Bank of Montreal 2003 Annual Report Download - page 46

Deposits ($ millions)
As at October 31 2003 2002 2001 2000 1999
Banks 24,755 15,273 20,539 23,385 30,398
Businesses and governments 72,405 71,411 66,132 69,454 65,459
Individuals 74,391 75,154 67,619 63,858 61,017
Total 171,551 161,838 154,290 156,697 156,874
Deposits increased $9.7 billion to $171.6 billion. Deposits by
banks increased $9.5 billion and provided much of the funding
for the increase in securities balances. Deposits from businesses
and governments, which account for 42% of total deposits, in-
creased $1.0 billion. Deposits from individuals, which tend to be
more stable, increased by $2.3 billion in source currency. How-
ever, due to the effects of the weaker U.S. dollar, deposits from
individuals declined $0.8 billion and accounted for 43% of
total deposits.
Further details on the composition of deposits are provided
in Note 14 on page 88 of the financial statements and in the
Liquidity and Funding Risk section on page 50.
Other Liabilities
Other liabilities decreased $5.7 billion to $69.6 billion. Accounts
payable, accrued interest and other items declined $2.3 billion.
Derivative-related amounts declined $1.4 billion and acceptances
were $1.3 billion lower.
Subordinated Debt
Subordinated debt declined $0.9 billion to $2.9 billion. The
decline was largely attributable to the maturity of a debenture, a
redemption prompted by the high yield relative to current market
rates and our stronger capital levels, and the weaker U.S. dollar.
Note 16 on page 89 of the financial statements provides details on
the attributes of the debt, issues and retirements, and future matu-
r ities by year.
Shareholders’ Equity
Shareholders’ equity increased $0.6 billion to $12.5 billion. The
increase was largely related to higher retained earnings and the
issue of common shares. The increase in retained earnings was
curtailed by higher income taxes related to hedges of net invest-
ments in foreign operations, principally our U.S. subsidiaries,
which is discussed further in the Income Tax section on page 26.
BMO’s Consolidated Statement of Changes in Shareholders’
Equity on page 72 provides a summary of items that increase or
reduce shareholders’ equity while Note 17 on page 90 provides
details on the components of and changes in share capital.
Details of our enterprise-wide capital management processes
and strategies can be found on page 43.
Management’s Discussion and Analysis of Operations and Financial Condition
BMO Financial Group 186th Annual Report 200342
61.0
63.9
67.6
75.2 74.4
Deposits from Individuals
($ billions)
20032002200120001999
20032002200120001999
11.0
11.9
10.7
11.9
12.5
Shareholders’ Equity
($ billions)
Off-Balance Sheet Arrangements
BMO enters into a number of off-balance sheet arrangements
in the normal course of operations. The discussion that fol-
lows addresses the more significant types of off-balance sheet
arrangements.
Guarantees
Items that meet the accounting definition of a guarantee are
considered to be off-balance sheet arrangements. These include
standby letters of credit and guarantees, certain of our commit-
ments to extend credit and certain of our derivative financial
instruments. BMO enters into these agreements as a method of
meeting the financial needs of our customers and receives fees
for meeting those needs. Amounts included in our Consolidated
Balance Sheet related to these activities, as well as the maximum
amounts payable by BMO under those agreements, are outlined
in Note 6 on page 78 of the financial statements.
Interests in Bank Securitization Vehicles
Periodically, we sell loans to off-balance sheet entities or trusts,
either for capital management purposes or to obtain alter-
nate sources of funding. The impact of these arrangements on
BMO’s funding is outlined in the cash flow disclosure included
in Note 7 on page 79 of the financial statements. As a result of
securitization activities, BMO recognizes in income the gains
or losses on sales to the securitization vehicles and other secur -
itization revenues paid to us for servicing the loans sold. The
impact of securitization activities on our revenues and expenses
is outlined in Note 7 on page 79 of the financial statements.
BMO has retained interests in these off-balance sheet entities, as
we are sometimes required to purchase subordinated interests
or maintain cash deposits in the entities. These retained inter-
ests serve as a source of liquidity for the vehicle. BMO can also
have deferred purchase price amounts related to securitizations
recorded in our balance sheet. The deferred purchase price
represents the difference between the amount recognized in
income upon sale of the loans to the securitization vehicle and
the amount of cash received from the vehicle to date. Amounts
recorded in BMO’s Consolidated Balance Sheet related to invest-
ments in securitization vehicles, deferred purchase price and
cash deposits with securitization vehicles are disclosed in Note 7
on page 79 of the financial statements.