BMO Financial Group Reports Net Income of $973 Million for First Quarter of 2018

Toronto (ots/PRNewswire) -

Financial Results Highlights:

First Quarter 2018 Compared with First Quarter 2017:

- Net income of $973 million, down 35% reflecting a revaluation of
the U.S. net deferred tax asset of $425 million related to U.S. tax
reform and a net gain in the prior year
- Adjusted net income[1] of $1,422 million, down 7% reflecting the
net gain in the prior year
- EPS[2] of $1.43, down 36%; adjusted EPS[1],[2 ]of $2.12, down 7%
- Good operating performance in retail businesses
- Provisions for credit losses (PCL) of $141 million, including a $33
million recovery of credit losses on performing loans[3], compared
with $167 million in the prior year
- Common Equity Tier 1 Ratio of 11.1%

For the first quarter ended January 31, 2018, BMO Financial Group
(TSX:BMO) (NYSE:BMO) recorded net income of $973 million or $1.43 per
share on a reported basis, and net income of $1,422 million or $2.12
per share on an adjusted basis.

"BMO had a good start to the year, with adjusted net income of
$1.4 billion and adjusted earnings per share of $2.12. These results
reflect strong operating revenue growth in Personal and Commercial
Banking in Canada and the U.S., driven by good loan and deposit
growth and the benefit of higher interest rates, as well as strong
credit performance which is reflective of our consistent approach to
effective risk management and building deep, long-term customer
relationships," said Darryl White, Chief Executive Officer, BMO
Financial Group.

"The constructive economic environment, particularly in the U.S.,
plays to the strengths of our business mix, with another quarter of
increased contribution from our U.S. segment, which grew at a higher
rate than the bank overall. We have made progress against our
strategic areas of focus, including making the bank more efficient
and continuing to invest in our digital agenda, our people and our
communities. Looking ahead, we see attractive opportunities to
deliver organic growth and achieve our financial objectives,"
concluded Mr. White.

Reported net income in the quarter included a $425 million (US$339
million) charge due to the revaluation of our U.S. net deferred tax
asset as a result of the enactment of the U.S. Tax Cuts and Jobs Act
[4], which had a negative impact of approximately 29% on reported net
income growth, and $0.65 to earnings per share. As previously
disclosed, this is a one-time non-cash charge resulting from the
reduction in the U.S. federal tax rate. Going forward, there is
expected to be a benefit from the lower tax rate on BMO's future U.S.
earnings.

Net income in the prior year included a net gain of $133 million,
attributed to a $168 million gain on the sale of Moneris US and a $35
million loss on the sale of a portion of the U.S. indirect auto loan
portfolio. The net gain had a negative impact of approximately 9% on
reported and adjusted net income growth.

Return on equity (ROE) was 9.4% compared with 14.9% in the prior
year, and adjusted ROE was 13.9% compared with 15.3%. Return on
tangible common equity (ROTCE) was 11.5% compared with 18.5% in the
prior year, and adjusted ROTCE was 16.7% compared with 18.6%.

[1] Results and measures in this document are presented on a GAAP
basis. They are also presented on an adjusted basis that excludes the
impact of certain items. Adjusted results and measures are non-GAAP
and are detailed for all reported periods in the Non-GAAP Measures
section, where such non-GAAP measures and their closest GAAP
counterparts are disclosed.

[2)] All Earnings per Share (EPS) measures in this document refer
to diluted EPS unless specified otherwise. EPS is calculated using
net income after deductions for net income attributable to
non-controlling interest in subsidiaries and preferred share
dividends.

[3] Effective in the first quarter of 2018, the bank prospectively
adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we
refer to the provision for credit losses on impaired loans and the
provision for credit losses on performing loans. Prior periods have
not been restated. Refer to the Changes in Accounting Policies
section on page 22 of our First Quarter 2018 Report to Shareholders
for further details.

[4] See the Critical Accounting Estimates - Income Taxes and
Deferred Tax Assets section on page 114 of BMO's 2017 Annual Report.
For further information see the Other Regulatory Developments section
on page 24 of our First Quarter 2018 Report to Shareholders.

