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BMO Financial Group
198th Annual Report 2015

Table of contents

  • Page 1
    BMO Financial Group 198th Annual Report 2015

  • Page 2
    ... results. now it gets interesting Business Review 2 4 10 11 16 17 18 20 21 Financial Snapshot/Who We Are Year in Review Chairman's Message CEO's Message Executive Committee Our Strategic Footprint Reasons to Invest in BMO Corporate Governance Board of Directors Financial Review 23 24 26 118 132...

  • Page 3
    ...in non-interest revenue. Prior period amounts and ratios have been reclassified. Corporate Services, including Technology & Operations. 2 3 Mark Gilbert, Commercial Account Manager, Mid Market. 4 Bank of Montreal brands the organization's member companies as BMO Financial Group. Note 28 on page...

  • Page 4
    ... Chief Technology & Operations Officer For the third consecutive year, BMO was recognized by global financial services research firm Celent with a 2015 Model Bank Award for excellence in the digital banking category. 4 BMO Financial Group 198th Annual Report 2015 BMO Financial Group 198th Annual...

  • Page 5
    ...- Global Banking & Finance Review Best Supply Chain Finance Bank in North America - Trade Finance magazine World's Best Metals & Mining Investment Bank - Global Finance magazine Best Wealth Management in Canada - Global Banking & Finance Review 6 BMO Financial Group 198th Annual Report 2015 BMO...

  • Page 6
    ... the help we provide is anchored by integrity, accountability and shared values. You can't buy trust, or invent it. Trust is earned. Consistently in the top rankings for sound corporate governance. Solid capital strength, with the longest-running dividend payout record of any company in Canada...

  • Page 7
    ... a differentiated customer experience, efficiency and quality earnings growth - is supported by the consistent track record of a bank that has always acted with responsibility, transparency and integrity. Since last year's Annual Report, we have had two excellent additions to the BMO board. Lorraine...

  • Page 8
    ... cost. a legacy of technological innovation dating from initial signs of digitization in the 1970s, when we were the first Canadian bank to connect our branches nationwide across a real-time network. From the earliest fully automated cheque-processing systems in the United States to ABM cash...

  • Page 9
    ... this consistent strategic focus is paying off: In 2015, adjusted annual net income grew by 4% year over year in Canadian Personal and Commercial Banking, by 9% (on a U.S. dollar basis) in U.S. Personal and Commercial Customers remain the key to value creation Adjusted Net Revenue Our business is...

  • Page 10
    ...on our strategy in a world that reveals new potential - and becomes more interesting - every day. BMO's strategic footprint spans strong regional economies. Our three operating groups serve individuals, businesses, governments and corporate customers across Canada and the United States with a focus...

  • Page 11
    ... economic conditions. BMO's performance in 2015 reflects the benefits of our diversified business mix, with Canadian and U.S. banking and Wealth Management all contributing to the bank's growth. Canadian and U.S. Personal and Commercial Banking and Wealth Management had record years in adjusted net...

  • Page 12
    ... Managing Partner, Ernst & Young Board/Committees: Audit and Conduct Review, Risk Review, The Pension Fund Society of the Bank of Montreal Other public boards: Experian PLC, Walgreens Co. Director since: 2012 Sophie Brochu President and Chief Executive Officer, Gaz Métro Board/Committees: Audit...

  • Page 13
    ... IBC Shareholder Information We have an advantaged business mix, a strong capital position and a customer-centric operating model that provide clear opportunities for growth across a diversified North American footprint: • Our large North American commercial banking business has advantaged market...

  • Page 14
    ... recent year. *Graph shows the efficiency ratio on a net revenue basis, calculated using revenue net of claims, commissions and changes in policy benefit liabilities. 2013 2014 2015 BMO reported BMO adjusted Canadian peer group average North American peer group average The Canadian peer group...

  • Page 15
    ... in 2015 Future Changes in Accounting Policies Transactions with Related Parties Management's Annual Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting Shareholders' Auditors' Services and Fees Enhanced Disclosure Task Force Enterprise-Wide Risk Management...

  • Page 16
    ... businesses: BMO Global Asset Management, BMO Nesbitt Burns, BMO Private Banking, BMO Insurance and BMO InvestorLine. BMO Capital Markets, our investment and corporate banking and trading products division, provides a full suite of financial products and services to North American and international...

  • Page 17
    ..., 2015 (Global Banking and Finance Review), Best FullService Investment Advisory in Canada, 2015 (Global Banking and Finance Review), 2015 Greenwich Quality Leader in Canadian Equity Sales and Corporate Access and 2015 Greenwich Share Leader for Canadian Fixed Income Research (Greenwich Associates...

  • Page 18
    ... Chinese business partners. ‰ Ranked among top 20 global investment banks and 12th largest investment bank in North and South America, based on fees, by Thomson Reuters. 5. Ensure our strength in risk management underpins everything we do for our customers. ‰ Leveraged our capital processes to...

  • Page 19
    ...any forward-looking statement. The Enterprise-Wide Risk Management section starting on page 86 describes a number of risks, including credit and counterparty, market, liquidity and funding, operational, model, insurance, legal and regulatory, business, strategic, reputation, environmental and social...

  • Page 20
    ...1.00 Canadian/U.S. Dollar Exchange Rates 1.31 1.31 1.09 1.12 1.1 0.9 0.50 0.50 0.13 0.13 0.13 0.1 2013 2014 2015* 2016* Jan 2014 Oct 2014 Canadian overnight rate U.S. federal funds rate Oct Oct 2015 2016* Jan 2014 Oct 2014 Oct Oct 2015 2016* Canada United States *Forecast *Forecast...

  • Page 21
    ... in additional common shares. Total Shareholder Return For the year ended October 31 2015 2014 2013 2012 2011 3-year CAGR (1) 5-year CAGR (1) Closing market price per common share ($) Dividends paid ($ per share) Dividend yield (%) Increase (decrease) in share price (%) Total annual shareholder...

  • Page 22
    ... charged to the operating groups, and acquisition integration costs in 2015 and 2014 related to F&C, which are charged to Wealth Management. (3) Credit-related items on the purchased performing portfolio in 2013 were comprised of revenue of $638 million, provisions for credit losses of $232 million...

  • Page 23
    ...57 2013 EPS 2014 2015 Adjusted EPS MD&A Growth demonstrates the benefits of our diversified business mix. Earnings per share (EPS) is calculated by dividing net income attributable to bank shareholders, after deduction of preferred dividends, by the average number of common shares outstanding...

  • Page 24
    ... Equity (Canadian $ in millions, except as noted) For the year ended October 31 2015 2014 2013 2012 2011* Reported net income Attributable to non-controlling interest in subsidiaries Preferred dividends Net income available to common shareholders Average common shareholders' equity Return on equity...

