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BMO Financial Group Reports Fourth Quarter and Fiscal 2021 Results
BMO’s 2021 audited annual consolidated financial statements and accompanying Management Discussion and Analysis (MD&A) are available online at www.bmo.com/investorrelations and at www.sedar.com .
Financial Results Highlights
Fourth Quarter 2021 Compared With Fourth Quarter 2020:
- Net income of $2,159 million, an increase of 36%; adjusted net income1 of $2,226 million, an increase of 38%
- Reported earnings per share (EPS)2 of $3.23, an increase of 36%; adjusted EPS1,2 of $3.33, an increase of 38%
- Recovery of the provision for credit losses of $126 million, compared with a provision for credit losses of $432 million
- Return on equity (ROE) of 16.0%, an increase from 12.4%; adjusted ROE1 of 16.5%, an increase from 12.6%
- Common Equity Tier 1 Ratio3 of 13.7%, an increase from 11.9%
- Dividend of $1.33, an increase of $0.27 or 25%
Fiscal 2021 Compared With Fiscal 2020:
- Net income of $7,754 million, an increase of 52%; adjusted net income1 of $8,651 million, an increase of 66%
- Reported EPS2 of $11.58, an increase of 53%; adjusted EPS1,2 of $12.96, an increase of 68%
- Provision for credit losses of $20 million, compared with $2,953 million
- ROE of 14.9%, an increase from 10.1%; adjusted ROE1 of 16.7%, an increase from 10.3%
TORONTO, Dec. 3, 2021 – For the fourth quarter ended October 31, 2021, BMO Financial Group (TSX: BMO) (NYSE: BMO) recorded net income of $2,159 million or $3.23 per share on a reported basis, and net income of $2,226 million or $3.33 per share on an adjusted basis.
“We delivered another quarter of strong performance with positive operating leverage in each of our diversified businesses, contributing to strong earnings for fiscal 2021. This year, we significantly advanced our strategy to build a digitally-enabled, future-ready bank, underpinned by our Purpose and a winning culture. We’ve taken action to improve our competitive position through a disciplined approach to expense management, capital allocation and investment in future growth, while meaningfully improving our efficiency ratio and return on equity over the last several years,” said Darryl White, Chief Executive Officer, BMO Financial Group.
“Strong, consistent financial performance enables us to continue to invest in improving the well-being of our employees, customers and communities. We continue to be recognized as a global leader in sustainability as one of only five Canadian companies included in the Dow Jones Sustainability World Index – a confirmation of the progress we’re making on our bold commitments for a thriving economy, a sustainable future and an inclusive society. We will continue to act as a catalyst for positive change, including serving as our clients’ lead partner in the transition to a net zero world.”
“Looking ahead to 2022, we will continue to position BMO for growth with the ensuing economic recovery. We are making targeted investments in technology and talent to drive enhanced customer experiences and deliver market-leading advice to help them make real financial progress. Today we announced a 25% dividend increase and our intention to repurchase up to 22.5 million shares, reflecting the strength of our capital position and confidence in delivering sustained, long-term performance for our shareholders,” concluded Mr. White.
Concurrent with the release of results, BMO announced a first quarter 2022 dividend of $1.33 per common share, an increase of $0.27 or 25% from the prior quarter and the prior year. The quarterly dividend of $1.33 per common share is equivalent to an annual dividend of $5.32 per common share.
The foregoing section contains forward-looking statements. Refer to the Caution Regarding Forward-Looking Statements.
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 measures are non-GAAP and are detailed for all reported periods in the Non-GAAP and Other Financial Measures section.
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.
The Common Equity Tier 1 (CET1) Ratio is disclosed in accordance with OSFI’s Capital Adequacy Requirements (CAR) Guideline.
Note: All ratios and percentage changes in this document are based on unrounded numbers.
Fourth Quarter 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 U.S. dollar amounts and ratios in this Fourth Quarter Performance Review section are on a non-GAAP basis and discussed in the Non-GAAP and Other Financial Measures section.
Reported and adjusted net income increased from the prior year, driven by revenue growth, an increase in expenses, and a recovery of the provision for credit losses. Net income increased across all operating groups. Adjusted results in the current quarter excluded expenses of $52 million ($62 million pre-tax) from the impact of divestitures related to the sale of our EMEA Asset Management business and the sale of our Private Banking business in Hong Kong and Singapore. Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior years.
Reported net income was $921 million, an increase of $274 million or 42% and adjusted net income was $921 million, an increase of $273 million or 42% from the prior year. Results were driven by a 13% increase in revenue, with higher net interest income and non-interest revenue, higher expenses, and a recovery of the provision for credit losses compared with a provision in the prior year.
Reported net income was $512 million, an increase of $188 million or 58% from the prior year and adjusted net income was $518 million, an increase of $185 million or 55%.The impact of the weaker U.S. dollar reduced net income growth by 8%, revenue growth by 6% and expense growth by 5%.
On a U.S. dollar basis, reported net income was US$408 million, an increase of US$162 million or 66% from the prior year, and adjusted net income was US$412 million, an increase of US$158 million or 63%. Reported and adjusted results were driven by a 9% increase in revenue, with higher net interest income and non-interest revenue, higher expenses and a recovery of the provision for credit losses compared with a provision in the prior year.
