Bank of Montreal 2013 Annual Report Download - page 41

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Average deposits of $59.3 billion increased slightly from the prior
year, as growth in our commercial business and in our personal
chequing and savings accounts more than offset a planned reduction in
higher-cost personal money market and time deposit accounts.
Business Environment, Outlook
and Challenges
U.S. P&C has a significant footprint in eight states, primarily concentrated
in six contiguous states (Illinois, Wisconsin, Indiana, Minnesota, Missouri
and Kansas).
The U.S. Midwest economy grew in line with the national average
in 2013, at a modest pace of approximately 1.6%, as growth was sup-
ported by the continued expansion in the automobile sector and a
recovery in housing activity. However, growth was restrained by
restrictive fiscal policies, modest consumer spending and a decline in
global demand. Modest loan and deposit growth in U.S. P&C was con-
sistent with the growth in the economy. There was a decline in
consumer loans consistent with our peers and the overall economy.
Consumer loan growth is expected to trend higher in 2014 due to an
improving economy. Residential mortgage growth will likely strengthen
as the housing market recovery continues and is supported by
affordability. Commercial loan growth should continue to improve in
2014 as credit becomes more widely available due to an improving
economy.
Economic growth is expected at a rate of 2.7% in 2014 as fiscal
restraint subsides.
The marketplace remains dynamic and highly competitive, as banks
compete aggressively on pricing for both loans and deposits to maintain
and increase market share. We are concentrating on our customer-
focused growth strategy and commercial sector expertise to increase our
loan and deposit balances in order to strengthen our financial perform-
ance in this challenging environment, while focusing on cost manage-
ment to improve efficiency. This will help alleviate the continued
pressure on margins in the highly competitive low interest rate
environment. Regulatory oversight is growing increasingly complex,
with new regulations and compliance requirements. We will continue to
leverage our strong governance framework to address existing and new
requirements.
The U.S. economic environment in 2013 and outlook for 2014 are
discussed in more detail in the Economic Developments and Outlook
section on page 32.
Caution
This U.S. P&C Banking section contains forward-looking statements. Please see the Caution
Regarding Forward-Looking Statements.
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section
on page 34.
52 BMO Financial Group 196th Annual Report 2013