  • Page 25
    ... balances and improved non-interest revenue. U.S. P&C revenue increased $458 million or 15% on a Canadian dollar basis, and was stable on a U.S. dollar basis as strong commercial loan growth and increased mortgage banking revenue offset the effects of lower net interest margin. Wealth Management...

  • Page 26
    ...foreign exchange rates during the year. During 2015, we hedged a portion of the forecasted BMO Capital Markets U.S. dollar net income. These hedges are subject to mark-to-market accounting, which resulted in a $21 million after tax loss in 2015, which was recorded in our BMO Capital Markets business...

  • Page 27
    ... lower investment banking fees and reduced securities gains. Corporate Services adjusted revenue declined by $105 million, mainly due to lower revenue related to the purchased loan portfolio. (1) Commencing in 2015, insurance claims, commissions and changes in policy benefit liabilities are reported...

  • Page 28
    ...year ended October 31 Net interest income (teb) Change 2015 2014 % Average earning assets Change 2015 2014 % Net interest margin (in basis points) 2015 2014 Change Canadian P&C U.S. P&C Personal and Commercial Banking (P&C) Wealth Management BMO Capital Markets Corporate Services Total BMO reported...

  • Page 29
    ... payment service charges Trading revenues Lending fees Card fees Investment management and custodial fees Mutual fund revenues Underwriting and advisory fees Securities gains, other than trading Foreign exchange, other than trading Insurance revenue (1) Other Total BMO reported (1) BMO reported, net...

  • Page 30
    ... and Non-Interest Trading-Related Revenues (1) (Canadian $ in millions) (taxable equivalent basis) For the year ended October 31 2015 2014 2013 Change from 2014 (%) Interest rates Foreign exchange Equities Commodities Other (2) Total (teb) Teb offset Reported Total Reported as: Net interest income...

  • Page 31
    ... the year ended October 31 2015 2014 2013 Canadian P&C U.S. P&C Personal and Commercial Banking Wealth Management BMO Capital Markets Corporate Services, including T&O (1) Impaired real estate loans Interest on impaired loans Purchased credit impaired loans Purchased performing loans (1) Adjusted...

  • Page 32
    ...U.S. banks. The adjusted efficiency ratio in Wealth Management on a net revenue basis improved by 40 basis points to 71.5%. BMO Capital Markets reported efficiency ratio increased by 100 basis points to 64.2%, as the stronger U.S. dollar increased the weighting of its higher efficiency U.S. business...

  • Page 33
    ... Ratio by Group (teb) (%) For the year ended October 31 2015 2014 2013 Efficiency Ratio Canadian P&C U.S. P&C Wealth Management BMO Capital Markets Total BMO Adjusted Efficiency Ratio Canadian P&C U.S. P&C Wealth Management Wealth Management, net of CCPB BMO Capital Markets Total BMO Total BMO, net...

  • Page 34
    ... Management 18% BMO CM 23% Canada 71% U.S. 22% Other countries 7% Canada 74% U.S. 20% Other countries 6% Results provide attractive diversification across businesses and geographies. *Percentages determined excluding results in Corporate Services. BMO Financial Group 198th Annual Report 2015...

  • Page 35
    ... as noted) For the year ended October 31 Personal and Commercial Banking 2015 2014 2013 2015 Wealth Management 2014 2013 2015 BMO Capital Markets 2014 2013 2015 Corporate Services 2014 2013 2015 Total Consolidated 2014 2013 Operating Groups Relative Contribution to BMO's Performance (%) Revenue 52...

  • Page 36
    ... segments are reviewed separately in the sections that follow. (Canadian $ in millions, except as noted) As at or for the year ended October 31 Canadian P&C 2015 2014 2013 2015 U.S. P&C 2014 2013 2015 Total P&C 2014 2013 Net interest income (teb) Non-interest revenue Total revenue (teb) Provision...

  • Page 37
    ...Points Credit Card. ‰ BMO's Premium CashBack MasterCard for Business was named #1 in MoneySense™ magazine's annual ranking of Canada's Best Business Cash Back. Commercial banking ‰ Achieved 7% growth in both commercial lending and deposits. ‰ Launched the BMO Biz Basic™ Plan, to help small...

  • Page 38
    ...-directed investment accounts, as well as a personal finance management tool, all in one place. ‰ Provided Interac® e-Transfers for all business customer services through our digital channels (Online Banking, Mobile Banking and Online Banking for Business). ‰ Opened or upgraded 24 branches...

  • Page 39
    ... accounts. Commercial deposit growth was broad-based, with balances growing 7% year over year. MD&A Business Environment, Outlook and Challenges Canada's economic growth and employment are expected to improve in 2016, benefitting from firm demand from the United States, the lower Canadian dollar...

  • Page 40
    ... Group Head Commercial Banking and President and CEO, BMO Harris Bank MD&A Lines of Business Personal Banking offers a broad range of products and services to individuals, as well as small and mid-sized business customers, including deposits, mortgages, consumer credit, business lending, credit...

  • Page 41
    ... management services, driving a 6% increase in fee income year over year. 2016 Focus ‰ Continue to leverage our North American commercial franchise and partnerships to deliver a "One Bank" customer experience and successfully integrate the acquired GE Capital Transportation Finance business...

  • Page 42
    ... in loan spreads and balances and reduced fees from deposits and credit cards, partially offset by increased mortgage banking revenue and chequing balance growth. Net interest margin decreased by 17 basis points to 3.46%, driven by competitive loan pricing, changes in mix including loans growing...

  • Page 43
    ... Capital Transportation Finance business acquisition. We are also positioned to benefit from rising interest rates. We will continue to actively manage risks and regulatory compliance through a reinforced oversight and control structure. The U.S. economic environment in 2015 and the outlook for 2016...

  • Page 44
    ... the Best Integrated Investment Advisor Digital Platform in Canada, 2015 (Global Banking and Finance Review); and BMO InvestorLine was named Best Overall Discount Brokerage, 2015 (Money Sense). 2016 Focus ‰ Attract new clients and focus on delivering a great client experience. Drive productivity...

  • Page 45
    ...revenue growth. Wealth Management (Canadian $ in millions, except as noted) As at or for the year ended October 31 2015 2014 2013 Adjusted Net Income ($ millions) 955 854 843 Net interest income Non-interest revenue (1) Total revenue (1) Insurance claims, commissions and changes in policy benefit...

  • Page 46
    ...in the second half. We recorded growth in client assets despite the softer equity markets towards the end of the year as a result of our strategic focus on enhancing the client experience, product innovation and sales force investments. The Bank of Canada reduced interest rates twice and the Federal...

  • Page 47
    ... to North American and international financial institutions. Trading Products offers research and access to global markets for institutional, corporate and retail clients through an integrated suite of sales and trading solutions that include debt, foreign exchange, interest rate, credit, equity...

