Bank of Montreal 2014 Annual Report Download - page 16

MD&A
Who We Are
Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of $589 billionand
more than 46,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to
more than 12 million customers. We serve more than seven million customers across Canada through our Canadian retail arm, BMO Bank of Montreal.
We also serve customers through our wealth management businesses: BMO Nesbitt Burns, BMO InvestorLine, BMO Private Banking, BMO Global Asset
Management and BMO Insurance. BMO Capital Markets, our investment and corporate banking and trading products division, provides a full suite of
financial products and services to North American and international clients. In the United States, BMO serves customers through BMO Harris Bank, based
in the U.S. Midwest with more than two million retail, small business and commercial customers. BMO Financial Group conducts business through three
operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets.
Our Financial Objectives
BMO’s medium-term financial objectives for certain important perform-
ance measures are set out below. We believe that we will deliver
top-tier total shareholder return and meet our medium-term financial
objectives by aligning our operations with, and executing on, our
strategic priorities, along with our vision and guiding principle, as out-
lined on the following page. We consider top-tier returns to be
top-quartile shareholder returns relative to our Canadian and North
American peer group.
BMO’s business planning process is rigorous and considers the
prevailing economic conditions, our risk appetite, our customers’
evolving needs and the opportunities available across our lines of busi-
ness. It includes clear and direct accountability for annual performance
that is measured against both internal and external benchmarks and
progress toward our strategic priorities.
Over the medium term, our financial objectives on an adjusted basis
are to achieve average annual earnings per share (adjusted EPS) growth
of 7% to 10%, earn an average annual return on equity (adjusted ROE) of
between 15% and 18%, generate average annual operating leverage of
2% or more and maintain strong capital ratios that exceed regulatory
requirements. These objectives are key guideposts as we execute against
our strategic priorities. Our operating philosophy is to increase revenues
at rates higher than general economic growth rates, while limiting
expense growth to achieve average annual adjusted operating leverage.
In managing our operations, we balance current profitability with the
need to both invest in our businesses for future growth and manage risk.
Reasons to Invest in BMO
‰Clear opportunities for growth across a diversified North
American footprint:
OLarge North American commercial banking business with
advantaged market share.
OGood momentum in our well-established Canadian Personal
and Commercial Banking business.
OAward-winning wealth franchise with strong growth oppor-
tunities in North America and select global markets.
OOperating leverage across our U.S. businesses.
‰Strong capital position and an attractive dividend yield.
‰Focus on efficiency through core operations and technology
integration, particularly for retail businesses across North
America.
‰Industry-leading customer loyalty and a focus on customer
experience to increase market share and drive revenue growth.
‰Committed to the highest standards of business ethics and
corporate governance.
As at and for the periods ended October 31, 2014
(%, except as noted) 1-year 5-year* 10-year*
Average annual total shareholder return 17.1 15.5 8.4
Compound growth in annual EPS 3.9 15.8 3.8
Compound growth in annual adjusted EPS 6.1 10.4 4.4
Average annual ROE 14.0 15.0 15.0
Average annual adjusted ROE 14.4 15.2 16.2
Compound growth in annual
dividends declared per share 4.8 1.9 6.8
Dividend yield** 3.8 4.4 4.5
Price-to-earnings multiple** 12.8 11.8 12.8
Market value/book value ratio** 1.70 1.62 1.78
Common Equity Tier 1 Ratio (Basel III basis) 10.1 na na
* 5-year and 10-year growth rates reflect growth based on CGAAP in 2009 and 2004,
respectively, and IFRS in 2014.
** 1-year measure as at October 31, 2014. 5-year and 10-year measures are the average of
year-end values.
na – not applicable
In Our Financial Objectives section above and the Enterprise-Wide Strategy and Economic Developments and Outlook sections that follow contain certain forward-looking
statements. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. Please refer to the Caution
Regarding Forward-Looking Statements on page 29 of this MD&A for a discussion of such risks and uncertainties and the material factors and assumptions related to the
statements set forth in such sections.
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 32.
BMO Financial Group 197th Annual Report 2014 27