BMO Financial Group releases Q2 2017 financial results

May 23, 2017
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BMO Financial Group releases Q2 2017 financial results

Second Quarter 2017 Compared with Second Quarter 2016:

Net income of $1.25 billion, up 28%; adjusted net income1 of $1.29 billion, up 12%
EPS2 of $1.84, up 27%; adjusted EPS1,2 of $1.92, up 11%
ROE of 12.6%, compared with 10.1%; adjusted ROE1 of 13.1%, compared with 12.1%
Provisions for credit losses of $259 million, compared with $201 million
Common Equity Tier 1 Ratio of 11.3%
Dividend increased by $0.02 to $0.90, up 5% from the prior year

Year-to-Date 2017 Compared with Year-to-Date 2016:

Net income of $2.74 billion, up 34%; adjusted net income1 of $2.83 billion, up 21%
EPS2 of $4.06, up 34%; adjusted EPS1,2 of $4.20, up 21%
ROE of 13.8%, compared with 10.5%; adjusted ROE1 of 14.2%, compared with 12.1%
Provisions for credit losses of $432 million, compared with $384 million

For the second quarter ended April 30, 2017, BMO Financial Group reported net income of $1,248 million or $1.84 per share on a reported basis, and net income of $1,295 million or $1.92 per share on an adjusted basis.

"BMO delivered good results in the quarter with adjusted net income of $1.3 billion and adjusted earnings per share of $1.92. Earnings growth reflects the benefits and resilience of our diversified business model, with strong contributions from our Wealth Management and BMO Capital Markets businesses, and consistent continuing investment in technology and our employees," said Bill Downe, Chief Executive Officer, BMO Financial Group.

"Personal and Commercial Banking in Canada continues to grow in customers, loans and deposits. Business and consumer confidence is strong, and while there has been a moderation in loan and deposit growth in the United States reflective of slower than anticipated business activity in the first calendar quarter, we are well-positioned to continue to build on the strength of our U.S. franchise.

"We remain confident in our ability to grow and create value in an evolving environment," concluded Mr. Downe.

Return on tangible common equity (ROTCE) was 15.7% compared with 12.8% in the prior year, and adjusted ROTCE was 15.9% compared with 14.8%.

Concurrent with the release of results, BMO announced a third quarter 2017 dividend of $0.90 per common share, up $0.02 per share and 2% from the preceding quarter, and up $0.04 per share and 5% from a year ago. The quarterly dividend of $0.90 per common share is equivalent to an annual dividend of $3.60 per common share.

Operating Segment Overview

Canadian P&C

Reported and adjusted net income of $531 million increased $6 million or 1% from a year ago due to higher balances across most products and increased non-interest revenue, largely offset by higher expenses and lower net interest margin.

During the quarter, we continued to build capabilities and enhance service offerings that enable customers to complete banking activities in their channel of choice, including launching free unlimited e-transfers, credit card alerts and the ability to view pending transactions. We were recognized by the global research and advisory firm Celent with the 2017 Model Bank Award for our work in advancing process automation through the effective deployment of new technology.

U.S. P&C

Reported net income of $248 million and adjusted net income of $260 million both decreased 7% from a year ago. Adjusted net income excludes the amortization of acquisition-related intangible assets.

Reported net income of US$185 million and adjusted net income of US$194 million both decreased 10% from a year ago mainly due to higher provisions for credit losses, as lower revenue was largely offset by lower expenses.

In March, BMO Harris Bank announced our consumer and small business deposit customers will now have free access to over 43,000 automated teller machines (ATMs) in the United States and 12,000 international ATMs as part of a new partnership with the Allpoint® ATM network.

Wealth Management

Reported net income was $251 million, up $117 million or 86% from a year ago. Adjusted net income, which excludes the amortization of acquisition-related intangible assets and acquisition integration costs, was $272 million, up $114 million or 72% from a year ago. Results were strong in both traditional wealth and insurance with continued benefit from productivity initiatives. Traditional wealth reported net income of $178 million increased $112 million or 166% from a year ago. Traditional wealth adjusted net income of $199 million increased $109 million or 121%, due to the impact of an investment write-down in the prior year, growth across most of our businesses and the benefit of improved equity markets. Insurance income of $73 million increased $5 million or 8% from a year ago mainly due to business growth, partially offset by favourable market movements in the prior year with no impact in the current quarter.

BMO Private Bank was named Best Private Bank for Entrepreneurs in North America by Global Finance magazine, recognizing our understanding of North American client needs and our ability to deliver the highest level of client service.

BMO Capital Markets

Reported net income of $321 million and adjusted net income of $322 million both increased 12% from a year ago. Results were driven by higher revenue with strong performance in our Investment and Corporate Banking business, partially offset by lower revenue in our Trading Products business, higher non-interest expenses and higher taxes.

BMO Capital Markets was named the World's Best Metals & Mining Investment Bank by Global Finance magazine for the 8th year in a row and awarded the Best Bank for the Canadian Dollar by FX Week for the 6th consecutive year.

Corporate Services

Corporate Services net loss for the quarter was $103 million compared with a net loss of $241 million a year ago. Corporate Services adjusted net loss for the quarter was $90 million compared with an adjusted net loss of $98 million a year ago. Adjusted results in both periods exclude acquisition integration costs and the prior year also excluded a restructuring charge of $132 million after-tax. Adjusted results increased due to above-trend revenue excluding teb (tax equivalent basis) in the current quarter, largely offset by higher expenses compared to below-trend expenses in the prior year, and lower credit recoveries. Reported results increased due to the net impact of drivers noted above, in addition to the restructuring charge in the prior year.

Adjusted results in this Operating Segment Overview section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Capital

BMO's Common Equity Tier 1 (CET1) Ratio was 11.3% at April 30, 2017. The CET1 Ratio increased from 11.1% at the end of the first quarter due largely to higher capital, partially offset by higher risk-weighted assets.

Provision for Credit Losses

The total provision for credit losses was $259 million, an increase of $58 million from the prior year due to higher provisions in U.S. P&C and lower credit recoveries in Corporate Services.

Re-disseminated by The Asian Banker