BMO Financial Group Reports Fourth Quarter and Fiscal 2018 Results

Toronto (ots/PRNewswire) – Fourth Quarter 2018

Financial Results Highlights

Fourth Quarter 2018 Compared with Fourth Quarter 2017:

* Net income of $1,695 million, up 38%, including a benefit from
the
remeasurement of an employee benefit liability2 in the current
quarter; adjusted net income1 of $1,529 million, up 17%

* EPS3 of $2.57, up 42%; adjusted EPS1,3 of $2.32, up 19%

* ROE of 16.1%, up from 12.1%; adjusted ROE1 of 14.5%, up from
12.9%

* Provision for credit losses4 (PCL) of $175 million, compared with
$202 million in the prior year

* Common Equity Tier 1 Ratio of 11.3%

* Dividend increased by $0.04 from the prior quarter to $1.00, up
8%
from the prior year

Fiscal 2018 Compared with Fiscal 2017:

* Net income of $5,450 million, up 2% including the impact of the
revaluation of our U.S. net deferred tax asset in the current
year5; adjusted net income1 of $5,979 million, up 9%

* EPS3 of $8.17, up 3%; adjusted EPS1,3 of $8.99, up 10%

* ROE of 13.2%, compared with 13.3%; adjusted ROE1 of 14.6%, up
from
13.7%

* PCL of $662 million4, including a $38 million recovery on
performing loans, compared with $822 million on an adjusted basis
and $746 million on a reported basis

For the fourth quarter ended October 31, 2018, BMO Financial Group
(TSX: BMO) (NYSE:BMO) recorded net income of $1,695 million or $2.57
per share on a reported basis, and net income of $1,529 million or
$2.32 per share on an adjusted basis.

„BMO’s fourth quarter results demonstrated continued positive
momentum and ended a successful year in which the bank delivered $6
billion in adjusted earnings and growth in adjusted earnings per
share of 10%, led by strong performance in our Personal and
Commercial banking businesses,“ said Darryl White, Chief Executive
Officer, BMO Financial Group.

„This year, we continued to make good progress against our strategic
objectives. We grew our U.S. segment at an accelerated pace,
increased momentum in our Commercial banking business, adding
relationships, loans and deposits, and delivered real value to our
personal customers with new and enhanced digital capabilities. We’ve
invested in and grown our businesses, and at the same time, improved
efficiency, returned capital to our shareholders through increased
dividends and share buybacks, and maintained a strong CET 1 ratio of
11.3%.

„Looking ahead to 2019, we will continue to build on this strong
foundation and our differentiating strengths, including an integrated
North American platform and deep relationships in our wealth, capital
markets and P&C businesses, to deliver sustainable and competitive
long-term performance,“ concluded Mr. White.

Reported net income in the current quarter included a benefit of $203
million after-tax ($277 million pre-tax) from the remeasurement of an
employee benefit liability, which was excluded from adjusted
earnings. Reported net income in the current year also includes a
$425 million charge related to the revaluation of our U.S. net
deferred tax asset5 which was also excluded from adjusted earnings.
Other adjusting items are included in the Non-GAAP Measures table on
page 5.

(1) Results and
measures in
this document
are presented
on a GAAP
basis. They are
also presented
on an adjusted
basis that
excludes the
impact of
certain items.
Adjusted
results and
measures are
non-GAAP and
are detailed
for all
reported
periods in the
Non-GAAP
Measures
section, where
such non-GAAP
measures and
their closest
GAAP
counterparts
are disclosed.
(2) The current
quarter
included a
benefit from
the
remeasurement
of an employee
benefit
liability as a
result of an
amendment to
our other
employee future
benefits plan
for certain
employees that
was announced
in the fourth
quarter of
2018. This
amount has been
included in
Corporate
Services in
non-interest
expense.
(3) All Earnings
per Share (EPS)
measures in
this document
refer to
diluted EPS,
unless
specified
otherwise. EPS
is calculated
using net
income after
deductions for
net income
attributable to
non-controlling
interest in
subsidiaries
and preferred
share
dividends.
(4) Effective the
first quarter
of 2018, the
bank
prospectively
adopted IFRS 9,
Financial
Instruments
(IFRS 9). Under
IFRS 9, we
refer to the
provision for
credit losses
on impaired
loans and the
provision for
credit losses
on performing
loans. Prior
periods have
not been
restated. Refer
to the Changes
in Accounting
Policies
section on page
121 of BMO’s
2018 Annual
MD&A for
further
details. In
prior periods,
changes to the
collective
allowance were
an adjusting
item. Refer to
the Non-GAAP
measures on
page 5.
(5) Reported net
income in the
first quarter
of 2018
included a $425
million (US$339
million) charge
related to the
revaluation of
our U.S. net
deferred tax
asset as a
result of the
enactment of
the U.S. Tax
Cuts and Jobs
Act. See the
Critical
Accounting
Estimates –
Income Taxes
and Deferred
Tax Assets
section on page
119 of BMO’s
2018 Annual
MD&A.
Note: All
ratios and
percentage
changes in
this
document
are based
on
unrounded
numbers

Return on equity (ROE) was 16.1%, up from 12.1% in the prior year and
adjusted ROE was 14.5%, up from 12.9%. Return on tangible common
equity (ROTCE) was 19.5%, compared with 14.8% in the prior year and
adjusted ROTCE was 17.3%, compared with 15.5%.

Concurrent with the release of results, BMO announced a first quarter
2019 dividend of $1.00 per common share, up $0.04 or 4% from the
prior quarter and up $0.07 per share or 8% from the prior year. The
quarterly dividend of $1.00 per common share is equivalent to an
annual dividend of $4.00 per common share.

