Bank of Montreal 2013 Annual Report Download - page 163

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 25: Earnings Per Share
Basic Earnings per Share
Our basic earnings per share is calculated by dividing our net income,
after deducting total preferred share dividends, by the daily average
number of fully paid common shares outstanding throughout the year.
Basic Earnings per Share
(Canadian $ in millions, except as noted) 2013 2012 2011
Net income attributable to bank
shareholders 4,183 4,115 3,041
Dividends on preferred shares (120) (136) (146)
Net income available to common
shareholders 4,063 3,979 2,895
Average number of common shares
outstanding (in thousands) 648,476 644,407 591,403
Basic earnings per share (Canadian $) 6.27 6.18 4.90
Diluted Earnings per Share
Diluted earnings per share represents what our earnings per share
would have been if instruments convertible into common shares that
would have had the impact of reducing our earnings per share had been
converted, either at the beginning of the year for instruments that were
outstanding at the beginning of the year or from the date of issue for
instruments issued during the year.
Diluted Earnings per Share
(Canadian $ in millions, except as noted)
Convertible Shares
In determining diluted earnings per share, we increase net income
available to common shareholders by the aggregate amount of
dividends paid on convertible preferred shares and interest on capital
trust securities, as these distributions would not have been paid if the
instruments had been converted at the beginning of the year. Similarly,
we increase the average number of common shares outstanding by the
number of shares that would have been issued had the conversion
taken place at the beginning of the year or on the date of issue, if later.
Employee Stock Options
In determining diluted earnings per share, we increase the average
number of common shares outstanding by the number of shares that
would have been issued if all stock options with a strike price below the
average share price for the year had been exercised. When performance
targets have not been met, affected options are excluded from the
calculation. We also decrease the average number of common shares
outstanding by the number of our common shares that we could have
repurchased if we had used the proceeds from the exercise of stock
options to repurchase them on the open market at the average share
price for the year. We do not adjust for stock options with a strike price
above the average share price for the year because including them
would increase our earnings per share, not dilute it.
2013 2012 2011
Net income available to common shareholders adjusted for dilution effect 4,063 3,989 2,935
Average number of common shares outstanding (in thousands) 648,476 644,407 591,403
Convertible shares – 3,040 13,536
Stock options potentially exercisable (1) 10,656 6,353 7,928
Common shares potentially repurchased (9,326) (5,185) (5,799)
Average diluted number of common shares outstanding (in thousands) 649,806 648,615 607,068
Diluted earnings per share (Canadian $) 6.26 6.15 4.84
(1) In computing diluted earnings per share, we excluded average stock options outstanding of 2,677,737, 6,226,858 and 4,549,499 with weighted-average exercise prices of $201.93, $132.63 and
$100.73 for the years ended October 31, 2013, 2012 and 2011, respectively, as the average share price for the period did not exceed the exercise price.
Note 26: Operating and Geographic Segmentation
Operating Groups
Notes
We conduct our business through three operating groups, each of which
has a distinct mandate. We determine our operating groups based on
our management structure and therefore these groups, and results
attributed to them, may not be comparable with those of other financial
services companies. We evaluate the performance of our groups using
measures such as net income, revenue growth, return on equity, net
economic profit and non-interest expense-to-revenue (productivity)
ratio, as well as cash operating leverage.
Personal and Commercial Banking
Personal and Commercial Banking (“P&C”) is comprised of two operating
segments: Canadian Personal and Commercial Banking and U.S. Personal
and Commercial Banking.
Canadian Personal and Commercial Banking
Canadian Personal and Commercial Banking (“Canadian P&C”) serves
personal and commercial banking customers through an integrated
national network of BMO Bank of Montreal branches, automated
banking machines (“ABMs”), telephone, mobile and online banking,
along with the expertise of our mortgage specialists and financial
planners. Personal banking provides financial solutions for everyday
banking, financing, investing, credit cards and creditor insurance needs.
Commercial banking provides our small business, medium-sized
enterprise and mid-market banking customers with a broad suite of
integrated commercial and capital markets products, as well as financial
advisory services.
U.S. Personal and Commercial Banking
U.S. Personal and Commercial Banking (“U.S. P&C”) offers a broad range
of products and services to individuals and small and mid-sized business
customers. Our retail and small and mid-sized business banking
customers are served through our network of BMO Harris Bank branches,
call centre, online and mobile banking platforms, and ABMs across
eight states.
Wealth Management
BMO’s group of wealth management businesses serves a full range of
client segments from mainstream to ultra-high net worth and
institutional, with a broad offering of wealth management products and
solutions including insurance products. Wealth Management (“WM”)
operates in both Canada and the United States, as well as in select
global markets including Asia and Europe.
174 BMO Financial Group 196th Annual Report 2013