Bank of Montreal 2013 Annual Report Download - page 46

Reported Net Income Revenue Revenue by Geography
(%)
($ millions) ($ millions)
Canada and other countries
3,428
3,315 3,276
1,094
1,021
975
United States
69%
31%
69% 68%
32%
31%
2011 2012 2013 2011 2012 2013 2011 2012 2013
Continue to enhance our risk management and regulatory
compliance practices to be responsive to an evolving regulatory
environment
2013 Achievements
‰ Invested in processes to meet new regulatory requirements and
maintained a consistent, proactive cross-border approach to both
compliance and risk management.
‰ Implemented expanded clearing arrangements to comply with the Dodd-
Frank Act.
2014 Focus
‰ Continue to monitor and adapt to new regulations as they are enacted.
Financial Review
BMO Capital Markets net income increased $73 million or 7% to
$1,094 million. The increase reflected growth in revenues and higher
recoveries of credit losses, partially offset by an increase in expenses.
Revenue increased $152 million or 5% to $3,428 million, driven by
increases in trading revenues and investment banking fees, particularly
in our U.S. platform. The stronger U.S. dollar increased revenue by
$30 million.
Net interest income increased $47 million or 4%, reflecting growth
in trading income related to improved market conditions, partially offset
by a decrease in revenues from interest-rate-sensitive businesses. Non-
interest revenue increased $105 million or 5% from the prior year,
reflecting growth in trading revenue related to improved market con-
ditions, and an increase in investment and corporate banking revenues
resulting from higher client activity levels.
Trading products revenue increased $69 million or 3% from the
prior year, reflecting growth in trading revenue related to improved
market conditions, partly offset by a decrease in revenues from interest-
rate-sensitive businesses and lower securities commissions.
Investment and corporate banking revenue increased $83 million,
reflecting higher activity levels as well as growth in corporate banking
revenue.
We continue to experience very low levels of credit losses across
our businesses. The recovery of credit losses was $36 million in 2013,
compared with a provision of $6 million in 2012.
Non-interest expense increased $93 million or 5% to $2,049 million
resulting from stronger revenue performance and increased technology
and support costs related to a changing business and regulatory
environment. The stronger U.S. dollar increased expenses by $15 million.
The group’s efficiency ratio of 59.8% remained relatively unchanged from
the prior year as revenue growth was offset by higher expenses.
The provision for income taxes was higher than in the prior year, as
the provision in 2012 benefited from higher recoveries of prior years’
income taxes.
Average assets of $247.6 billion were relatively unchanged from the
prior year. Decreases in derivative financial assets, primarily due to
declines in the fair value of interest rate contracts as a result of rising
interest rates, were largely offset by increases in securities borrowed or
BMO Capital Markets (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) 1,238 1,191 1,229 4
Non-interest revenue 2,190 2,085 2,086 5
Total revenue (teb) 3,428 3,276 3,315 5
Provision for (recovery of) credit
losses (36) 6 32 (+100)
Non-interest expense 2,049 1,956 1,896 5
Income before income taxes 1,415 1,314 1,387 8
Provision for income taxes (teb) 321 293 412 10
Reported net income 1,094 1,021 975 7
Adjusted net income 1,096 1,022 976 7
Key Performance Metrics and Drivers
Trading Products revenue 2,146 2,077 2,035 3
Investment and Corporate Banking
revenue 1,282 1,199 1,280 7
Net income growth (%) 7 5 20 nm
Revenue growth (%) 5 (1) 2 nm
Net economic profit 471 509 541 (7)
Return on equity (%) 18.9 21.7 25.0 (2.8)
Operating leverage (%) (0.1) (4.3) (3.0) nm
Efficiency ratio (teb) (%) 59.8 59.7 57.2 0.1
Average common equity 5,582 4,527 3,723 23
Average assets 247,578 251,562 216,306 (2)
Average loans and acceptances 24,843 23,441 21,351 6
Average deposits 121,881 103,836 92,068 17
Debt underwriting participation
(deals) 677 635 525 7
Equity underwriting participation
(deals) 292 307 293 (5)
Full-time equivalent employees 2,278 2,176 2,286 5
U.S. Business Selected Financial Data (US$ in millions)
Total revenue (teb) 1,081 1,028 1,038 5
Non-interest expense 849 828 797 3
Reported net income 213 145 104 47
Average loans and acceptances 8,567 8,089 7,552 6
Average deposits 60,788 48,776 38,112 25
nm – not meaningful
purchased under resale agreements related to higher levels of client
activity, an increase in net loans and acceptances related to growth in
corporate banking, and higher levels of securities balances.
Net income from U.S. operations increased US$68 million or 47% to
US$213 million. Revenue increased from the prior year, driven by
growth in investment and corporate banking revenue, higher gains on
securities and an increase in commission fees, partially offset by a
decline in trading revenue. Recoveries of credit losses were higher.
Non-interest expense increased from the prior year resulting from
stronger revenue performance and higher technology and support costs.
The provision for income taxes was lower than in the prior year, mainly
due to recoveries of prior years’ income taxes in 2013.
BMO Financial Group 196th Annual Report 2013 57
MD&A