RNS No 8811m
BANK OF MONTREAL
26 May 1999
BANK OF MONTREAL REPORTS SECOND QUARTER RESULTS
TORONTO, May 26, 1999 - Bank of Montreal reported net income of $364
million for the quarter ended April 30, 1999, compared with $377 million
a year ago and $362 million in the first quarter of 1999.
Fully diluted earnings per share were $1.25 ($1.26 basic), compared with
$1.32 ($1.34 basic) last year and $1.24 ($1.25 basic) in the first
quarter of 1999. Return on equity was 15.5 per cent, compared with 18.0
per cent for the second quarter of 1998 and 15.1 per cent for the first
quarter of 1999.
Net income for the first six months of the year was $726 million,
compared with $738 million in 1998, while fully diluted earings per share
were $2.49 ($2.51 basic), compared with $2.59 ($2.63 basic) one year ago. Return
on equity for the first six months in 1999 was 15.3 per cent, compared with 17.7
per cent for the first six months of 1998.
Net income for the second quarter relative to a year ago reflected
revenue growth of $51 million, or 2.7 per cent, offset by expense growth
of $76 million, or 6.2 per cent and an increase of $35 million in the
provision for loan losses. Revenue growth resulted from business volume
growth, partially offset by a decline in spreads in our retail and
commercial businesses, and a higher contribution from our investment in
Grupo Financiero Bancomer. Net income for the current quarter was
relatively unchanged from the first quarter of 1999 as revenue growth of
$27 million was offset by expense growth of $39 million.
"During the first half of fiscal 1999. Bank of Montreal completed a
significant organizational restructuring that consolidated all of our
North American lines of business into three client-focussed groups. We
also recently put in place a new senior executive team to lead these
groups," said F. A. Comper, President and Chief Executive Officer.
"During the second half of the year, we will continue to focus efforts
on managing expenses while we implement key next steps in our strategy.
As we move forward with Value Based Management, we will continue with
the disciplined approach to decision making that will see us concentrate
on key lines of business, and that led to the recently announced sale of
our Global Custody business," he said.
REVENUES
Revenues for the second quarter increased $51 million relative to a year ago, or
2.7 per cent, driven mainly by growth from those operating groups serving
primarily our retail and commercial clients(1) (Personal and Commercial
Financial Services, Electronic Financial Services and Harris Regional Banking)
as well as from Bancomer. Revenue contribution from our operating groups
serving primarily our institutional and private clients(1) (Investment and
Corporate Banking, and Portfolio and Risk Management Group) remained relatively
unchanged.
Revenue growth relative to a year ago from the retail and commerical businesses
was driven by business growth, partially offset by a decline in spreads to a
flatter yield curve in Canada.
In Canada, the bank's residential mortgages increased $3.0 billion from a year
ago. Credit card and other personal loans were up $1.1 billion and loans to
commercial enterprises, including small and medium-sized businesses, were up
$0.8 billion. U.S. retail banking results were driven by average loan growth of
$2.2 billion at Harris Bank.
Bancomer's contribution to revenues was $42 million, an increase of 87 per cent
from $22 million a year ago. The increase was primarily due to higher spreads,
continued growth in fee income, lower operating expenses and improved asset
quality.
Revenues from businesses serving primarily our institutional and private clients
remained relatively unchanged as volume growth and wider spreads in the
corporate lending portfolios were offset by the effects of lower capital markets
activities relative to a year ago. The aggregate contribution of earnings from
lesser developed countries, cash collections on non-performing loans, and
securities gains and losses in the current quarter was $46 million compared to
$50 million a year ago.
Revenues for the second quarter increased $27 million, or 1.3 per cent, from the
first quarter of 1999. Businesses serving primarily our institutional and
private clients experienced revenue growth as a result of increased capital
markets activity. In addition, the aggregate revenue from lesser developed
countries, cash collections on non performing loans, and securities gains and
losses increased by $21 million over the first quarter of 1999. Increased
revenues in theses businesses were partially offset by the impact of fewer days
in the second quarter relative to the first quarter.
EXPENSES
Expense growth relative to last year of $76 million, or 6.2 per cent, was driven
primarily by on-going business operations (3.0 per cent). Also contributing to
expense growth was continued spending on strategic initiatives (2.0 per cent).
the foreign exchange rate impact on U.S based expenses (1.0 per cent) and higher
revenue driven compensation (0.2 per cent).