  • Page 48
    ... 2014 Mid-Market Equity House of the Year by International Financing Review. Ranked among Top 20 global investment banks and 12th-largest investment bank in North and South America, based on fees, by Thomson Reuters. Average lending assets increased 20% in the United States from the prior year. 2016...

  • Page 49
    MANAGEMENT'S DISCUSSION AND ANALYSIS BMO Capital Markets (Canadian $ in millions, except as noted) As at or for the year ended October 31 2015 2014 2013 Reported Net Income ($ millions) 1,040 1,077 1,032 Net interest income (teb) Non-interest revenue Total revenue (teb) Provision for (recovery of...

  • Page 50
    ... in commodities and energy prices at new lows. While market volatility persists, and equity markets remain challenging, our Capital Markets strategy remains constant. We continue to concentrate on our growth strategy, while leveraging our diversified business model and focusing on the United States...

  • Page 51
    ... management and risk reporting, stress testing and anti-money laundering. MD&A Financial Review Corporate Services reported net loss for the year was $408 million, compared with a reported net loss of $194 million a year ago. Reported results in 2015 included certain acquisition integration costs...

  • Page 52
    ... year and higher securities commissions and fees. Investment and Corporate Banking revenue increased due to higher lending revenue. Both Trading Products and Investment and Corporate Banking revenue were impacted by lower securities gains. Corporate Services revenue was lower due to a higher group...

  • Page 53
    ... adjusted net income growth of 11% in Canadian P&C, 4% growth in BMO Capital Markets and 2% growth in U.S. P&C on a U.S. dollar basis. There was a modest decline in Wealth Management, due to a $121 million after-tax security gain in the prior year, and lower results in Corporate Services. Adjusting...

  • Page 54
    ...revenue-based costs. The stronger U.S. dollar increased expenses by $44 million or 2%. BMO Capital Markets BMO Capital Markets net income increased $37 million or 4% to $1,077 million in 2014. The increase reflected growth in revenue across both Investment and Corporate Banking and Trading Products...

  • Page 55
    ... in recent quarters. Corporate Services Adjusted quarterly net income can vary from quarter to quarter but has been relatively stable in 2014 and 2015, despite reduced benefits from the purchased loan portfolio. Foreign Exchange The U.S. dollar strengthened significantly in 2014 and 2015, with the...

  • Page 56
    ... net loans and acceptances Effective tax rate Adjusted effective tax rate Canadian/U.S. dollar as at exchange rate ($) Canadian/U.S. dollar average exchange rate ($) Cash and securities-to-total assets Capital Ratios (%) Common Equity Tier 1 Ratio Tier 1 Capital Ratio Total Capital Ratio 2,367...

  • Page 57
    ...Balance Sheet (Canadian $ in millions) As at October 31 2015 2014 2013 2012 2011 Assets Cash and interest bearing deposits with banks Securities Securities borrowed or purchased under resale agreements Net loans and acceptances Other assets Total assets Liabilities and Shareholders' Equity Deposits...

  • Page 58
    ... in Note 15 on page 168 of the financial statements. Equity (Canadian $ in millions) As at October 31 2015 2014 2013 2012 2011 Share capital Preferred shares Common shares Contributed surplus Retained earnings Accumulated other comprehensive income Total shareholders' equity Non-controlling...

  • Page 59
    ... of our enterprise-wide strategy. Finance and Risk Management are responsible for the design and implementation of the corporate policies and framework related to capital and risk management and the ICAAP. Regulatory Capital Common equity is the most permanent form of capital. Common Equity Tier...

  • Page 60
    ... active banks (both G-SIBs and non G-SIBs). BMO conducts business through a variety of corporate structures, including subsidiaries and joint ventures. A framework is in place for subsidiaries to appropriately manage their funding and capital. BMO Financial Group 198th Annual Report 2015 71

  • Page 61
    ... of foreign exchange movements on its capital ratios and did so during 2015. Regulatory Capital (All-in basis (1)) (Canadian $ in millions) As at October 31 2015 2014 Common Equity Tier 1 capital: instruments and reserves Directly issued qualifying common share capital plus related stock surplus...

  • Page 62
    ... above. Risk-Weighted Assets (Canadian $ in millions) As at October 31 2015 2014 Credit Risk Wholesale Corporate, including specialized lending Corporate small and medium-sized enterprises Sovereign Bank Retail Residential mortgages, excluding home equity line of credit Home equity line of credit...

  • Page 63
    ... AND ANALYSIS Economic Capital and RWA by Operating Group and Risk Type (As at October 31, 2015) BMO Financial Group Operating Groups Personal and Commercial Banking Wealth Management BMO Capital Markets Corporate Services Economic Capital by Risk Type (%) MD&A Credit Market Operational...

  • Page 64
    ... business growth, fund strategic investments and provide for a sound capital level. At year end, BMO's common shares provided a 4.3% annual dividend yield based on the year-end closing share price and dividends declared in the last four quarters. On December 1, 2015, BMO announced that the Board...

  • Page 65
    ... fees totalled approximately $89 million in 2015 and $66 million in 2014. Canadian Customer Securitization Vehicles The customer securitization vehicles we sponsor in Canada provide our customers with access to financing either directly from BMO or in the asset-backed commercial paper (ABCP) markets...

  • Page 66
    ... have an internal rating that maps to investment grade. Off-Balance Sheet Arrangements BMO enters into a number of off-balance sheet arrangements in the normal course of operations. Credit Instruments In order to meet the financial needs of our clients, we use a variety of off-balance sheet credit...

  • Page 67
    ... the plans' specific cash flows. Additional information regarding our accounting for pension and other employee future benefits, including a sensitivity analysis for key assumptions, is included in Note 23 on page 184 of the financial statements. 78 BMO Financial Group 198th Annual Report 2015

  • Page 68
    ... test in all periods. In determining fair value less costs to sell, we employ a discounted cash flow model, consistent with that used when we acquire businesses. This model is dependent on assumptions related to revenue growth, discount rates, synergies achieved on acquisition and the availability...

  • Page 69
    ... rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and recognize the related cash proceeds as secured financing in our Consolidated Balance Sheet. Additional information concerning the transfer of financial assets...

  • Page 70
    ... bank. Details of our investments in joint arrangements and associates and the compensation of key management personnel are disclosed in Note 29 on page 197 of the financial statements. We also offer employees a subsidy on annual credit card fees. MD&A BMO Financial Group 198th Annual Report 2015...

  • Page 71
    ... and procedures, as defined in Canada by National Instrument 52-109, Certification of Disclosure in Issuers' Annual and Interim Filings, and in the United States by Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), are effective. Internal Control over Financial Reporting...

