Bank of Montreal 2003 Annual Report Download - page 40

BMO Financial Group 186th Annual Report 200336
Business Environment and Outlook
The depressed global economic and capital market conditions of
last year persisted in early 2003. Weak business activity levels
were exacerbated by geopolitical uncertainties, a weakening
U.S. dollar and a less favourable environment for interest-rate-
sensitive businesses. The U.S. mid-market, where competition is
considerable, was hit particularly hard. This was characterized
by lower than normal utilization of credit facilities and depressed
investment banking activity. In this continued difficult climate,
the group’s diverse business mix proved its value by maintaining
solid earnings growth.
Over the past several years, IBG remained committed to our
strategy of expanding further in the lucrative U.S. market. We
focused onrepositioning ourselves in the competitive North Amer-
ican financial services industry by exiting low-return businesses,
expanding our capabilities in key growth areas and aggressively
managing costs. During the yearwealso aggressively managed
capital by reducing non-core corporate lending balances and
risk-weighted assets by more than $2 billion and $4.7 billion, res-
pectively. In 2003, we acquired New York-based Gerard Klauer
Mattison – operating as Harris Nesbitt Gerard (HNG) – which
brings a U.S. equity research, sales and trading platform to our
Investment Banking Group
Yvan J.P. Bourdeau
President and Chief Operating Officer, BMO Nesbitt Burns
“The heart of our business philosophy is focused on analyzing the needs of our clients and then providing
them with complete solutions that fit their specific business requirements – from complicated M&A
assignments to capital raising to treasury and operating services.”
Selectively expand into new products and trading strategies that relate
to our areas of existing expertise.
▪ Introduced Harris Nesbitt Mezzanine Fund, a private equity fund with
US$75 million in authorized capital, which expands our offering to U.S.
mid-market clients.
▪ Tripled research coverage of U.S.-based companies from 100 to 300
companies.
▪U.S. Index Arbitrage team, formed in October 2002, exceeded net income
targets by more than 200%.
Further build on our strengths in targeted high-growth sectors and
markets.
▪ Expanded Media and Communications core broadcasting business and
broadened sector focus.
▪ Expanded U.S. mid-market client base in sectors such as Business Services,
Consumer, Media and Entertainment, Technology and Telecom, and
Health Care.
▪ Improved securitization line of business net income by 38% year-over-year.
▪ Harris Nesbitt Energy Group expanded its client base by approximately
40%, doubling net income year-over-year.
▪ Deepen and broaden relationships with target clients by leveraging the
full range of our cross-border capabilities, including enhancing our product
offering through the full integration of Harris Nesbitt Gerard.
▪ Continue a disciplined approach to capital and cost management, and
improve our cash productivity ratio.
Group Description and Strategy
Investment Banking Group (IBG) combines all of the businesses serving corporate, institutional and government clients. In Canada, operating under the
BMO Nesbitt Burns brand, our client base comprises large corporations and institutions across a broad range of industry sectors. In the United States, operating
under the Harris Nesbitt brand, we serve mid-market corporate and institutional clients in selected sectors. IBG also serves institutional and government
clients in the
United Kingdom, Europe and Asia.
We offer clients complete financial solutions across the entire balance sheet, including treasury services, cash management, foreign exchange, trade
finance, corporate lending, securitization, and public and private debt and equity underwriting. The group also offers leading financial advisory services in
mergers and acquisitions and restructurings, while providing investing clients with industry-leading research, sales and trading services.
Our strategy is to build a full-service, integrated North American investment and corporate bank, capitalizing on industry specialties and distinctive capabilities.
2003 Group Objectives and Achievements
Maintain Canadian leadership in the high-return fee businesses of merg -
ers and acquisitions, equity and debt underwriting, and securitization.
▪ Participated in 617 Canadian corporate debt and equity transactions that
raised $67 billion.
▪Advised on $18.5 billion of completed Canadian mergers and acquisitions,
more than any other investment bank.
▪ Ranked Top Overall Research Team in the Brendan Wood International
Survey of institutional investors for the 23rd consecutive year. We also
ranked first for Overall Quality of Sales Service.
▪Canadian Securitization unit ranked first in market share of asset-backed
commercial paper conduit outstandings.
Continue to build on the success of the Harris Nesbitt mid-market
franchise.
▪ Acquired Gerard Klauer Mattison, adding a U.S. equity, sales and trading plat-
form to complete our U.S.-based investment and corporate banking offering.
▪ Unified all U.S.-based investment and corporate banking activities under
the Harris Nesbitt brand.
Maintain a disciplined approach to cost and capital management.
▪Improved our productivity ratio by 410 bps to 51.5%.
▪ Decreased risk-weighted assets by $4.7 billion to $50.8 billion, contributing
to improving ROE from 10.6% to 14.4%.
2004 Group Objectives
▪ Maintain Canadian leadership in the high-return fee businesses of mergers
and acquisitions, equity and debt underwriting, and securitization.
▪Accelerate growth through further integration of our U.S. operations, with
a focus on increasing the proportion of fee-based revenue.