BMO Financial Group Reports Third Quarter 2020 Results
BMO Financial Group reported a net income of $1,232 million or $1.81 per share for Q3 2020, down from $1,557 million or $2.34 per share in Q3 2019. Adjusted net income was $1,259 million, compared to $1,582 million last year. Revenue increased 4% year-over-year to $6,000 million. Provisions for credit losses surged to $1,054 million from $306 million. Return on equity (ROE) fell to 9.4% from 13.2%. The CET1 Ratio stood at 11.6%. The quarterly dividend of $1.06 is unchanged from the prior quarter.
- Adjusted earnings per share rose to $1.85, with a 12% increase in pre-provision pre-tax earnings year-over-year.
- Expenses decreased by 2% year-over-year, demonstrating effective expense management.
- BMO Wealth Management saw a 37% increase in reported net income, reflecting strong performance.
- Net income dropped significantly from $4,564 million year-to-date in 2019 to $3,513 million in 2020.
- Provisions for credit losses increased dramatically to $2,521 million year-to-date from $619 million in 2019.
- Return on equity (ROE) decreased from 13.5% in 2019 to 9.3% year-to-date.
Financial Results Highlights
Third Quarter 2020 Compared With Third Quarter 2019:
- Net income of
$1,232 million , compared with$1,557 million ; adjusted net income1 of$1,259 million , compared with$1,582 million - Reported EPS2 of
$1.81 , compared with$2.34 ; adjusted EPS1,2 of$1.85 , compared with$2.38 - Revenue, net of CCPB3, of
$6,000 million , up4% - Provision for credit losses (PCL) of
$1,054 million , compared with$306 million ; current quarter includes PCL on performing loans of$608 million - ROE of
9.4% , compared with13.2% ; adjusted ROE1 of9.6% , compared with13.5% - Common Equity Tier 1 Ratio of
11.6% - Dividend of
$1.06 , unchanged from the prior quarter; up3% from the prior year
Year-to-Date 2020 Compared With Year-to-Date 2019:
- Net income of
$3,513 million , compared with$4,564 million ; adjusted net income1 of$3,591 million , compared with$4,642 million - Reported EPS2 of
$5.18 , compared with$6.88 ; adjusted EPS1,2 of$5.30 , compared with$7.00 - Revenue, net of CCPB3, of
$17,492 million , up3% - Provision for credit losses of
$2,521 million , compared with$619 million , including year-to-date PCL on performing loans of$1,338 million - ROE of
9.3% , compared with13.5% ; adjusted ROE1 of9.5% , compared with13.7%
TORONTO, Aug. 25, 2020 /PRNewswire/ - For the third quarter ended July 31, 2020, BMO Financial Group (TSX: BMO) (NYSE: BMO) recorded net income of
"For the third quarter, we delivered very good results in a fluid environment, demonstrating the continued strength and resiliency of our diversified business model. We produced adjusted earnings per share of
"We entered the COVID-19 pandemic with momentum and in a position of strength and we have served our communities with consistent, safe and uninterrupted access to banking services and personalized financial advice. While the pandemic continues to have a serious disruptive impact causing lingering uncertainty and hardship for many, we are committed to standing by our customers and employees as we move into the next phase of the economic recovery.
"This quarter, we continued to deliver on our commitment to expense management, a critical and appropriate lever in the current environment. Expenses declined
"We are moving forward with a strong foundation and good operating momentum, and are well positioned to withstand both economic headwinds and recovery. We will continue to provide unwavering support to our customers while delivering increased shareholder value through efficiency, discipline and a strong focus on our strategic goals," concluded Mr. White.
(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) | All Earnings per Share (EPS) measures in this document refer to diluted EPS, unless specified otherwise. EPS is calculated using net income after deducting total dividends on preferred shares and distributions payable on other equity instruments. |
(3) | On a basis that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue. |
Note: All ratios and percentage changes in this document are based on unrounded numbers. | |
While COVID-19 continues to have an impact on the bank's earnings in the current quarter, the bank's operational performance remains good. Reported net income of
Return on equity (ROE) was
Concurrent with the release of results, BMO announced a fourth quarter 2020 dividend of
The extent to which the COVID-19 pandemic impacts our business, results of operations, reputation and financial performance and condition, including our regulatory capital and liquidity ratios, and credit ratings, as well as its impact on our customers, competitors and trading exposures, and the potential for loss from higher credit, counterparty and mark-to-market losses, will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by governmental and regulatory authorities, which could vary by country, and other third parties in response to the pandemic. The COVID-19 pandemic may also impact our ability to achieve, or the timing to achieve, certain previously announced targets, goals and objectives. Please refer to the Impact of COVID-19 and Risk Management sections.
Our complete Third Quarter 2020 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended July 31, 2020, is available online at www.bmo.com/investorrelations and at www.sedar.com.
