Q1 2017 Real-Time Call Brief

Highlights

Today, we announced net income for the first quarter of $1.5 billion and earnings per share of $ 2.28. Strong earnings growth of 30% was driven by good performance across our businesses, and an improved environment compared to this time last year.

Although our results benefited from the net impact of the sale of non-strategic assets during the quarter, underlying earnings grew at 19%.

With a CET1 ratio of 11.1%, ROE was 15.3%.

Loans grew by 5% and deposits were up 8%, as we continue to grow and deepen customer relationships.

Expenses continued to be well-managed, up 3% year-over-year.

Expenses remained well-controlled, up approximately 1%, excluding the extra month of Transportation Finance in the current quarter.

The digital adoption rate has increased to 49%, with 16% of sales now originated through digital channels.

Global transactions are up 54% in each of the last two years, and we expect these trends to continue.

Reported EPS for the quarter was $2.22, and net income was $1.5 billion.

Results in the quarter also benefited from the combination of the sale of Moneris US and the sale of a portion of our U.S indirect auto loan portfolio, which resulted in a net gain of $133 million after tax or $0.20 per share.

Adjusted EPS was $2.28 and net income was $1.5 billion, both up 30% year-over-year, or 19% excluding the net gain.

Adjusted net revenue of $5.4 billion was up 13% from last year, with the net gain contributing 3% of that.

Net interest income was up 2%.

Adjusted non-interest revenue was up 24%, primarily due to the gain on sale, as well as higher trading revenue, insurance revenue, and underwriting and advisory fees.

Adjusted expenses were up 4% from last year.

On a net revenue basis, the adjusted operating leverage was 9.1%, with 3% of that coming from the net gain.

The adjusted efficiency ratio improved 530 basis points to 61.5%, with 150 basis points of the improvement due to the net gain.

On a reported basis, efficiency was 62.6%.

The adjusted effective tax rate was 19.8%, up from 16.2% a year ago, and was 24.4% on a TEB basis, down from 24.8%.

The common equity Tier 1 ratio was 11.1%, up from 10.1% last quarter.

Canadian Personal and Commercial adjusted net income was $744 million and includes the $168 million gain on the sale of Moneris US.

Revenue growth of 15% was driven by higher non-interest revenue and higher balances, partially offset by lower net interest margin.

The gain included in non-interest revenue contributed 11% to the 15% revenue growth.

Total loans were up 5% and deposit growth was good at 8%.

NIM was down 2 basis points from last quarter, largely due to the low rate environment.

Expense growth was 3%, as we balanced investing in the business with good expense management.

The adjusted net income was $272 million, up 3% from last year.

Adjusted net income of $205 million was up 7% from last year.

Income includes a $27 million loss on the sale of indirect auto loans, which reduced income growth by 14%.

Revenue was up 3%, driven by an additional month of BMO Transportation Finance being included in the results this year.

Higher deposit revenue and increased loan volumes, partially offset by loan spread compression and the impact from the loan sale, which reduced revenue growth by 5%.

Average loan growth was 6%.

Net interest margin increased 12 basis points from last quarter, largely from benefits from reducing the lower yielding auto loan portfolio and from the Fed interest rate increase.

Expenses were up 5% year-over-year, primarily due to an additional month of the acquired BMO Transportation Finance business being included in results in the current quarter.

On an adjusted basis, operating leverage was negative 1.6%., and it was solidly positive if you remove the 5% impact from the loan sale.

BMO Capital Markets had strong net income of $376 million.

Revenue was $1.2 billion, up 21%, driven by strong performance of Trading Products and growth in Investment and Corporate Banking.

Expense growth of 9% largely reflects higher employee costs in line with performance.

Operating leverage was double-digit, and the efficiency ratio was 58.8%.

Wealth Management adjusted net income was $281 million, up significantly from last year.

Adjusted earnings in traditional wealth were up 16%, reflecting improved market conditions, business growth and efficiency benefits.

Adjusted expenses declined 1% year-over-year due to favorable FX impacts and good expense management, partially offset by higher revenue-based comps.

The net loss was $143 million, compared to $48 million a year ago.

Our PCLs were $173 million or 19 basis points, flat compared to the prior quarter.

Capital Markets had a PCL of negative $4 million, once again benefiting from recoveries in the oil and gas sector.

Formations and gross impaired loans were both down, with gross impaired loans decreasing 2 basis points to 60 basis points.

57% of this portfolio is insured and our loan-to-value ratio on uninsured mortgages remains low at 54%.