Bank of Montreal 2013 Annual Report Download - page 24

Earnings per Share Growth
The year-over-year percentage change in earnings per share (EPS) and
in adjusted EPS are our key measures for analyzing earnings growth. All
references to EPS are to diluted EPS, unless indicated otherwise.
EPS was $6.26, up $0.11 or 2% from $6.15 in 2012. Adjusted EPS
was $6.30, up $0.30 or 5% from $6.00 in 2012. Our three-year com-
pound average annual adjusted EPS growth rate was 9%, in line with
our current medium-term objective of achieving average annual
adjusted EPS growth of 7% to 10%. EPS growth in both 2013 and 2012
reflected increased earnings. Adjusted net income available to common
shareholders was 47% higher over the three-year period from the end
of 2010, while the average number of diluted common shares out-
standing increased 15% over the same period, primarily due to the
issuance of common shares on the acquisition of M&I in July 2011.
Net income was $4,248 million in 2013, up $59 million from the
previous year. Adjusted net income was $4,276 million, up $184 million
or 5%.
On an adjusted basis, there was good revenue growth and a
decrease in provisions for credit losses in 2013. Higher revenues
exceeded incremental costs, contributing to growth in net income. There
was a higher effective income tax rate in 2013.
There was significant adjusted net income growth in Wealth
Management, good growth in Canadian P&C and BMO Capital Markets,
with U.S. P&C relatively unchanged and a decline in Corporate Services.
Canadian P&C reported net income increased $79 million or 4% to
$1,854 million, with growth in balances and fees across most products,
lower net interest margin and modest increases in expenses. Expenses
rose due to continued investment in the business, including our dis-
tribution network, net of strong expense management. Canadian P&C
results are discussed in the operating group review on page 47.
Wealth Management adjusted net income increased significantly by
$316 million or 58% to $861 million, with net income growth in both
wealth and insurance businesses. Adjusted net income in the wealth
businesses was $600 million, up $213 million or 55%. The significant
increase in net income was driven by a security gain of $121 million and
good growth of 23% in our other wealth businesses. Insurance net
income increased as the prior year was impacted by unfavourable
movements in long-term interest rates, and there was continued growth
in both the underlying creditor and life insurance businesses. Wealth
Management results are discussed in the operating group review on
page 53.
BMO Capital Markets reported net income increased $73 million or
7% to $1,094 million. Improved results were driven by increases in
trading revenues and investment banking fees and higher recoveries of
credit losses, partially offset by an increase in expenses resulting from
stronger revenue performance and increased technology and support
costs related to a changing business and regulatory environment. BMO
Capital Markets results are discussed in the operating group review on
page 56.
U.S. P&C adjusted net income was relatively unchanged, with a
decline of $8 million or 1% to $633 million on a U.S. dollar basis. Lower
provisions for credit losses and a reduction in adjusted expenses were
more than offset by lower revenue. Revenue declined as the benefits of
strong core commercial and industrial loan and deposit growth and
higher commercial lending fees were more than offset by the effects of
lower net interest margin, reductions in certain portfolios and lower
deposit and debit card fees. U.S. P&C results are discussed in the
operating group review on page 50.
Corporate Services adjusted loss was $191 million, compared with
adjusted net income of $96 million in 2012, primarily due to lower
revenues and growth in expenses. Adjusted revenues decreased
primarily due to a group teb offset that was higher than the prior year
and a decline in treasury-related items. Adjusted non-interest expense
was higher, primarily due to increases in pension and benefit costs, and
regulatory-related and technology costs. Adjusted recoveries of credit
losses were lower, reflecting lower recoveries on the purchased credit
impaired loan portfolio, offset in part by recoveries on the impaired real
estate loan portfolio in 2013, compared to provisions in 2012. Corporate
Services results are discussed in the operating group review on page 59.
Changes to reported and adjusted net income for each of our operating
groups are discussed in more detail in the 2013 Review of Operating
Groups Performance, which starts on page 44.
EPS ($)
2011 2013 2012
Adjusted EPS
EPS
4.84 5.10
6.15 6.00 6.26 6.30
Increases reflect a continued
focus on the execution of our
strategy and the benefits of
diversification.
Earnings per share (EPS)
is calculated by dividing net
income, after deduction of
preferred dividends, by the
average number of common
shares outstanding. Diluted EPS,
which is our basis for measuring
performance, adjusts for
possible conversions of financial
instruments into common
shares if those conversions
would reduce EPS, and is more
fully explained in Note 25 on
page 174 of the financial
statements. Adjusted EPS is
calculated in the same manner
using adjusted net income.
MD&A
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 34.
BMO Financial Group 196th Annual Report 2013 35