BMO's Third Quarter 2024 Report to Shareholders, including the unaudited interim consolidated financial statements for the period ended July 31, 2024 are available online at www.bmo.com/investorrelations and at www.sedarplus.ca.
Financial Results Highlights
Third Quarter 2024 compared with Third Quarter 2023:
Net income of $1,865 million, compared with $1,565 million; adjusted net income1, 2 of $1,981 million, compared with $2,148 million
Reported earnings per share (EPS)3 of $2.48, compared with $2.12; adjusted EPS1, 2, 3 of $2.64, compared with $2.94
Provision for credit losses (PCL) of $906 million, compared with $492 million
Return on equity (ROE) of 10.0%, compared with 9.0%; adjusted ROE1, 2 of 10.6%, compared with 12.5%
Common Equity Tier 1 (CET1) Ratio4 of 13.0%, compared with 12.3%
Year-to-Date 2024 compared with Year-to-Date 2023:
Net income of $5,023 million, compared with $2,727 million; adjusted net income1, 2 of $5,907 million, compared with $6,492 million
Reported EPS3 of $6.57, compared with $3.56; adjusted EPS1, 2, 3 of $7.78, compared with $8.88
PCL of $2,238 million, compared with $1,732 million on a reported basis and $1,027 million on an adjusted basis1
ROE of 9.0%, compared with 5.1%; adjusted ROE1, 2 of 10.7%, compared with 12.7%
Adjusted1, 2 results in the current quarter and the prior year excluded the following items:
Acquisition and integration costs of $19 million ($25 million pre-tax) in the current quarter; $370 million ($497 million pre-tax) in the prior year.
Amortization of acquisition-related intangible assets of $79 million ($107 million pre-tax) in the current quarter; $85 million ($115 million pre-tax) in the prior year.
Impact of the U.S. Federal Deposit Insurance Corporation (FDIC) special assessment of $5 million ($6 million pre-tax) in the current quarter.
Impact of a lawsuit associated with a predecessor bank, M&I Marshall and Ilsley Bank, of $13 million ($18 million pre-tax) in the current quarter; a net recovery of $3 million ($4 million pre-tax) in the prior year.
A charge of $131 million ($160 million pre-tax) related to tax measures enacted by the Canadian government that amended the GST/HST definition for financial services in the prior year.
TORONTO, Aug. 27, 2024 /PRNewswire/ - For the third quarter ended July 31, 2024, BMO Financial Group (TSX:BMO) (NYSE:BMO) recorded net income of $1,865 million or $2.48 per share on a reported basis, and net income of $1,981 million or $2.64 per share on an adjusted basis.
"This quarter, BMO delivered strong pre-provision, pre-tax earnings and met our commitment to positive operating leverage for the quarter and year-to-date, reflecting good cost discipline and the sustained strength of our operating performance. While the cyclical increase in credit costs has resulted in loan loss provisions above our historical range, performance has been supported by operating momentum across our diversified businesses, including continued revenue growth in Canadian Personal and Commercial Banking and stronger client activity in our market-sensitive businesses. Across our U.S. markets, we're adding new customers and expanding capabilities, contributing to consistent pre-provision-pre-tax earnings in our U.S. Segment," said Darryl White, Chief Executive Officer, BMO Financial Group.
"With our strategic goals firmly in place, a strong balance sheet, robust capital and liquidity, we are well positioned to deliver sustainable returns to our shareholders. How we live our Purpose, to Boldly Grow the Good in business and life, continues to be recognized, including being named to Corporate Knights' ranking of Canada's Best 50 Corporate Citizens for the 23rd consecutive year," concluded Mr. White.
Concurrent with the release of results, BMO announced a fourth quarter 2024 dividend of $1.55 per common share, unchanged from the prior quarter and an increase of $0.08 or 5% from the prior year. The quarterly dividend of $1.55 per common share is equivalent to an annual dividend of $6.20 per common share.
Caution
The foregoing section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.
(1)
Results and measures in this document are presented on a generally accepted accounting principles (GAAP) basis. They are also presented on an adjusted basis that excludes the impact of certain specified items from reported results. Adjusted results and ratios are non-GAAP and are detailed for all reported periods in the Non-GAAP and Other Financial Measures section. For details on the composition of non-GAAP amounts, measures and ratios, as well as supplementary financial measures, refer to the Glossary of Financial Terms in our Third Quarter 2024 Report to Shareholders.