Third Quarter Operating Segment Overview
Canadian P&C
Reported and adjusted net income were
During the quarter, we were named the Best Commercial Bank in Canada by World Finance magazine for the sixth consecutive year, recognized for our achievements and innovations in the global banking industry. In addition, we launched enhancements to our Indigenous Personal Banking Program, including 12 months free banking with a Performance Plan Chequing Account for new customers, preferred rates on a wide range of mortgage options and a BMO CashBack Mastercard with no annual fee.
U.S. P&C
Reported net income was
Reported net income was US
During the quarter, we were among eight select U.S. banks chosen to offer mobile-first chequing accounts managed via Google Pay, launching in 2021. This collaboration is an acknowledgement of our proven ability to deliver innovative and customer-centric digital financial services.
BMO Wealth Management
Reported net income was
BMO Private Banking was named Best Private Bank in Canada by World Finance magazine for the tenth consecutive year, a recognition of our client-centric approach and ability to understand and adapt to evolving trends.
BMO Capital Markets
Reported net income was
We continue to provide innovative solutions for our clients during the pandemic. In the current quarter, we acted as joint bookrunner on a
Corporate Services
Reported and adjusted net loss were
Adjusted results in this Third Quarter Operating Segment Overview section are non-GAAP amounts or non-GAAP measures. Please refer to the Non-GAAP Measures section.
Capital
BMO's Common Equity Tier 1 (CET1) Ratio was
Provision for Credit Losses
Total provision for credit losses was
Caution
The foregoing sections contain forward-looking statements. Please refer to 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 U.S. Securities and Exchange Commission'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. |
Non-GAAP Measures
Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. They are also presented on an adjusted basis that excludes the impact of certain items, as set out in the table below. Results and measures that exclude the impact of Canadian/U.S. dollar exchange rate movements on our U.S. segment are non-GAAP measures. Please refer to the Foreign Exchange section on page 8 of our Third Quarter 2020 Report to Shareholders for a discussion of the effects of changes in exchange rates on our results. Pre-provision pre-tax earnings (PPPT) is a non-GAAP measure, and is calculated as the difference between revenue, net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and non-interest expense. Management assesses performance on a reported basis and on an adjusted basis, and considers both to be useful in assessing underlying ongoing business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. It also permits readers to assess the impact of certain specified items on results for the periods presented, and to better assess results excluding those items that may not be reflective of ongoing results. 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. Adjusted results and measures are non-GAAP and as such 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.
Non-GAAP Measures
(Canadian $ in millions, except as noted) | Q3-2020 | Q2-2020 | Q3-2019 | YTD-2020 | YTD-2019 |
Reported Results | |||||
Revenue | 7,189 | 5,264 | 6,666 | 19,200 | 19,396 |
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) | (1,189) | 197 | (887) | (1,708) | (2,374) |
Revenue, net of CCPB | 6,000 | 5,461 | 5,779 | 17,492 | 17,022 |
Total provision for credit losses | (1,054) | (1,118) | (306) | (2,521) | (619) |
Non-interest expense | (3,444) | (3,516) | (3,491) | (10,629) | (10,643) |
Income before income taxes | 1,502 | 827 | 1,982 | 4,342 | 5,760 |
Provision for income taxes | (270) | (138) | (425) | (829) | (1,196) |
Net income | 1,232 | 689 | 1,557 | 3,513 | 4,564 |
EPS ($) | 1.81 | 1.00 | 2.34 | 5.18 | 6.88 |
Adjusting Items (Pre-tax) (1) | |||||
Acquisition integration costs (2) | (5) | (3) | (3) | (11) | (11) |
Amortization of acquisition-related intangible assets (3) | (32) | (30) | (29) | (91) | (90) |
Adjusting items included in reported pre-tax income | (37) | (33) | (32) | (102) | (101) |
Adjusting Items (After tax) (1) | |||||
Acquisition integration costs (2) | (4) | (2) | (2) | (8) | (8) |
Amortization of acquisition-related intangible assets (3) | (23) | (24) | (23) | (70) | (70) |
Adjusting items included in reported net income after tax | (27) | (26) | (25) | (78) | (78) |
Impact on EPS ($) | (0.04) | (0.04) | (0.04) | (0.12) | (0.12) |
Adjusted Results | |||||
Revenue | 7,189 | 5,264 | 6,666 | 19,200 | 19,396 |
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) | (1,189) | 197 | (887) | (1,708) | (2,374) |
Revenue, net of CCPB | 6,000 | 5,461 | 5,779 | 17,492 | 17,022 |
Total provision for credit losses | (1,054) | (1,118) | (306) | (2,521) | (619) |
Non-interest expense | (3,407) | (3,483) | (3,459) | (10,527) | (10,542) |
Income before income taxes | 1,539 | 860 | 2,014 | 4,444 | 5,861 |
Provision for income taxes | (280) | (145) | (432) | (853) | (1,219) |
Net income | 1,259 | 715 | 1,582 | 3,591 | 4,642 |
EPS ($) | 1.85 | 1.04 | 2.38 | 5.30 | 7.00 |
(1) | Adjusting items are generally included in Corporate Services, with the exception of the amortization of acquisition-related intangible assets and certain acquisition integration costs, which are charged to the operating groups. |
(2) | KGS–Alpha and Clearpool acquisition integration costs are reported in BMO Capital Markets. Acquisition integration costs are recorded in non-interest expense. |
(3) | These amounts were charged to the non-interest expense of the operating groups. Before-tax and after-tax amounts for each operating group are provided on pages 19, 20, 22, 24 and 26 of our Third Quarter 2020 Report to Shareholders |
Adjusted results and measures in this table are non-GAAP amounts or non-GAAP measures. | |
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 2020 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, the regulatory environment in which we operate and the results of or outlook for our operations or for the Canadian, U.S. and international economies, our response to the COVID-19 pandemic and its expected impact on our business, operations, earnings, results and financial performance and condition, including our regulatory capital and liquidity ratios and credit ratings, as well as its impact on our customers, competitors, reputation and trading exposures, and the potential for loss from higher credit, counterparty and mark-to-market losses, and include statements of our management. Forward-looking statements are typically identified by words such as "will", "would", "should", "believe", "expect", "anticipate", "project", "intend", "estimate", "plan", "goal", "target", "may" and "could."
