Bank of Montreal 2015 Annual Report Download - page 25

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
2015 Financial Performance Review
This section provides a review of our enterprise financial performance for 2015 that focuses on the Consolidated Statement of Income included in our
consolidated financial statements, which begin on page 135. A review of our operating groups’ strategies and performance follows the enterprise
review. A summary of the enterprise financial performance for 2014 appears on page 64. This section contains adjusted results, which are non-GAAP
and are disclosed in more detail in the Non-GAAP Measures section on page 33.
Highlights
‰On a net revenue basis(1), revenue increased $1,417 million or 8% in
2015 to $18,135 million. Adjusted revenue increased $1,419 million
or 8% to $18,137 million. Revenue growth was due to the benefits
of our diversified business mix and successful execution against our
strategic priorities. The impact of the stronger U.S. dollar increased
adjusted net revenue growth by $732 million or 4%. The remaining
increase was mainly due to revenue growth in Canadian P&C and
Wealth Management.
‰Revenue growth in Canadian P&C reflected higher 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 revenue growth was driven by
traditional wealth growth of 20%, including the full year contribution
from the acquired F&C business. Insurance net revenue declined due
to higher actuarial benefits in the prior year. BMO Capital Markets
revenue increased, driven by the stronger U.S. dollar. Corporate
Services adjusted revenue declined mainly due to lower revenue
related to the purchased loan portfolio.
‰Provisions for credit losses totalled $612 million in the current year,
up from $561 million in 2014, primarily due to lower recoveries in
Corporate Services and higher provisions in BMO Capital Markets,
partially offset by reduced provisions in the P&C businesses.
‰Adjusted non-interest expense increased $1,058 million or 10%
to $11,819 million, of which approximately 6% was due to the
stronger U.S. dollar, 2% was due to the inclusion of F&C results for
two additional quarters relative to a year ago, and 2% was due to
business growth.
‰The effective income tax rate in 2015 was 17.5%, compared with
17.2% in 2014. The adjusted effective income tax rate(2) was
18.0%, compared with 17.5% in 2014. The higher adjusted
effective tax rate was attributable to a lower proportion of income
from lower tax rate jurisdictions.
(1) See page 38 for a description of net revenue.
(2) The adjusted rate is computed using adjusted net income rather than net income in the
determination of income subject to tax.
36 BMO Financial Group 198th Annual Report 2015