(2)
Effective the first quarter of 2024, the bank adopted IFRS 17, Insurance Contracts (IFRS 17), and retrospectively applied it to fiscal 2023 results and opening retained earnings as at November 1, 2022. For further information, refer to the Changes in Accounting Policies section in our Third Quarter 2024 Report to Shareholders.
(3)
All EPS measures in this document refer to diluted EPS, unless specified otherwise.
(4)
The CET1 Ratio is disclosed in accordance with the Capital Adequacy Requirements (CAR) Guideline, as set out by the Office of the Superintendent of Financial Institutions (OSFI), as applicable.
Note: All ratios and percentage changes in this document are based on unrounded numbers.
Third Quarter 2024 Performance Review
Adjusted results and ratios in this section are on a non-GAAP basis. Refer to the Non-GAAP and Other Financial Measures section for further information on adjusting items. The order in which the impact on net income is discussed in this section follows the order of revenue, expenses and provision for credit losses, regardless of their relative impact.
Canadian P&C
Reported net income was $914 million, an increase of $33 million or 4% from the prior year, and adjusted net income was $920 million, an increase of $31 million or 3%. Results reflected a 7% increase in revenue, driven by higher net interest income due to balance growth and higher margins, higher expenses and a higher provision for credit losses.
U.S. P&C
Reported net income was $470 million, a decrease of $32 million or 6% from the prior year, and adjusted net income was $539 million, a decrease of $40 million or 7% from the prior year.
On a U.S. dollar basis, reported net income was $344 million, a decrease of $32 million or 9% from the prior year, and adjusted net income, which excludes amortization of acquisition-related intangible assets, was $395 million, a decrease of $39 million or 9%. Results reflected lower revenue driven by a decrease in non-interest revenue, lower expenses and a higher provision for credit losses.
BMO Wealth Management
Reported net income was $362 million, a decrease of $34 million or 9% from the prior year, and adjusted net income was $364 million, a decrease of $33 million or 8%. Wealth and Asset Management reported net income was $300 million, an increase of $91 million or 44%, reflecting higher revenue due to growth in client assets, including stronger global markets, partially offset by lower net interest income, as well as lower expenses. Insurance net income was $62 million, a decrease of $125 million from the prior year, primarily due to changes in portfolio positioning during the transition to IFRS 17.
BMO Capital Markets
Reported net income was $389 million, an increase of $94 million or 32% from the prior year, and adjusted net income was $394 million, an increase of $93 million or 31%. Results reflected higher revenue in both Global Markets and Investment and Corporate Banking driven by higher trading, underwriting and advisory, and corporate banking-related revenue, as well as lower expenses and a higher provision for credit losses.
Corporate Services
Reported net loss was $270 million, compared with reported net loss of $509 million in the prior year, and adjusted net loss was $236 million, compared with adjusted net loss of $18 million. Reported net loss decreased, primarily due to lower acquisition and integration costs and the impact of tax measures in the prior year. Adjusted net loss increased due to lower revenue, partially offset by lower expenses.
Capital
BMO's Common Equity Tier 1 Ratio was 13.0% as at July 31, 2024, a decrease from 13.1% at the end of the second quarter of 2024, with internal capital generation more than offset by higher source currency risk-weighted assets.
Credit Quality
Total provision for credit losses was $906 million, compared with a provision of $492 million in the prior year. The provision for credit losses on impaired loans was $828 million, an increase of $495 million, due to higher provisions in U.S. P&C, Canadian P&C and BMO Capital Markets. The provision for credit losses on performing loans was $78 million, compared with a provision of $159 million in the prior year. The $78 million provision for credit losses on performing loans in the current quarter was primarily driven by portfolio credit migration.
Refer to the Critical Accounting Estimates and Judgments section of BMO's 2023 Annual Report and Note 4 of our audited annual consolidated financial statements for further information on the allowance for credit losses as at October 31, 2023.
Regulatory Filings
BMO's continuous disclosure materials, including 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.sedarplus.ca, and on the EDGAR section of the U.S. Securities and Exchange Commission's website at www.sec.gov. Information contained in or otherwise accessible through our website (www.bmo.com), or any third-party websites mentioned herein, does not form part of this document.