Note: All ratios and percentage changes in this document are based
on unrounded numbers.

Concurrent with the release of results, BMO announced a second
quarter 2018 dividend of $0.93 per common share, unchanged from the
preceding quarter and up $0.05 per share or 6% from a year ago. The
quarterly dividend of $0.93 per common share is equivalent to an
annual dividend of $3.72 per common share.

Our complete First Quarter 2018 Report to Shareholders, including
our unaudited interim consolidated financial statements for the
period ended January 31, 2018, is available online at
http://www.bmo.com/investorrelations and at http://www.sedar.com.

Operating Segment Overview

Canadian P&C

Reported net income of $647 million decreased $97 million or 13%
and adjusted net income of $647 million decreased $98 million or 13%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. A gain on the sale of Moneris
US in the prior year had a negative impact of approximately 25% on
net income growth. Good operating revenue growth and a gain related
to the restructuring of Interac Corporation was partially offset by
higher expenses, including a legal reserve, in the current quarter.

During the quarter, we continued to enhance our digital
capabilities, introducing BMO for Amazon Alexa, which allows
customers with Alexa-enabled devices to access information such as
nearby BMO automated teller machine locations, up-to-date foreign
exchange rates and information on BMO products.

U.S. P&C

Reported net income of $310 million increased $61 million or 24%
and adjusted net income of $321 million increased $60 million or 23%
from a year ago. Adjusted net income excludes the amortization of
acquisition-related intangible assets.

Reported net income of US$247 million increased US$59 million or
31% from a year ago and adjusted net income of US$256 million
increased US$59 million or 30%, mainly due to higher revenue,
including the impact of a prior year US$27 million after-tax loss on
a loan sale, the more favourable tax rate as a result of U.S. tax
reform and a lower provision for credit losses, partially offset by
higher expenses. The prior year loss on the loan sale contributed
approximately 16% to reported and adjusted net income growth.

BMO Harris Bank earned an Outstanding rating for the Community
Reinvestment Act performance from the Office of the Comptroller of
the Currency, recognizing the bank's commitment to help support low-
and moderate- income communities.

BMO Wealth Management

Reported net income was $266 million compared to $269 million a
year ago, and adjusted net income was $276 million compared to $284
million a year ago. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Traditional wealth reported
net income of $184 million increased $20 million or 12% from a year
ago and adjusted net income of $194 million increased $15 million or
8%, primarily due to business growth and improved equity markets,
partially offset by higher expenses. Insurance net income was $82
million compared to $105 million last year primarily due to more
favourable market movements in the prior year, partially offset by
underlying business growth.

The strength of BMO Asset Management's Exchange Traded Funds (ETF)
business was recognized at the 2017 Thomson Reuters Lipper Fund
Awards, with seven BMO ETFs claiming top honours, recognizing top
risk-adjusted performing funds relative to peers.

BMO Capital Markets

Reported and adjusted net income were $271 million compared to
$367 million in the prior year, primarily due to lower revenue from
our Trading Products business following record revenue performance in
the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets.

BMO Capital Markets was named Best Bank for the Canadian Dollar
for the seventh consecutive year by FX Week. We also partnered with
the World Bank as joint lead manager on its inaugural Sustainable
Development Bond to raise awareness for women and girls' empowerment,
raising $1 billion.

Corporate Services

Corporate Services net loss for the quarter was $521 million
compared with a net loss of $141 million a year ago. Corporate
Services adjusted net loss for the quarter was $93 million compared
with an adjusted net loss of $127 million a year ago. Adjusted
results exclude the one-time non-cash charge due to the revaluation
of our U.S. net deferred tax asset of $425 million in the current
quarter and acquisition integration costs in both periods. Adjusted
results increased mainly due to above-trend taxes in the prior year,
as well as higher revenue excluding the taxable equivalent basis
(teb) adjustment and lower expenses in the current quarter. Reported
results decreased due to the U.S. net deferred tax asset revaluation
charge in the current quarter, partially offset by the drivers noted
above.

Adjusted results in this Operating Segment Overview section are
non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP
Measures section.

Capital

BMO's Common Equity Tier 1 (CET1) Ratio was 11.1% at January 31,
2018.