Expenses in the current quarter increased $39 million, or 3.0 per cent, from
the first quarter of 1999 driven by on-going business operations (1.0 per
cent), higher revenue driven compensation (2.0 per cent) and spending on
strategic initiatives (0.5 per cent), offset in part by a lower foreign exchange
rate impact on U.S based expenses (0.5 per cent).
HARRIS BANK
Harris Bank earnings were $79 million for the quarter, an increase of 12.1 per
cent from $70 million a year ago and an increase of 3.9 per cent from $76
million in the first quarter. Excluding the effects of the gain on sale of the
Harris credit card portfolio and the one-time charge for certain process
improvements and system conversions both recorded in the second quarter of 1998,
net income growth was 19.3 per cent relative to a year ago.
ASSET QUALITY
The provision for credit losses for the quarter was $80 million versus $45
million in 1998. This is based on a forecast provision for the year of $320
million, compared to $130 million in 1998 which benefited from a high
level of recoveries.
Gross impaired loans at the end of the quarter reflected an increase of $145
million over the prior quarter, resulting primarily from weak commodity prices.
particularly in the oil and agribusiness; sectors. However, the allowance for
credit losses continues to exceed gross impaired loans. At the end of the second
quarter, the allowance exceeded gross impaired loans by $212 million, compared
to $467 million at the end of the second quarter of 1998 and $319 million at the
end of the first quarter of 1999.
CAPITAL MANAGEMENT
Average assets for the quarter were $225 billion, up $3 billion from a year ago
and down $5 billion from the first quarter of 1999. The Bank's Tier 1 Capital
Ratio increased to 7.73 per cent and the Total Capital Ratio increased to 10.85
per cent at April 30, 1999. This compares with 7.41 per cent and 10.53 per
cent, respectively, at January 31, 1999.
Bank of Montreal, Canada's first bank, is a highly diversified financial
services institution with assets of $225 billion. The bank's group of
companies include Nesbitt Bums, one of Canada's largest full-service
investment firms, Chicago-based Harris Bank, a major U.S. mid-west
financial institution and Mbanx, the first North American-wide virtual
banking unit Bank of Montreal has an equity position in and an alliance
with Grupo Financiero Bancomer, a leading Mexican financial institution.
1) The aggregation of our operating groups reflects the organizational
structure in place during the quarter.
Media Relations Contacts:
Lynne Kilpatrick, Toronto (416) 927-2740
Ronald Monet, Montreal (514) 877-1101
Internet: http://www.bmo.com
Investor Relations Contacts:
Bob Wells, (416) 867-4009
Cathy Cranston, (416) 867-6656
BANK OF MONTREAL
FINANCIAL HIGHLIGHTS
(Canadian $ in millions except as noted)
For the three months ended For the six months ended
Apr 30 Jan 31 Apr 30 Change from Apr 30 Apr 30 Change from
1999 1999 1998 Apr 30,1998 1999 1998 Apr 30,1998
Net Income Statement
Net Interest
Income (TEB)(a) $1,112 $1,089 $1,035 7.5% $2,201 $2,089 5.4%
Other Income 849 845 875 (3.0) 1,694 1,652 2.6
Total Revenue
(TEB) (a) 1,961 1,934 1,910 2.7 3,895 3,741 4.1
Provision for
credit losses 80 80 45 77.7 160 90 77.8
Non-interest
expense 1,283 1,244 1,207 6.2 2,627 2,381 6.1
Provision for
income taxes
(TEB) (a) 229 241 273 (15.8) 470 520 (9.6)
Non-controlling
interest in
subsidiaries 5 7 8 (35.2) 12 12 (0.3)
Net income 364 362 377 (3.5) 726 738 (1.6)
Taxable
equivalent
adjustment 35 36 31 14.7 71 60 18.6
For Common Share($)
Net Income
- basic $ 1.26 $ 1.25 $ 1.34 $ (0.08) $ 2.51 $ 2.63 $ (0.12)
- fully diluted 1.26 1.24 1.32 (0.07) 2.49 2.59 (0.10)
Dividends
declared 0.47 0.47 0.44 0.03 0.94 0.88 0.06