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. In this document, the names BMO and BMO Financial Group, as well as the words "bank", "we" and "our", mean Bank of Montreal, together with its subsidiaries.
Caution Regarding Forward-Looking Statements
Bank of Montreal's public communications often include written or oral forward-looking statements. Statements of this type are included in this document and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the "safe harbor" provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements in this document may include, but are not limited to: statements with respect to our objectives and priorities for fiscal 2024 and beyond; our strategies or future actions; our targets and commitments (including with respect to net zero emissions); expectations for our financial condition, capital position, the regulatory environment in which we operate, the results of, or outlook for, our operations or the Canadian, U.S. and international economies; plans for the combined operations of BMO and Bank of the West; and include statements made by our management. Forward-looking statements are typically identified by words such as "will", "would", "should", "believe", "expect", "anticipate", "project", "intend", "estimate", "plan", "commit", "target", "may", "schedule", "forecast", "outlook", "seek" and "could" or negative or grammatical variations thereof.
By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties, both general and specific in nature. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct, and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements, as a number of factors – many of which are beyond our control and the effects of which can be difficult to predict – could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.
The future outcomes that relate to forward-looking statements may be influenced by many factors, including, but not limited to: general economic and market conditions in the countries in which we operate, including labour challenges and changes in foreign exchange and interest rates; the anticipated benefits from acquisitions, including Bank of the West, are not realized; changes to our credit ratings; the emergence or continuation of widespread health emergencies or pandemics, and their impact on local, national or international economies, as well as their heightening of certain risks that may affect our future results; cyber and cloud security, including the threat of data breaches, hacking, identity theft and corporate espionage, as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption; technology resiliency; failure of third parties to comply with their obligations to us; political conditions, including changes relating to, or affecting, economic or trade matters; climate change and other environmental and social risks; the Canadian housing market and consumer leverage; inflationary pressures; global supply-chain disruptions; technological innovation and competition; changes in monetary, fiscal or economic policy; changes in laws, including tax legislation and interpretation, or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs and capital requirements; weak, volatile or illiquid capital or credit markets; the level of competition in the geographic and business areas in which we operate; exposure to, and the resolution of, significant litigation or regulatory matters, our ability to successfully appeal adverse outcomes of such matters and the timing, determination and recovery of amounts related to such matters; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans, complete proposed acquisitions or dispositions and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and judgments, and the effects of changes in accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; global capital markets activities; the possible effects on our business of war or terrorist activities; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.
We caution that the foregoing list is not exhaustive of all possible factors. Other factors and risks could adversely affect our results. For more information, please refer to the discussion in the Risks That May Affect Future Results section, and the sections related to credit and counterparty, market, insurance, liquidity and funding, operational non-financial, legal and regulatory, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section of BMO's 2023 Annual Report, and the Risk Management section in our Third Quarter 2024 Report to Shareholders, all of which outline certain key factors and risks that may affect our future results. Investors and others should carefully consider these factors and risks, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. We do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting shareholders and analysts in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.
Material economic assumptions underlying the forward-looking statements contained in this document include those set out in the Economic Developments and Outlook section of BMO's 2023 Annual Report, as updated in the Economic Developments and Outlook section and the Risk Management - Update on General Economic Conditions section in our Third Quarter 2024 Report to Shareholders, as well as in the Allowance for Credit Losses section of BMO's 2023 Annual Report, as updated in the Allowance for Credit Losses section in our Third Quarter 2024 Report to Shareholders. Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, we primarily consider historical economic data, past relationships between economic and financial variables, changes in government policies, and the risks to the domestic and global economy.
Non-GAAP and Other Financial Measures
Results and measures in this document are presented on a generally accepted accounting principles (GAAP) basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements and our unaudited interim consolidated financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board. References to GAAP mean IFRS. We use a number of financial measures to assess our performance, as well as the performance of our operating segments, including amounts, measures and ratios that are presented on a non‑GAAP basis, as described below. We believe that these non‑GAAP amounts, measures and ratios, read together with our GAAP results, provide readers with a better understanding of how management assesses results.
Non-GAAP amounts, measures and ratios do not have standardized meanings under GAAP. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, or as a substitute for, GAAP results.