The CET1 Ratio decreased from 11.4% at the end of the fourth
quarter as retained earnings growth was more than offset by business
growth and share repurchases during the quarter. The impact of the
revaluation of our U.S. net deferred tax asset was a decrease of
approximately 17 basis points in the CET1 Ratio.

Provision for Credit Losses

Effective in the first quarter of 2018, the bank prospectively
adopted IFRS 9, Financial Instruments (IFRS 9). Under IFRS 9, we
refer to the provision for credit losses on impaired loans and the
provision for credit losses on performing loans. The provision for
credit losses on impaired loans under IFRS 9 is consistent with the
specific provision under IAS 39, Financial Instruments: Recognition
and Measurement (IAS 39) in prior years. The provision for credit
losses on performing loans replaces the collective provision under
IAS 39. Refer to Note 3 to the unaudited interim consolidated
financial statements for an explanation of the provision for credit
losses. Prior periods have not been restated.

The total provision for credit losses was $141 million, a decrease
of $26 million from the prior year. The provision for credit losses
on impaired loans of $174 million increased $7 million reflecting
higher provisions in U.S. P&C and lower recoveries in BMO Capital
Markets, partially offset by lower provisions in Canadian P&C. There
was a reduction in the allowance for credit losses on performing
loans this quarter, resulting in a recovery of credit losses of $33
million, primarily in U.S. P&C, as an improved macroeconomic outlook
resulted in lower future expected credit losses. In Canada, the
macroeconomic outlook was relatively stable.

Caution

The foregoing sections contain forward-looking statements. Please
see the Caution Regarding Forward-Looking Statements.

Regulatory Filings

Our continuous disclosure materials, including our interim
filings, annual Management's Discussion and Analysis and audited
consolidated financial statements, Annual Information Form and Notice
of Annual Meeting of Shareholders and Proxy Circular are available on
our website at http://www.bmo.com/investorrelations, on the Canadian
Securities Administrators' website at http://www.sedar.com and on the
EDGAR section of the SEC's website at http://www.sec.gov.

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.

Non-GAAP 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 financial statements prepared in
accordance with International Financial Reporting Standards (IFRS).
References to GAAP mean IFRS. They are also presented on an adjusted
basis that excludes the impact of certain items as set out in the
table below. Results and measures that exclude the impact of
Canadian/U.S. dollar exchange rate movements on our U.S. segment are
non-GAAP measures (please see the Foreign Exchange section for a
discussion of the effects of changes in exchange rates on our
results). Management assesses performance on a reported basis and on
an adjusted basis and considers both to be useful in assessing
underlying ongoing business performance, and providing readers with a
better understanding of management's perspective on our performance.
Except as otherwise noted, management's discussion of changes in
reported results in this document applies equally to changes in
corresponding adjusted results. Adjusted results and measures are
non-GAAP and as such do not have standardized meaning under GAAP.
They are unlikely to be comparable to similar measures presented by
other companies.

Non-GAAP Measures

(Canadian $ in millions, except as noted) Q1-2018
Q4-2017 Q1-2017
Reported Results
Revenue 5,678
5,655 5,405
Insurance claims, commissions and changes in
policy benefit liabilities (CCPB) (361)
(573) (4)
Revenue, net of CCPB 5,317
5,082 5,401
Total provision for credit losses (141)
(202) (167)
Non-interest expense (3,441)
(3,375) (3,385)
Income before income taxes 1,735
1,505 1,849
Provision for income taxes (762)
(278) (361)
Net Income 973
1,227 1,488
EPS ($) 1.43
1.81 2.22
Adjusting Items (Pre-tax) (1)
Amortization of acquisition-related
intangible assets (2) (28)
(34) (37)
Acquisition integration costs (3) (4)
(24) (22)
Restructuring costs (4) -
(59) -
Adjusting items included in reported pre-tax
income (32)
(117) (59)
Adjusting Items (After tax) (1)
Amortization of acquisition-related
intangible assets (2) (21)
(26) (28)
Acquisition integration costs (3) (3)
(15) (14)
Restructuring costs (4) -
(41) -
U.S. net deferred tax asset revaluation (5) (425)
- -
Adjusting items included in reported net
income after tax (449)
(82) (42)
Impact on EPS ($) (0.69)
(0.13) (0.06)
Adjusted Results
Revenue 5,678
5,655 5,405
Insurance claims, commissions and changes in
policy benefit liabilities (CCPB) (361)
(573) (4)
Revenue, net of CCPB 5,317
5,082 5,401
Total provision for credit losses (141)
(202) (167)
Non-interest expense (3,409)
(3,258) (3,326)
Income before income taxes 1,767
1,622 1,908
Provision for income taxes (345)
(313) (378)
Net income 1,422
1,309 1,530
EPS ($) 2.12
1.94 2.28

