Bank of Montreal 2014 Annual Report Download - page 38

MD&A
201420132012
Adjusted Net Income
(US$ millions)
632 619 636
201420132012
Average Deposits
(US$ billions)
Personal
Commercial
201420132012
Average Current Loans and Acceptances
(US$ billions)
Personal
Commercial
26.0
24.5 24.6
26.8 23.9
30.8
17.7
41.3
19.7
39.6
21.7
37.7
Continue to deploy our unique commercial operating model by
delivering local access and industry expertise to our clients across a
broad geographic footprint
2014 Achievements
‰Continued focus on new client acquisitions resulted in an increase of
9% in new client relationships over 2013 base.
‰Strong core C&I and commercial real estate loan growth, with year-
over-year increases of 18% in both segments.
‰Strong focus on our corporate payments business, which had an
increase of 6% in transactional revenues from the prior year.
2015 Focus
‰Keep building on the strength of our commercial banking business,
focusing on new client acquisitions, increasing our market share and
extending our corporate payments penetration.
Financial Review
Amounts in this section are expressed in U.S. dollars.
Net income of $592 million increased $22 million or 4% from a year
ago. Adjusted net income of $636 million increased $17 million or 3%.
Revenue decreased $45 million or 2% to $2,796 million as the
benefits of strong commercial loan growth were more than offset by the
effects of lower net interest margin and reduced mortgage banking
revenue.
In our commercial banking business, revenue increased $52 million
or 4% to $1,386 million, reflecting strong loan balance growth, primarily
in the core C&I loan portfolio, partly offset by the impact of competitive
spread compression.
In our personal banking business, revenue decreased by
$110 million or 7% to $1,363 million, primarily due to declines in loan
spreads and balances and reduced mortgage banking revenue.
Net interest margin decreased by 25 basis points to 3.74%, driven
by competitive loan pricing, changes in mix including loans growing
faster than deposits and the low rate environment.
Provisions for credit losses of $150 million declined by $67 million
or 31% from a year ago, primarily reflecting better credit quality in the
consumer loan portfolio.
Non-interest expense of $1,833 million increased $7 million.
Adjusted non-interest expense of $1,772 million increased $20 million
or 1%, as we continue to focus on productivity while making selective
investments in the business and responding to regulatory changes.
U.S. P&C (US$ in millions, except as noted)
As at or for the year ended October 31 2014 2013 2012
Net interest income (teb) 2,275 2,274 2,398
Non-interest revenue 521 567 588
Total revenue (teb) 2,796 2,841 2,986
Provision for credit losses 150 217 273
Non-interest expense 1,833 1,826 1,910
Income before income taxes 813 798 803
Provision for income taxes (teb) 221 228 234
Reported net income 592 570 569
Amortization of acquisition-related
intangible assets (1) 44 49 63
Adjusted net income 636 619 632
Key Performance Metrics and Drivers
Net income growth (%) 3.9 – +100
Adjusted net income growth (%) 2.7 (2.2) +100
Revenue growth (%) (1.6) (4.9) 47.4
Non-interest expense growth (%) 0.4 (4.4) 53.2
Adjusted non-interest expense growth (%) 1.1 (3.5) 51.6
Operating leverage (teb) (%) (2.0) (0.5) (5.7)
Adjusted operating leverage (teb) (%) (2.7) (1.3) (4.2)
Efficiency ratio (teb) (%) 65.6 64.3 64.0
Adjusted efficiency ratio (teb) (%) 63.4 61.7 60.8
Net interest margin on average earning
assets (teb) (%) 3.74 3.99 4.31
Average earning assets 60,845 57,023 55,682
Average current loans and acceptances 54,706 51,356 50,549
Average deposits 59,403 59,257 58,964
Full-time equivalent employees 7,753 7,932 7,906
(1) Before tax amounts of: $61 million in 2014; $74 million in 2013; and $94 million in 2012 are
included in non-interest expense.
Average current loans and acceptances increased $3.4 billion to
$54.7 billion. The core C&I loan portfolio continues to experience strong
growth, increasing by $4.0 billion or 18% from a year ago to
$26.5 billion. We have grown our commercial real estate portfolio by
$0.5 billion or 18% in addition to growing our indirect automobile loan
portfolio by $0.8 billion or 13% from a year ago. These increases parti-
ally offset decreases in home equity and mortgage loans, due in part to
the effects of our continued practice of selling most mortgage origi-
nations in the secondary market and our active loan portfolio
management.
Average deposits of $59.4 billion were relatively unchanged, as
growth in our commercial business and in our personal chequing
accounts was offset by a planned reduction in higher-cost personal
money market and time deposit accounts.
BMO Financial Group 197th Annual Report 2014 49