Certain information contained in BMO's Management's Discussion and Analysis dated August 27, 2024 for the period ended July 31, 2024 (Third Quarter 2024 Report to Shareholders) is incorporated by reference into this document. For further details on the composition of non-GAAP amounts, measures and ratios, including supplementary financial measures, please refer to the Glossary of Financial Terms section in our Third Quarter 2024 Report to Shareholders which is available at www.sedarplus.ca.
Our non‑GAAP measures broadly fall into the following categories:
Adjusted measures and ratios
Management considers both reported and adjusted results and measures to be useful in assessing underlying ongoing business performance. Adjusted results and measures remove certain specified items from revenue, non‑interest expense, provision for credit losses and income taxes, as detailed in the following table. Adjusted results and measures presented in this document are non‑GAAP. Presenting results on both a reported basis and an adjusted basis permits readers to assess the impact of certain items on results for the periods presented, and to better assess results excluding those items that may not be reflective of ongoing business performance. As such, the presentation may facilitate readers' analysis of trends. Except as otherwise noted, management's discussion of changes in reported results in this document applies equally to changes in the corresponding adjusted results.
Tangible common equity and return on tangible common equity
Tangible common equity is calculated as common shareholders' equity, less goodwill and acquisition-related intangible assets, net of related deferred tax liabilities. Return on tangible common equity is commonly used in the North American banking industry and is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed organically.
Measures net of insurance claims, commissions and changes in policy benefit liabilities
For periods prior to November 1, 2022, we presented adjusted revenue on a basis net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and our efficiency ratio and operating leverage were calculated on a similar basis. Measures and ratios presented on a basis net of CCPB are non-GAAP amounts. For more information, refer to the Insurance Claims, Commissions and Changes in Policy Benefit Liabilities section of the 2023 Annual MD&A. Beginning the first quarter of 2023, we no longer report CCPB, given the adoption and retrospective application of IFRS 17, Insurance Contracts (IFRS 17).
Caution
This Non-GAAP and Other Financial Measures section contains forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.
Non-GAAP and Other Financial Measures
(Canadian $ in millions, except as noted)
Q3-2024
Q2-2024
Q3-2023
YTD-2024
YTD-2023
Reported Results
Net interest income
4,794
4,515
4,905
14,030
13,740
Non-interest revenue
3,398
3,459
3,147
9,808
7,200
Revenue
8,192
7,974
8,052
23,838
20,940
Provision for credit losses
(906)
(705)
(492)
(2,238)
(1,732)
Non-interest expense
(4,839)
(4,844)
(5,572)
(15,072)
(15,455)
Income before income taxes
2,447
2,425
1,988
6,528
3,753
Provision for income taxes
(582)
(559)
(423)
(1,505)
(1,026)
Net income
1,865
1,866
1,565
5,023
2,727
Diluted EPS ($)
2.48
2.36
2.12
6.57
3.56
Adjusting Items Impacting Revenue (Pre-tax)
Management of fair value changes on the purchase of Bank of the West (1)
-
-
-
-
(2,011)
Legal provision (recorded in revenue) (2)
(14)
(14)
(3)
(42)
(16)
Impact of loan portfolio sale (3)
-
-
-
(164)
-
Impact of Canadian tax measures (4)
-
-
(138)
-
(138)
Impact of adjusting items on revenue (pre-tax)
(14)
(14)
(141)
(206)
(2,165)
Adjusting Items Impacting Provision for Credit Losses (Pre-tax)
Initial provision for credit losses on purchased performing loans (pre-tax) (5)
-
-
-
-
(705)
Adjusting Items Impacting Non-Interest Expense (Pre-tax)
Acquisition and integration costs (6)
(25)
(36)
(497)
(137)
(1,463)
Amortization of acquisition-related intangible assets (7)
(107)
(107)
(115)
(326)
(238)
Legal provision (including legal fees) (2)
(4)
(1)
7
(6)
5
FDIC special assessment (8)
(6)
(67)
-
(490)
-
Impact of Canadian tax measures (4)
-
-
(22)
-
(22)
Impact of adjusting items on non-interest expense (pre-tax)
(142)
(211)
(627)
(959)
(1,718)
Impact of adjusting items on reported net income (pre-tax)
(156)
(225)
(768)
(1,165)
(4,588)
Adjusting Items Impacting Revenue (After-tax)
Management of fair value changes on the purchase of Bank of the West (1)
-
-
-
-
(1,461)
Legal provision (including related interest expense and legal fees) (2)
(11)
(11)
(2)
(32)
