Bank of Montreal 2000 Annual Report Download - page 57

Financial Results
Net income of the Personal and Commercial Client Group, excluding the contribution from
the Bank’s investment in Bancomer, was $966 million in 2000, compared with $642 million in
1999, an increase of $324 million or 50.6%. Excluding non-recurring items which increased net
income by $135 million in 2000 and $18 million in 1999, net income increased $207 million or
33.2% to $831 million.
Revenues for 2000, excluding the contribution from the Bank’s investment in Bancomer, were
$4,822 million, an increase of $595 million or 14.1%. Excluding non-recurring items, revenues
increased $396 million or 9.4%, driven by volume growth, primarily from mortgages, consumer
finance, commercial loans and commercial deposits in Canada and in the United States as a
result of successful strategic initiatives augmented by a robust economy. Margins improved
across most lines of business.
Expense growth of $5 million or 0.2% for the year was the result of business growth and
strategic initiative spending, which were almost entirely offset by lower costs resulting from
business dispositions and sustained cost control.
The provision for credit losses increased $57 million or 32.8%, primarily due to asset growth,
an increase in bankruptcies and the extension of the expected loss provisioning methodology.
Bancomer contributed $56 million to total P&C net income in 2000, which represents a
decrease of $54 million from 1999. On June 30, 2000, Bancomer shareholders approved its merger
with Grupo Financiero Probursa. With this event, the Bank reduced its ownership interest and
adopted the cost basis of accounting, replacing the equity basis of accounting for this investment.
Additionally, lower reported earnings from Bancomer also contributed to the decline. At Octo-
ber 31, 2000, the market value of the Bank’s investment exceeded its cost base by $181 million,
net of a deferred currency translation adjustment of $96 million.
1999 Compared with 1998
Net income of $752 million in 1999 rose $79 million over 1998. Revenue growth of $203 million
was driven by strong volume growth across most lines of business and higher revenues from
credit card and other fee-related operations, partially offset by the effects of the narrower
spreads. Expense growth was the result of ongoing business operations and strategic initiatives.
Personal and Commercial Client Group ($ millions except as noted)
As at or for the year ended October 31 2000 1999* 1998*
Net interest income 3,083 2,924 2,845
Other income 1,804 1,422 1,298
Total Revenue 4,887 4,346 4,143
Provision for credit losses 231 174 167
Non-interest expense 2,958 2,953 2,816
Income before provision for income taxes,
non-controlling interest in subsidiaries and goodwill 1,698 1,219 1,160
Income taxes 642 434 459
Non-controlling interest 15 16 11
Amortization of goodwill, net of applicable income tax 19 17 17
Net Income 1,022 752 673
Net Income comprised of:
P&C Canada 850 614 600
P&C Harris 116 28 53
Total, excluding Bancomer 966 642 653
Bancomer 56 110 20
Net Income 1,022 752 673
Average assets 99,665 93,756 86,830
Risk-weighted assets 63,558 56,863 NA
Average current loans (including securities purchased under resale agreements) 85,723 80,438 75,200
Average deposits 49,601 49,845 53,015
Assets under administration (a) 84,723 61,861 69,905
Full-time equivalent staff 20,975 21,272 22,260
Basic return on equity (%) 22.5 19.5 19.7
Expense-to-revenue ratio (%) 60.5 67.9 68.0
*Restated to give effect to the current year’s organization structure and presentation changes as outlined on page 29.
(a) Excludes assets under administration related to Global Custody.
NA – Not available
P&C – Canada 
Commercial Portfolio* ($ billions)
Average loans and acceptances
Average commercial deposits
19.6
9.5
21.2
10.1
23.0
10.7
98 99 00
P&C – Canada 
Number of Branches and 
In-store Branches
Branches In-store Branches
1,055
10
999
43
912
71
98 99 00
*Represents average balances in Small Business
and Commercial Mid-Market lines of business
within P&C – Canada.
Outlook
Canadian economic growth is
expected to moderate to a more
sustainable pace over the next
several years. A slowing economy
is expected to dampen deposit
and loan growth over the next
year. However, the Canadian
market is large and profitable, and
strong growth rates are expected
to continue over the next few
years, while the pace of spread
compression is expected to level
off.Theabilityofnewcompetitors
to enter the Canadian market-
place has increased; however, our
large physical distribution network
provides a strong competitive
advantage. We expect to achieve
profitable growth through
the launch of new products,
penetration of new markets, the
migration to lower-cost distribu-
tion channels, and by leveraging
off our North American scale
and knowledge transfer.
In light of our commitment to
maximize shareholder value, we
expect to realize our investment
in Bancomer in an orderly fashion
on terms that are most advanta-
geous to our shareholders.
Bank of Montreal Group of Companies Annual Report 2000 ■33