(1) Adjusting items are
included in
Corporate Services,
with the exception
of the amortization
of
acquisition-related
intangible assets,
which is charged to
the operating
groups.
(2) These expenses were
charged to the
non-interest expense
of the operating
groups. Before and
after-tax amounts
for each operating
group are provided
on pages 14, 15, 16
and 18 of our First
Quarter 2018 Report
to Shareholders.
(3) Acquisition
integration costs related
to the acquired BMO
Transportation
Finance business are
charged to
Corporate Services,
since the
acquisition impacts
both Canadian and
U.S. P&C businesses.
Acquisition costs
are recorded in
non-interest expense.
(4) Restructuring charge
in Q4-2017 as we
continued to
accelerate the use of
technology to
enhance customer
experience and focus
on driving
operational
efficiencies. Restructuring
cost is recorded in
non-interest
expense.
(5) For more information
on the impact of
the U.S. Tax Cuts
and Jobs Act see the
Other Regulatory
Developments section
on page 24 of our
First Quarter 2018
Report to
Shareholders.
Certain comparative
figures have been
reclassified to
conform with the
current year's
presentation.
Adjusted results and
measures in this
table are non-GAAP
amounts or non-GAAP
measures.

Caution Regarding Forward-Looking Statements

Bank of Montreal's public communications often include written or
oral forward-looking statements. Statements of this type are included
in this document, and may be included in other filings with Canadian
securities regulators or the U.S. Securities and Exchange Commission,
or in other communications. All such statements are made pursuant to
the "safe harbor" provisions of, and are intended to be
forward-looking statements under, the United States Private
Securities Litigation Reform Act of 1995 and any applicable Canadian
securities legislation. Forward-looking statements may involve, but
are not limited to, comments with respect to our objectives and
priorities for fiscal 2018 and beyond, our strategies or future
actions, our targets, expectations for our financial condition or
share price, and the results of or outlook for our operations or for
the Canadian, U.S. and international economies. Forward-looking
statements are typically identified by words such as "will",
"should", "believe", "expect", "anticipate", "intend", "estimate",
"plan", "goal", "target", "may" and "could".

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. 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;
weak, volatile or illiquid capital and/or credit markets; interest
rate and currency value fluctuations; changes in monetary, fiscal, or
economic policy and tax legislation and interpretation; the level of
competition in the geographic and business areas in which we operate;
changes in laws or in supervisory expectations or requirements,
including capital, interest rate and liquidity requirements and
guidance, and the effect of such changes on funding costs; judicial
or regulatory proceedings; the accuracy and completeness of the
information we obtain with respect to our customers and
counterparties; our ability to execute our strategic plans and to
complete and integrate acquisitions, including obtaining regulatory
approvals; critical accounting estimates and the effect of changes to
accounting standards, rules and interpretations on these estimates;
operational and infrastructure risks; changes to our credit ratings;
political conditions, including changes relating to or affecting
economic or trade matters; global capital markets activities; the
possible effects on our business of war or terrorist activities;
outbreaks of disease or illness that affect local, national or
international economies; natural disasters and disruptions to public
infrastructure, such as transportation, communications, power or
water supply; technological changes; information and cyber security,
including the threat of 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; and our ability to anticipate and effectively manage
risks arising from all of the foregoing factors.