  • Page 72
    ... for 2015 and 2014 relate primarily to fees paid for reviews of compliance with regulatory requirements for financial information and reports on internal controls over services provided by various BMO Financial Group businesses. They also include costs of translation services. BMO Financial Group...

  • Page 73
    ... changes in Common Equity Tier 1, Additional Tier 1, and Tier 2 capital. Supplementary Financial Information: Regulatory capital flow statement is provided on page 39. Discuss capital planning within a more general discussion of management's strategic planning. Annual Report: BMO's capital planning...

  • Page 74
    ...Supplementary Financial Information: Tables detailing credit risk information are provided on pages 20 to 29 and 42 to 49. 27 28 29 Describe the bank's policies related to impaired loans and renegotiated loans. Annual Report: Impaired and renegotiated loan policies are described in Note 4 on pages...

  • Page 75
    ...AND ANALYSIS Enterprise-Wide Risk Management As a diversified financial services company actively providing banking, wealth management, capital market and insurance services, we are exposed to a variety of risks that are inherent in carrying out our business activities. A disciplined and integrated...

  • Page 76
    ... trade and business investment. In the short run, market shocks can impact our Capital Markets business, while over a longer period of time the broader impact could be felt through reduced North American economic growth and weaker credit quality in our internationally exposed customers. BMO benefits...

  • Page 77
    ...small business, corporate and commercial clients in Canada. A strengthening of the U.S. dollar could increase the value of our risk-weighted assets, lowering our capital ratios. Refer to the Foreign Exchange section on page 37, the Enterprise-Wide Capital Management section on page 70 and the Market...

  • Page 78
    ... model and our risk appetite framework, underpinned by our risk governance structure, and our strong risk culture. 3 Lines of Defence Operating Model Risk Appetite Framework Enterprise-Wide Risk Management Framework Risk Culture Risk Governance BMO Financial Group 198th Annual Report 2015...

  • Page 79
    ... of internal control within the enterprise, including risk management and governance processes that support the enterprise, its objectives and the Board of Directors' discharge of its responsibilities. Risk Culture At BMO, we believe that risk management is the responsibility of every employee...

  • Page 80
    ... integrity, internal controls, succession planning and evaluation of senior management, communication, public disclosure and corporate governance. Risk Review Committee of the Board of Directors (RRC) assists the Board in fulfilling its oversight responsibilities in relation to BMO's identification...

  • Page 81
    ... products and services offered to our customers are reviewed and approved by Corporate Support areas, as well as by other senior management committees, including the Operational Risk Committee and Reputation Risk Management Committee, as appropriate. 92 BMO Financial Group 198th Annual Report 2015

  • Page 82
    ...of our risk management framework and corporate culture, that allow senior management, committees and the Board of Directors to effectively exercise their business management, risk management and oversight responsibilities at enterprise, operating group and key legal entity levels. Internal reporting...

  • Page 83
    ... the credit risk management framework. BMO's credit risk management framework incorporates governing principles which are defined in a series of corporate policies and standards, and which flow through to more specific guidelines and procedures. These are reviewed on a regular basis and modified...

  • Page 84
    ... discussion of our model risk mitigation processes. Retail (Consumer and Small Business) The retail portfolios are made up of a diversified group of individual customer accounts and include residential mortgages, personal loans, credit cards and small business loans. These loans are managed in pools...

  • Page 85
    MANAGEMENT'S DISCUSSION AND ANALYSIS factors associated with borrowers in different industries and portfolios. Risk ratings are assigned using the appropriate internal model. BRRs are assessed and assigned at the time of loan origination and reviewed at least annually. More frequent reviews are ...

  • Page 86
    ... used to estimate risk-based capital. For commercial and corporate loans, key determinants of incurred but not identified losses include the underlying risk rating of the borrower, industry sector, credit product and amount and quality of collateral held. For consumer and small business loans...

  • Page 87
    ...of $1.3 billion ($17 million to GIIPS). (2) Funded lending includes loans (primarily trade finance). (3) Securities include cash products, insurance investments and traded credit. (4) BMO's total net notional CDS exposure (embedded as part of the securities exposure in this table) to Europe was $153...

  • Page 88
    ... Cross-currency interest rate swaps Forward foreign exchange contracts Purchased options Written options Total foreign exchange contracts Commodity Contracts Swaps Purchased options Written options Total commodity contracts Equity Contracts Credit Default Swaps Purchased Written Total credit default...

  • Page 89
    ...and notional values and revenue losses. Value at Risk (VaR) is measured for specific classes of risk in BMO's trading and underwriting activities related to interest rates, foreign exchange rates, credit spreads, equity and commodity prices and their implied volatilities. This measure calculates the...

  • Page 90
    ... at Risk (SVaR) Summary (1)(2) As at or for the year ended October 31 (pre-tax Canadian $ equivalent in millions) 2015 Year-end Average High Low 2014 Year-end Commodity SVaR Equity SVaR Foreign exchange SVaR Interest rate SVaR Credit SVaR Diversification Total Trading SVaR (1) One-day measure using...

  • Page 91
    MANAGEMENT'S DISCUSSION AND ANALYSIS Trading Net Revenue The charts below present daily net revenue plotted against total trading VaR, along with a representation of daily net revenue distribution. During the current year, the largest loss occurred on June 30, and was the result of normal trading ...

  • Page 92
    ... assets funded by common shareholders' equity, is managed to a target profile through interest rate swaps and securities. Product embedded option risk arises when product features allow customers to alter cash flows, such as scheduled maturity or repricing dates, usually in response to changes...

  • Page 93
    ... related to the net investment in our U.S. operations and from transaction risk associated with our U.S.-dollar-denominated net income. Translation risk represents the impact that changes in foreign exchange rates can have on BMO's reported shareholders' equity and capital ratios. When the Canadian...

  • Page 94
    ...transfer pricing, and they also help to shape the design of business plans and contingency plans. The Liquidity and Funding Risk Management Framework is also integrated with enterprise-wide stress testing. In addition to the NLP, we regularly monitor positions against the limits and guidelines noted...

  • Page 95
    ... at BMO Harris Bank in U.S.-dollar-denominated assets. The size of the supplemental liquidity pool is highly integrated with our measurement of liquidity risk, as its size is calibrated to meet the potential funding needs, outside of our trading businesses, in the parent bank and BMO Harris Bank and...

  • Page 96
    ... mortgage-backed securities (reported as loans at amortized cost). BMO's LCR is summarized in the table on the following page. The average month-end LCR for the quarter ended October 31, 2015 of 130% is calculated as the ratio of the stock of High-Quality Liquid Assets (HQLA) to total net stressed...

