Bank of Montreal 2012 Annual Report Download - page 28

MD&A
Who We Are
Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of $525 billionand
46,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to more than
12 million customers. 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 Private Banking, BMO Global Asset Manage-
ment and BMO Insurance. BMO Capital Markets, our 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 BMO Harris Bank, an integrated financial services
organization based in the U.S. Midwest with more than two million retail, small business and commercial customers. BMO Financial Group conducts
business through three operating groups: Personal and Commercial Banking, Private Client Group and BMO Capital Markets.
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 deliver top-tier total shareholder return
and meet our medium-term financial objectives by aligning our oper-
ations with, and executing on, our strategic priorities as outlined on the
following page. We consider top-tier returns to be top-quartile share-
holder returns relative to our Canadian and North American peer group.
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.
Over the medium term, our financial objectives on an adjusted basis
are to achieve average annual earnings per share (adjusted EPS) growth
of 8% to 10%, earn average annual return on equity (adjusted ROE) of
between 15% and 18%, generate average annual operating leverage of
2% or more, and maintain strong capital ratios that exceed regulatory
requirements. These objectives 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 adjusted operating
leverage (defined as the difference between the growth rates of
adjusted revenue and adjusted non-interest expense) of 2% or more. In
managing our operations, we balance current profitability with the need
to invest in our businesses for future growth.
Our Vision
To be the bank that defines great customer experience.
Our Guiding Principle
We aim to deliver top-tier total shareholder return and balance our
commitments to financial performance, our customers, our employ-
ees, the environment and the communities where we live and work.
Our Medium-Term Financial Objectives
Over the medium term, achieve average annual adjusted EPS growth
of 8% to 10%, earn average annual adjusted ROE of between 15%
and 18%, generate average annual adjusted operating leverage of
2% or more, and maintain strong capital ratios that exceed regu-
latory requirements.
Reasons to Invest in BMO
‰Operating leverage from our expanded U.S. platform
‰Focused on generating revenue growth by achieving industry-
leading customer experience and loyalty
‰Enhancing productivity to drive performance
‰Proven strength in commercial banking across our North
American platform
‰Well-diversified business mix with a retail focus
‰Strong capital position
As at or for the periods ended October 31, 2012
(%, except as noted) 1-year 5-year* 10-year*
Compound annual total shareholder return 5.2 4.2 9.1
Compound growth in annual EPS 27.1 8.4 8.7
Compound growth in annual adjusted EPS 17.6 2.0 7.5
Average annual ROE 15.9 13.0 14.8
Average annual adjusted ROE 15.5 15.1 16.5
Compound growth in annual
dividends declared per share 0.7 0.8 8.9
Dividend yield at October 31 4.9 5.3 4.4
Price-to-earnings multiple 9.60 12.4 12.9
Market value/book value ratio 1.47 1.53 1.91
Common Equity Ratio (Basel II basis) 10.5 na na
* 5-year and 10-year growth rates reflect growth based on CGAAP in 2007 and 2002, respectively,
and IFRS in 2012.
na – not applicable
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures
section on page 98.
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 27 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.
BMO Financial Group 195th Annual Report 2012 25