Book value
per share 33.53 33.09 31.01 2.52 33.53 31.01 2.52
Market value
per share 60.80 66.75 78.00 (17.20) 60.80 78.00 (17.20)
Total market
value of common
shares ($
billions) 16.2 17.7 20.5 (4.3) 16.2 20.5 (4.3)
As at
Apr 30 Jan 31 Apr 30 Change from
1999 1999 1998 Apr 30, 1998
Balance Sheet Summary
Assets $219,653 $224,919 $212,885 3.2%
Loans 132,984 134,481 124,540 6.8
Deposits 146,965 146,577 148,480 (1.0)
Capital funds 15,479 15,413 14,318 8.1
Common equity 8,916 8,785 8,139 9.5
Net impaired loans
and acceptances (212) (319) (467) 54.6
Average Balances
Loans 134,806 136,226 125,615 7.3
Assets 224,762 230,169 221,975 1.3
Apr 30 Oct 31 Apr 30
1999 1998 1998
Six Twelve Six
Months Months Months
Primary Financial Measures (%)(b)
Five-year return on common
shareholders' investment 23.4 23.3 30.6
Return on common share-
holders' equity 16.3 15.2 17.7
EPS growth - fully diluted (3.9) 0.8 14.1
Revenue growth 4.1 1.4 8.7
Expense-to-revenue ratio 64.9 66.5 63.7
Provision for credit loses %
of average
loans and acceptances 0.22 0.09 0.14
Gross Impaired loans and
acceptances as a % of
equity and allowance for credit
losses 8.36 6.66 6.11
Tier 1 capital ratio (c) 7.73 7.26 7.16
Cash and securities-to-total
assets 28.4 32.9
Credit rating 28.3 AA- AA-
Other Financial Ratios
(% execpt as noted) (b)
Return on common shareholders'
investment (0.8) 6.4 31.3
Dividend yield 2.9 2.9 2.9
Price-to-earnings ratio (times) 13.2 13.4 15.5
Market-to-book value (times) 1.81 1.93 2.52
Cash earnings per share
-basis ($) 2.64 4.98 2.76
Cash return on common
shareholders' equity 17.2 17.5 20.3
Net economic profit ($ millions) 262 464 317
Return on average assets 0.64 0.59 0.67
Net interest income to average
assets 1.95 1.83 1.89
Other income as a % of total
revenue 43.5 42.9 44.2
Expense growth 6.1 4.7 8.4
Tier 1 capital ratio - U.S.
basis (c) 7.38 6.95 7.13
Total capital ratio (c) 10.85 10.38 10.10
Equity-to-assets ratio 5.1 5.0 4.9
(a) Reported on a taxable equivalent basis (TEB).
(b) For the period ended or as at, as appropriate.
(c) The April 30, 1998 total capital ratio and tier 1 capital ratios reflect
the inclusion of $250 million May 15, 1998 issue of Class B preferred shares.
Excluding this issue, the total capital ratio is 9.91%, the tier 1 capital ratio
is 6.97% and the tier 1 capital ratio - U.S. basis is 6.94% as at April 30,
1998.
BANK OF MONTREAL
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Canadian $ in millions except number of common shares)
For the three months ended For the six months ended
Apr 30 Jan 31 Apr 30 Apr 30 Apr 30
1999 1999 1998 1999 1998
Interest, Dividend and
Fee Income
Loans $ 2,231 $ 2,566 $ 2,409 $ 4,887 $ 4,720
Securities 611 637 638 1,248 1,214
Deposits with banks 260 277 423 637 875
3,192 3,480 3,470 6,672 6,809
Interest Expense
Deposits 1,482 1,730 1,788 3,212 3,503
Subordinated debt 83 86 77 169 152
Other liabilities 550 611 601 1,161 1,125
2,115 2,427 2,466 4,542 4,780
Net Interest Income 1,077 1,053 1,004 2,130 2,029
Provision for credit
losses 80 80 45 160 90
Net Interest Income after Provision
for Credit Losses 997 973 959 1,970 1,939
Other Income
Deposit and payment
service charges 160 146 137 296 269
Lending fees 71 78 79 149 132
Capital market fees 185 184 226 369 459
Card services 46 48 45 94 100
Investment management and
custodial fees 101 104 104 205 197
Mutual fund revenues 46 49 50 95 95
Trading revenues 92 65 70 157 133
Securitization revenues 68 75 39 143 61
Other fees and
commissions 90 96 125 186 206
849 845 875 1,694 1,652
Net Interest and
Other Income 1,846 1,818 1,834 3,664 3,591
Non-interest Expense
Salaries and employee
benefits 698 668 647 1,366 1,300
Premises and equipment 274 274 233 548 456
Communications 68 66 67 134 134
Other expenses 226 218 242 444 454
