Bank of Montreal 2013 Annual Report Download - page 37

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Reported Net Income Average Loans and Acceptances Average Deposits
($ millions) ($ billions) ($ billions)
1,854
1,775
1,715 129.6 72.4
Personal Personal 69.6
118.2 67.0
111.9
Commercial Commercial
41.2
36.7
34.8
45.5
41.3
39.4
2011 2012 2013 2011 2012 2013 2011 2012 2013
Drive growth in commercial lending and deposits to improve
market share
2013 Achievements
‰ We enhanced our performance management system and continued to
focus our commercial workforce on having more complete con-
versations with our customers. This produced strong results with
commercial deposit growth of 12%, our highest since 2007. Commer-
cial lending momentum continued with strong balance growth of
11%, our highest since 2008. We maintained our second place posi-
tion in commercial lending market share.
‰ BMO was awarded a seven-year contract to provide a corporate cards
program for the Government of Canada.
‰ Tied for first place among the big banks in the Canadian Federation of
Independent Business report Battle of the Banks, based on a 2012
survey of almost 13,000 small and medium-sized enterprise (SME)
owners that assessed how well banks are serving their SME
customers.
2014 Focus
‰ Accelerate financial performance by improving our sales force
productivity.
Financial Review
Canadian P&C reported net income of $1,854 million, up $79 million or
4% from a year ago. Revenue increased $129 million or 2% to $6,341
million. Net interest margin was 2.59%, down 20 basis points from the
prior year, primarily due to changes in mix, including growth in loan
balances that was greater than growth in deposits and lower deposit
spreads in the low-rate environment. We achieved strong loan and
deposit growth throughout the year and reduced net interest margin
compression in the last two quarters, reflected in a significant improve-
ment in our financial performance, as net income grew by more than
7% and revenue grew by more than 4% in the second half of the year.
In our personal banking business, revenue increased $74 million or
2%. The increase was due to the effects of growth in balances and fees
across most products, partially offset by lower net interest margin.
In our commercial banking business, revenue increased $55 million
or 2%, as the effects of growth in balances and fees across most prod-
ucts were partially offset by lower net interest margin.
Canadian P&C (Canadian $ in millions, except as noted)
Change
from 2012
As at or for the year ended October 31 2013 2012 2011 (%)
Net interest income (teb) 4,429 4,365 4,381 1
Non-interest revenue 1,912 1,847 1,807 4
Total revenue (teb) 6,341 6,212 6,188 2
Provision for credit losses 574 615 664 (7)
Non-interest expense 3,250 3,183 3,133 2
Income before income taxes 2,517 2,414 2,391 4
Provision for income taxes (teb) 663 639 676 4
Reported net income 1,854 1,775 1,715 4
Adjusted net income 1,864 1,785 1,724 4
Key Performance Metrics and Drivers
Net income growth (%) 4 4 3 nm
Revenue growth (%) 2 – 6 nm
Operating leverage (teb) (%) – (1.2) 0.3 nm
Efficiency ratio (teb) (%) 51.3 51.2 50.6 0.1
Net interest margin on earning
assets (teb) (%) 2.59 2.79 2.94 (0.20)
Average loans and acceptances 175,079 159,484 151,331 10
Average deposits 113,644 106,256 101,784 7
Full-time equivalent employees 15,957 16,197 16,723 (1)
nm – not meaningful
Provisions for credit losses declined $41 million or 7% to
$574 million, driven by lower provisions in the consumer portfolio. We
continue to grow our business while remaining attentive to the credit
quality of our portfolio.
Non-interest expense was $3,250 million, up $67 million or 2%,
primarily due to continued investment in the business, including our
distribution network, net of strong expense management. Our efficiency
ratio was 51.3%, in line with the prior year. Improving the customer
experience and productivity is a focus for Canadian P&C in 2014. We
expect productivity to improve as balance growth continues, margin
compression subsides and the benefits from productivity initiatives are
realized, including mortgage and commercial lending process
improvements.
48 BMO Financial Group 196th Annual Report 2013