Bank of Montreal 2015 Annual Report Download - page 51

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Corporate Services, including Technology and Operations
Corporate Services consists of Corporate Units and Technology and Operations (T&O). Corporate Units provide enterprise-wide expertise and
governance support in a variety of areas, including strategic planning, risk management, finance, legal and regulatory compliance, marketing,
communications and human resources. T&O manages, maintains and provides governance over information technology, operations services, real
estate and sourcing for BMO Financial Group.
The costs of these Corporate Units and T&O services are largely transferred to the three client operating groups (P&C, Wealth Management and
BMO Capital Markets), and only relatively minor amounts are retained in Corporate Services results. As such, Corporate Services adjusted operating
results largely reflect the impact of certain asset-liability management activities, the elimination of taxable equivalent adjustments, the results from
certain impaired real estate secured assets and purchased loan accounting impacts. Corporate Services reported results in 2013 and prior years
reflected a number of items and activities that were excluded from BMO’s adjusted results to help assess BMO’s performance. These adjusting items
were not reflective of core operating results. They are itemized in the Non-GAAP Measures section on page 33.
Corporate Services focuses on enterprise-wide priorities that improve service quality and efficiency to deliver an excellent customer experience.
Notable achievements during the year included:
‰Simplifying and automating our processes for greater efficiency: digitized cheque image capture and digital statements; improved commercial and
retail lending systems for quicker customer response and more efficient workflow.
‰Leveraging data to better serve our customers: building enterprise-level data solutions which both meet regulatory expectations and help us
intuitively anticipate customer needs.
‰Extending the digital experience across all channels: improvements to our mobile and online platforms for security and convenience; improvements
to our ABM network in the United States to allow customers to withdraw cash using their mobile device.
‰Realizing real estate synergies and improving our technology capabilities in channels, products, functions and infrastructure.
‰Meeting regulatory expectations: continued delivery of programs that meet evolving expectations of our regulators, for example, in credit risk
management and risk reporting, stress testing and anti-money laundering.
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 and a $106 million charge, primarily due to restructuring to drive operational efficiencies.
The adjusted net loss for the year was $296 million, compared with an adjusted net loss of $194 million a year ago. Excluding the impact of the
group teb adjustment on revenue and taxes, results were lower mainly due to lower purchased loan portfolio revenues and lower credit recoveries.
Adjusted non-interest expense was down modestly.
Corporate Services, including Technology and Operations
(Canadian $ in millions, except as noted)
As at or for the year ended October 31 2015 2014 2013
Net interest income before group teb offset (253) (62) 409
Group teb offset (524) (476) (344)
Net interest income (teb) (777) (538) 65
Non-interest revenue 281 147 146
Total revenue (teb) (496) (391) 211
Recovery of credit losses (36) (123) (175)
Non-interest expense (1) 613 471 802
Loss before income taxes (1,073) (739) (416)
Recovery of income taxes (teb) (665) (545) (342)
Reported net loss (408) (194) (74)
Adjusted total revenue (teb) (494) (391) (480)
Adjusted recovery of credit losses (36) (123) (405)
Adjusted non-interest expense 459 471 456
Adjusted net loss (296) (194) (135)
Full-time equivalent employees 14,277 14,229 13,586
U.S. Business Select Financial Data (US$ in millions)
Total revenue (teb) (87) (31) 459
Recovery of credit losses (79) (120) (256)
Non-interest expense 272 298 564
Provision for (recovery of) income taxes (teb) (133) (103) 38
Reported net income (loss) (147) (106) 113
Adjusted total revenue (teb) (87) (31) (169)
Adjusted recovery of credit losses (30) (117) (398)
Adjusted non-interest expense 228 298 307
Adjusted net loss (148) (105) (28)
(1) Includes restructuring costs in 2015 and 2013 to align our cost structure with the environment.
62 BMO Financial Group 198th Annual Report 2015