  • Page 97
    ... and cash inflows and outflows. (4) Adjusted values are calculated based on total weighted values after applicable caps as defined by the LAR Guideline. Funding Strategy Our funding philosophy requires that secured and unsecured wholesale funding used to support loans and less liquid assets must...

  • Page 98
    ... forecast information. Customer Deposits-andCapital-to-Customer-Loans Ratio (%) 98.6 94.6 94.5 94.7 262 239 204 221 Customer Deposits ($ billions) MD&A 2012 2013 2014 2015 2012 2013 2014 2015 Our large customer base and strong capital position reduce our reliance on wholesale funding...

  • Page 99
    ... in January 2015. The Net Stable Funding Ratio (NSFR) was finalized by the Basel Committee on Banking Supervision in 2015 and is expected to come into force on January 1, 2018. As mentioned on page 71 in the Enterprise-Wide Capital Management section, in August 2014, Canada's Department of...

  • Page 100
    ... Data Exchange Association, the American Bankers Association and other international and national associations of banks that share loss data information anonymously to assist in risk identification, assessment and modelling. ‰ BMO's operational risk management training programs ensure employees...

  • Page 101
    ...and the Model Governance group), meets regularly to help direct the bank's use of models, to oversee the development, implementation and maintenance of the Model Risk Management Framework and to discuss requirements governing the enterprise's models. 112 BMO Financial Group 198th Annual Report 2015

  • Page 102
    ... group, with all conclusions reported to senior management. Trading and Underwriting Market Risk - All internal models used to calculate regulatory capital and Economic Capital for trading and underwriting market risk have their Value at Risk (VaR) results back-tested regularly. The bank's internal...

  • Page 103
    ...' Boards of Directors. The Insurance Risk Management Committee for BMO Insurance oversees and reports on risk management activities on a quarterly basis to the insurance companies' Boards of Directors. Senior management within the various lines of business is responsible for managing insurance risk...

  • Page 104
    ...extension to July 21, 2017. BMO completed a significant review of our operations and developed policies and procedures to meet the July 21, 2015 deadline. We now have systems in place to assess, monitor, and report on Volcker Rule compliance across the enterprise. In addition, under Dodd-Frank, most...

  • Page 105
    ... policies, procedures and controls to meet these requirements. Under the direction of the CCO, LCG identifies and reports on gaps and deficiencies, and tracks remedial action plans. The Chief Anti-Money Laundering Officer also regularly reports to the ACRC. All BMO employees are required to annually...

  • Page 106
    ...tools to assist employees in identifying and managing environmental, social and governance risks. We review our environmental and social risk policies and procedures on a periodic basis. BMO is a signatory to the UN Principles for Responsible Investment, a framework designed to encourage sustainable...

  • Page 107
    ... 31 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 Market Price per Common Share ($) High Low Close Common Share Dividends Dividends declared per share ($) Dividend payout ratio (%) Dividend yield (%) Dividends declared ($ millions) Total Shareholder Return (%) Five-year average annual return...

  • Page 108
    ... Statement and Growth Statistics ($ millions, except as noted) For the year ended October 31 2015 2014 2013 2012 2011 5-year CAGR 10-year CAGR Income Statement - Reported Results Net interest income Non-interest revenue Revenue Insurance claims, commissions and changes in policy benefit liabilities...

  • Page 109
    ... margin (%) Canadian dollar net interest margin (%) U.S. dollar and other currencies net interest margin (%) Non-Interest Revenue Securities commissions and fees Deposit and payment service charges Trading revenues Lending fees Card fees Investment management and custodial fees Mutual fund revenues...

  • Page 110
    ...ten years. Together, total premises and equipment expense and the amortization of intangible assets increased at a compound annual growth rate of 7.4% over ten years. (2) This ratio is calculated excluding insurance claims, commissions and changes in policy benefit liabilities (CCPB). (3) Government...

  • Page 111
    ... rate (%) 2013 Interest income/ expense Assets Canadian Dollar Deposits with other banks Securities Securities borrowed or purchased under resale agreements Loans Residential mortgages Non-residential mortgages Personal and credit cards Businesses and governments Total loans Total Canadian dollar...

  • Page 112
    ... Average rate Total 2014/2013 Increase (decrease) due to change in Average balance Average rate Total Assets Canadian Dollar Deposits with other banks Securities Securities borrowed or purchased under resale agreements Loans Residential mortgages Non-residential mortgages Personal and credit cards...

  • Page 113
    ... October 31 2015 2014 Canada 2013 2012 2011 2015 United States 2014 2013 2012 2011 2015 Other countries 2014 2013 2012 2011 2015 2014 Total 2013 2012 2011 Consumer Residential mortgages Credit cards Consumer instalment and other personal loans Total consumer Total businesses and governments 96,975...

  • Page 114
    ...) As at October 31 2015 2014 2013 2012 2011 Net Loans and Acceptances by Province Atlantic provinces Quebec Ontario Prairie provinces British Columbia and territories Total net loans and acceptances in Canada Net Businesses and Governments Loans by Industry Commercial real estate Construction (non...

  • Page 115
    ... 2015 2014 Canada 2013 2012 2011 2015 2014 United States 2013 2012 2011 2015 Other countries 2014 2013 2012 2011 2015 2014 Total 2013 2012 2011 Gross impaired loans and acceptances (GIL), beginning of year Consumer Businesses and governments Total GIL, beginning of year Additions to impaired loans...

  • Page 116
    ...as noted) As at October 31 2015 2014 Canada 2013 2012 2011 2015 2014 United States 2013 2012 2011 2015 Other countries 2014 2013 2012 2011 2015 2014 Total 2013 2012 2011 Consumer Residential mortgages Consumer instalment and other personal loans Total consumer Businesses and governments Off-balance...

  • Page 117
    ...Table 15: Provision for Credit Losses - Segmented Information (2) ($ millions) For the year ended October 31 2015 2014 2013 2012 2011 Consumer Residential mortgages Cards Consumer instalment and other personal loans Total consumer Businesses and Governments Commercial real estate Construction (non...

  • Page 118
    ...-weighted assets 2014 Standardized Advanced Total Approach Approach (2) 2014 Total Credit Risk Wholesale Corporate, including specialized lending Corporate small and medium-sized enterprises Sovereign Bank Retail Residential mortgages, excluding home equity line of credit Home equity line of credit...

  • Page 119
    ... the Shareholders' Auditors and internal audit. The Shareholders' Auditors and the bank's Chief Auditor have full and free access to the Board of Directors, its Audit and Conduct Review Committee and other relevant committees to discuss audit, financial reporting and related matters. The Office of...

  • Page 120
    ...have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Bank's internal control over financial reporting as of October 31, 2015, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of...

  • Page 121
    ...with Canadian generally accepted auditing standards and the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Bank as at October 31, 2015 and 2014, the consolidated statements of income, comprehensive income, changes in equity and cash...

