Bank of Montreal 2013 Annual Report Download - page 43

MANAGEMENT’S DISCUSSION AND ANALYSIS
Adjusted Net Income Assets under Management 2013 Revenue by
($ millions)
and Administration ($ billions)
Line of Business
(%)
MD&A
Wealth Assets under administration
Insurance 861 Assets under management
292.8
490 545
150.2
2011 2012 2013
Invest in our people, products, technology and footprint to drive
future growth
2013 Achievements
‰ Expanded our geographic footprint and wealth management platform
through the acquisition of a wealth management business based in
Hong Kong and Singapore.
‰ Increased our investment in our sales teams to expand coverage to
new segments and geographic regions and provide the best experi-
ence for our clients.
‰ Leveraged our investments in technology to drive sales and improve
efficiency.
‰ Strengthened our brand with an enhanced online presence on
bmo.com, which now offers potential clients a tool to help them
identify the wealth management options that best suit their needs, as
well as information about our full-service investing, private banking,
financial planning and asset management services – all in one place –
resulting in a fivefold increase in site visits.
2014 Focus
‰ Invest in our sales force and enhance technology to drive revenue
growth, with a particular focus on the United States.
Financial Review
Wealth Management net income was $834 million, up $310 million or 59%
from a year ago. Adjusted net income, which excludes the amortization of
acquisition-related intangible assets, was $861 million, up $316 million or
58% from a year ago. Adjusted net income in 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. Adjusted net income in insurance was
$261 million, up $103 million or 65%.
Revenue of $3,454 million increased $549 million or 19%. Revenue
in our wealth businesses increased 16%, reflecting strong performance
driven by growth in client assets, the $191 million security gain and the
benefit of recent acquisitions. Insurance revenue increased 49% 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.
Provisions for credit losses of $3 million decreased $19 million or
84%, primarily due to a loan recovery recorded in the current year,
compared to a larger than usual loan write-down in the prior year
related to a single commercial account.
2011 2012 2013
164.3 183.6
322.2
369.3 BMO Nesbitt Burns 33%
BMO Insurance 13%
BMO Global Asset
Management
23%
BMO’s Private
Banking Businesses
25%
BMO InvestorLine 6%
Wealth Management (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) 564 561 462 –
Non-interest revenue 2,890 2,344 2,130 23
Total revenue (teb) 3,454 2,905 2,592 19
Provision for credit losses 3 22 10 (84)
Non-interest expense 2,340 2,219 1,956 5
Income before income taxes 1,111 664 626 67
Provision for income taxes (teb) 277 140 146 96
Reported net income 834 524 480 59
Adjusted net income 861 545 490 58
Key Performance Metrics and Drivers
Adjusted net income growth (%) 58 11 11 nm
Net income growth (%) 59 9 10 nm
Revenue growth (%) 19 12 15 nm
Return on equity (%) 28.6 24.1 32.9 4.5
Adjusted operating leverage (%) 13.7 (0.6) (1.6) nm
Operating leverage (%) 13.4 (1.3) (1.9) nm
Adjusted efficiency ratio (%) 66.7 75.4 75.0 (8.7)
Efficiency ratio (teb) (%) 67.7 76.4 75.5 (8.7)
Average common equity 2,884 2,143 1,436 35
Average loans and acceptances 11,909 10,833 9,299 10
Average deposits 23,337 21,753 19,136 7
Assets under administration 369,277 322,222 292,801 15
Assets under management 183,625 164,293 150,176 12
Full-time equivalent employees 6,117 6,108 6,518 –
U.S. Business Selected Financial Data (US$ in millions)
Total revenue (teb) 883 699 430 26
Non-interest expense 574 552 349 4
Reported net income 200 84 47 +100
Adjusted net income 221 99 53 +100
Average loans and acceptances 2,510 2,650 2,260 (5)
Average deposits 4,947 4,960 3,199 –
nm – not meaningful
Non-interest expense was $2,340 million, up $121 million or 5%.
Adjusted non-interest expense was $2,304 million, up $114 million or
5%. The increase was due to growth in revenue-based costs and the
costs of recent acquisitions, partly offset by the benefits of a continued
focus on productivity.
Assets under management and administration grew by $66.4 billion
to $552.9 billion, driven by market appreciation, growth in new client
assets and the stronger U.S. dollar.
Net income in Wealth Management U.S. businesses was US$200
million, up US$116 million from US$84 million a year ago. Adjusted net
income in Wealth Management U.S. businesses was US$221 million, up
US$122 million from US$99 million a year ago due to the security gain
and growth across most of our lines of business.
54 BMO Financial Group 196th Annual Report 2013