik MasterCard.
Investment management and custodial fees decreased $11 mil-
lion, reflecting the weak investment environment in the earlier
part of the year, particularly in the United States.
Mutual fund revenues increased $12 million, reflecting vol-
ume growth, improved equity market valuations and the full-year
inclusion of CSFBdirect in wealth management operations.
Securitization revenues decreased $85 million due to lower
credit card loans securitizations and the termination of our
collateralized loans securitization. Results in 2002 also reflected
higher gains on sales. Securitization revenues are detailed in
Note 7 on page 79 of the financial statements.
Non-Interest Revenue ($ millions)
For the year ended October 31 2003 2002 2001 2000 1999
Securities commissions and fees 894 813 742 859 666
Deposit and payment
service charges 756 732 670 646 616
Trading revenues 275 209 490 388 295
Lending fees 293 306 352 322 329
Card fees 290 260 204 216 205
Investment management
and custodial fees 303 314 336 373 419
Mutual fund revenues 321 309 251 232 207
Securitization revenues 244 329 331 343 296
Underwriting and advisory fees 268 228 234 210 175
Investment securities gains (losses) (41) (146) 123 183 (85)
Foreign exchange,
other than trading 160 151 127 146 133
Insurance income 124 105 125 96 73
Other revenues 333 314 237 312 182
Total 4,220 3,924 4,222 4,326 3,511
Contribution to Non-Interest Revenue Growth (%)
For the year ended October 31 2003 2002 2001
Trading revenues 1.7 (6.7) 2.4
Securitization revenues (2.2)
–
(0.3)
Securities commissions and fees 2.1 1.7 (2.7)
Net securities gains (losses) 2.7 (6.4) (1.4)
Other business revenue 3.3 4.3 (0.4)
Total non-interest revenue growth 7.6 (7.1) (2.4)
Assets under Administration
($ billions)
168
220 230
246 253
20032002200120001999
20032002200120001999
Assets under Management
($ billions)
64
81
96 96
90
1.95
1.85 1.91
1.99
1.91
227
235
243 248
264
Average Assets
($ billions)
and Net Interest Margin
(%)
Net interest margin (%)
Average assets ($ billions)
20032002200120001999
4.4
4.3
4.6
4.9 5.1
3.5
4.3 4.2
3.9
4.2
Net Interest Income (teb)
and Non-Interest Revenue
($ billions)
Net interest income (teb)
Non-interest revenue
20032002200120001999