Bank of Montreal 2004 Annual Report Download - page 53

BMO Financial Group Annual Report 2004 49
MD&A
Financial Condition Review
Corporate Support
Balance Sheet
Summary Balance Sheet ($ millions)
As at October 31 2004 2003 2002 2001 2000
Assets
Cash resources 18,045 19,860 19,305 17,656 18,508
Securities 50,472 54,790 43,715 37,676 46,463
Net loans and acceptances 156,248 146,156 149,596 144,765 142,447
Other assets 40,429 35,688 40,248 39,312 25,978
265,194 256,494 252,864 239,409 233,396
Liabilities and
Shareholders’ Equity
Deposits 175,190 171,551 161,838 154,290 156,697
Other liabilities 74,420 69,605 75,338 69,763 59,847
Subordinated debt 2,395 2,856 3,794 4,674 4,911
Shareholders’ equity 13,189 12,482 11,894 10,682 11,941
265,194 256,494 252,864 239,409 233,396
Total assets increased $8.7 billion or 3% from last year to
$265.2 billion at October 31, 2004, even though the weaker U.S.
dollar reduced assets by $5.4 billion. There was a $10.1 billion
increase in net loans and acceptances and a $4.7 billion
increase in other assets. These were partially offset by a
$4.3 billion reduction in securities and a $1.8 billion decline
in cash resources.
Group Description
Corporate Support includes the corporate units that provide
expertise and governance support to BMO Financial Group in
areas such as strategic planning, law, finance, internal audit,
risk management, corporate communications, economics,
human resources and learning. Our operating results include
revenues and expenses associated with certain securitization
activities, the hedging of foreign-source earnings, and activities
related to the management of certain balance sheet positions
and BMO’s overall asset-liability structure.
Operating results for Technology and Solutions (T&S)
are included with Corporate Support for reporting purposes.
However, costs of T&S services are transferred to the three
client operating groups, and only minor amounts are retained
in T&S results. As such, results in this section largely reflect
Corporate Support activities.
Financial Results
Net income for the year was $261 million, compared with
$23 million in 2003. The improvement was driven by a sig-
nificantly lower provision for credit losses, as well as higher
net gains on investment securities and foreign exchange
translation, partially offset by lower net investment earnings
in the sustained low interest rate environment and propor-
tionately lower tax benefits in 2004.
Corporate Support is generally charged (or credited) with
differences between the periodic provisions for credit losses
charged to the client operating groups under our expected loss
provisioning methodology and the required periodic provisions
charged by the consolidated organization under GAAP.
However, during the third quarter of 2004, Investment Banking
Group was credited with a $39 million reduction in its provi-
sion for credit losses in respect of a recovery on a loan that
was written off in 2001. The original specific provision for
credit losses on this loan was charged to Investment Banking
Group and was not subject to our expected loss provisioning
methodology at the time.
Corporate Support, including Technology and Solutions
($ millions, except as noted)
Reported Change from 2003
As at or for the year ended October 31 2004 2003 2002 $%
Net interest income (teb) (187) (201) (160) 14 7
Non-interest revenue 203 255 287 (52) (20)
Total revenue (teb) 16 54 127 (38) (69)
Provision for credit losses (545) (79) 312 (466) (+100)
Non-interest expense 143 138 143 53
Income before income taxes
and non-controlling interest
in subsidiaries 418 (5) (328) 423 +100
Income taxes (teb) 98 (88) (318) 186 +100
Non-controlling interest 59 60 60 (1) (2)
Net income 261 23 (70) 238 +100
Full-time equivalent staff 6,641 6,893 7,301 (252) (4)