Bank of Montreal 2014 Annual Report Download - page 22

MD&A
Summary Financial Results and Earnings per Share Growth
The year-over-year percentage change in earnings per share (EPS) and
in adjusted EPS are our key measures for analyzing earnings growth. All
references to EPS are to diluted EPS, unless indicated otherwise.
EPS was $6.41, up $0.24 or 4% from $6.17 in 2013. Adjusted EPS
was $6.59, up $0.38 or 6% from $6.21 in 2013. Our three-year average
annual adjusted EPS growth rate was 9%, in line with our current
medium-term objective of achieving average annual adjusted EPS
growth of 7% to 10%. EPS growth in both 2014 and 2013 reflected
increased earnings. Adjusted net income available to common share-
holders was 40% higher over the three-year period from the end of
2011, while the average number of diluted common shares outstanding
increased 7% over the same period.
Net income was $4,333 million in 2014, up $138 million or 3%
from the previous year. Adjusted net income was $4,453 million, up
$230 million or 5%.
On an adjusted basis, there was good revenue growth in 2014.
Higher revenues exceeded incremental costs, contributing to growth in
net income. There were higher provisions for credit losses and a lower
effective income tax rate in 2014.
There was strong adjusted net income growth in Canadian P&C and
3% growth in BMO Capital Markets and U.S. P&C on a U.S. dollar basis,
with a modest decline in Wealth Management and lower results in
Corporate Services.
Canadian P&C reported net income increased $202 million or 11%
to $2,014 million, due to continued good revenue growth driven by
strong loan and deposit growth, partially offset by higher expenses.
Expenses rose primarily due to continued investment in the business,
net of expense management. Canadian P&C results are discussed in the
operating group review on page 45.
U.S. P&C adjusted net income increased $17 million or 3% to $636
million on a U.S. dollar basis. Lower provisions for credit losses were
partially offset by lower revenue. The benefits of strong commercial
loan growth were more than offset by the effects of lower net interest
margin and reduced mortgage banking revenue. U.S. P&C results are
discussed in the operating group review on page 48.
Wealth Management adjusted net income was $848 million, down
$9 million or 1% from a year ago, as the prior year included a $121
million after-tax security gain. Adjusted net income in traditional wealth
of $562 million decreased $34 million. Strong growth of $87 million,
including the contribution from the acquired F&C business, was more
than offset by the security gain in the prior year. Adjusted net income in
insurance was $286 million, up $25 million or 9%. Wealth Management
results are discussed in the operating group review on page 51.
BMO Capital Markets reported net income increased $35 million or
3% to $1,079 million. The increase reflected growth in revenue across
both Investment and Corporate Banking and Trading Products, with good
contribution from our U.S. businesses. This growth was partially offset
by an increase in expenses. BMO Capital Markets results are discussed in
the operating group review on page 54.
Corporate Services adjusted net loss for the year was $193 million,
compared with an adjusted net loss of $133 million a year ago. Adjusted
results decreased due to lower adjusted recoveries, primarily on the
purchased credit impaired loan portfolio, partially offset by better
adjusted revenues which included the purchased performing loan
portfolio results. Corporate Services results are discussed in the
operating group review on page 57.
Changes to reported and adjusted net income for each of our
operating groups are discussed in more detail in the 2014 Operating
Groups Performance Review, which starts on page 42.
EPS ($)
2012 20142013
Adjusted EPS
EPS
6.10
5.95
6.17 6.21
6.41
6.59
Earnings per share (EPS)
is calculated by dividing net
income attributable to bank
shareholders, after deduction of
preferred dividends, by the
average number of common
shares outstanding. Diluted EPS,
which is our basis for measur-
ing performance, adjusts for
possible conversions of
financial instruments into
common shares if those
conversions would reduce EPS,
and is more fully explained in
Note 26 on page 173 of the
financial statements. Adjusted
EPS is calculated in the same
manner using adjusted net
income.
Growth reflects strong
momentum in Canadian P&C
and an improving environment
for our U.S. businesses, partially
offset by lower recoveries.
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 33