Bank of Montreal 2008 Annual Report Download - page 63

MD&A
BMO Financial Group 191st Annual Report 2008 | 59
investments in reverse repurchase agreements in favour of investing in
the securities that had served as collateral on the loans. Within the trading
securities portfolio, there was a shift away from corporate debt and equity
into more stable and secure Canadian and U.S. government securities.
Loans and Acceptances ($ millions)
As at October 31 2008 2007 2006 2005 2004
Residential mortgages 49,343 52,429 63,321 60,871 56,444
Consumer instalment and
other personal loans 43,737 33,189 30,418 27,929 24,887
Credit cards 2,120 4,493 3,631 4,648 3,702
Businesses and governments 84,151 62,650 56,030 47,803 44,559
Acceptances 9,358 12,389 7,223 5,934 5,355
Securities borrowed or
purchased under
resale agreements 28,033 37,093 31,429 28,280 22,609
Gross loans and acceptances 216,742 202,243 192,052 175,465 157,556
Allowance for credit losses (1,747) (1,055) (1,058) (1,128) (1,308)
Net loans and acceptances 214,995 201,188 190,994 174,337 156,248
Net loans and acceptances increased $13.8 billion to $215.0 billion,
which reflected approximately $17 billion in growth due to the impact
of the stronger U.S. dollar. Loans to businesses and governments,
including acceptances, increased $18.5 billion due to growth in demand
from businesses and other financial institutions. Consumer instalment
and other personal loans increased $10.5 billion, reflecting healthy
personal lending markets and growth from acquisitions. The consumer
portfolio remains well diversified, with growth in both Canada and
the United States. Residential mortgages decreased $3.1 billion,
reflecting the conversion of BMO-underwritten Canadian mortgages
to government-insured mortgage-backed securities. Credit card
loans decreased $2.4 billion, reflecting securitization activity during
the year. Securities borrowed or purchased under resale agreements
decreased $9.1 billion as a result of lower trading volume.
Table 11 on page 96 provides a comparative summary of loans by
geographic location and product. Table 13 on page 97 provides a compar-
ative summary of net loans in Canada by province and industry. Loan
quality is discussed on page 41 and further details on loans are provided
in Notes 4, 5 and 7 to the financial statements, starting on page 113.
Other Assets
Other assets increased $35.6 billion to $79.8 billion, primarily due
to derivative financial instrument assets. The year-over-year increase
in derivative assets and liabilities of $33.0 billion and $26.5 billion,
respectively, was primarily due to movements in interest rates, foreign
exchange rates and underlying equity values as well as client-driven
volume. Volatility in exchange and interest rates increases the value of
derivative assets and liabilities, usually comparably. These positions are
managed with other trading assets, and any changes in volume and
value of the derivative instruments are generally offset by changes
in the associated trading assets.
Deposits ($ millions)
As at October 31 2008 2007 2006 2005 2004
Banks 30,346 34,100 26,632 25,473 20,654
Businesses and governments 136,111 121,748 100,848 92,437 79,614
Individuals 91,213 76,202 76,368 75,883 74,922
257,670 232,050 203,848 193,793 175,190
Deposits increased $25.6 billion to $257.7 billion. The stronger U.S. dollar
increased deposits by $24.3 billion. Deposits from businesses and govern -
ments, which account for 53% of total deposits, increased $14.4 billion
and deposits from individuals, which account for 35% of total deposits,
increased $15.0 billion. Deposits by banks, which account for 12% of
total deposits, decreased $3.8 billion. Further details on the composition
of deposits are provided in Note 15 on page 130 of the financial state-
ments and in the Liquidity and Funding Risk section on page 81.
Other Liabilities
Other liabilities increased $20.4 billion to $134.8 billion. Derivative-related
liabilities increased $26.5 billion, increasing at a rate lower than the
increase in derivative-related assets. Acceptances decreased $3.0 billion
and there was a $2.0 billion increase in other liabilities. Securities sold
but not yet purchased decreased $6.2 billion and securities lent or
sold under repurchase agreements increased $1.2 billion, both due to
lower trading volume. Further details on the composition of other liabili-
ties are provided in Note 16 on page 131 of the financial statements.
Subordinated Debt
Subordinated debt increased $0.9 billion to $4.3 billion. There was
one new issuance in 2008, as detailed in Note 18 on page 132 of the
financial statements.
Shareholders’ Equity
Shareholders’ equity increased $2.6 billion to $17.9 billion. The increase
was largely related to a decrease in accumulated other comprehensive
loss as a result of exchange gains on our net investment in foreign
operations, and to higher share capital and retained earnings. BMO’s
Consolidated Statement of Changes in Shareholders’ Equity on page 106
provides a summary of items that increase or reduce shareholders’
equity, while Note 21 on page 135 of the financial statements provides
details on the components of and changes in share capital. Details of
our enterprise-wide capital management practices and strategies can be
found on page 60.
20082007200620052004
133.6
146.1
159.6 164.1
187.0
Net Loans – Excluding
Securities Borrowed or
Purchased under Resale
Agreements
($ billions)
The stronger U.S. dollar accounted
for $14 billion of loan growth.
The portfolio remains well
diversified, with a lower level
of residential mortgages than
in prior years.
20082007200620052004
74.9 75.9 76.4 76.2
91.2
Deposits from Individuals
($ billions)
The increase in 2008 reflects growth
in term investments and the
$4.5 billion impact of the stronger
U.S. dollar.
20082007200620052004
12.7
13.8
15.1 15.3
17.9
Shareholders’ Equity
($ billions)
The increase was due to shares
issued to acquire Ozaukee and
to a decline in accumulated other
comprehensive loss.
Portfolio Diversification –
Gross Loans and Acceptances*
Residential
mortgages 26%
Commercial 24%
Consumer 24%
Corporate 26%
*Excluding securities borrowed or purchased
under resale agreements