BMO's First Quarter 2022 Report to Shareholders, including the unaudited interim consolidated financial statements for the period ended
Financial Results Highlights
First Quarter 2022 Compared With First Quarter 2021:
- Net income of
$2,933 million , an increase of 45%; adjusted net income1,3 of$2,584 million , an increase of 27% - Reported earnings per share (EPS)2 of
$4.43 , an increase of 46%; adjusted EPS1,2,3 of$3.89 , an increase of 27% - Recovery of the provision for credit losses of
$99 million , compared with a provision for credit losses of$156 million - Return on equity (ROE) of 21.4%, an increase from 15.7%; adjusted ROE1,3 of 18.8%, an increase from 15.8%
- Common Equity Tier 1 Ratio4 of 14.1%, an increase from 12.4%
"We continue to build on our operating momentum and delivered another quarter of very strong earnings, driven by our Canadian and
"We are responding to the most urgent economic, environmental and social challenges of our day, including our ambition to be our clients' lead partner in the transition to a net-zero world. This quarter, we were proud to celebrate our third consecutive year as the most sustainable bank in
"Our proven, diversified business model is consistently delivering strong returns for our shareholders. We are investing in our businesses and executing on our Purpose-driven, Digital-First strategies aimed at helping our customers make real financial progress, and positioning us for continued growth while strengthening our capital position in advance of closing our acquisition of
Concurrent with the release of results, BMO announced a second quarter 2022 dividend of
The foregoing section contains forward-looking statements. Refer to the Caution Regarding Forward-Looking Statements.
(1) | Results and measures in this document are presented on a GAAP basis. They are also presented on an adjusted basis that excluded 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 First Quarter 2022 Report to Shareholders. |
(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) | Q1-2022 reported net income included the impact of the announced acquisition of |
(4) | The Common Equity Tier 1 (CET1) Ratio is disclosed in accordance with the Office of the Superintendent |
Note: All ratios and percentage changes in this document are based on unrounded numbers. |
Significant Events
During the current quarter, we completed the sale of our EMEA Asset Management business to Ameriprise Financial, Inc., including the transfer of certain
On
This acquisition aligns with our strategic, financial, and cultural objectives, and meaningfully accelerates our
A signature strength of the
Leveraging our deep integration experience and proven track record for
Under IFRS accounting, the purchase price will be allocated to the fair value of identifiable assets and liabilities of
We are proactively managing exposure to capital from changes in fair value with the goal of creating an economically and risk neutral outcome. As part of our fair value management actions, we entered into interest rate swaps that rise in value as interest rates rise, resulting in mark-to-market gains (losses) recorded in trading revenue, and a portfolio of matched duration
The impact of the fair value management actions on our results in the current quarter was treated as an adjusting item, and included $413 million after-tax (
This Significant Events section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.
First Quarter 2022 Performance Review
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.
Adjusted results and ratios, and
Reported and adjusted net income increased from the prior year, driven by strong revenue growth, an increase in expenses, and a recovery of the provision for credit losses. Net income increased in
Adjusted results in the current quarter excluded the impact of the announced acquisition of
Canadian P&C
Reported and adjusted net income was
Reported net income was
On a
BMO Wealth Management
Reported net income was
Reported net income was
Corporate Services
Reported net income was
Capital
BMO's Common Equity Tier 1 (CET1) Ratio was 14.1% as at
Credit Quality
Total recovery of the provision for credit losses was
Refer to the Critical Accounting Estimates section of BMO's 2021 Annual Report and Note 4 of our audited annual consolidated financial statements for further information on the allowance for credit losses as at
Supporting a Sustainable and Inclusive Future
BMO has a deep sense of purpose – to be a champion for progress and a catalyst for change. We are leveraging our position as a leading financial services provider to create opportunities for our communities and our stakeholders to make positive, sustainable change, in the belief that success can and must be mutual. In support of our customers, communities and employees, BMO:
- Extended over
$2 billion in lending authorizations to more than 33,500 businesses acrossCanada through BMO Business XpressTM, our industry-leading business onboarding platform launched inOctober 2018 . The innovative and intuitive digital banking platform increases access to capital to help more businesses make real financial progress. - Collaborated with
PLATO, Canada's only Indigenous-led and Indigenous-staffed IT services and training firm, offering theAmazon Web Services (AWS) re/Start program virtually to Indigenous students acrossCanada . Twenty-two students, some from remote communities, have started a 12-week Cloud computing boot camp, followed by a six-month BMO internship to learn and apply those skills on the job, with opportunities for full-time employment. - Committed
$100 million to launch the Business Within Reach: BMO for Black Entrepreneurs lending program, providing business owners with greater access to working capital, educational resources, and professional partnerships to start up, scale up, and grow. - BMO's leadership continues to be recognized across a number of rankings, including:
- Named to
Corporate Knights' 2022 Global 100 Most Sustainable Corporations in the World and, for the third consecutive year, asNorth America's most sustainable bank. We ranked in the top quartile for clean revenue and diversity on our board and among our leadership. - Included in the Bloomberg Gender-Equality Index (GEI) for the seventh consecutive year, which identifies BMO as a global leader in gender inclusion, as well as a leader within the financial sector.
