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8BMO Financial Group 190th Annual Report 2007
Demonstrating the fundamental strength
and diversity of our business
Net income of $2.1 billion was affected by commodities losses
and, in the fourth quarter, the difficult capital markets environment.
With a return on equity of 14.4%, our results demonstrated the
fundamental strength and diversity of our businesses. Excluding
significant items1, BMO produced net income of $2.9 billion and
a 19.8% return on equity.
Financial Results
BMO Financial Group’s net income for 2007 was $2,131 million, with a return on
equity of 14.4%, despite the impact of four significant items: commodities losses,
charges related to the difficult capital markets environment, restructuring costs
and an increase in the general allowance for credit losses.
Excluding these items, our net income was $2,918 million, an increase of
$278 million or 10.5% over 2006, representing a return on equity of 19.8% and an
improvement in our cash productivity ratio of 150 basis points to 60.9% in 2007.
We were able to build solid momentum in most of our businesses by focusing
on our customers and delivering on our priorities. The businesses performed well,
which should pay off as market conditions improve.
Operating Groups
In 2007, our Personal and Commercial Banking Canada (P&C Canada) and Private
Client Group (PCG) both set new net income records. P&C Canada is now funda-
mentally stronger and better positioned, a reflection of our renewed commitment
to customers that we will make it easier for them to do business with us. This
strength is reflected in net income, which increased to $1,250 million in 2007, an
increase of 9%, while we continued to invest in the businesses. PCG, a consistent
performer once again in 2007, achieved outstanding results with net income
of $408 million, an increase of 15% over 2006. P&C U.S. enjoyed a solid year,
achieving net income of US$105 million, including acquisition integration expenses.
Net income excluding these costs was better in each successive quarter in 2007,
a substantial accomplishment in a difficult operating environment. The financial
performance of BMO Capital Markets saw a significant decline to net income
of $425 million due to the impact of commodities losses and the capital markets
2007 Financial Review
$
2,131
million
Net Income
14.4
%
Return on Equity
(1) Results stated on a basis that excludes commodities losses, charges related to deterioration in the capital markets environment,
changes in the general allowance for credit losses and/or restructuring charges are non-GAAP measures. Please see the Non-GAAP
Measures section in Management’s Discussion and Analysis on page 34.