Bank of Montreal 2010 Annual Report Download - page 45

MD&A
Contributions to Revenue, Expenses, Net Income and Average Assets by Operating Group and by Location ($ millions, except as noted)
Personal and Commercial Private BMO Corporate Services, including Total
Banking Client Group Capital Markets Technology and Operations Consolidated
For the year ended
October 31 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008 2010 2009 2008
Operating Groups Relative Contribution to BMO’s Performance (%)
Revenue 59.4 62.0 60.1 18.4 18.2 21.0 26.9 27.9 21.3 (4.7) (8.1) (2.4) 100 100 100
Expenses 52.8 52.6 52.9 21.2 21.3 22.8 24.0 23.6 23.7 2.0 2.5 0.6 100 100 100
Net income 64.7 95.2 70.5 16.7 20.1 21.5 29.2 48.9 28.7 (10.6) (64.2) (20.7) 100 100 100
Average assets 44.7 41.4 43.0 3.6 2.6 2.2 50.4 56.6 56.4 1.3 (0.6) (1.6) 100 100 100
Total Revenue
Canada 5,741 5,287 4,794 1,818 1,597 1,764 2,028 1,471 1,270 (413) (641) (217) 9,174 7,714 7,611
United States 1,513 1,568 1,342 252 241 219 1,035 1,332 861 (161) (321) (130) 2,639 2,820 2,292
Other countries – – – 175 174 163 216 286 47 6 70 92 397 530 302
7,254 6,855 6,136 2,245 2,012 2,146 3,279 3,089 2,178 (568) (892) (255) 12,210 11,064 10,205
Total Expenses
Canada 2,945 2,837 2,733 1,362 1,297 1,295 929 890 882 203 206 101 5,439 5,230 5,011
United States 1,065 1,042 915 222 250 237 755 723 627 (67) (26) (69) 1,975 1,989 1,710
Other countries – – – 27 22 37 138 131 127 11 9 9 176 162 173
4,010 3,879 3,648 1,611 1,569 1,569 1,822 1,744 1,636 147 189 41 7,590 7,381 6,894
Net Income
Canada 1,626 1,415 1,153 311 197 305 682 369 424 (83) (420) 126 2,536 1,561 2,008
United States 193 286 242 17 (6) (10) 71 363 146 (222) (753) (562) 59 (110) (184)
Other countries – – – 142 168 131 67 141 (2) 6 27 25 215 336 154
1,819 1,701 1,395 470 359 426 820 873 568 (299) (1,146) (411) 2,810 1,787 1,978
Average Assets
Canada 144,839 139,945 134,402 11,371 8,332 5,827 107,414 128,687 105,453 (7,013) (10,315) (9,187) 256,611 266,649 236,495
United States 33,106 41,674 36,507 2,340 2,811 2,385 66,443 90,581 87,471 12,445 7,412 2,897 114,334 142,478 129,260
Other countries – – – 503 451 446 27,009 28,926 31,365 17 44 43 27,529 29,421 31,854
177,945 181,619 170,909 14,214 11,594 8,658 200,866 248,194 224,289 5,449 (2,859) (6,247) 398,474 438,548 397,609
BMO employs a methodology for segmented reporting purposes
whereby expected credit losses are charged to the operating groups
quarterly based on their share of expected credit losses. The difference
between quarterly charges based on expected credit losses and required
quarterly provisions based on actual losses is charged to Corporate
Services. The operating group results are presented on an expected
credit loss basis.
The actual specific provision for credit losses for P&C was
$1,177 million, comprised of $712 million in P&C Canada and $465 million
in P&C U.S., compared with $1,296 million, $664 million and $632 million,
respectively, for the 2009 fiscal year. The P&C Canada provision for
credit losses of
$712 million included credit losses of $203 million related
to securitized assets, which are reflected as a reduction of non-interest
revenue in Corporate Services under our securitization reporting method-
ology and are therefore not included in BMO’s $1,049 million of specific
provisions. For Private Client Group, the actual specific provision for credit
losses was $13 million, compared with $30 million in 2009, and for BMO
Capital Markets, the actual specific provision for credit losses for 2010
was $62 million, compared with $389 million in 2009.
In 2010, we changed the manner in which we report securitized
assets in our segmented disclosure. Previously, certain securitized mort-
gage assets were not reported in P&C Canada’s balance sheet. We now
report all securitized mortgage assets in P&C Canada with offsetting
amounts in Corporate Services, and net interest income earned on all
securitized mortgage assets is included in P&C Canada net interest
income. Previously, net interest income earned on certain securitized
mortgage assets was included in P&C Canada non-interest revenue.
These changes do not have a meaningful impact on the earnings of
P&C Canada. Results for prior periods have been restated to conform to
the current presentation.
BMO analyzes consolidated revenues on a GAAP basis. However,
like many banks, BMO analyzes the revenues of its operating groups and
associated ratios computed using revenue on a taxable equivalent basis
(teb). This basis includes an adjustment that increases GAAP revenues
and the GAAP provision for income taxes by an amount that would
raise revenues on certain tax-exempt securities to a level equivalent to
amounts that would incur tax at the statutory rate. The offset to the
group teb adjustments is reflected in Corporate Services revenues and
income tax provisions.
In 2010, we determined that certain BMO Capital Markets
trans actions should be reported on a teb. Similar transactions have
been reported in prior periods and amounts reported in respect of those
transactions in prior periods have been restated to reflect the current
basis of reporting, resulting in increases in net interest income, net inter-
est
margin and income taxes in BMO Capital Markets, with offsetting
amounts reflected in Corporate Services.
To position our commercial business for growth as the United States
emerges from recession, we identified U.S. mid-market clients that
would be better served by a commercial banking model and transferred
their business to P&C U.S. from BMO Capital Markets in the second
quarter of 2010. As a result, P&C U.S. assumed $5.4 billion in loans and
$3.2 billion in deposits, with results for prior periods restated to reflect
the transfer.
BMO Financial Group 193rd Annual Report 2010 43