Bank of Montreal 2013 Annual Report Download - page 40

Adjusted Net Income Average Current Loans and Acceptances Average Deposits
(US$ millions) (US$ billions) (US$ billions)
641 633
Personal 26.0 26.8 Personal
24.6
24.5
Commercial Commercial 41.3 39.6
19.2
14.1
296 27.2
19.7
17.7
9.7
2011 2012 2013 2011 2012 2013 2011 2012 2013
‰ Maintained our adjusted efficiency ratio of 60.1% at a level
relatively unchanged from the previous year. Our adjusted operating
leverage improved through effective expense management.
2014 Focus
‰ Increase loan and deposit balances while focusing on cost management.
Continue to deploy our unique commercial operating model by
delivering local access and industry expertise to our clients across a
broad geographic footprint
2013 Achievements
‰ Focus on new client acquisition resulted in a 10% increase in the
number of our client relationships.
‰ Strong core commercial and industrial loan growth, with a
year-over-year increase of 19% and eight consecutive quarters of
positive growth.
‰ Expanded into new specialty areas and geographic regions through
targeted talent acquisition. Within the last year, we opened new
commercial banking offices in Atlanta and Omaha and acquired a
team of experienced franchise finance lenders, with additional hires in
the dealership finance and equipment finance specialties in Houston,
Atlanta, Seattle and Washington, D.C.
‰ Continued to leverage our robust thought leadership website, The
Resource Center, which provides current and prospective clients with
valuable industry insights from BMO experts, as well as third-party
content via our exclusive partnerships.
2014 Focus
‰ Keep building on the strength of our commercial banking business
with a focus on new client acquisition, increasing market share and
expanding our corporate payments penetration.
Financial Review
Amounts in this section are expressed in U.S. dollars. U.S. P&C net
income in 2013 was $584 million, an increase of $6 million or 1% from
$578 million a year ago. Adjusted net income, which excludes the
amortization of acquisition-related assets, was $633 million, down
$8 million or 1%.
Revenue of $2,871 million decreased $144 million or 5%, as the
benefits of strong growth in core commercial and industrial loans and
deposits 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.
In our commercial banking business, revenue increased $48 million
or 4%, reflecting growth in loan and deposit products and global
treasury management services.
In our personal banking business, revenue decreased by $154 mil-
lion or 9%, primarily as a result of the low interest rate environment,
reductions in certain acquired loan portfolios and deposit balances, and
lower deposit and debit card fees. During the year we continued to
U.S. P&C (US$ in millions, except as noted)
Change
from 2012
As at or for the year ended October 31 2013 2012 2011 (%)
Net interest income (teb) 2,324 2,449 1,673 (5)
Non-interest revenue 547 566 352 (3)
Total revenue (teb) 2,871 3,015 2,025 (5)
Provision for credit losses 217 273 366 (21)
Non-interest expense 1,797 1,895 1,247 (5)
Income before income taxes 857 847 412 1
Provision for income taxes (teb) 273 269 152 2
Reported net income 584 578 260 1
Adjusted net income 633 641 296 (1)
Key Performance Metrics and Drivers
Adjusted net income growth (%) (1) +100 31 nm
Net income growth (%) 1 +100 25 nm
Revenue growth (%) (5) 49 49 nm
Adjusted operating leverage (teb) (%) (0.4) (1.5) 16.0 nm
Operating leverage (teb) (%) 0.4 (3.1) 13.9 nm
Adjusted efficiency ratio (teb) (%) 60.1 59.8 59.1 0.3
Efficiency ratio (teb) (%) 62.6 62.9 61.6 (0.3)
Net interest margin on earning assets
(teb) (%) 4.07 4.40 4.53 (0.33)
Average current loans and acceptances 51,356 50,549 33,286 2
Average deposits 59,257 58,964 36,866 –
Full-time equivalent employees 7,971 7,906 7,564 1
nm – not meaningful
execute our lower-cost funding strategy, and we have reduced the
number of higher-cost time deposits and money market accounts, in
favour of growth in lower-cost chequing and savings accounts.
Net interest margin decreased by 33 basis points, primarily due to
lower loan spreads due to competitive pricing and deposit spread
compression given the low-rate environment.
Provisions for credit losses of $217 million declined by $56 million
or 21% from a year ago, primarily reflecting better credit quality in the
consumer loan portfolio.
Non-interest expense of $1,797 million decreased $98 million or
5%. Adjusted non-interest expense of $1,723 million was $78 million or
4% lower, primarily as a result of synergy-related savings in the current
year and cost reductions resulting from our productivity initiatives,
partially offset by the effects of selective investments in the business
and higher regulatory-related costs.
Average current loans and acceptances increased $0.8 billion year-
over-year to $51.4 billion. The core commercial and industrial loan
portfolio continues to experience good growth, increasing by $3.5 billion
or 19% from a year ago to $22.4 billion. In addition, we have grown our
indirect automobile loan portfolio by $0.9 billion from a year ago. These
increases helped to offset expected decreases in certain commercial
loan portfolios, as well as reductions in home equity and mortgage
loans, due in part to the effects of our continued practice of selling most
mortgage originations in the secondary market and our active loan
portfolio management.
MD&A
BMO Financial Group 196th Annual Report 2013 51