BMO Wealth Management
Reported net income was $369 million, an increase of $49 million or 15% from the prior year and adjusted net income was $373 million, an increase of $45 million or 14%. Results were driven by higher revenue, partially offset by an increase in expenses. Traditional Wealth reported net income was $318 million, an increase of $65 million or 26% and adjusted net income was $322 million, an increase of $61 million or 24%, driven by higher revenue, primarily from growth in client assets, including stronger global markets, partially offset by higher expenses. Insurance net income was $51 million, a decrease from $67 million in the prior year, primarily due to prior-year benefits from changes in investments to improve asset-liability management.
BMO Capital Markets
Reported net income was $536 million, an increase of $157 million or 41% from the prior year, and adjusted net income was $541 million, an increase of $154 million or 40%. Reported and adjusted results were driven by continued strong revenue performance, with higher Investment and Corporate Banking revenue partially offset by lower Global Markets revenue, expenses relatively unchanged from the prior year and a recovery of credit losses compared with a provision in the prior year.
Reported net loss was $179 million and adjusted net loss was $127 million, compared with a reported and adjusted net loss of $86 million in the prior year. Reported and adjusted results decreased due to lower revenue, driven by treasury-related activities, higher expenses, and the impact of a more favourable tax rate in the prior year.
BMO’s Common Equity Tier 1 (CET1) Ratio was 13.7% as at October 31, 2021, an increase from 13.4% at the end of the third quarter of fiscal 2021, driven by retained earnings growth, partially offset by higher source currency risk-weighted assets.
Total recovery of the provision for credit losses was $126 million, compared with a provision for credit losses of $432 million in the prior year. The total recovery of credit losses as a percentage of average net loans and acceptances ratio was 11 basis points, compared with a provision for credit losses ratio of 37 basis points in the prior year. The provision for credit losses on impaired loans was $84 million, a decrease of $255 million from $339 million in the prior year. The provision for credit losses on impaired loans as a percentage of average net loans and acceptances ratio was 7 basis points, compared with 29 basis points in the prior year. There was a $210 million recovery of the provision for credit losses on performing loans in the current quarter, compared with a $93 million provision in the prior year. The $210 million recovery in the current quarter largely reflected an improving economic outlook and positive credit migration, partially offset by growth in loan balances, while the $93 million provision in the prior year reflected a more severe adverse scenario, partially offset by an improving economic outlook and reduced balances.
Refer to the Accounting Policies and Critical Accounting Estimates section of BMO’s 2021 Annual MD&A and Note 4 of our audited annual consolidated financial statements for further information on the allowance for credit losses as at October 31, 2021.
Supporting a Sustainable and Inclusive Recovery
At BMO, we have a long-standing commitment to support a thriving economy, a sustainable future and an inclusive society, and we are acting with purpose. In support of our customers, communities and employees, BMO recently:
- Ranked among the most sustainable companies on the Dow Jones Sustainability Indices (DJSI) – one of only five companies in Canada included in the DJSI World Index, earning the highest score in Corporate Governance, Customer Relationship Management, Financial Inclusion, Environmental Reporting and Social Reporting.
- Announced it is joining the United Nations-convened Net-Zero Banking Alliance as part of a global industry-led initiative to accelerate and support efforts to address climate change.
- Helped clients achieve environmental, social and governance (ESG) goals with sustainability-linked loans, as part of its commitment to deploy $300 billion in sustainable lending and underwriting to companies pursuing sustainable outcomes.
- As part of BMO’s five-year, $5 billion EMpowerTM commitment, launched the new BMO Women in Business Credit Program through BMO Harris Bank and expanded our Black and Latinx Small Business Program across our U.S. footprint, increasing access to capital, educational resources and meaningful partnerships.
- Released Wîcihitowin ᐑᒋᐦᐃᑐᐏᐣ, BMO’s first annual Indigenous Partnerships and Progress report, highlighting the partnership with Indigenous communities and BMO’s Indigenous Advisory Council to further education, employment and economic empowerment.
- Was recognized by Forbes magazine as BMO Harris Bank was named one of the World’s Best Employers for 2021.
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.
The extent to which the COVID-19 pandemic impacts BMO’s business, results of operations, reputation, financial performance and condition, including the potential for credit, counterparty and mark-to-market losses, its credit ratings and regulatory capital and liquidity ratios, as well as impacts to its customers and competitors will depend on future developments. Such developments are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic and actions taken by third parties, governments, and governmental and regulatory authorities, which could vary by country and region. The COVID-19 pandemic may also impact the bank’s ability to achieve, or the timing to achieve, certain previously announced targets, goals and objectives.
For additional information, refer to the Risks That May Affect Future Results section of BMO’s 2021 Annual MD&A.
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.
Management’s Discussion and Analysis (MD&A) commentary is as at December 3, 2021. The material that precedes this section comprises part of this MD&A. The MD&A should be read in conjunction with the unaudited interim consolidated financial statements for the period ended October 31, 2021, included in this document, as well as the audited annual consolidated financial statements for the year ended October 31, 2021, and the MD&A for fiscal 2021, contained in BMO’s 2021 Annual Report.
BMO’s 2021 Annual MD&A includes a comprehensive discussion of its 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 at October 31, 2021, of Bank of Montreal’s disclosure controls and procedures (as defined in the rules of the U.S. Securities and Exchange Commission and the Canadian Securities Administrators) and has concluded that such disclosure controls and procedures are effective.
There were no changes in our internal control over financial reporting during the quarter ended October 31, 2021, which materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Because of inherent limitations, disclosure controls and procedures and internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements.
As in prior quarters, Bank of Montreal’s Audit and Conduct Review Committee reviewed this document and Bank of Montreal’s Board of Directors approved the document prior to its release.
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