  • Page 122
    ... payment service charges Trading revenues Lending fees Card fees Investment management and custodial fees Mutual fund revenues Underwriting and advisory fees Securities gains, other than trading (Note 3) Foreign exchange, other than trading Insurance revenue Other Total Revenue Provision for Credit...

  • Page 123
    ... of pension and other employee future benefit plans (6) Gains on remeasurement of own credit risk on financial liabilities designated at fair value (Note 1) (7) 200 120 320 3,265 $ 7,670 7,635 35 $ 7,670 Other Comprehensive Income Total Comprehensive Income Attributable to: Bank shareholders Non...

  • Page 124
    Consolidated Balance Sheet As at October 31 (Canadian $ in millions) 2015 2014 Assets Cash and Cash Equivalents (Note 2) Interest Bearing Deposits with Banks (Note 2) Securities (Note 3) Trading Available-for-sale Held-to-maturity Other $ 40,295 7,382 72,460 48,006 9,432 1,020 130,918 68,066 105,...

  • Page 125
    ...Canadian $ in millions) 2015 2014 2013 Preferred Shares (Note 17) Balance at beginning of year Issued during the year Redeemed during the year Balance at End of Year Common Shares (Note 17) Balance at beginning of year Issued under the Shareholder Dividend Reinvestment and Share Purchase Plan (Note...

  • Page 126
    ... sales of securities, other than trading Premises and equipment - net (purchases) Purchased and developed software - net (purchases) Acquisitions (Note 10) Net Cash Provided by (Used in) Investing Activities Effect of Exchange Rate Changes on Cash and Cash Equivalents Net increase in Cash and Cash...

  • Page 127
    ... management and investment banking products and services. The bank's head office is at 129 rue Saint Jacques, Montreal, Quebec. Its executive offices are at 100 King Street West, 1 First Canadian Place, Toronto, Ontario. Our common shares are listed on the Toronto Stock Exchange and the New York...

  • Page 128
    ... employee future benefits expense, plan assets and defined benefit obligations are also sensitive to changes in discount rates. We determine discount rates at each year end for all of our plans using high-quality Aa rated corporate bonds with terms matching the plans' specific cash flows. Additional...

  • Page 129
    ... from a change in the assumption for future investment yields. Additional information regarding insurance-related liabilities is included in Note 14. Provisions The bank and its subsidiaries are involved in various legal actions in the ordinary course of business. Provisions are recorded at the best...

  • Page 130
    ... rate and/or credit risk associated with the securitized loans, they do not qualify for derecognition. We continue to recognize the loans and the related cash proceeds as secured financing in our Consolidated Balance Sheet. We also use securitization vehicles to securitize our Canadian credit card...

  • Page 131
    ... in anticipation of changes in interest rates and resulting prepayment risk, changes in credit risk, changes in foreign currency risk, changes in funding sources or terms, or to meet liquidity needs. Available-for-sale securities are initially recorded at fair value plus transaction costs. They are...

  • Page 132
    ... banking business. We account for all of our securities transactions using settlement date accounting in our Consolidated Balance Sheet. Changes in fair value between the trade date and settlement date are recorded in net income, except for those related to available-for-sale securities, which...

  • Page 133
    ... 143,319 Notes (1) These amounts are supported by insured mortgages or issued by U.S. agencies and government-sponsored enterprises. Yields in the table above are calculated using the cost of the security and the contractual interest or stated dividend rates associated with each security, adjusted...

  • Page 134
    ... insurance operations for the year ended October 31, 2015 ($379 million in 2014 and $(190) million in 2013). Certain comparative figures have been reclassified to conform with the current year's presentation and for changes in accounting policies. Notes BMO Financial Group 198th Annual Report 2015...

  • Page 135
    ..., net of expected costs and any amounts legally required to be paid to the borrower. Security can vary by type of loan and may include cash, securities, real properties, accounts receivable, guarantees, inventory or other capital assets. 148 BMO Financial Group 198th Annual Report 2015 Notes

  • Page 136
    ... as follows: (Canadian $ in millions) Residential mortgages (1) 2015 2014 2013 Credit card, consumer instalment and other personal loans 2015 2014 2013 Business and government loans 2015 2014 2013 Customers' liability under acceptances 2015 2014 2013 2015 Total 2014 2013 Gross loan balances at end...

  • Page 137
    ... are as follows: (Canadian $ in millions) Residential mortgages 2015 2014 Credit card, consumer instalment and other personal loans 2015 2014 Business and government loans (2) 2015 2014 Total 2015 2014 By geographic region (1): Canada United States Other countries Total (1) Geographic region is...

  • Page 138
    ... font in Management's Discussion and Analysis on pages 94 to 96 of this report. Additional information on loans and derivative-related credit risk is disclosed in Notes 4 and 8, respectively. Concentrations of Credit and Counterparty Risk Concentrations of credit risk exist if a number of clients...

  • Page 139
    ... Sub-investment grade Problem Default / Impaired Total 84,059 67,586 3,530 1,208 156,383 71,282 56,181 2,881 1,300 131,644 Consumer Gross Loans by Risk Rating (Canadian $ in millions) Residential mortgages 2015 2014 Credit card and other personal loans 2015 2014 2015 Total 2014 Notes...

  • Page 140
    ..., foreign exchange rates, equity and commodity prices and their implied volatilities, and credit spreads, as well as the risk of credit migration and default. We incur market risk in our trading and underwriting activities and in the management of structural market risk in our banking and insurance...

  • Page 141
    ... with access to financing in the asset-backed commercial paper ("ABCP") markets by allowing them to sell their assets into the vehicle, which then issues ABCP to investors to fund the purchases. We do not sell assets to the customer securitization vehicle. We earn fees for providing services related...

  • Page 142
    ...vehicles Canadian customer securitization vehicles (1) 2015 Structured finance vehicles Capital and funding vehicles Canadian customer securitization vehicles (1) 2014 Structured finance vehicles Interests recorded on the balance sheet Cash and cash equivalents Trading securities Available-for-sale...

  • Page 143
    ... term of the hedge. Foreign currency translation on investments in foreign operations is managed through deposits. The foreign currency translation on the deposits designated in net investment hedges is recorded in other comprehensive income. 156 BMO Financial Group 198th Annual Report 2015 Notes

  • Page 144
    ... part of our risk management strategy that do not qualify as hedges for accounting purposes ("economic hedges"). We structure and market derivative products to enable customers to transfer, modify or reduce current or expected risks. Principal trading activities include market-making and positioning...

  • Page 145
    ... are recorded in securities - available-for-sale, subordinated debt, deposits and other liabilities. Net Investment Hedges Net investment hedges mitigate our exposure to foreign currency exchange rate fluctuations related to our net investment in foreign operations. Deposit liabilities denominated...

