Bank of Montreal 2008 Annual Report Download - page 30

MANAGEMENT’S DISCUSSION AND ANALYSIS
MD&A
26 | BMO Financial Group 191st Annual Report 2008
Financial Performance and Condition at a Glance
Our Performance (Note 1) Peer Group Performance
Total Shareholder Return (TSR)
•BMO shareholders have earned an average annual return of 0.9%
over the past five years.
•The one-year TSR in 2008 was –27.9%, reflecting the difficult
economic and market conditions. BMO’s one-year return was
slightly better than the comparable indices.
Earnings per Share (EPS) Growth
•EPS fell 8.5% to $3.76 in 2008.
•The net impact of notable items (see page 36) reduced EPS
by $1.16 in 2008 and $1.55 in 2007.
•Personal and Commercial Banking Canada earned higher revenue
in 2008 and its net income rose in each quarter of the year.
•Private Client Group net income matched the record results
of a year ago.
Return on Equity (ROE)
•ROE was 13.0% in a difficult year, reflecting BMO’s relative strength
and stability among global financial institutions, as the industry
felt the effects of higher credit losses and difficulties in credit and
capital markets.
•ROE of 13% or better has been achieved for 19 consecutive years,
distinguishing BMO as the only bank in its North American peer
group with this level of earnings consistency.
Net Economic Profit (NEP) Growth
•NEP, a measure of added economic value, fell to $405 million
from $603 million in the prior year.
•The decrease was driven by higher credit losses.
•NEP remained positive in the difficult economic environment,
supported by strong earnings in P&C Canada, stable earnings in
Private Client Group and improved results in BMO Capital Markets.
Revenue Growth
•Revenue increased $856 million or 9.2% in 2008 to a record
$10,205 million.
•There was growth in each operating group.
Productivity Ratio (Expense-to-Revenue Ratio)
•The productivity ratio was 67.6% and improved 300 basis points
from 2007. Similarly, the cash productivity ratio also improved
300 basis points, to 67.1%.
Five-Year TSR (%)
•The Canadian peer group average annual five-year TSR
was 6.4%.
•The one-year TSR in 2008 of –22.7% reflected economic and
market conditions.
•The North American peer group average annual five-year TSR
of 3.0% and one-year TSR of –28.4% were lower than the
Canadian average as the major U.S. banks were more severely
affected by the difficult capital markets environment.
EPS Growth (%)
•The Canadian peer group average EPS decreased 41% in
2008 as all banks were affected by notable items this year
and last.
•EPS growth for the North American peer group was –127%,
reflecting the more difficult market environment for the
U.S. banks.
ROE (%)
•The Canadian peer group average ROE of 11.6% reflected
lower returns.
•ROE for the North American peer group was –3.9%, with
every bank recording lower returns this year and five of
the 15 banks recording negative returns.
NEP Growth (%)
•The Canadian peer group average NEP growth was –80%
as NEP decreased for five of the six banks, reflecting
the overall EPS decline for the group.
•NEP growth for the North American peer group was
–358%, with every bank recording a decrease.
Revenue Growth (%)
•Revenue growth for the Canadian peer group
averaged –10.8%.
•Retail banking in Canada and the United States contributed
good positive growth but revenues were reduced by a
decline in wholesale banking revenue.
•Revenue growth for the North American peer group
was –13.4%.
Productivity Ratio (%)
•The Canadian peer group average productivity ratio was
71.4%, a deterioration of 870 basis points from 62.7% last
year, with four banks deteriorating and two improving.
•The cash productivity ratio for the peer group deteriorated
by 830 basis points to 70.1%.
•The average productivity ratio for the North American
peer group was 79.9%, a deterioration of more than
22 percentage points.
20082007200620052004
0.9
19.1
13.8
18.9
14.2
5.2
11.2
27.9
(20.2)
(8.5)
20082007200620052004
20082007200620052004
13.0
19.2
14.4
18.8
19.4
20082007200620052004
(51.0)
(32.8)
10.3
58.2
0.1
Further details are provided on page 35.
Further details are provided on page 34. Graph not to scale.
Further details are provided on page 35. Graph not to scale.
Further details are provided on page 38. Graph not to scale.
Note 1. Results stated on a cash basis as well as NEP are
non-GAAP measures. Please see page 85 for a discussion
of the use of non-GAAP measures.
Further details are provided on page 42.
Further details are provided on page 33.
Certain BMO and peer group prior year data has been restated to
conform with the current year’s basis of presentation.
Results are as at or for the years ended October 31 for Canadian
banks and as at or for the years ended September 30 for U.S.
banks, as appropriate.
BMO Financial Group
Canadian peer group average
North American peer group average
20082007200620052004
(6.4)
9.2
1.5
3.9
5.3
20082007200620052004
70.6
67.6
63.6
66.0
64.4