Bank of Montreal 2003 Annual Report Download - page 84

BMO Financial Group 186th Annual Report 200380
Notes to Consolidated Financial Statements
Credit information related to our securitized loans is as follows:
(Canadian $ in millions) 2003 2002
Securitized Credit Securitized Credit
loans losses loans losses
Residential mortgages $ 6,066 $ 1 $ 7,241 $ –
Consumer instalment
and other personal loans 960 7 1,271 4
Credit card loans 1,450 34 1,950 53
Business and government loans –– 402 70
Total $ 8,476 $ 42 $ 10,864 $ 127
Our credit exposure to securitized assets as at October 31, 2003 was
limited to our deferred purchase price of $121 million ($149 million
in 2002), certain cash deposits of $12 million ($93 million in
2002) and investments in securitization vehicles of $45 million
($56 million in 2002).
Static pool credit losses provide a measure of the credit risk in
our securitized assets. They are calculated by totalling actual and
projected future credit losses and dividing the result by the original
balance of each pool of assets. Static pool credit losses for the years
ended October 31 are as follows:
Static Pool Credit Losses 2003 2002
Residential mortgages ––
Consumer instalment and other personal loans 1.30% 2.19%
Credit card loans 2.65% 3.74%
Business and government loans – 2.50%
The following table outlines the key economic assumptions used
in measuring the deferred purchase price and the sensitivity of the
current value of the deferred purchase price as at October 31, 2003
to immediate 10% and 20% adverse changes in those assumptions.
The sensitivity analysis should be used with caution as it is hypo-
thetical and changes in each key assumption may not be linear. The
sensitivities in each key variable have been calculated independently
of changes in the other key variables. Actual experience may result
in changes in a number of key assumptions simultaneously. Changes
in one factor may result in changes in another, which could amplify
or reduce certain sensitivities.
Consumer
instalment
and other
Residential personal Credit card
(Canadian $ in millions, except as noted) mortgages loans loans
Deferred purchase price $ 102 $ 5 $ 14
Weighted-average life (in years) 2.72 1.49 0.16
Prepayment rate (%) 16.22
– 21.35 5.0 – 8.0 33.0
Impact of: 10% adverse change $2.0
– $0.6 $0.1 $0.04
20% adverse change $3.9 – $1.2 $0.2 $0.09
Interest rate (%) 0.74 – 2.32 1.81 – 3.17 8.78
Impact of: 10% adverse change $12.1
– $3.1 $0.7 $1.5
20% adverse change $24.3 – $6.2 $1.4 $3.0
Expected credit losses (%) – 1.25 – 1.50 2.47
Impact of: 10% adverse change $
– $0.7 $0.5
20% adverse change $ – $1.5 $0.9
Discount rate (%) 3.20 – 11.79 11.90 – 13.73 11.79
Impact of: 10% adverse change $1.2
– $0.1 $0.1 $ –
20% adverse change $2.4 – $0.2 $0.1 $0.1
The impact of securitizations on our Consolidated Statement of Income for the years ended October 31 is as follows:
Consumer instalment Business and
(Canadian $ in millions) Residential mortgages and other personal loans Credit card loans government loans Total
2003 2002 2001 2003 2002 2001 2003 2002 2001 2003 2002 2001 2003 2002 2001
Gains on sales of loans $ 39 $ 37 $ 38 $ 1 $ 14 $ 5 $ 117 $ 117 $ 39 $ – $ – $ – $ 157 $ 168 $ 82
Other securitization revenue 14 37 58 20 10 – 43 70 172 – 39 19 77 156 249
Amortization of servicing liability 10 5 –––––––––– 10 5 –
Total $ 63 $ 79 $ 96 $ 21 $ 24 $ 5 $ 160 $ 187 $ 211 $ – $ 39 $ 19 $ 244 $ 329 $ 331
Cash flows received from securitization vehicles for the years ended October 31 are as follows:
Consumer instalment Business and
(Canadian $ in millions) Residential mortgages and other personal loans Credit card loans government loans
2003 2002 2001 2003 2002 2001 2003 2002 2001 2003 2002 2001
Proceeds from new securitizations $ – $ – $ 1,197 $ – $ 519 $ 1,037 $ – $ – $ – $ – $ – $ –
Proceeds from loans sold to
revolving securitization vehicles 2,662 2,737 2,117 59 –– 7,351 10,795 11,549 –––
Servicing fees collected 936 –– 132 47 50 –– 2
Receipt of deferred purchase price 80 92 83 18 10 – 138 134 136 –– 37
The impact of securitizations on our Consolidated Balance Sheet as at October 31 is as follows:
Consumer
Residential instalment and Business and
(Canadian $ in millions) mortgages other personal loans Credit card loans government loans
2003 2002 2003 2002 2003 2002 2003 2002
Retained interests
Investment in securitization vehicles $ – $ – $ 45 $ 56 $ – $ – $ – $ –
Deferred purchase price 102 117 5714 25 ––
Cash deposits with securitization vehicles 12 11 ––––– 170
Servicing liability 21 14 ––––––