BMO Financial CEO Discusses F4Q2010 Results – Earnings Call Transcript

BMO Financial CEO Discusses F4Q2010 Results â¿¿ Earnings Call Transcript
By Seeking Alpha ,

BMO Financial Group (BMO)

F4Q2010 Earnings Call Transcript

December 7, 2010 2:00 pm ET

Executives

Viki Lazaris – SVP, IR

Bill Downe – President and CEO

Russel Robertson – CFO

Tom Flynn – EVP and Chief Risk Officer

Frank Techar

President & CEO, Personal and Commercial Banking Canada, BMO Bank of Montreal

Ellen Costello – President & CEO, Personal and Commercial Banking U.S. and Harris Financial Corp.

Tom Milroy – CEO, BMO Capital Markets

Gilles Ouellette – President & CEO, Private Client Group, BMO Financial Group

Analysts

Andre Hardy – RBC Capital Markets

John Reucassel – BMO Capital Markets

Darko Mihelic – Cormark Securities

Sumit Malhotra – Macquarie Capital Management

Robert Sedran – CIBC

Mario Mendonca – Canaccord Genuity

Brad Smith – Stonecap Securities

Presentation

Operator

Compare to:
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» Bank of Montreal CEO Discusses F3Q2010 Results - Earnings Call Transcript
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» BMO Financial Group F1Q10 (Qtr End 01/31/10) Earnings Call Transcript

Good afternoon, and welcome to the BMO Financial Group’s fourth quarter 2010 conference call for December 7

th

, 2010. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Viki Lazaris

Thank you, and good afternoon, everyone, and thanks for joining us today. Our agenda for today’s investor presentation is as follows. We will begin the call with remarks from Bill Downe, BMO’s CEO; followed by presentations from Russ Robertson, the Bank’s Chief Financial Officer; and Tom Flynn, our Chief Risk Officer.

After their presentations, we will have a short question-and-answer period where we will take questions from pre-qualified analysts. To give everyone an opportunity to participate, please keep it to one or two questions and then re-queue. We will wrap up the call at 3 PM. Also with us this afternoon are BMO’s business unit heads; Tom Milroy from BMO Capital Markets; Gilles Ouellette from the Private Client Group; Frank Techar, Head of P&C Canada; and Ellen Costello from P&C U.S.

At this time, I would like to caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements may be made during this call, and they are subject to a variety of risks and uncertainties. Actual results could differ materially from forecasts, projections, or conclusions in the forward-looking statements. You can find information about the material factors that could cause our actual results to so differ, and information about the material factors and assumptions that were applied in drawing conclusions or making the forecasts or projections in these forward-looking statements on Page 29 and Page 30 of our 2010 Annual MD&A.

With that said, I’ll hand things over to Bill.

Bill Downe

Thank you, Viki, and good afternoon everyone. As noted, my comments may include forward-looking statements. BMO’s fourth quarter financial results reinforced the trends that have been evident throughout the year. We are generating good revenue growth, momentum is visible across all our business groups, loan loss trends are generally positive, return on equity continues to increase, and our capital position remains strong. We are achieving the success, we are also investing in future growth, specifically the fourth quarter saw increased investment spend in our retail businesses and in technology and operations resulting in higher expense. This reflects rather our commitment to invest in frontline staff and to expand our branch network and online customer experience.

Revenue in the fourth quarter was $3.2 billion, up 8% and net income was 739 million, 14% above last year. Cash EPS came in at $1.26 per share and our ROE was 15.1%. The 253 million fourth quarter provisions for credit losses were significantly improved from last year and was slightly elevated from the previous quarter, we believe that there was a credit recovery underway and have confidence in an overall continued positive trend, and Tom Flynn will provide more color later in the call.

For the full year, revenue increased 10.4% to $12.2 billion, and net income increased to 2.8 billion. Provisions for credit losses were reduced substantially and cash productivity improved 440 basis points to 61.9%. Return on equity increased to 14.9% from 9.9% a year ago, and BMO’s U.S. operations returned to profitability in 2010 as reported with actual credit losses.

Pretax pre-provision earnings were 4.6 billion, up 937 million from the previous year, reaching the highest level in the history of the Bank, and BMO finished the year with a strong capital position. Russ will take you through our Group results in more detail, but let me touch on some highlights.

P&C Canada continued to excel, delivering strong growth in revenue and net income in the fourth quarter and for the year. Net income for fiscal 2010 grew 16%, and on an actual loss basis 22.5%. Performance was driven by higher revenues across each of our businesses. The business has a clear strategy and strong execution capabilities. Everything we are undertaking from customer offers to the 5,650 employees who completed customer conversation sales training this year lines up to support our brand, Making Money Make Sense. As a result, in 2010, we generated improved customer royalty as well as year-over-year increases in the average number of product categories used by both our personal and commercial customers.

And as I indicated, we are investing strategically to improve our competitive position, leveraging our customer knowledge base to drive further growth. P&C U.S. net income in Q4 was $37 million U.S. dollars, down 21% from a year ago, reflecting the cost of the integration of the AMCORE acquisition, which was completed in the fourth quarter. We are pleased with this addition of new customers and the added presence it brings in Wisconsin and Illinois, and excluding the integration costs, net income was essentially unchanged at $48 million for the year – rather for the quarter.

Harris continues to increase its presence and visibility in the market. In 2010, we added over 7,000 new checking accounts, increased personal core deposits by 258 million, increased personal deposit market share by 35 basis points in the Chicago metropolitan market, and our net promoter score of 40 remained among the highest compared with both large and regional banks in our markets.

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