Bank of Montreal 2014 Annual Report Download - page 9

14 BMO Financial Group 197th Annual Report 2014 BMO Financial Group 197th Annual Report 2014 15
bill payments was higher through digital channels than
ABMs in Canada – something that has been true in the U.S.
for some time. But the vast majority of customers still
prefer to drop by a branch to open an account or arrange
a mortgage – and for now, this is independent of age
or geography.
In the end, keeping pace with human change means
a lot of things. Fundamentally, it’s a question of embracing
progress, but not without thinking about its implications.
As a bank, we will continue to make the required trade-
offs and let go of the parts that are less relevant to
stakeholders. And we will continue to insist on behaviours
that lead to high trust. Because it’s what we have
always done.
Measuring our performance
BMO’s performance in fiscal 2014 confirms the value of this
work and can be measured in financial terms. Results from
our four principal business groups reflect the momentum
flowing from investments we have been making over the
past several years as we execute the bank’s customer-
focused strategy:
Canadian Personal and Commercial Banking had a record
year, with over $2 billion in earnings and operating
leverage of 2%. Our largest business continued to deliver
good balance sheet growth and improved efficiency.
U.S. Personal and Commercial Banking finished fiscal 2014
with good momentum and growth, demonstrating
improved revenue and earnings trends in the second half.
Commercial lending continues to be strong, the small-
business segment is moving forward and retail banking is
coming to life.
Wealth Management has been the fastest-growing
operating group in the bank over the past five years,
growing from 17% of the bank’s operating group revenue to
22% in that period. BMO’s expanded global asset
management business continues to innovate and diversify
across its distinctive product offering.
Capital Markets generated over $1 billion in earnings, with a
strong ROE of 19%. We’ve made good progress in growing
Corporate & Investment Banking, improving the balance
with sales and trading, and enhancing our business across
an integrated North American platform with an increased
contribution from the U.S.
The results we’re seeing today reflect the consistent
performance of the 46,000 people who work here and the
overall soundness of our strategy. Four years ago, we made
a decision to strengthen BMO’s continental advantage as a
North American bank, with a footprint spanning strong
regional economies. We’re realizing the full value of our
investment through continued earnings growth. Progress in
the most recent fiscal year can be credited to decisions
made two and three years ago. We can’t ignore continuing
adjustment in markets across the world but remain
confident in the capacity of the system to adjust and
innovate – and in our ability to remain relevant and
profitable in all market conditions, good or bad.
The bank’s progress is sustainable, because our
commitment to generate a fair return for shareholders is in
balance with the need to provide high-quality products at
an optimal price, and to invest in a talented, well-trained
workforce. As digital sales continue to grow, we are
defining a path to improve relative efficiency and, at the
same time, a differentiated position in customer loyalty. In
all of our decision-making, we weigh what is necessary
against what is possible, determining where financial
performance intersects with social responsibility.
Chief Executive Officer’s Message
technology to manage the bank better, automate
processes and reduce costs to drive competitive advantage
– these are strategic competencies we work on every single
day. Likewise, we are managing a great deal more data
than before – and our first job is to protect our customers
and their ever-growing trail of digital information. Our
bank is strong in all of these areas and has the necessary
capabilities to lead the way.
And like our customers, we can’t help but be enthused by
new technologies.
In 2014, the next release of BMO’s top-rated mobile banking
app reinforced our position as an industry leader. The volume
of sales transactions that our customers conduct online is
now equivalent to more than 120 retail branches. We’re also
providing bite-sized financial management right on customers’
mobile devices, as we anticipate the questions that often
arise in the moment.
In the coming year, we’ll continue that momentum:
• Testing touchless ABMs in the U.S. that allow customers
to type in their transaction details on a smartphone
app and then scan a Quick Response code on the ABM
screen to conduct the transaction, replacing the need
for a card.
• Testing video ABMs that offer direct access to bankers
anytime for additional information and help.
• Launching Apple Pay for customers of BMO Harris
Bank, enabling them to pay for purchases using their
iPhones in a secure and contactless transaction that
doesn’t require sharing their debit and credit card
numbers with merchants.
• Experimenting with MasterPass™ by MasterCard®,
which lets customers easily check out online purchases
– a shop-and-click experience that stores all of their
payment and shipping information in one convenient
and secure place.
All of these experiences have to be frictionless. We’re very
familiar with that, too.
The next wave of mobile capabilities is already having an
impact on consumers’ lives. Receiving travel alerts at the
airport; tracking personal health and fitness on the move;
being told that the item you viewed online is available
when you walk into a store – such innovations are now par
for the course. They are everywhere you look.
While companies launched in the digital era create products
and services that are remarkably convenient, many are still
largely unregulated. It is a fact that some customers are
ready and willing to pay with a smartphone instead of a
plastic card at the checkout counter and transfer money
through social media. These capabilities will inevitably
become part of nearly every bank’s product mix – ours
included. But they are not everything. The relevance of
human interaction has actually increased.
Our industry just reached a tipping point this year: retail
transaction volume for transactions such as transfers and
38%
Canadian P&C Banking
22%
BMO Capital Markets
22%
Wealth Management
18%
U.S. P&C Banking
2014 Revenue by
Operating Group1
(C$)
1 Excludes Corporate Services revenue
Over 75% of revenue
from retail businesses1
Diversified business mix
with retail focus
It’s a question of
embracing progress,
but not without thinking
about its implications.