Bank of Montreal (BMO)
F3Q2010 Earnings Call Transcript
August 24, 2010 2:00 pm ET
Viki Lazaris – SVP, IR
Bill Downe – President and CEO, BMO Financial Group
Russ Robertson – CFO, BMO Financial Group
Tom Flynn – EVP and Chief Risk Officer, BMO Financial Group
Frank Techar – President and CEO, Personal and Commercial Banking Canada, BMO Bank of Montreal
Tom Milroy – CEO, BMO Capital Markets
Ellen Costello – President and CEO, Personal and Commercial Banking US and Harris Financial Corp.
Darko Mihelic – Cormark Securities
Sumit Malhotra – Macquarie Capital
Rob Sedran – CIBC
Mario Mendonca – Canaccord Genuity
John Aiken – Barclays Capital
John Reucassel – BMO Capital Markets
Michael Goldberg – Desjardins
André Hardy – RBC Capital Markets
Steve Theriault – Bank of America/Merrill Lynch
Brian Klock – KBW
Cheryl Pate – Morgan Stanley
Gabriel Dechaine – Credit Suisse
Brad Smith – Stonecap Securities
Previous Statements by BMO
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Good afternoon and welcome to the BMO Financial Group’s third quarter 2010 conference call for August 24, 2010. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.
Thank you. 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 to take the questions 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 US.
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 there are risks that actual results could differ materially from forecasts, projections, or conclusions in the forward-looking statements. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projections in these forward-looking statements.
You can find additional information about such material factors and assumptions and the material factors that could cause actual results to differ in the Caution Regarding Forward-looking Statements set forth in our news release or on the Investor Relations website.
With that said, I’ll hand things over to Bill.
Thank you, Viki. And good afternoon, everyone. As noted, my comments may include forward-looking statements. BMO’s third quarter results were solid, underlying the benefit of the Bank’s diversified business mix. Three factors were particularly significant in these results. P&C Canada maintained its strong performance, including market share gains, with results up 17% from last year and 8% from the robust Q2.
Second, our capital market results reflect lower trading revenues, particularly relevant to recent quarters where we had good spreads and capitalized on some unique market opportunities. And finally, we experienced a continued significant reduction in loan loss provisions, better than we had anticipated.
Net income was $669 million, 20% above last year. Cash EPS came in at $1.14 a share. Our ROE for the quarter was 13.7% and we posted 14.8% year-to-date. A $214 million, our third quarter provisions for credit losses reflect a continuation of a positive trend. PCLs were $203 million better than last year and $35 million better than last quarter. Gross impaired loans and formations declined sequentially.
There is a credit recovery underway, and we have confidence in an overall continued positive trend, and Tom Flynn will provide more color later in the call. Russ is going to take you through our group results in more detail, but let me touch on the quarterly highlights.
P&C Canada continues to set the pace for the company. We are deepening customer relationships across all of our businesses, highlighted by year-over-year increases in the average number of product categories used by both personal and commercial customers; strength in commercial banking with increases in market share and growth in loans and deposits and growth in personal banking, notably in our mortgage portfolio; and good market share gains in consumer loans.
Our commitment to delivering for our customers is yielding dividends for our shareholders, marked by the eighth consecutive quarter of strong revenue growth. P&C US results reflect the economic environment in which we are operating. At this time, our objective continues to be to effectively position P&C US for growth as business conditions improve.
To this end, we are executing on the integration of the FDI assisted transaction in Rockford, Illinois. We have completed the branch rationalization and headcount reduction plan. The next milestones will be the replacement of all signage and the technology conversion in September. We are seeing good climb in deposit retention as well as growth in deposits and checking accounts.
We are replicating strong offers across the company. In June, we introduced Harris Helpful Steps to the US market. It’s an extension of a program that has worked remarkably well in Canada. And as expected, we are seeing early and positive response.
And in commercial banking, we have built a business model that focuses on specialized coverage of seven business segments where we have expertise that sets the stage for faster growth in key markets, broadening our footprint and establishing brand leadership. We are going into the economic recovery with an energized US management team and enhanced business structure and ramped up visibility of the strong Harris brand, all good positions to be in.
Net income in the Private Client Group was $108 million, with growth across most of our businesses. Assets under management and administration improved 11% year-over-year after adjusting to exclude the impact of the weaker US dollar. We continue to strategically invest in the business, increasing our sales force and enhancing our product offers. We continue to pioneer in the ETF sector. We launched eight more ETFs in the quarter, expanding our product line now to a total of 30 funds.