Bank of Montreal 2003 Annual Report Download - page 35

Our loan and deposit growth in both retail and business
banking exceeded our targets for the year and we believe will
compare favourably to our peer group. Volumes also grew in our
indirect auto lending business, both in Illinois and elsewhere,
and we profited from the highest origination levels ever in our
mortgage business. Through our partnership with our PCG
colleagues, we enhanced our client offering by launching Harris
Asset Manager, a new product that integrates our banking and
brokerage capabilities. We continued to focus on driving produc-
tivity improvements that give us the flexibility to fund initiatives
that enhance the customer experience.
In 2004, we will continue execution of our strategy, focusing on
continued community branch expansion and making it easier
for our customers to do business with us.
2004 Focus
▪Integrate and leverage the Lakeland Community Bank acqui-
sition to expand our customer base in the fast-growing Lake
County market.
▪
Increase convenient branch access by adding 10 new locations
and piloting branch merchandising strategies.
▪Expand our suite of business products by leveraging our new
single commercial deposit processing system.
▪Explore opportunities to improve operational efficiency while
maintaining our focus on providing a superior community-
based customer experience.
in the next two to three years in our home market. In the longer
term, competitive pressures should subside and profitability
should improve. We expect the larger players to reap the benefits
of these developments and we intend to be one of those players.
We expect that the Chicagoland market will remain quite attrac-
tive for the foreseeable future and experience growth on par
with the overall economy. Demand for consumer credit should
continue to generate healthy profits across most creditworthy
client segments and affluent customers should continue to fuel
strong, profitable growth in assets under management. Lastly,
the financial needs of small business clients should expand with
an economic recovery as well as continue to grow in volume and
complexity, creatingnewopportunities.
U.S. Overview
This year was particularly satisfying. We were disciplined and
focused onexecutingourstrategy to be the leading and most suc -
cessful bank in our chosen markets, and our success was reflected
in both volume growth and improved productivity. Dedicated
employees continue to make the difference for our one million
personal and business customers. In addition, investments in
the expansion of our branch network in Chicagoland position us
for market share growth while providing even more convenient
access for our customers.
Personal and Commercial Client Group Financial Results
Personal and Commercial Client Group net income rose
$128 million or 16% to $946 million. The increase was due to
higher revenue and a lower effective tax rate.
Revenue increased $243 million or 5%, driven by strong volume
growth in both Canadian and U.S. operations. In Canada, the
personal banking segment posted strong gains, led by increases
in retail deposits, card services and residential mortgages.
Revenue was substantially unchanged in the United States as the
effect of strong deposit and loan growth was offset by the impact
of the lower Canadian/U.S. dollar exchange rate, which reduced
revenue in 2003 by $74 million. In Canada, the low interest rate
environment supported consumer loan growth, and record home
sales supported growth in mortgage lending. The introduction of
our Mosaik MasterCard helped increase card services revenue.
Revenue growth was also attributable to significant increases
in inter-group referrals with Private Client Group, and was sup-
ported by our initiatives to improve our sales and service capa-
bilities over the past year and improve our customer experience.
Our commercial banking segment revenue also improved in
spite of the economic events of 2003, which had a pronounced
impact on the business community.
Personal and Commercial Client Group ($ millions, except as noted)
As at or for the year ended October 31 2003 2002 2001
Net interest income (teb) 3,319 3,099 2,973
Non-interest revenue 1,451 1,428 1,363
Total revenue (teb) 4,770 4,527 4,336
Provision for credit losses 301 280 267
Non-interest expense 3,008 2,932 2,795
Income before income taxes, non-controlling
interest in subsidiaries and goodwill amortization 1,461 1,315 1,274
Income taxes (teb) 511 495 503
Non-controlling interest 42 –
Amortization of goodwill, net of applicable
income taxes –– 23
Net income 946 818 748
Amortization of goodwill and
intangible assets (after tax) 30 32 48
Cash net income 976 850 796
Net economic profit 524 416 444
Return on equity (%) 23.0 20.6 23.8
Cash return on equity (%) 23.8 21.5 25.5
Non-interest expense-to-revenue ratio (%) 63.1 64.8 64.5
Cash non-interest expense-to-revenue ratio (%) 62.4 64.0 63.9
Average net interest margin (%) 3.02 3.04 3.21
Average common equity 3,944 3,785 2,971
Average assets 109,911 102,051 92,734
Total risk-weighted assets 72,192 66,795 61,332
Average current loans 104,232 95,903 87,405
Average deposits 56,475 54,170 45,521
Assets under administration 11,295 14,452 15,504
Assets under management
– 371 486
Full-time equivalent staff 19,499 19,242 19,120
BMO Financial Group 186th Annual Report 2003 31