Bank of Montreal 2015 Annual Report Download - page 49

MD&A
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
Net interest income (teb) 1,334 1,177 1,197
Non-interest revenue 2,539 2,543 2,186
Total revenue (teb) 3,873 3,720 3,383
Provision for (recovery of) credit losses 26 (18) (36)
Non-interest expense 2,486 2,351 2,082
Income before income taxes 1,361 1,387 1,337
Provision for income taxes (teb) 329 310 297
Reported net income 1,032 1,077 1,040
Amortization of acquisition-related intangible assets (1) 212
Adjusted net income 1,034 1,078 1,042
Key Performance Metrics and Drivers
Trading Products revenue 2,412 2,257 2,126
Investment and Corporate Banking revenue 1,461 1,463 1,257
Net income growth (%) (4.2) 3.6 5.4
Revenue growth (%) 4.1 9.9 4.2
Non-interest expense growth (%) 5.7 12.9 5.0
Return on equity (%) 14.9 19.1 17.9
Operating leverage (teb) (%) (1.6) (3.0) (0.8)
Efficiency ratio (teb) (%) 64.2 63.2 61.5
Net interest margin on average earning assets (teb) (%) 0.56 0.53 0.59
Average common equity 6,538 5,422 5,582
Average earning assets 238,916 222,471 202,062
Average assets 290,325 259,746 246,702
Average current loans and acceptances 37,416 30,101 24,807
Average deposits 141,275 133,405 121,193
Full-time equivalent employees 2,223 2,270 2,163
U.S. Business Select Financial Data (US$ in millions)
Total revenue (teb) 1,099 1,154 1,040
Non-interest expense 890 887 823
Reported net income 142 216 203
Average earning assets 76,630 79,958 76,984
Average assets 84,872 88,902 92,690
Average current loans and acceptances 10,969 9,536 8,502
Average deposits 55,942 57,754 60,116
(1) Before tax amounts of $2 million in 2015, $3 million in 2014 and $2 million in 2013 are included in non-interest expense.
Reported Net Income
2013 2014 2015
1,040 1,077 1,032
($ millions)
2013 2014 2015
3,383
3,720 3,873
Revenue
($ millions)
201520142013
69%
31%
66%
34%
64%
36%
Revenue by Geography
Canada and
other countries
United States
(%)
Financial Review
BMO Capital Markets net income decreased $45 million or 4% to $1,032 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. Return on equity of 14.9% declined by 4.2% from the prior year,
largely due to higher allocated capital.
Revenue increased $153 million or 4% to $3,873 million. Excluding the impact of the stronger U.S. dollar, revenue was stable year over year as
higher trading revenues, including the prior year unfavourable impact of implementing a funding valuation adjustment, and higher lending revenues
were offset by lower investment banking fees and reduced securities gains.
Trading Products revenue increased $155 million or 7%. Excluding the impact of the stronger U.S. dollar, revenue increased $69 million or 3%,
reflecting higher trading revenues related to stronger client trading activity.
Investment and Corporate Banking revenue was consistent with the prior year. Excluding the impact of the stronger U.S. dollar, revenue
decreased $65 million or 4%, as growth in lending revenue was more than offset by lower investment banking client activity and reduced
securities gains.
Provision for credit losses was $44 million higher due to higher provisions compared with net recoveries in the prior year.
Non-interest expense increased $135 million or 6% to $2,486 million. Excluding the impact of the stronger U.S. dollar, non-interest expense
decreased $7 million primarily due to lower employee-related expenses, partially offset by higher support costs related to a changing business and
regulatory environment.
Average assets of $290.3 billion increased $30.6 billion from the prior year. Excluding the impact of the stronger U.S. dollar, average assets
increased $16.9 billion. Higher levels of net loans and acceptances due to increases in corporate banking activity and higher repo and derivative
financial assets were partially offset by decreases in securities and cash balances.
BMO Capital Markets participated in 1,355 new global issues in 2015, comprised of 571 corporate debt deals, 558 government debt deals and
226 equity transactions, raising $3,650 billion.
60 BMO Financial Group 198th Annual Report 2015