Bank of Montreal 2012 Annual Report Download - page 97

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Net income in Private Client Group was $476 million, up $45 million
or 10% from 2010. Adjusted net income was $486 million, up
$49 million or 11%. Adjusted net income in PCG excluding insurance
was $355 million, up $86 million or 32%. Adjusted net income in
Insurance was $131 million, down $37 million or 22%, due to the
impact of higher than usual earthquake-related reinsurance claims and
the unfavourable impact of movements in long-term interest rates.
Revenue of $2,585 million in 2011 increased $329 million or 15%.
Revenue in PCG excluding insurance increased by 19% due to the impact
of the M&I and LGM acquisitions, as well as growth in all of our busi-
nesses, due in part to increases in client assets under management and
administration. Insurance revenues decreased 15% primarily due to the
impact of the reinsurance claims and interest rate movements described
above, partially offset by higher net premium revenue. Non-interest
expense of $1,956 million increased $277 million or 17%. Adjusted
non-interest expense of $1,944 million increased $271 million or 16%
primarily due to the impact of acquisitions and higher revenue-based
costs, in line with improved performance.
Net income in BMO Capital Markets increased $86 million to
$902 million in 2011, as revenue increases and lower provisions for
credit losses were partially offset by increased expenses. Revenue
increased $21 million to $3,299 million in 2011. Revenue growth
reflected the strength and resilience of our businesses. Net interest
income decreased due to lower trading net interest income in a weaker
market environment, and a decrease in corporate banking revenue,
reflecting lower asset levels and reduced spreads. Non-interest revenue
increased, driven by higher investment banking fees, particularly from
mergers and acquisitions and debt underwriting, and an improvement in
equity trading revenue, partly offset by a decline in lending fees. The
weaker U.S. dollar reduced revenue by $70 million. Provisions for credit
losses were $145 million lower on an expected loss basis. Non-interest
expense increased $70 million or 3.8% to $1,895 million due to
increased employee costs, as we made strategic hires across our oper-
ations to position our business for future growth, and to higher pro-
fessional fees and computer costs.
Corporate Services net loss for the year was $389 million, compared
with a net loss of $245 million in 2010. There was an adjusted net loss
of $281 million, compared with an adjusted net loss of $244 million in
2010. The increase in the adjusted net loss was attributable to higher
expenses and higher provisions for credit losses charged to Corporate
Services under our expected loss provisioning methodology, partly offset
by improved revenues. The improvement in revenues was primarily due
to a lower group teb offset, partially offset by higher residual funding
costs and costs associated with supplemental liquidity. Adjusted
expense increased, driven by increases in technology investment spend-
ing, professional fees and employee costs.
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 98.
94 BMO Financial Group 195th Annual Report 2012