Bank of Montreal 1998 Annual Report Download - page 26

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NORTH AMERICAN
PEER GROUP COMPARISON
1998 1997(a) Five-Year Average
Bank of 22 Bank of 22 Bank of 22
Montreal Bank Montreal Bank Montreal Bank
Performance Rank Average*Performance Rank Average*Performance Rank Average*
Primary Financial Performance Measures (%)
Five-year return on
common shareholders’
investment (ROI) 23.3 420.7 26.1 130.4 23.3(e) 420.7(e)
Fully diluted EPS growth
(b) 0.9 40.8(c) 11.9 114.2 13.0 110.0
Return on average
common shareholders’
equity (ROE) 15.2 415.2(c) 17.1 416.6 15.9 116.0
Revenue growth (b) 1.4 121.5 15.1 413.5 8.5 111.8
Expense-to-revenue ratio 66.5 163.1 64.4 161.2 64.1 162.4
Primary Financial Condition Measures (%)
Provision for credit
losses as a % of
average loans
and acceptances 0.09 20.81(c) 0.23 20.61 0.30 20.73
Gross impaired loans
and acceptances
as a % of equity
and allowance for
credit losses 6.66 15.73 7.65 16.79 6.66(f) 15.73(f)
Tier 1 ratio (d) 6.95 17.71 6.35 17.59 6.95(f) 17.71(f)
Cash and securities-
to-total assets 28.4 134.5 35.6 229.8 28.4(f) 134.5(f)
Credit rating AA
-
2A+ AA
-
2A+ AA
-
(f) 2A+(f)
*The selection of the 22 largest banks is based on the size of their 1997 common shareholders’ equity:
Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of
Canada, The Toronto-Dominion Bank, Banc One Corp., BankAmerica Corporation, Bankers Trust New
York Corporation, The Bank of New York Company, Inc., The Chase Manhattan Corporation, Citicorp
N.A., First Chicago NBD Corporation, First Union Corporation, Fleet Financial Group, J.P. Morgan
& Co. Inc., Keycorp, U.S. Bancorp, Norwest Corporation, PNC Bank Corp., SunTrust Banks, Inc.,
Wachovia Corporation, Wells Fargo & Company.
Note: Performance for the U.S. banks was based on the twelve-month period ended September 30
to approximate the Canadian bank fiscal year which ended on October 31.
(a) Reclassified to conform with 1998 presentation.
(b)
Ratios shown are the actual reported ratios with the exception of fully diluted EPS growth for
National Bank of Canada which was restated as per note (c). Non-recurring items are excluded for
ranking purposes.
(c) The reported numbers for National Bank of Canada were restated to reflect the addition to the
general allowance for credit losses as a charge to current year income instead of a direct charge to
retained earnings.
(d) U.S. basis
(e) Reflects five-year ROI for the period ending October 31, 1998.
(f) Condition ratios are as at October 31, 1998.
2Top T i e r 4Above Average/Average 1Below Average
1998 COMPARISON
Our ranking in the North American peer group in 1998 was top tier in two of our ten financial
measures, down from three in 1997, due to a lower ranking in our cash and securities-to-total
assets measure in 1998. We were above average/average in three of our measures, improved
from two in 1997, as improvements were made in five-year ROI and fully diluted EPS growth
rankings, whereas our revenue growth ranking was lower in 1998.
We were below average in five measures, namely revenue growth, expense-to-revenue ratio,
gross impaired loans and acceptances as a percentage of equity and allowance for credit losses,
Tier 1 ratio and cash and securities-to-total assets. Our below average revenue growth
and
expense-to-revenue ratios in 1998 reflected the unusual market conditions in the fourth quarter
on several of our institutional businesses and Bancomer, as well as the impact on revenues
of the sale of our U.S. credit card business. These factors partially offset continued business
volume growth. In addition, because of the relatively low level of expenses associated with
these lower revenues, the expense-to-revenue ratio was negatively impacted. Although three
of our financial condition measures were below the North American peer group average we
consider that our asset quality, liquidity level and capital base remain strong.
FIVE-YEAR AVERAGE
Our ranking relative to the North American peer group on a five-year average basis was top
tier in two of our ten financial measures, unchanged from 1997, as the improved ranking of our
provision for credit losses as a percentage of average loans and acceptances measure was
offset by the lower ranking of our cash and securities-to-total assets measure. We were above
average/average in respect of the five-year ROI, which is a higher ranking than in 1997.
We were below average in seven measures, namely fully diluted EPS growth, ROE, revenue
growth, expense-to-revenue ratio, gross impaired loans and acceptances as a percentage of
equity and allowance for credit losses, Tier 1 ratio and cash and securities-to-total assets. Our
lower ranking in the first two of these measures reflected stronger industry performance in
1994 and 1995. Our lower ranking for revenue growth and the expense-to-revenue ratio was due
to stronger industry results in 1996 and 1998. Our ranking in the last three of these measures,
which all relate to financial condition, is discussed under 1998 comparison.