BMO Harris Bank was recognized for the fifth consecutive year by theHuman Rights Campaign Foundation as an industry leader in LGBTQ+ workplace equality, earning a perfect score of 100 on the 2022 Corporate Equality Index (CEI).
Caution
The foregoing sections contain forward-looking statements. Please refer to the Caution Regarding Forward-Looking Statements.
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.sedar.com, 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.
Non-GAAP and Other Financial 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 our unaudited interim consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to GAAP mean IFRS. We use a number of financial measures to assess our performance, as well as the performance of our operating businesses, including 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
Our non-GAAP measures broadly fall into the following categories:
Adjusted measures and ratios
Management considers both reported and adjusted results and measures useful in assessing underlying ongoing business performance. Adjusted results and measures remove certain specified items from revenue, non-interest expense 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.
Measures net of insurance claims, commissions and changes in policy benefit liabilities (CCPB)
We also present reported and adjusted revenue on a basis that is net of insurance claims, commissions and changes in policy benefit liabilities (CCPB), and our efficiency ratio and operating leverage are calculated on a similar basis, as reconciled in the Revenue section. Measures and ratios presented on a basis net of CCPB are non-GAAP. Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets, caused by movements in interest rates and equity markets. The investments that support policy benefit liabilities are predominantly fixed income assets recorded at fair value, with changes in fair value recorded in insurance revenue in the Consolidated Statement of Income. These fair value changes are largely offset by changes in the fair value of policy benefit liabilities, the impact of which is reflected in CCPB. The presentation and discussion of revenue, efficiency ratios and operating leverage on a net basis reduces this variability, which allows for a better assessment of operating results. For more information refer to the Insurance Claims, Commissions and Changes in Policy Benefit Liabilities section in our First Quarter 2022 Report to Shareholders.
Presenting results on a taxable equivalent basis (teb)
We analyze consolidated revenue on a reported basis. In addition, we analyze revenue on a taxable equivalent basis (teb) at the operating group level, consistent with the Canadian peer group. Revenue and the provision for income taxes in
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.
Non-GAAP and Other Financial Measures
(Canadian $ in millions, except as noted) | Q1-2022 | Q4-2021 | Q1-2021 |
Reported Results | |||
Revenue | 7,723 | 6,573 | 6,975 |
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) | (81) | (97) | (601) |
Revenue, net of CCPB | 7,642 | 6,476 | 6,374 |
Total provision for (recovery of) credit losses | 99 | 126 | (156) |
Non-interest expense | (3,846) | (3,803) | (3,613) |
Income before income taxes | 3,895 | 2,799 | 2,605 |
Provision for income taxes | (962) | (640) | (588) |
Net income | 2,933 | 2,159 | 2,017 |
Diluted EPS ($) | 4.43 | 3.23 | 3.03 |
Adjusting Items Impacting Revenue (Pre-tax) | |||
Impact of divestitures (1) | (29) | - | - |
Management of fair value changes on the purchase of | 562 | - | - |
Impact of adjusting items on revenue (pre-tax) | 533 | - | - |
Adjusting Items Impacting Non-Interest Expense (Pre-tax) | |||
Acquisition and integration costs (3) | (12) | (1) | (3) |
Amortization of acquisition-related intangible assets (4) | (8) | (20) | (25) |
Impact of divestitures (1) | 3 | (62) | - |
Impact of adjusting items on non-interest expense (pre-tax) | (17) | (83) | (28) |
Impact of adjusting items on reported pre-tax income | 516 | (83) | (28) |
Adjusting Items Impacting Revenue (After-tax) | |||
Impact of divestitures (1) | (29) | - | - |
Management of fair value changes on the purchase of | 413 | - | - |
Impact of adjusting items on revenue (after-tax) | 384 | - | - |
Adjusting Items Impacting Non-Interest Expense (After-tax) | |||
Acquisition and integration costs (3) | (10) | (1) | (2) |