BMO’s 2018 audited annual consolidated financial statements and
accompanying management discussion & analysis (MD&A), is available
online at www.bmo.com/investorrelations and at www.sedar.com.

Fourth Quarter Operating Segment Overview

Canadian P&C

Reported fourth quarter net income of $675 million and adjusted net
income of $676 million both increased $51 million or 8% from the
prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Results reflect revenue growth
and lower provision for credit losses, partially offset by higher
expenses.

During the quarter, we continued to enhance our digital capabilities
as we launched Business Xpress, a small business lending platform
that speeds up the loan approval process by 95% for small business
loans. The platform uses data analytics technology and best-in-class
automatic adjudication strategies providing a faster and more
convenient way for Canada’s small businesses to obtain capital.

U.S. P&C

Reported net income of $372 million increased $102 million or 37% and
adjusted net income of $383 million increased $102 million or 36%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets.

Reported net income of US$285 million increased US$71 million or 33%
and adjusted net income of US$294 million increased US$71 million or
31% from the prior year, due to good revenue growth and lower taxes
from the benefit of U.S. tax reform and a favourable U.S. tax item,
partially offset by higher expenses and higher provisions for credit
losses.

During the quarter, the Federal Deposit Insurance Corporation
released its annual deposit market share report and we improved our
market share and maintained our ranking of second place in the
Chicago and Milwaukee markets, and fourth place within our core
footprint, which includes Illinois, Kansas, Wisconsin, Missouri,
Indiana, and Minnesota.

BMO Wealth Management

Reported net income of $219 million increased $44 million or 25% and
adjusted net income of $229 million increased $40 million or 21% from
the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Traditional wealth reported
net income of $192 million was unchanged and adjusted net income of
$202 million decreased $4 million or 2% from the prior year, as
business growth and lower taxes were more than offset by a legal
provision and higher expenses. Insurance net income of $27 million
was below trend but increased $44 million from the prior year,
primarily due to less elevated reinsurance claims in the current
year, with this partially offset by unfavourable market movements in
the current quarter relative to favourable market movements in the
prior year.

BMO Global Asset Management was named the Best Environmental Social
and Governance (ESG) Research Team in the Investment Week Sustainable
& ESG Investment Awards 2018. This award recognizes our longstanding
commitment and leadership in responsible investing, and our belief
that prudent management of ESG issues can have an important impact on
the creation of long-term investor value.

BMO Capital Markets

Reported net income of $298 million decreased $18 million or 6%, and
adjusted net income of $309 million decreased $7 million or 2% from a
year ago, as higher Investment and Corporate Banking revenue and
lower taxes were more than offset by higher expenses and lower
Trading Products revenue. Adjusted net income excludes acquisition
integration costs and the amortization of acquisition-related
intangible assets.

On September 1, 2018, we completed the acquisition of KGS-Alpha
Capital Markets (KGS-Alpha), a U.S. fixed income broker-dealer
specializing in U.S. mortgage and asset-backed securities in the
institutional investor market.

Corporate Services

Reported net income for the quarter was $131 million, compared with a
net loss of $158 million in the prior year. Corporate Services
adjusted net loss for the quarter was $68 million, compared with an
adjusted net loss of $102 million in the prior year. Adjusted results
increased mainly due to higher revenue excluding the teb adjustment
and lower expenses. The adjusted results exclude a benefit of $203
million after-tax from the remeasurement of an employee benefit
liability in the current period, a restructuring charge in the prior
year, and acquisition integration costs in both periods.

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 October 31,
2018. The CET1 Ratio decreased from 11.4% at the end of the third
quarter, as retained earnings growth, net of share repurchases, was
more than offset by higher risk-weighted assets, including an
acquisition.

Provision for Credit Losses

The total provision for credit losses was $175 million, a decrease of
$27 million from the prior year. The provision for credit losses on
impaired loans of $177 million decreased $25 million from $202
million in the prior year, primarily due to lower provisions in the
P&C businesses and higher net recoveries in BMO Capital Markets and
Corporate Services. There was a $2 million net recovery of credit
losses on performing loans in the current quarter.

Caution

The foregoing sections contain forward-looking statements. Please see
the Caution Regarding Forward-Looking Statements.

Regulatory Filings

Our continuous disclosure materials, including our interim filings,
annual Management’s Discussion and Analysis and audited annual
consolidated financial statements, Annual Information Form and Notice
of Annual Meeting of Shareholders and Proxy Circular are available on
our website at www.bmo.com/investorrelations, on the Canadian
Securities Administrators‘ website at www.sedar.com and on the EDGAR
section of the SEC’s website at www.sec.gov.

Bank of Montreal uses
a unified branding approach
that links all of the
organization’s member
companies. Bank of Montreal,
together with its
subsidiaries, is known as BMO
Financial Group. As such, in this
document, the names BMO and
BMO Financial Group mean
Bank of Montreal, together
with its subsidiaries.

Financial Review

The Financial Review commentary is as of December 4, 2018. The
material that precedes this section comprises part of this Financial
Review. The Financial Review should be read in conjunction with the
unaudited interim consolidated financial statements for the period
ended October 31, 2018, included in this document, as well as the
audited annual consolidated financial statements for the year ended
October 31, 2018, and the MD&A for fiscal 2018.

The 2018 Annual MD&A includes a comprehensive discussion of our
businesses, strategies and objectives, and can be accessed on our
website at www.bmo.com/investorrelations. Readers are also encouraged
to visit the site to view other quarterly financial information.

Bank of Montreal’s management, under the supervision of the CEO and
CFO, has evaluated the effectiveness, as of October 31, 2018, of Bank
of Montreal’s disclosure controls and procedures (as defined in the
rules of the Securities and Exchange Commission and the Canadian
Securiti

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