Bank of Montreal 2015 Annual Report Download - page 23

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Summary Financial Results and Earnings per Share Growth
The year-over-year percentage change in earnings per share (EPS) and in adjusted EPS are our key measures for
analyzing earnings growth. All references to EPS are to diluted EPS, unless indicated otherwise.
EPS was $6.57, up $0.16 or 2% from $6.41 in 2014. Adjusted EPS was $7.00, up $0.41 or 6% from $6.59 in
2014. Our five-year average annual adjusted EPS growth rate was 7.9%, in line with our current medium-term
objective of achieving average annual adjusted EPS growth of 7% to 10%. EPS growth in both 2015 and 2014
primarily reflected increased earnings. Adjusted net income available to common shareholders was 67% higher
over the five-year period, while the average number of diluted common shares outstanding increased 15% over
the same period.
Net income was $4,405 million in 2015, up $72 million or 2% from the previous year. Adjusted net income
was $4,681 million, up $228 million or 5%.
On an adjusted basis, there was solid revenue growth in 2015. Higher revenue exceeded incremental costs,
contributing to growth in net income. There were modestly higher provisions for credit losses and a slightly
higher effective income tax rate in 2015.
There was good adjusted net income growth in Canadian P&C, Wealth Management and U.S. P&C, a decline
in BMO Capital Markets and lower results in Corporate Services. In addition to operating performance, adjusted
net income benefitted from the stronger U.S. dollar. This benefit was more than offset by lower purchased loan
accounting benefits.
Canadian P&C adjusted net income increased $88 million or 4% to $2,108 million, due to continued revenue
growth as a result of higher balances and improved non-interest revenue, with stable net interest margin,
partially offset by higher expenses. Expenses rose primarily due to continued investment in the business, net of
expense management, and higher costs associated with a changing business and regulatory environment.
Canadian P&C results are discussed in the operating group review on page 48.
U.S. P&C adjusted net income increased $174 million or 25% to $880 million, and increased $57 million or
9% to $701 million on a U.S. dollar basis, primarily due to lower provisions for credit losses. Revenue was stable
as higher balances and increased mortgage banking revenue offset the effects of lower net interest margin. Non-
interest expenses also remained stable. U.S. P&C results are discussed in the operating group review on page 51.
Wealth Management adjusted net income was $955 million, up $112 million or 13% from a year ago.
Adjusted net income in traditional wealth was $715 million, up $158 million or 28% from a year ago, due to good
organic growth from the businesses, a gain on the sale of BMO’s U.S. retirement services business, and the full
year benefit from the acquired F&C business. Adjusted net income in insurance was $240 million, compared to
$286 million a year ago, primarily due to higher taxes in the current year and higher actuarial benefits in the prior
year. Wealth Management results are discussed in the operating group review on page 55.
BMO Capital Markets adjusted net income decreased $44 million or 4% to $1,034 million as the benefit of
the stronger U.S. dollar was more than offset by higher provisions in the current year compared to net recoveries
in the prior year. BMO Capital Markets results are discussed in the operating group review on page 58.
Corporate Services adjusted net loss for the year was $296 million, compared with an adjusted net loss of
$194 million a year ago. Adjusted results decreased mainly due to lower purchased loan portfolio revenues and
lower credit recoveries. Corporate Services results are discussed in the operating group review on page 62.
Changes to reported and adjusted net income for each of our operating groups are discussed in more detail
in the 2015 Operating Groups Performance Review, which starts on page 45.
EPS ($)
2013 20152014
Adjusted EPSEPS
6.17 6.21
6.41
6.59 6.57
7.00
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. Diluted EPS, which is our basis for measuring performance, adjusts for possible conversions of
financial instruments into common shares if those conversions would reduce EPS, and is more fully explained in Note 25 on page 191 of the
financial statements. Adjusted EPS is calculated in the same manner using adjusted net income.
Adjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measures section on page 33.
34 BMO Financial Group 198th Annual Report 2015