Bank of Montreal 2004 Annual Report Download - page 23

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BMO Financial Group Annual Report 2004 19
MD&A
Credit Losses
•The provision for credit losses improved by $558 million.
Specific provisions fell $388 million and there was a
$170 million reduction of the general allowance.
•The provision represented negative 7 basis points of average
net loans and acceptances and the specific provision
represented 4 basis points, an improvement from 30 basis
points in 2003 and significantly better than our target.
Cash and Securities-to-Total Assets
•The cash and securities-to-total assets ratio decreased
to 25.8% from 29.1% in 2003.
•Liquidity remains sound and continues to be supported
by broad diversification of deposits.
Capital Adequacy
•The Tier 1 Capital Ratio was 9.81%, up from 9.55% last
year and above our minimum target of 8.0%.
•The Total Capital Ratio was 11.31%, down from 12.09%
in 2003.
Credit Rating (Standard & Poor’s)
•Our credit rating, as measured by Standard & Poor’s
®
7
(S&P) senior debt ratings, remained at AA
–
, matching two
competitors and exceeding the rating of the other three
major Canadian banks.
•S&P’s ratings outlook on BMO remains stable.
Credit Rating (Moody’s)
•Our credit rating, as measured by Moody’s
®
8
senior debt
ratings, remained at Aa3, slightly below the highest-rated
Canadian bank and consistent with the highest of the
remaining major Canadian banks.
•Moody’s ratings outlook on BMO remains stable.
Impaired Loans
•Gross impaired loans and acceptances were $1,119 million,
compared with $1,918 million in 2003, and represented
6.7% of equity and allowances for credit losses, versus 12.2%
a year ago.
•Formations of new impaired loans and acceptances, a key
driver of credit provisions, were $607 million, down from
$1,303 million in 2003.
Our Performance Peer Group Comparison
BMO Financial Group
Canadian peer group average
North American peer group average
Further details are provided on pages 31 and 60.
Further details are provided on pages 31 and 61.
Further details are provided on pages 64 and 65.
Further details are provided on pages 51 and 52.
Further details are provided on page 52.
Further details are provided on page 52.
Provision for Credit Losses as a %
of Average Loans and Acceptances
•
BMO’s provision for credit losses of (0.07)%
of average net loans and acceptances
was better than the Canadian peer group
average of 0.10% and the North American
peer group average of 0.57%.
•BMO’s credit loss experience has been
consistently better than both the Canadian
and North American peer groups.
Gross Impaired Loans and
Acceptances as a % of Equity and
Allowances for Credit Losses
•BMO’s ratio of 6.7% was marginally better
than the Canadian peer group average of
6.9% but higher than the North American
peer group average of 4.2%.
•
BMO’s ratio has approximated the Canadian
average but been higher than the North
American average in recent years.
Cash and Securities-to-Total
Assets (%)
•BMO’s ratio of 25.8% was below the
Canadian peer group average of 30.5%
and the North American peer group
average of 39.4%.
•The ratio remains higher than our
minimum target ratio.
Tier 1 Capital Ratio (%)
•Our Tier 1 Capital Ratio at 9.81% was the
highest in recent years but was below the
Canadian peer group average of 10.40%.
•On a U.S.-basis, our Tier 1 Capital Ratio
was 9.44% and was above the North
American peer group average of 8.40%.
Credit Rating
•BMO’s credit rating of AA
–
, as measured
by S&P’s senior debt ratings, was consistent
with the Canadian peer group median as
two of the peer group are rated as highly
as BMO and three are rated lower. BMO’s
rating remains higher than the North
American peer group median rating of A+.
Credit Rating
•BMO’s credit rating of Aa3, as measured
by Moody’s senior debt ratings, was
comparable to the Canadian and North
American peer group medians.
See page 20 for further comments on peer
group comparisons.
20042003200220012000
(0.07)
0.30
0.56
0.66
0.25
20042003200220012000
6.7
12.2
15.2
14.2
10.5
20042003200220012000
25.8
29.1
24.9
23.1
27.8
20042003200220012000
9.81
9.55
8.80
8.15
8.83
AA– AA– AA– AA–
A+ A+A+ A+
A+
AA–
A+
20042003200220012000
Aa3 Aa3 Aa3 Aa3 Aa3
Aa3 Aa3Aa3 Aa3 Aa3
20042003200220012000