Bank of Montreal 2004 Annual Report Download - page 54

BMO Financial Group Annual Report 200450
MD&A
Management’s Discussion and Analysis
lowering of the Canadian/U.S. dollar exchange rate and
higher oil prices. These factors caused contract values to rise
and the increase in volatility promoted greater client activity.
Deposits ($ millions)
As at October 31 2004 2003 2002 2001 2000
Banks 20,654 24,755 15,273 20,539 23,385
Businesses and governments 79,614 72,405 71,411 66,132 69,454
Individuals 74,922 74,391 75,154 67,619 63,858
175,190 171,551 161,838 154,290 156,697
Deposits increased $3.6 billion to $175.2 billion, even though
the weaker U.S. dollar reduced deposits by $5.1 billion. Deposits
from businesses and governments, which account for 45% of
total deposits, increased $7.2 billion and deposits from indi-
viduals, which account for 43% of total deposits, increased
$0.5 billion. The increase in deposits was used to fund growth
in loans. Deposits by banks, which account for 12% of total
deposits, decreased $4.1 billion. The decrease reflects the
reduction in cash resources and securities.
Further details on the composition of deposits are provided
in Note 14 on page 105 of the financial statements and in the
Liquidity and Funding Risk section on page 64.
Deposits from Individuals
($ billions)
20042003200220012000
74.9
63.9
67.6
75.2 74.4
Shareholders’ Equity
($ billions)
20042003200220012000
13.2
11.9
10.7
11.9
12.5
Deposits from individuals remained
stable despite the lower Canadian/U.S.
dollar exchange rate.
Shareholders’ equity has increased
steadily since 2001 due to net income
retained to support our businesses.
Net Loans – Excluding
Securities Purchased under
Resale Agreements ($ billions)
133.7
117.5
121.9
127.0 127.3
20042003200220012000
*Excluding securities purchased
under resale agreements
Portfolio Diversification –
Gross Loans and Acceptances*
Residential
mortgages 38%
Commercial 25%
Consumer 20%
Corporate 17%
There was strong growth in residential
mortgages and personal loans.
The portfolio remains well diversified,
with corporate loans declining as a
percentage of the portfolio.
Securities ($ millions)
As at October 31 2004 2003 2002 2001 2000
Investment securities 15,017 19,660 21,271 21,470 24,469
Trading securities 35,444 35,119 22,427 16,200 21,994
Loan substitute securities 11 11 17 6 –
50,472 54,790 43,715 37,676 46,463
Investment securities decreased $4.6 billion to $15.0 billion,
due to a reduction in holdings of U.S. and Canadian government
debt related to expectations of rising interest rates. Trading
securities were relatively unchanged, as an increase in corpo-
rate debt securities related to growth in our credit derivatives
business was offset by a decrease in equities due to reduced
client activity. Note 3 on page 88 of the financial statements
provides further details on securities.
Net Loans and Acceptances ($ millions)
As at October 31 2004 2003 2002 2001 2000
Residential mortgages 56,444 52,095 47,569 41,941 39,485
Consumer instalment
and other personal loans 24,887 22,103 21,168 19,107 18,038
Credit cards 3,702 2,967 2,280 1,527 1,407
Businesses and governments 50,020 51,889 57,963 61,249 60,176
Acceptances 5,355 5,611 6,901 7,936 8,630
Securities purchased under
resale agreements 17,148 13,276 15,664 14,954 16,308
Gross loans and acceptances 157,556 147,941 151,545 146,714 144,044
Allowance for credit losses (1,308) (1,785) (1,949) (1,949) (1,597)
Net loans and acceptances 156,248 146,156 149,596 144,765 142,447
Net loans and acceptances increased $10.1 billion to $156.2 bil-
lion. Residential mortgages increased $4.3 billion, reflecting
strong market demand in the low interest rate environment.
Credit cards and consumer instalment and other personal loans
increased $3.5 billion in total, also reflecting healthy personal
lending markets. The portfolio remains well diversified, with a
higher proportion of Canadian loans due to the growth in resi-
dential mortgages in Canada in 2004 and the impact of the lower
Canadian/U.S. dollar exchange rate. Loans to businesses and
governments and related acceptances decreased $2.1 billion,
reflecting weak demand and the lower exchange rate. Securities
purchased under resale agreements increased $3.9 billion,
reflecting the rising interest rate environment. These instru-
ments are very short-term loans, and increased partly due
to reductions in longer-term instruments such as cash deposits
with other banks and fixed income investments, which would
likely lose more value if interest rates increased as expected.
Table 11 on page 76 provides a comparative summary of
loans by geographic location and product. Table 13 on page 77
provides a comparative summary of net loans in Canada by
province and industry. Loan quality is discussed on pages 31
and 60 and further details on loans are provided in Notes 4, 5
and 7 to the financial statements starting on page 91.
Other Assets
Other assets increased $4.7 billion to $40.4 billion, primarily
due to higher values of derivative financial instruments,
particularly in foreign exchange and commodity contracts.
These contracts increased in value because of the sustained