Bank of Montreal 2010 Annual Report Download - page 60

MANAGEMENT’S DISCUSSION AND ANALYSIS
MD&A
Securities ($ millions)
As at October 31 2010 2009 2008 2007 2006
Investment – – – – 14,166
Trading 71,710 59,071 66,032 70,773 51,820
Available-for-sale 50,543 50,257 32,115 26,010 –
Other 1,146 1,485 1,991 1,494 1,414
Loan substitute – – – – 11
123,399 110,813 100,138 98,277 67,411
Securities increased $12.6 billion to $123.4 billion in 2010. Trading securities
increased $12.6 billion to $71.7 billion, mainly due to an increase in
U.S. government issued securities and corporate equity securities backing
equity derivatives trading and our equity-linked notes program. Further
details on the composition of securities are provided in Note 3 on page
116 of the financial statements.
Securities Borrowed or Purchased Under
Resale Agreements
Securities borrowed or purchased under resale agreements decreased
$7.9 billion to $28.1 billion, largely as a result of client demand.
Loans and Acceptances ($ millions)
As at October 31 2010 2009 2008 2007 2006
Residential mortgages 48,715 45,524 49,343 52,429 63,321
Consumer instalment
and other personal 51,159 45,824 43,737 33,189 30,418
Credit cards 3,308 2,574 2,120 4,493 3,631
Businesses and
governments 68,338 68,169 84,151 62,650 56,030
Acceptances 7,001 7,640 9,358 12,389 7,223
Gross loans and
acceptances 178,521 169,731 188,709 165,150 160,623
Allowance for credit losses (1,878) (1,902) (1,747) (1,055) (1,058)
Net loans and acceptances 176,643 167,829 186,962 164,095 159,565
Net loans and acceptances increased $8.8 billion to $176.6 billion, despite
the impact of the weaker U.S. dollar, which lowered the increase by
$4.0 billion. Consumer instalment and other personal loans increased
$5.3 billion, reflecting continued growth in demand for personal lending
products, particularly in the Canadian market. Residential mortgages
increased $3.2 billion, reflecting strong growth in Canada in the first half
of 2010, as homebuyers chose to finance their purchases before the
introduction of the Harmonized Sales Tax in Ontario and British Columbia,
as well as lower levels of securitization activity. These factors were
partially offset by lower mortgage balances in the United States, reflect-
ing secondary market sales. Credit card loans increased $0.7 billion due
to the Diners Club business acquisition and lower levels of securitization
activity. Overall loan growth was increased by US$1.3 billion by the
Rockford, Illinois-based bank transaction and $1.0 billion by the Diners
Club business acquisition.
Table 11 on page 102 provides a comparative summary of loans by
geographic location and product. Table 13 on page 103 provides a com-
parative summary of net loans in Canada by province and industry. Loan
quality is discussed on page 40 and further details on loans are provided
in Notes 4, 5 and 8 to the financial statements, starting on page 120.
Other Assets
Other assets increased $2.4 billion to $62.9 billion, primarily reflecting
an increase of $1.9 billion in derivative financial instrument assets.
The year-over-year increase was primarily due to movements in interest
rates and their impact on the valuation of contracts. Volatility in interest
rates increases the value of derivative assets and liabilities, usually
comparably. Derivative instruments are detailed in Note 10 on
page 130 of the financial statements.
Deposits ($ millions)
As at October 31 2010 2009 2008 2007 2006
Banks 19,435 22,973 30,346 34,100 26,632
Businesses and
governments
130,773 113,738 136,111 121,748 100,848
Individuals 99,043 99,445 91,213 76,202 76,368
249,251 236,156 257,670 232,050 203,848
Deposits increased $13.1 billion to $249.3 billion. The weaker U.S. dollar
reduced deposit growth by $5.6 billion. Deposits from businesses
and governments, which account for 52% of total deposits, increased
$17.0 billion, largely as a result of the replacement of maturing deposits
by banks and funding our growth in loans and securities. Deposits from
individuals, which account for 40% of total deposits, decreased $0.4 bil-
lion but increased $1.2 billion in source currency. Deposits by banks, which
account for 8% of total deposits, decreased $3.5 billion due to maturing
deposits, as noted above. The growth in deposits includes the addition
of US$1.9 billion as a result of the Rockford transaction. Further details
on the composition of deposits are provided in Note 15 on page 140 of
the financial statements and in the Liquidity and Funding Risk section
on page 85.
Other Liabilities
Other liabilities increased $9.2 billion to $135.9 billion. Securities sold
but not yet purchased increased $4.4
billion and securities lent or
sold under repurchase agreements increased $0.8
billion, mainly due
to client-driven trading activities related to market opportunities.
Derivative liabilities increased $3.2 billion, mainly due to the same
reasons described above for derivative assets. Further details on the
composition of other liabilities are provided in Note 16 on page 141
of the financial statements.
Shareholders’ Equity
Shareholders’ equity increased $1.7 billion to $21.9 billion. The increase
was largely related to a $1.1 billion increase in retained earnings and
the issuance of approximately 9.7 million common shares with a value
of $0.5 billion through the bank’s Dividend Reinvestment and Share
Purchase Plan, which is described on page 63 of the Enterprise-Wide
Capital Management section. Our Consolidated Statement of Changes
in Shareholders’ Equity on page 112 provides a summary of items that
increase or reduce shareholders’ equity, while Note 20 on page 145 of
the financial statements provides details on the components of and
changes in share capital. Details of our enterprise-wide capital manage-
ment practices and strategies can be found on page 59.
58 BMO Financial Group 193rd Annual Report 2010