Bank of Montreal 2014 Annual Report Download - page 87

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Asset Encumbrance (Canadian $ in millions)
Total gross
assets (1)
Encumbered (2) Net unencumbered
As at October 31, 2014
Pledged as
collateral
Other
encumbered
Other
unencumbered (3)
Available as
collateral (4)
Cash and deposits with other banks 34,496 – 1,637 417 32,442
Securities (5) 253,961 79,778 36,061 10,796 127,326
Loans and acceptances 285,186 37,060 1,965 137,357 108,804
Other assets
Derivative instruments 32,655 – – 32,655 –
Premises and equipment 2,276 – – 2,276 –
Goodwill 5,353 – – 5,353 –
Intangible assets 2,052 – – 2,052 –
Current tax assets 665 – – 665 –
Deferred tax assets 3,019 – – 3,019 –
Other assets 8,231 – – 8,231 –
Total other assets 54,251 – – 54,251 –
Total assets 627,894 116,838 39,663 202,821 268,572
Total gross
assets (1)
Encumbered (2) Net unencumbered
As at October 31, 2013
Pledged as
collateral
Other
encumbered
Other
unencumbered (3)
Available as
collateral (4)
Cash and deposits with other banks 32,607 – 1,211 1,467 29,929
Securities (5) 217,427 64,168 24,014 6,815 122,430
Loans and acceptances 265,719 35,639 4,675 123,227 102,178
Other assets
Derivative instruments 30,259 – – 30,259 –
Premises and equipment 2,168 – – 2,168 –
Goodwill 3,819 – – 3,819 –
Intangible assets 1,511 – – 1,511 –
Current tax assets 1,065 – – 1,065 –
Deferred tax assets 3,027 – – 3,027 –
Other assets 7,695 – – 7,695 –
Total other assets 49,544 – – 49,544 –
Total assets 565,297 99,807 29,900 181,053 254,537
(1) Gross assets include on-balance sheet and off-balance sheet assets.
(2) Pledged as collateral refers to the portion of on-balance sheet assets and other cash and securities received that is pledged through repurchase agreements, securities lent, derivative contracts,
minimum required deposits at central banks and requirements associated with participation in clearing houses and payment systems. Other encumbered includes assets which are restricted from use
for legal or other reasons, such as restricted cash and short sales.
(3) Other unencumbered assets include select liquid asset holdings that management believes are not readily available to support BMO’s liquidity requirements. These include cash and securities of
$11.2 billion as at October 31, 2014, which include securities held in BMO’s insurance subsidiary and credit protection vehicle, significant equity investments, and certain investments held in our
merchant banking business. Other unencumbered assets also include mortgages and loans that may be securitized to access secured funding.
(4) Loans included as available as collateral represent loans currently lodged at central banks that could potentially be used to access central bank funding. Loans available for pledging as collateral do
not include other sources of additional liquidity that may be realized from the loan portfolio, including incremental securitization, covered bond issuances and FHLB advances.
(5) Includes securities, securities borrowed or purchased under resale agreements and NHA mortgage-backed securities (reported as loans at amortized cost).
Funding Strategy
Our funding philosophy requires that secured and unsecured wholesale
funding used to support loans and less liquid assets is longer term
(typically maturing in two to ten years) to better match the term to
maturity of these assets. Wholesale secured and unsecured funding for
liquid trading assets is generally shorter term (maturing in one year or
less), is aligned with the liquidity of the assets being funded, and is
subject to limits on aggregate maturities that are permitted across
different time periods. Supplemental liquidity pools are funded with a
mix of wholesale term funding.
BMO maintains a large and stable base of customer deposits that, in
combination with our strong capital base, is a source of strength. It
supports the maintenance of a sound liquidity position and reduces our
reliance on wholesale funding. Customer deposits include core deposits
and larger retail and commercial fixed-rate customer deposits. Customer
deposits totalled $238.7 billion at the end of the year, up from
$220.6 billion in 2013. BMO also receives deposits to facilitate certain
trading activities, receives non-marketable deposits from corporate and
institutional customers and issues structured notes primarily to retail
investors. These deposits totalled $28.2 billion as at October 31, 2014.
2012 20132011
Customer Deposits-and-
Capital-to-Customer-Loans
Ratio
(%)
Core and Customer Deposits
($ billions)
Core deposits
Customer deposits
Our large customer base and
strong capital position reduce our
reliance on wholesale funding.
Core and customer deposits
provide a strong funding base.
2011 201420132012
2014
98.6 94.6 94.5
177 191
205 218
194 204
221
239
99.8
Material presented in a blue-tinted font above is an integral part of the 2014 annual consolidated financial statements (see page 77).
98 BMO Financial Group 197th Annual Report 2014