Amortization of acquisition-related intangible assets (4) | (6) | (14) | (19) |
Impact of divestitures (1) | (19) | (52) | - |
Impact of adjusting items on non-interest expense (after-tax) | (35) | (67) | (21) |
Impact of adjusting items on reported net income (after-tax) | 349 | (67) | (21) |
Impact on diluted EPS ($) | 0.54 | (0.10) | (0.03) |
Adjusted Results | |||
Revenue | 7,190 | 6,573 | 6,975 |
Insurance claims, commissions and changes in policy benefit liabilities (CCPB) | (81) | (97) | (601) |
Revenue, net of CCPB | 7,109 | 6,476 | 6,374 |
Total provision for credit losses | 99 | 126 | (156) |
Non-interest expense | (3,829) | (3,720) | (3,585) |
Income before income taxes | 3,379 | 2,882 | 2,633 |
Provision for income taxes | (795) | (656) | (595) |
Net income | 2,584 | 2,226 | 2,038 |
Diluted EPS ($) | 3.89 | 3.33 | 3.06 |
(1) | Q1-2022 reported net income included the impact of divestitures related to the sale of our EMEA Asset Management business, comprising a |
(2) | Q1-2022 reported net income included revenue and expenses related to the announced acquisition of |
(3) | Acquisition integration costs related to Clearpool in Q1-2022 and acquisition integration costs related to both KGS-Alpha and Clearpool in Q4-2021 and Q1-2021 are recorded in non-interest expense in |
(4) | Amortization of acquisition-related intangible assets is recorded in non-interest expense in the related operating group and was |
Summary of Reported and Adjusted Results by
BMO Wealth | Corporate | |||||||
(Canadian $ in millions) | Canadian P&C | | Total P&C | Management | Markets | Services | (US $ in millions) | |
Q1-2022 | ||||||||
Reported net income (loss) | 1,004 | 681 | 1,685 | 315 | 705 | 228 | 2,933 | 1,145 |
Acquisition and integration costs (2) | - | - | - | - | 3 | 7 | 10 | 7 |
Amortization of acquisition-related intangible assets (3) | - | 1 | 1 | 1 | 4 | - | 6 | 4 |
Impact of divestitures (4) | - | - | - | - | - | 48 | 48 | (40) |
Management of fair value changes on the purchase of | - | - | - | - | - | (413) | (413) | (325) |
Adjusted net income (loss) | 1,004 | 682 | 1,686 | 316 | 712 | (130) | 2,584 | 791 |
Q4-2021 | ||||||||
Reported net income (loss) | 933 | 509 | 1,442 | 345 | 531 | (159) | 2,159 | 618 |
Acquisition and integration costs (2) | - | - | - | - | 1 | - | 1 | 2 |
Amortization of acquisition-related intangible assets (3) | - | 6 | 6 | 4 | 4 | - | 14 | 9 |
Impact of divestitures (4) | - | - | - | - | - | 52 | 52 | 4 |
Adjusted net income (loss) | 933 | 515 | 1,448 | 349 | 536 | (107) | 2,226 | 633 |
Q1-2021 | ||||||||
Reported net income (loss) | 750 | 579 | 1,329 | 336 | 478 | (126) | 2,017 | 672 |
Acquisition and integration costs (2) | - | - | - | - | 2 | - | 2 | 2 |
Amortization of acquisition-related intangible assets (3) | - | 7 | 7 | 8 | 4 | - | 19 | 9 |
Adjusted net income (loss) | 750 | 586 | 1,336 | 344 | 484 | (126) | 2,038 | 683 |
(1) | |
(2) | Acquisition integration costs related to Clearpool in Q1-2022 and acquisition integration costs related to both KGS-Alpha and Clearpool in Q4-2021 and Q1-2021 are recorded in non-interest expense in BMO Capital Markets. Acquisition integration costs are |
(3) | Amortization of acquisition-related intangible assets is recorded in non-interest expense in the related operating group. Canadian P&C did not record any amounts in Q1-2022, Q4-2021, or Q1-2021. |
(4) | Q1-2022 reported net income included the impact of divestitures related to the sale of our EMEA Asset Management business, comprising a |
(5) | Q1-2022 reported net income included revenue and expenses related to the announced acquisition of |
Return on Equity and Return on Tangible Common Equity
(Canadian $ in millions, except as noted) | Q1-2022 | Q4-2021 | Q1-2021 |
Reported net income | 2,933 | 2,159 | 2,017 |
Dividends on preferred shares and distributions on other equity instruments | (55) | (59) | (56) |
Net income available to common shareholders (A) | 2,878 | 2,100 | 1,961 |
After-tax amortization of acquisition-related intangible assets | 6 | 14 | 19 |
Net income available to common shareholders after adjusting for amortization of acquisition-related intangible assets (B) | 2,884 | 2,114 | 1,980 |
After-tax impact of other adjusting items (1) | (355) | 53 | 2 |
Adjusted net income available to common shareholders (C) | 2,529 | 2,167 | 1,982 |
Average common shareholders' equity (D) | 53,345 | 52,113 | 49,648 |
