Bank of Montreal 2008 Annual Report Download - page 60

MANAGEMENT’S DISCUSSION AND ANALYSIS
MD&A
56 | BMO Financial Group 191st Annual Report 200856 | BMO Financial Group 191st Annual Report 2008
C ontinue to grow BMO Capital Markets U.S. revenues by increasing
product penetration, improving cross-selling to the U.S. client
base, expanding trading activities and enhancing client coverage
of key segments, with a focus on growing fee-based revenues.
•Configured our U.S. lending business to focus on our core clients,
emphasizing our profitable, multi-product relationships.
•Advised United States Sugar Corporation on multi-billion-dollar land
sale to support Florida Everglades restoration.
•
Named by StarMine in February 2008 as the number-two stock picker in
the United States for 2007, based on coverage of stocks in the S&P 500.
Implement a number of high-value initiatives to drive earnings
growth in our Trading Products line of business.
•Reorganized our Canadian and U.S. equity products and research
group to provide an integrated North American research, sales and
trading platform to our global client base.
•
Demonstrated what can be achieved by bringing together the
strengths of BMO Financial Group for the benefit of our clients and
shareholders by partnering with BMO Mutual Funds in the creation
of the BMO Lifestages Plus Fund, raising over $1 billion in 14 months.
We also led multiple notable transactions in 2008 including the
$130 million initial public offering of Cymbria Corporation.
•Doubled the size of our U.S. municipal bonds business through the
acquisition of Griffin, Kubik, Stephens & Thompson Inc.
Maintain Canadian leadership in the high-return fee businesses
of mergers and acquisitions, equity and debt underwriting
and securitization.
•Named Best Investment Bank in Canada by Global Finance magazine.
2008 Group Objectives and Achievements
•Hosted 17th annual BMO Capital Markets Global Metals & Mining
conference, which attracted more than 1,200 attendees from
six continents.
•Bookrunner on the IPO of Franco-Nevada by Newmont Mining,
the largest-ever mining IPO in North America.
Other Achievements
•Ranked as the top Equity Research Group in Canada for the 28th
consecutive year in the Brendan Wood International Survey of
Institutional Investors.
•We will be opening our first subsidiary in India, located in Mumbai.
Our expanded presence in India will help to facilitate strategic
dialogue between issuers in high-growth regions and our core
clients and markets, primarily in North America.
•
Participated in 162 corporate and government debt transactions
that raised $126 billion. Raised $45 billion through participation in
197 equity transactions.
•Advised on 54 completed mergers and acquisitions in North America
totalling $46 billion.
1,156
1,246 1,173
490
U.S. Revenues
Total revenues (US$ millions)
Excluding commodities losses
200820072006
Solid performance in U.S.
businesses despite difficult
market conditions.
20082007200620052004
102
143
238
394
888
1,318
1,933 2,041
154
1,682
Canadian Mergers and
Acquisitions (M&A) Market (1)
Value of deals ($ billions)
Number of deals
(1) For the 12 months ended September 30
M&A activity decreased due to
market conditions.
73
42
95
49
92
52
BMO Capital Markets
Market
200820072006
North American Debt
Underwriting – Canadian
Issuers ($ billions)
Continued strong participation in
corporate debt markets.
20082007200620052004
18.6
21.0
18.5
12.2
7.7
Excluding commodities losses
16.6
Return on Equity (%)
ROE reflected the deterioration in
capital markets.
2009 Group Objectives
•Increase our focus on core profitable clients.
•Optimize our capital.
•Improve our risk-return profile.
•Improve our return on equity while securing our future growth.
Business Environment and Outlook
Fiscal 2008 was very challenging for BMO Capital Markets. The difficul-
ties and related volatility in global credit markets that began in August
2007 continued to negatively affect our earnings. As capital markets
conditions deteriorated, we recorded losses related to certain trading
activities and valuation adjustments. The North American economy
weakened sharply and, given the uncertain economic outlook, invest-
ment banking volumes declined from the higher levels of recent years.
Despite difficult market conditions, there was very strong performance
in our interest-rate-sensitive businesses and foreign exchange trading
businesses during the year. We also reduced the size and risk profile
of our commodities portfolio, which had incurred large losses in the
previous year. Further, in our efforts to improve the risk-return profile
of our businesses, we also reduced the size and risk exposure of our
core credit trading business, securitization business and structured
investment vehicles (SIVs). During the year, corporate banking assets
continued to grow, mainly due to clients accessing undrawn commit-
ments. In our lending business, approximately 20% of our U.S.
authorizations were designated as non-core in the third quarter and