  • Page 146
    ... fair values of the related on-balance sheet financial instruments or future cash flows. Assets are shown net of liabilities to customers where we have a legally enforceable right to offset amounts and we intend to settle contracts on a net basis. Notes BMO Financial Group 198th Annual Report 2015...

  • Page 147
    ..., foreign exchange rates, equity and commodity prices and their implied volatilities, as well as credit spreads, credit migration and default. We strive to limit market risk by employing comprehensive governance and management processes for all market risk-taking activities. 160 BMO Financial Group...

  • Page 148
    ... (Canadian $ in millions) Replacement cost Credit risk equivalent 2015 Riskweighted assets Replacement cost Credit risk equivalent 2014 Riskweighted assets Interest Rate Contracts Swaps Forward rate agreements Purchased options Total interest rate contracts Foreign Exchange Contracts Cross-currency...

  • Page 149
    ...: As at October 31, 2015 (Canadian $ in millions) Interest rate contracts Foreign exchange contracts Commodity contracts Equity contracts Credit default swaps Total Financial institutions Governments Natural resources Energy Other Total As at October 31, 2014 (Canadian $ in millions) 13,882...

  • Page 150
    ... - F&C Asset Management plc ("F&C") On May 7, 2014, we completed the acquisition of all the issued and outstanding share capital of F&C Asset Management plc, an investment manager based in the United Kingdom, for cash consideration of £712 million. BMO Financial Group 198th Annual Report 2015 163

  • Page 151
    ...CGU. The cost of capital for each CGU was estimated using the Capital Asset Pricing Model, based on the historical betas of publicly traded peer companies that are comparable to the CGU. There were no write-downs of goodwill due to impairment during the years ended October 31, 2015 and 2014. The key...

  • Page 152
    ... 2015 and 2014 is as follows: Personal and Commercial Banking Canadian P&C U.S. P&C Total Traditional Wealth Management Insurance Wealth Management Total BMO Capital Markets (Canadian $ in millions) Total Balance - October 31, 2013 Acquisitions during the year Other (1) Balance - October 31, 2014...

  • Page 153
    ... on demand (Canadian $ in millions) Interest bearing 2015 2014 Non-interest bearing 2015 2014 Payable after notice 2015 2014 Payable on a fixed date 2015 2014 Total 2015 2014 Deposits by: Banks Businesses and governments Individuals Total (1) (2) Booked in: Canada United States Other countries...

  • Page 154
    ... balances (Canadian $ in millions) 2015 2014 Average rate paid (%) 2015 2014 Deposits Booked in Canada Demand deposits - interest bearing Demand deposits - non-interest bearing Payable after notice Payable on a fixed date Total deposits booked in Canada Deposits Booked in the United States and...

  • Page 155
    ...Canadian $ in millions) 2015 2014 Insurance-related liabilities, beginning of year Increase (decrease) in life insurance policy benefit liabilities from: New business In-force policies Changes in actuarial assumptions and methodology Foreign currency Net increase (decrease) in life insurance policy...

  • Page 156
    ...-Cumulative Preferred Shares of the bank, Series 12, without the consent of the holders on the occurrence of specific events, such as a wind-up of the bank, a regulatory requirement to increase capital or violations of regulatory capital requirements. BMO Financial Group 198th Annual Report 2015 169

  • Page 157
    ...: Equity Share Capital (Canadian $ in millions, except as noted) Number of shares 2015 Dividends declared per share Number of shares 2014 Dividends declared per share Number of shares 2013 Dividends declared per share Amount Amount Amount Preferred Shares - Classified as Equity Class B - Series...

  • Page 158
    ... an unlimited number of our common shares without par value, for unlimited consideration. Our common shares are not redeemable or convertible. Dividends are declared by our Board of Directors on a quarterly basis and the amount can vary from quarter to quarter. Normal Course Issuer Bid On February...

  • Page 159
    ... of stock options, as further described in Note 22. Treasury Shares When we purchase our common shares as part of our trading business, we record the cost of those shares as a reduction in shareholders' equity. If those shares are resold at a price higher than their cost, the premium is recorded as...

  • Page 160
    ...the performance of interest rates, foreign currencies, commodities or equity securities have been designated at fair value through profit or loss. The fair value of these structured notes is estimated using internally vetted valuation models and incorporates observable market prices for identical or...

  • Page 161
    ... prices Valued using models (with observable inputs) 2015 Valued using models (without observable inputs) Securities Held to maturity Other (1) Securities purchased under resale agreements (2) Loans Residential mortgages Consumer instalment and other personal Credit cards Businesses and governments...

  • Page 162
    ...-sale securities is determined using discounted cash flow models with observable spreads or third-party vendor quotes. Level 2 structured note liabilities are valued using models with observable market information. Level 2 derivative assets and liabilities are valued using industry-standard models...

  • Page 163
    ... collateralized mortgage obligations Corporate debt Corporate equity Other Securities Fair Value Liabilities Securities sold but not yet purchased Structured note liabilities and other note liabilities Annuity liabilities Derivative Assets Interest rate contracts Foreign exchange contracts Commodity...

  • Page 164
    ...from the investment or fund manager. The valuation of certain private equity securities is based on the economic benefit derived from our investment. EV/EBITDA Multiple The fair value of private equity and merchant banking investments is derived by calculating an enterprise value ("EV") using the EV...

  • Page 165
    ... (Canadian $ in millions) Balance October 31, 2014 Included in earnings Purchases Sales Maturities/ Settlement (1) Transfers into Level 3 Transfers out of Level 3 Fair value as at October 31, 2015 Trading Securities Issued or guaranteed by: U.S. states, municipalities and agencies Corporate...

  • Page 166
    ... (Canadian $ in millions) Balance October 31, 2013 Included in earnings Purchases Sales Maturities / Settlement (1) Transfers into Level 3 Transfers Fair value as out of at October 31, 2014 Level 3 Trading Securities Issued or guaranteed by: U.S. states, municipalities and agencies Corporate...

  • Page 167
    ... based on customer behaviour and the application of our asset and liability management strategies. The assumptions for the years ended October 31, 2015 and 2014 were as follows: Notes Assets Fixed rate, fixed term assets, such as residential mortgage loans and consumer loans, are reported based...

  • Page 168
    ... a cost-effective structure that: considers our target regulatory capital ratios and internal assessment of required economic capital; is consistent with our targeted credit ratings; underpins our operating groups' business strategies; and builds depositor confidence and long-term shareholder value...

  • Page 169
    ... recorded in contributed surplus, in share capital. The estimated grant date fair value of stock options granted to employees who are eligible to retire is expensed at the date of grant. The following table summarizes information about our Stock Option Plan: (Canadian $, except as noted) Number...