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. The uncertainty created by the COVID-19 pandemic has heightened this risk given the increased challenge in making assumptions, 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; the severity, duration and spread of the COVID-19 pandemic, its impact on local, national or international economies and its heightening of certain risks that may affect our future results; the possible impact on our business and operations of outbreaks of disease or illness that affect local, national or international economies; the Canadian housing market and consumer leverage; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal, or economic policy and tax legislation and interpretation; the level of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance, and the effect of such changes on funding costs; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; failure of third parties to comply with their obligations to us; our ability to execute our strategic plans and to complete and integrate acquisitions, including obtaining regulatory approvals; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; changes to our credit ratings; political conditions, including changes relating to or affecting economic or trade matters; 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; technological changes; information, privacy and cyber 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; 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, legal and regulatory, business, strategic, environmental and social, and reputation risk, in the Enterprise-Wide Risk Management section that begins on page 68 of BMO's 2019 Annual Report, and the Risk Management section on page 35 of our Third Quarter 2020 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 our shareholders 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 are set out in the Economic Developments and Outlook section on page 18 of BMO's 2019 Annual Report and updated in the Economic Review and Outlook section of our Third Quarter 2020 Report to Shareholders, as well as in the Allowance for Credit Losses section of our Third Quarter 2020 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. Please refer to the Economic Review and Outlook and the Allowance for Credit Losses sections in our Third Quarter 2020 Report to Shareholders.
INVESTOR AND MEDIA PRESENTATION
Investor Presentation Materials
Interested parties are invited to visit our website at www.bmo.com/investorrelations to review our 2019 annual MD&A and audited annual consolidated financial statements, quarterly presentation materials and supplementary financial information package.
Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on Tuesday, August 25, 2020, at 7.15 a.m. (ET). The call may be accessed by telephone at 416-340-2217 (from within Toronto) or 1-800-806-5484 (toll-free outside Toronto), entering Passcode: 6163481#. A replay of the conference call can be accessed until Wednesday, September 23, 2020, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering Passcode: 8932373#.
A live webcast of the call can be accessed on our website at www.bmo.com/investorrelations. A replay can also be accessed on the website.
Shareholder Dividend Reinvestment and Share Purchase | For other shareholder information, please contact |
Plan (the Plan) | Bank of Montreal |
Average market price as defined under the Plan | Shareholder Services |
May 2020: | Corporate Secretary's Department |
June 2020: | One First Canadian Place, 21st Floor |
July 2020: | Toronto, Ontario M5X 1A1 |
Telephone: (416) 867-6785 | |
For dividend information, change in shareholder address | Fax: (416) 867-6793 |
or to advise of duplicate mailings, please contact | E-mail: corp.secretary@bmo.com |
Computershare Trust Company of Canada | |
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Toronto, Ontario M5J 2Y1 | Bank of Montreal |
Telephone: 1-800-340-5021 (Canada and the United States) | Investor Relations Department |
Telephone: (514) 982-7800 (international) | P.O. Box 1, One First Canadian Place, 10th Floor |
Fax: 1-888-453-0330 (Canada and the United States) | Toronto, Ontario M5X 1A1 |
Fax: (416) 263-9394 (international) | |
E-mail: service@computershare.com | To review financial results and regulatory filings and disclosures online, |
Our 2019 Annual MD&A, audited annual consolidated financial statements, annual information form and annual report on Form 40-F (filed with the U.S. Securities and Exchange Commission) are available online at www.bmo.com/investorrelations and at www.sedar.com. Printed copies of the bank's complete 2019 audited financial statements are available free of charge upon request at 416-867-6785 or corp.secretary@bmo.com.
Annual Meeting 2021 The next Annual Meeting of Shareholders will be held on Wednesday, April 7, 2021, in Toronto, Ontario. |
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SOURCE BMO Financial Group
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