1,266 1,226 1,189 2,492 2,344
Goodwill and other valuation
intangibles 17 18 18 35 37
Total non-interest
expense 1,283 1,244 1,207 2,527 2,381
Income Before Provision
for Income Taxes 563 574 627 1,137 1,210
Provision for
income taxes 194 205 242 339 460
Income before Non-
Controlling Interest
in Subsidiaries 369 369 385 738 760
Non-controlling
Interest 5 7 8 12 12
Net Income $ 364 $ 362 $ 377 $ 726 $ 738
Dividends Declared
-preferred shares $ 30 $ 30 $ 27 $ 60 $ 50
-common shares $ 125 $ 125 $ 115 $ 250 $ 231
Average Number
of Common
Shares
Outstanding 265,696 473 204,952,530 261,963,798 266,317,845 261,748,815
Average Assets $ 224,762 $ 230,169 $ 221,975 $ 227,610 $ 223,003
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited (Canadian $ in millions) As at
April 30,1999 January 31,1999 April 20,1998
Cash resources $ 23,215 $ 23,823 $ 26,599
Securities 39,035 40,420 43,504
62,250 64,243 70,103
Loans
Residential mortgages 36,196 36,349 37,883
Consumer Instalment and other
personal loans 16,226 15,817 15,504
Credit card loans 919 882 562
Loans to businesses and
governments 51,999 50,658 51,962
Securities purchased under
resale agreements 28,903 31,996 19,806
134,243 135,702 125,717
Allowance for credit losses (1,259) (1,221) (1,177)
132,984 134,481 124,540
Customers' liability under
acceptances 6,630 6,649 5,652
Other assets 17,889 19,546 12,590
Total assets $ 219,653 $ 224,919 $ 212,885
Deposits
Banks $ 27,930 $ 28,926 32,896
Businesses and governments 58,199 66,968 57,356
Individuals 60,836 60,683 58,228
146,985 146,577 148,480
Acceptances 6,530 6,649 5,652
Securities sold but not yet
purchased 9,181 8,038 13,591
Securities sold under repurchase
agreements 26,526 31,655 18,270
Other liabilities 14,972 16,587 12,574
57,209 62,929 50,087
Subordinated debt 4,699 4,750 4,499
Shareholders' equity
Share capital
Preferred shares 1,864 1,878 1,680
Common shares 3,152 3,138 3,046
Retained earnings 5,764 5,647 5,093
10,780 10,663 9,819
Total Liabilities and
Shareholders' Equity $ 219,653 $ 224,919 $ 212,885
Note: These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles, including the
accounting requirements of the Superintendent of Financial Institutions
Canada.
BANK OF MONTREAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(Unaudited) (Canadian $ in millions) For the six months ended
April 30 1999 April 30 1998
Cash Flows From Operating Activities
Net Income $ 726 $ 738
Adjustments to determine net cash flows 4,102 (222)
4,828 516
Cash Flows From Financing Activities
Deposits 2,982 4,268
Other liabilities (1,689) 151
Debt and share capital (129) 1,101
854 5,239
Cash Flows Used in investing Activities
Investment securities (1,355) 1,498
Loans 3,420 9,712
Premises and equipment - net purchases 132 191
Interest bearing deposits with banks 3,662 (5,305)
5,859 6,096
Net (Decrease) in Cash Equivalents (177) (341)
Cash and Cash Equivalents at Beginning of Period 2,962 2,651
Cash and Cash Equivalents at End of Period $ 2,785 $ 2,310
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited) (Canadian $ in millions) For the six months ended
April 30 1999 April 30 1998
Balance at Beginning of Period $ 10,608 $ 8,903
Net income 726 738
Dividends - Preferred shares (60) (50)
- Common shares (250) (231)
Preferred share issues (redemptions) (72) 400
Common share issues 57 27
Translation adjustment on preferred shares issued in (22) 6
a foreign currency
Unrealized gain (loss) on transaction of net investment
in foreign operations, net of hedging activities
and applicable income taxes (182) 31
Cost of proposed merger, net of income taxes (25) --
Share issue expense, net of applicable income taxes -- (5)
Balance at End of Period $ 10,780 $ 9,819
END
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