Bank of Montreal 2014 Annual Report Download - page 51

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
BMO Capital Markets
Net income in BMO Capital Markets increased $59 million or 6% to
$1,044 million in 2013. The increase reflected growth in revenues and
higher recoveries of credit losses, partially offset by an increase in
expenses. Revenue increased $143 million or 4% to $3,392 million,
driven by increases in trading revenues and investment banking fees,
particularly in our U.S. platform. Investment and Corporate Banking
revenue increased $81 million, reflecting higher activity levels as well as
growth in corporate banking levels. Trading Products revenue increased
$62 million, reflecting growth in trading revenues related to improved
market conditions, partly offset by a decrease in revenues from interest-
rate-sensitive businesses and lower securities commissions. Non-interest
expense increased $98 million or 5% to $2,084 million, resulting from
stronger revenue performance and increased technology and support
costs related to a changing business and regulatory environment.
Corporate Services
Corporate Services net loss for the year was $72 million, compared
with net income of $324 million in 2012. The adjusted net loss was
$133 million, compared with adjusted net income of $131 million in
2012. Adjusted revenue decreased $219 million, primarily due to a
group teb offset that was $78 million higher than the prior year and a
decline in treasury-related items. Adjusted non-interest expense
increased $69 million, primarily due to increases in regulatory-related
and technology costs. Adjusted recoveries of credit losses were
$40 million lower, primarily due to lower recoveries on the purchased
credit impaired loan portfolio, offset in part by recoveries on the
impaired real estate loan portfolio in 2013, compared to provisions
in 2012.
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 32.
Financial Condition Review
Summary Balance Sheet
(Canadian $ in millions)
As at October 31 2014 2013 2012 2011 2010
Assets
Cash and interest bearing deposits with banks 34,496 32,607 26,256 25,656 20,554
Securities 143,319 135,800 129,441 122,115 123,399
Securities borrowed or purchased under resale agreements 53,555 39,799 47,011 37,970 28,102
Net loans and acceptances 303,038 279,294 253,846 238,885 176,643
Other assets 54,251 49,544 68,130 75,949 62,942
Total assets 588,659 537,044 524,684 500,575 411,640
Liabilities and Shareholders’ Equity
Deposits 393,088 368,369 325,235 302,373 249,251
Other liabilities 155,254 133,500 165,813 164,197 135,933
Subordinated debt 4,913 3,996 4,093 5,348 3,776
Capital trust securities –– – 821 800
Shareholders’ equity 34,313 30,107 28,108 26,353 21,880
Non-controlling interest in subsidiaries (1) 1,091 1,072 1,435 1,483 –
Total liabilities and shareholders’ equity 588,659 537,044 524,684 500,575 411,640
(1) Included in other liabilities under CGAAP in 2010.
Overview
Total assets increased $51.6 billion from the prior year to $588.7 billion,
including a $17.1 billion increase due to the stronger U.S. dollar. The
increase was comprised of net loans and acceptances of $23.7 billion,
securities borrowed or purchased under resale agreements of $13.8
billion, securities of $7.5 billion, cash and interest bearing deposits with
banks of $1.9 billion, and other assets of $4.7 billion.
Liabilities and shareholders’ equity increased $51.6 billion, including
a $17.1 billion increase as a result of the stronger U.S. dollar. The
increase was comprised of deposits of $24.7 billion, other liabilities of
$21.8 billion, shareholders’ equity of $4.2 billion and subordinated debt
of $0.9 billion.
Cash and Interest Bearing Deposits with Banks
Cash and interest bearing deposits with banks increased $1.9 billion to
$34.5 billion in 2014, primarily reflecting an increase in balances held
with the Federal Reserve.
Securities
(Canadian $ in millions)
As at October 31 2014 2013 2012 2011 2010
Trading 85,022 75,159 70,109 69,925 71,710
Available-for-sale 46,966 53,710 57,340 51,426 50,543
Held-to-maturity 10,344 6,032 875 – –
Other 987 899 1,117 764 1,146
143,319 135,800 129,441 122,115 123,399
Securities increased $7.5 billion to $143.3 billion, primarily reflecting
increases in trading securities and held-to-maturity securities, partially
offset by a decrease in available-for-sale securities. The increase in
trading securities is primarily related to client-driven activities in BMO
Capital Markets. The increase in held-to-maturity securities reflects
higher levels of supplemental liquid assets held to support contingent
liability requirements. Supplemental liquid assets held in available-for-
sale securities have declined from the prior year.
62 BMO Financial Group 197th Annual Report 2014