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 see the discussion in the Risks
That May Affect Future Results section on page 79 of BMO's 2017
Annual MD&A, the sections related to credit and counterparty, market,
insurance, liquidity and funding, operational, model, legal and
regulatory, business, strategic, environmental and social, and
reputation risk, which begin on page 86 of BMO's 2017 Annual MD&A,
the discussion in the Critical Accounting Estimates - Income Taxes
and Deferred Tax Assets section on page 114 of BMO's 2017 Annual
MD&A, and the Risk Management section in this document, all of which
outline certain key factors and risks that may affect Bank of
Montreal's 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. Bank of Montreal does 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 our shareholders
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 2017 Annual
MD&A under the heading "Economic Developments and Outlook", as
updated by the Economic Review and Outlook section set forth in this
document. Assumptions about the performance of the Canadian and U.S.
economies, as well as overall market conditions and their combined
effect on our business, are material factors we consider when
determining our strategic priorities, objectives and expectations for
our business. In determining our expectations for economic growth,
both broadly and in the financial services sector, we primarily
consider historical economic data provided by governments, historical
relationships between economic and financial variables, and the risks
to the domestic and global economy. See the Economic Review and
Outlook section of our First Quarter 2018 Report to Shareholders.

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials

Interested parties are invited to visit our website at
http://www.bmo.com/investorrelations to review our 2017 annual MD&A
and audited annual consolidated financial statements, quarterly
presentation materials and supplementary financial information
package.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly
conference call on Tuesday, February 27, 2018, at 2:00 p.m. (EST). At
that time, senior BMO executives will comment on results for the
quarter and respond to questions from the investor community. The
call may be accessed by telephone at 416-641-2144 (from within
Toronto) or 1-888-789-9572 (toll-free outside Toronto) Passcode:
5126346. A replay of the conference call can be accessed until
Tuesday, May 29, 2018, by calling 905-694-9451 (from within Toronto)
or 1-800-408-3053 (toll-free outside Toronto) and entering Passcode:
5740558.

A live webcast of the call can be accessed on our website at
http://www.bmo.com/investorrelations. A replay can also be accessed
on the site.

Shareholder Dividend Reinvestment and Share Purchase Plan (the
Plan)

Average market price as defined under the Plan

November 2017: $99.35

December 2017: $100.21

January 2018: $103.06

For dividend information, change in shareholder address or to
advise of

duplicate mailings, please contact

Computershare Trust Company of Canada

100 University Avenue, 9th Floor

Toronto, Ontario M5J 2Y1

Telephone: 1-800-340-5021 (Canada and the United States)

Telephone: (514) 982-7800 (international)

Fax: 1-888-453-0330 (Canada and the United States)

Fax: (416) 263-9394 (international)

E-mail: service@computershare.com

For other shareholder information, including the notice for

our normal course issuer bid, please contact

Bank of Montreal

Shareholder Services

Corporate Secretary's Department

One First Canadian Place, 21st Floor

Toronto, Ontario M5X 1A1

Telephone: (416) 867-6786

Fax: (416) 867-6793

E-mail: corp.secretary@bmo.com

For further information on this document, please contact

Bank of Montreal

Investor Relations Department

P.O. Box 1, One First Canadian Place, 10th Floor

Toronto, Ontario M5X 1A1

To review financial results and regulatory filings and disclosures
online, please visit our website at
http://www.bmo.com/investorrelations.

Our 2017 Annual MD&A, audited annual consolidated financial
statements and annual report on Form 40-F (filed with the U.S.
Securities and Exchange Commission) are available online at
http://www.bmo.com/investorrelations and at http://www.sedar.com.
Printed copies of the bank's complete 2017 audited financial
statements are available free of charge upon request at 416-867-6785
or corp.secretary@bmo.com.

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Media Relations Contacts: Paul Gammal, Toronto,
paul.gammal@bmo.com, +1-416-867-3996; François Morin, Montreal,
francois1.morin@bmo.com, +1-514-877-1873; Investor Relations
Contacts: Jill Homenuk, Head, Investor Relations,
jill.homenuk@bmo.com, +1-416-867-4770; Christine Viau, Director,
Investor Relations, christine.viau@bmo.com , +1-416-867-6956

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