Bank of Montreal 2013 Annual Report Download - page 28

Net Interest Income
Net interest income for the year was $8,545 million, a decrease of
$263 million or 3% from 2012. Adjusted net interest income of
$7,888 million was down 2% from 2012, due to a decline of 11 basis
points in adjusted net interest margin to 1.63% in the current low
interest rate environment. The impact of the stronger U.S. dollar
increased adjusted net interest income by $53 million.
Adjusted net interest income primarily excludes amounts for the
recognition of a portion of the credit mark on the M&I purchased
performing loan portfolio.
BMO’s average earning assets increased $23.9 billion or 5% in
2013, including a $3.8 billion increase as a result of the stronger U.S.
dollar. There was strong growth in Canadian P&C and Wealth Manage-
ment, growth in BMO Capital Markets and U.S. P&C, and a reduction in
Corporate Services.
The main drivers of BMO’s overall net interest margin are the
individual group margins, changes in the magnitude of each operating
group’s average earning assets and changes in net interest income in
Corporate Services. Changes are discussed in the 2013 Review of
Operating Groups Performance section on page 44.
Table 9 on page 110 and Table 10 on page 111 provide further
details on net interest income and net interest margin.
Net interest income is comprised of earnings on assets, such as
loans and securities, including interest and dividend income and
BMO’s share of income from investments accounted for using the
equity method of accounting, less interest expense paid on liabilities,
such as deposits.
Net interest margin is the ratio of net interest income to average
earning assets, expressed as a percentage or in basis points.
MD&A
Average earning assets
increased 5% and adjusted net
interest margin decreased in the
low-rate environment.
2011 2012 2013
Average Earning Assets and
Net Interest Margin
Average earning assets ($ billions)
Net interest margin (%)
Adjusted net interest margin (%)
Net Interest Income
and Non-Interest Revenue*
($ billions)
Non-interest revenue
Net interest income
Adjusted non-interest revenue
Adjusted net interest income
Revenue increased in the year
with net interest income slightly
lower, due to lower net interest
margin, and higher non-interest
revenue.
2011 20132012
13.9 13.7
16.1 15.1 16.3 15.6
8.8 8.5
7.3 7.7
7.0
8.0
7.7
7.9
404
484
460
1.79
1.77
1.74
1.91
1.85
1.63
7.5
6.5 6.5
7.2
*Numbers may not add due to rounding.
Revenue Revenue by Country (%)
Canada
United States
Other countries
Wealth Management, BMO
Capital Markets and Canadian
P&C drove revenue growth.
Revenue by country was consistent
with the prior year.
Revenue
Adjusted revenue
72
26
2 3
63
34
2012
3
2013201120132011 2012
64
33
13.9
16.3
16.1 15.6
15.1
13.7
($ billions)
Change in Net Interest Income, Average Earning Assets and Net Interest Margin
Net interest income (teb) Average earning assets Net interest margin
($ millions) Change ($ millions) Change (in basis points)
For the year ended October 31 2013 2012 % 2013 2012 % 2013 2012 Change
Canadian P&C 4,429 4,365 1 170,847 156,231 9 259 279 (20)
U.S. P&C 2,378 2,456 (3) 58,369 55,857 4 407 440 (33)
Personal and Commercial Banking (P&C) 6,807 6,821 – 229,216 212,088 8 297 322 (25)
Wealth Management 564 561 – 19,399 17,875 9 291 314 (23)
BMO Capital Markets 1,238 1,191 4 202,361 193,889 4 61 61 –
Corporate Services, including Technology and Operations (721) (544) (33) 33,165 36,353 (9) nm nm nm
Total BMO adjusted 7,888 8,029 (2) 484,141 460,205 5 163 174 (11)
Adjusting items impacting net interest income 657 779 (16) na na na nm nm nm
Total BMO reported 8,545 8,808 (3) 484,141 460,205 5 177 191 (14)
na – not applicable
nm – not meaningful
BMO Financial Group 196th Annual Report 2013 39