Bank of Montreal 2000 Annual Report Download - page 39

Total revenues from trading-related activities increased $41 million from $412 million to $453 mil-
lion. This growth reflects the active equity markets during the year, relative to the more typical
conditions in 1999. Debt capital markets were less active in 2000 than in 1999.
In the third quarter of 2000, exposure to natural gas price volatility resulted in a pre-tax loss
of $52 million ($30 million after-tax), which reduced trading revenues as further discussed in
the enterprise-wide risk management section on page 24.
1999 Compared with 1998
During 1999, total revenue grew 9.0% from $7,270 million to $7,928 million. Excluding non-
recurring items, revenue grew 9.4% to $7,956 million. This increase resulted from an increase
in net interest income of 6.4% and growth in other income of 13.5%. The increase in net interest
income reflected increased volumes in higher spread retail and commercial businesses, higher
volumes and spreads in corporate lending, decreased volumes in lower spread securities and the
increased contribution from our investment in Bancomer due to business growth and improved
market conditions in Mexico. Revenue in 1999 was also positively affected by the inclusion of
an additional month of results from BMO Nesbitt Burns as a result of its change in year-end,
amounting to $89 million. The most significant contributor to growth in other income in 1999
was trading revenue, which reflected improved performance and a return to more normal capital
market conditions relative to the abnormal trading conditions in the fourth quarter of 1998.
Expense-to-Revenue Ratio
Performance Review
The expense-to-revenue ratio of 60.7% improved by 600 basis points from 66.7% in 1999. Excluding
non-recurring items, the expense-to-revenue ratio of 62.8% improved by 190 basis points from
64.7% in 1999, as revenue growth of 6.1% was higher than expense growth of 3.0%.
Expense Growth of 3.0% (excluding non-recurring items)
Our secondary measure of productivity is year-over-year expense growth, which excluding
non-recurring items was 3.0% in 2000, compared with 7.6% growth last year. The extra month
of BMO Nesbitt Burns increased 1999 expenses by $72 million or by 1.5% from 1998. Expenses
from normal operations in 2000 increased by $226 million or 4.5%.
Contribution to Expense Growth (excluding non-recurring items) (%)
For the year ended October 31 2000 1999 1998
Revenue-driven compensation 4.4 1.6 (0.9)
Currency translation effect 0.5 (0.4) (1.9)
Disposed businesses (1.3) ––
BMO Nesbitt Burns additional month (1.5) 1.5 –
Ongoing business volume growth and strategic initiatives
spending, partially offset by cost reduction initiatives 0.9 4.9 9.3
Total expense growth 3.0 7.6 6.5
The increase in expenses of 3.0% in 2000 is a lower rate of growth than we have experienced in
recent years. This reflects control of our costs and our cost reduction initiatives for which we had
set a target of $250 million for the year. During 2000, we realized $263 million, which is expected
to produce $403 million in cost savings in 2001, mostly in centralized services and distribution.
Outlook
We are targeting an expense-to-revenue ratio in 2001 consistent with the 2000 ratio.
Outlook
We are targeting revenue growth of 7.0% to 9.0% in 2001.
Bank of Montreal Group of Companies Annual Report 2000 ■15
Expense-to-Revenue Ratio (%)
(excluding non-recurring items)
62.5 62.7
65.8 64.7 62.8
96 97 98 99 00
Measure
The expense-to-revenue ratio
is our primary measure of
productivity. It is calculated as
non-interest expense divided
by total revenues. The ratio
is calculated on a taxable equiv-
alent basis.
15.5
6.5 7.6
3.0
97 98 99 00
9.5
96
Expense Growth (%) 
(excluding non-recurring items)