Return on equity (%) (= A/D) | 21.4 | 16.0 | 15.7 |
Adjusted return on equity (%) (= C/D) | 18.8 | 16.5 | 15.8 |
Average tangible common equity (E) (2) | 48,431 | 46,580 | 43,137 |
Return on tangible common equity (%) (= B/E) | 23.6 | 18.0 | 18.2 |
Adjusted return on tangible common equity (%) (= | 20.7 | 18.5 | 18.2 |
(1) | Refer to footnotes (1) to (4) in the Non-GAAP and Other Financial Measures table above. |
(2) | Average tangible common equity is average common shareholders' equity (D above) adjusted for goodwill of |
Caution Regarding Forward-Looking Statements
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, including labour challenges; the severity, duration and spread of the COVID-19 pandemic, and possibly other outbreaks of disease or illness, and its impact on local, national or international economies, as well as its heightening of certain risks that may affect our future results; 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; benchmark interest rate reforms; technological changes and technology resiliency; political conditions, including changes relating to, or affecting, economic or trade matters; climate change and other environmental and social risk; the Canadian housing market and consumer leverage; inflationary pressures; global supply-chain disruptions; 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; weak, volatile or illiquid capital or credit markets; the level of competition in the geographic and business areas in which we operate; 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 proposed acquisitions or dispositions, including obtaining regulatory approvals; critical accounting estimates and the effects of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks, including with respect to reliance on third parties; the possibility that our proposed acquisition of
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 2021 Annual Report, and the Risk Management section in our First Quarter 2022 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 are set out in the Economic Developments and Outlook section of BMO's 2021 Annual Report and updated in the Economic Developments and Outlook section in our First Quarter 2022 Report to Shareholders, as well as in the Allowance for Credit Losses section of BMO's 2021 Annual Report and updated in the Allowance for Credit Losses section in our First Quarter 2022 Report to Shareholders. Assumptions about the performance of the Canadian and
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 Developments and Outlook and Allowance for Credit Losses sections in our First Quarter 2022 Report to Shareholders.
INVESTOR AND MEDIA INFORMATION
Investor Presentation Materials
Interested parties are invited to visit BMO's website at www.bmo.com/investorrelations to review the 2021 Annual MD&A and audited annual consolidated financial statements, quarterly presentation materials and supplementary financial and regulatory information package.
Quarterly Conference Call and Webcast Presentations
Interested parties are also invited to listen to our quarterly conference call on
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 Plan (the Plan) Average market price as defined under the Plan
For dividend information, change in shareholder address or to advise of duplicate mailings, please contact Telephone: 1-800-340-5021 ( Telephone: (514) 982-7800 (international) Fax: 1-888-453-0330 ( Fax: (416) 263-9394 (international) E-mail: service@computershare.com
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For other shareholder information, please contact Shareholder Services Corporate Secretary's Department One Telephone: (416) 867-6785 Fax: (416) 867-6793 E-mail: corp.secretary@bmo.com
For further information on this document, please contact Investor Relations Department P.O. Box 1,
To review financial results and regulatory filings and disclosures online,
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BMO's 2021 Annual MD&A, audited 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 on SEDAR at www.sedar.com. Printed copies of the bank's complete 2021 audited consolidated financial statements are available free of charge upon request at 416-867-6785 or corp.secretary@bmo.com.
Annual Meeting 2022 The next Annual Meeting of Shareholders will be held on |
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