Bank of Montreal 2010 Annual Report Download - page 29

MD&A
Established in 1817, BMO Financial Group is a highly diversified North American financial services provider. With total assets of $412 billion and
38,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services. We serve more
than seven million customers across Canada through our Canadian retail arm, BMO Bank of Montreal. We also serve customers through our wealth
management businesses, BMO Nesbitt Burns, BMO InvestorLine, BMO Insurance and BMO Harris Private Banking. BMO Capital Markets, our North
American investment and corporate banking division, provides a full suite of financial products and services to our North American and international
clients. In the United States, BMO serves customers through Chicago-based Harris, an integrated financial services organization with almost 1.3 million
retail, small business and commercial customers. BMO Financial Group comprises three operating groups: Personal and Commercial Banking,
Private Client Group and BMO Capital Markets.
Who We Are
Our Financial Objectives
BMO’s vision, guiding principle and medium-term financial objectives
for certain important performance measures are set out in the adjacent
chart. We believe that we will maximize total shareholder return and
meet our medium-term financial objectives by aligning our operations
with and executing on our strategic priorities, as outlined on the
following page.
BMO’s business planning process is rigorous and considers the
prevailing economic conditions, our customers’ evolving needs and
the opportunities available across our lines of business. It includes
clear and direct accountability for annual performance that is measured
against internal and external benchmarks and progress towards our
strategic priorities.
Our medium-term financial objectives of, over time, increasing
earnings per share (EPS) by an average of 12% per year, earning an
average annual return on equity (ROE) of 17% to 20% and maintaining
strong capital ratios that meet both current and expected regulatory
requirements are key guideposts as we execute against our strategic
priorities. Our operating philosophy is to increase revenues at rates
higher than general economic growth rates, while limiting expense
growth to achieve average annual cash operating leverage (defined
as the difference between the revenue and cash-based expense
growth rates) of at least 1.5% over time. In managing our operations,
we balance current profitability with the need to invest in our
businesses for future growth.
The Our Financial Objectives section above and the Enterprise-Wide Strategy and Economic Developments sections that follow contain certain forward-looking
statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the
Caution Regarding Forward-Looking Statements on page 29 of this MD&A for a discussion of such risks and uncertainties and the material factors and assumptions
related to the statements set forth in such sections.
Our Vision
To be the bank that defines great customer experience.
Our Guiding Principle
We aim to maximize total shareholder return and balance
our commitments to financial performance, our customers, our
employees, the environment and the communities where we
live and work.
Our Medium-Term Financial Objectives
Over time, increase EPS by an average of 12% per year,
earn average annual ROE of between 17% and 20%, achieve
average annual cash operating leverage of at least 1.5%,
and maintain strong capital ratios that meet both current
and expected regulatory requirements.
Reasons to Invest in BMO
• Clear growth strategy
• Strong financial position
• Proactive risk management
• Commitment to stakeholders
As at or for the periods ended October 31, 2010
(%, except as noted) 1-year 5-year 10-year
Compound annual total shareholder return 26.4 5.9 9.8
Compound growth in annual EPS 54.2 0.5 3.9
Average annual ROE 14.9 14.3 15.3
Compound growth in annual
dividends declared per share – 8.6 10.8
Dividend yield at October 31, 2010 4.7 na na
Price-to-earnings multiple 12.7 na na
Market value/book value ratio 1.77 na na
Tier 1 Capital Ratio 13.45 na na
na – not applicable
BMO Financial Group 193rd Annual Report 2010 27