  • Page 170
    ... information about our Stock Option Plan: (Canadian $ in millions, except as noted) 2015 2014 2013 Unrecognized compensation cost for non-vested stock option awards Weighted-average period over which this cost will be recognized (in years) Total intrinsic value of stock options exercised Cash...

  • Page 171
    ... benefit assets or liabilities. In addition, we provide defined contribution pension plans to employees in some of our subsidiaries. The costs of these plans, recorded in employee compensation expense, are equal to our contributions to the plans. Notes 184 BMO Financial Group 198th Annual Report...

  • Page 172
    ... and retired employees. Short-term employee benefits, such as salaries, paid absences, bonuses and other benefits, are accounted for on an accrual basis over the period in which the employees provide the related services. Investment Policy The assets of the defined benefit pension plans are managed...

  • Page 173
    ... for fiscal 2016 are estimated to be $402 million. A summary of plan information for the past three years is as follows: (Canadian $ in millions) 2015 Pension benefit plans 2014 2013 Other employee future benefit plans 2015 2014 2013 Defined benefit obligation Fair value of plan assets Surplus...

  • Page 174
    ... Total defined benefit obligation Weighted-average assumptions used to determine the defined benefit obligation Discount rate at end of year Rate of compensation increase Assumed overall health care cost trend rate Fair value of plan assets Fair value of plan assets at beginning of year Opening...

  • Page 175
    ... No plan assets are directly invested in the bank's or related parties' securities as at October 31, 2015 and 2014. As at October 31, 2015, our primary Canadian plan indirectly held, through a BMO managed pooled fund, approximately $9 million ($11 million in 2014) of our common shares. The plans do...

  • Page 176
    ...the year in connection with our employee future benefit plans are as follows: (Canadian $ in millions) 2015 Pension benefit plans 2014 2013 Other employee future benefit plans 2015 2014 2013 Contributions to defined benefit plans Contributions to defined contribution plans Benefits paid directly to...

  • Page 177
    ...that we have recorded in our Consolidated Statement of Income: (Canadian $ in millions, except as noted) 2015 2014 2013 Combined Canadian federal and provincial income taxes at the statutory tax rate Increase (decrease) resulting from: Tax-exempt income from securities Foreign operations subject to...

  • Page 178
    ... and diluted earnings per share: Basic Earnings per Share (Canadian $ in millions, except as noted) 2015 2014 2013 Net income attributable to bank shareholders Dividends on preferred shares Net income available to common shareholders Average number of common shares outstanding (in thousands) Basic...

  • Page 179
    ... we manage our credit risk for other credit instruments using the same credit risk process that is applied to loans and other credit assets. The maximum amount payable related to our various commitments is as follows: (Canadian $ in millions) 2015 2014 Financial Guarantees Standby letters of credit...

  • Page 180
    ... to which they relate: (Canadian $ in millions) 2015 2014 Bank Assets Cash and securities (1) Issued or guaranteed by the government of Canada Issued or guaranteed by a Canadian province, municipality or school corporation Other Mortgages, securities borrowed or purchased under resale agreements...

  • Page 181
    ... banking, financing, investing, credit card and creditor insurance needs. Commercial banking provides our small business and commercial banking customers with a broad suite of integrated commercial and capital markets products, as well as financial advisory services. U.S. Personal and Commercial...

  • Page 182
    ... follows: (Canadian $ in millions) Canadian P&C U.S. P&C Wealth Management BMO CM Corporate Services (1) Total Canada United States Other countries 2015 (2) Net interest income Non-interest revenue Total Revenue Provision for credit losses Insurance claims, commissions and changes in policy benefit...

  • Page 183
    ...Burns Securities Ltd. BMO Private Equity (Canada) Inc. and subsidiaries BMO Nesbitt Burns Financial Services Inc. BMO Holding Finance, LLC BMO Investments Inc. BMO Global Tax Advantage Fund Inc. BMO InvestorLine Inc. BMO Service Inc. Bank of Montreal Ireland plc Bank of Montreal Mortgage Corporation...

  • Page 184
    ... interest rates on credit card balances, a fee-based subsidy on annual credit card fees, and a select suite of customer loan and mortgage products at rates normally accorded to preferred customers. At October 31, 2015, loans to key management personnel totalled $15 million ($5 million in 2014...

  • Page 185
    ... years No maturity 2015 Total On-Balance Sheet Financial Instruments Assets Cash and cash equivalents Interest bearing deposits with banks Securities Trading securities Available-for-sale securities Held-to-maturity securities Other securities Total securities Securities borrowed or purchased under...

  • Page 186
    ... 9 to 12 months 1 to 2 years 2 to 5 years Over 5 years No maturity 2015 Total Liabilities and Equity Deposits (1) Banks Businesses and governments Individuals Total deposits Other liabilities Derivative instruments Acceptances Securities sold but not yet purchased Securities lent or sold under...

  • Page 187
    ... years No maturity 2014 Total On-Balance Sheet Financial Instruments Assets Cash and cash equivalents Interest bearing deposits with banks Securities Trading securities Available-for-sale securities Held-to-maturity securities Other securities Total securities Securities borrowed or purchased under...

  • Page 188
    ... 9 to 12 months 1 to 2 years 2 to 5 years Over 5 years No maturity 2014 Total Liabilities and Equity Deposits (1) Banks Businesses and governments Individuals Total deposits Other liabilities Derivative instruments Acceptances Securities sold but not yet purchased Securities lent or sold under...

  • Page 189
    ... or foreign exchange rates, equity or commodity prices or other indices. Derivatives allow for the transfer, modification or reduction of current or expected risks from changes in rates and prices. Dividend Payout Ratio represents common share dividends as a percentage of net income available...

  • Page 190
    ...credit, securities lending, documentary and commercial letters of credit, and other indemnifications. Office of the Superintendent of Financial Institutions Canada (OSFI) is the government agency responsible for regulating banks, insurance companies, trust companies, loan companies and pension plans...

  • Page 191
    ... U.S. domestic companies under New York Stock Exchange Listing Standards is posted on our website. www.bmo.com/corporategovernance Online filing information: BMO filings in Canada Canadian Securities Administrators www.sedar.com www.sedar.com For assistance with your investment portfolio or other...

  • Page 192
    ...by way of private placement and are not listed on an exchange. Employee Ownership* 81.2% of Canadian employees participate in the BMO Employee Share Ownership Plan - a clear indication of their commitment to the company. *As of October 31, 2015. Direct Deposit You can choose to have your dividends...

  • Page 193
    ... of Canada as the winner of the 2015 Award of Excellence in Corporate Reporting for the Financial Services industry. Judges specifically acknowledged our thorough sustainability reporting, our best-in-class electronic disclosure and the Management's Discussion and Analysis section of our 2014 annual...