BMO Financial Group Reports Fourth Quarter and Fiscal 2018 Results

Toronto (ots/PRNewswire) -

Fourth Quarter 2018

Financial Results Highlights

Fourth Quarter 2018 Compared with Fourth Quarter 2017:

- Net income of $1,695 million, up 38%, including a benefit from the
remeasurement of an employee benefit liability2 in the current
quarter; adjusted net income1 of $1,529 million, up 17%
- EPS3 of $2.57, up 42%; adjusted EPS1,3 of $2.32, up 19%
- ROE of 16.1%, up from 12.1%; adjusted ROE1 of 14.5%, up from 12.9%
- Provision for credit losses4 (PCL) of $175 million, compared with
$202 million in the prior year
- Common Equity Tier 1 Ratio of 11.3%
- Dividend increased by $0.04 from the prior quarter to $1.00, up 8%
from the prior year

Fiscal 2018 Compared with Fiscal 2017:

- Net income of $5,450 million, up 2% including the impact of the
revaluation of our U.S. net deferred tax asset in the current
year5; adjusted net income1 of $5,979 million, up 9%
- EPS3 of $8.17, up 3%; adjusted EPS1,3 of $8.99, up 10%
- ROE of 13.2%, compared with 13.3%; adjusted ROE1 of 14.6%, up from
13.7%
- PCL of $662 million4, including a $38 million recovery on
performing loans, compared with $822 million on an adjusted basis
and $746 million on a reported basis

For the fourth quarter ended October 31, 2018, BMO Financial Group
(TSX: BMO) (NYSE:BMO) recorded net income of $1,695 million or $2.57
per share on a reported basis, and net income of $1,529 million or
$2.32 per share on an adjusted basis.

"BMO's fourth quarter results demonstrated continued positive
momentum and ended a successful year in which the bank delivered $6
billion in adjusted earnings and growth in adjusted earnings per
share of 10%, led by strong performance in our Personal and
Commercial banking businesses," said Darryl White, Chief Executive
Officer, BMO Financial Group.

"This year, we continued to make good progress against our
strategic objectives. We grew our U.S. segment at an accelerated
pace, increased momentum in our Commercial banking business, adding
relationships, loans and deposits, and delivered real value to our
personal customers with new and enhanced digital capabilities. We've
invested in and grown our businesses, and at the same time, improved
efficiency, returned capital to our shareholders through increased
dividends and share buybacks, and maintained a strong CET 1 ratio of
11.3%.

"Looking ahead to 2019, we will continue to build on this strong
foundation and our differentiating strengths, including an integrated
North American platform and deep relationships in our wealth, capital
markets and P&C businesses, to deliver sustainable and competitive
long-term performance," concluded Mr. White.

Reported net income in the current quarter included a benefit of
$203 million after-tax ($277 million pre-tax) from the remeasurement
of an employee benefit liability, which was excluded from adjusted
earnings. Reported net income in the current year also includes a
$425 million charge related to the revaluation of our U.S. net
deferred tax asset5 which was also excluded from adjusted earnings.
Other adjusting items are included in the Non-GAAP Measures table on
page 5.

(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) The current
quarter
included a
benefit from
the
remeasurement
of an employee
benefit
liability as a
result of an
amendment to
our other
employee future
benefits plan
for certain
employees that
was announced
in the fourth
quarter of
2018. This
amount has been
included in
Corporate
Services in
non-interest
expense.
(3) 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.
(4) Effective 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
121 of BMO's
2018 Annual
MD&A for
further
details. In
prior periods,
changes to the
collective
allowance were
an adjusting
item. Refer to
the Non-GAAP
measures on
page 5.
(5) Reported net
income in the
first quarter
of 2018
included a $425
million (US$339
million) charge
related 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. See the
Critical
Accounting
Estimates -
Income Taxes
and Deferred
Tax Assets
section on page
119 of BMO's
2018 Annual
MD&A.
Note: All
ratios and
percentage
changes in
this
document
are based
on
unrounded
numbers

Return on equity (ROE) was 16.1%, up from 12.1% in the prior year
and adjusted ROE was 14.5%, up from 12.9%. Return on tangible common
equity (ROTCE) was 19.5%, compared with 14.8% in the prior year and
adjusted ROTCE was 17.3%, compared with 15.5%.

Concurrent with the release of results, BMO announced a first
quarter 2019 dividend of $1.00 per common share, up $0.04 or 4% from
the prior quarter and up $0.07 per share or 8% from the prior year.
The quarterly dividend of $1.00 per common share is equivalent to an
annual dividend of $4.00 per common share.

BMO's 2018 audited annual consolidated financial statements and
accompanying management discussion & analysis (MD&A), is available
online at www.bmo.com/investorrelations and at www.sedar.com.

Fourth Quarter Operating Segment Overview

Canadian P&C

Reported fourth quarter net income of $675 million and adjusted
net income of $676 million both increased $51 million or 8% from the
prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Results reflect revenue growth
and lower provision for credit losses, partially offset by higher
expenses.

During the quarter, we continued to enhance our digital
capabilities as we launched Business Xpress, a small business lending
platform that speeds up the loan approval process by 95% for small
business loans. The platform uses data analytics technology and
best-in-class automatic adjudication strategies providing a faster
and more convenient way for Canada's small businesses to obtain
capital.

U.S. P&C

Reported net income of $372 million increased $102 million or 37%
and adjusted net income of $383 million increased $102 million or 36%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets.

Reported net income of US$285 million increased US$71 million or
33% and adjusted net income of US$294 million increased US$71 million
or 31% from the prior year, due to good revenue growth and lower
taxes from the benefit of U.S. tax reform and a favourable U.S. tax
item, partially offset by higher expenses and higher provisions for
credit losses.

During the quarter, the Federal Deposit Insurance Corporation
released its annual deposit market share report and we improved our
market share and maintained our ranking of second place in the
Chicago and Milwaukee markets, and fourth place within our core
footprint, which includes Illinois, Kansas, Wisconsin, Missouri,
Indiana, and Minnesota.

BMO Wealth Management

Reported net income of $219 million increased $44 million or 25%
and adjusted net income of $229 million increased $40 million or 21%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Traditional wealth reported
net income of $192 million was unchanged and adjusted net income of
$202 million decreased $4 million or 2% from the prior year, as
business growth and lower taxes were more than offset by a legal
provision and higher expenses. Insurance net income of $27 million
was below trend but increased $44 million from the prior year,
primarily due to less elevated reinsurance claims in the current
year, with this partially offset by unfavourable market movements in
the current quarter relative to favourable market movements in the
prior year.

BMO Global Asset Management was named the Best Environmental
Social and Governance (ESG) Research Team in the Investment Week
Sustainable & ESG Investment Awards 2018. This award recognizes our
longstanding commitment and leadership in responsible investing, and
our belief that prudent management of ESG issues can have an
important impact on the creation of long-term investor value.

BMO Capital Markets

Reported net income of $298 million decreased $18 million or 6%,
and adjusted net income of $309 million decreased $7 million or 2%
from a year ago, as higher Investment and Corporate Banking revenue
and lower taxes were more than offset by higher expenses and lower
Trading Products revenue. Adjusted net income excludes acquisition
integration costs and the amortization of acquisition-related
intangible assets.

On September 1, 2018, we completed the acquisition of KGS-Alpha
Capital Markets (KGS-Alpha), a U.S. fixed income broker-dealer
specializing in U.S. mortgage and asset-backed securities in the
institutional investor market.

Corporate Services

Reported net income for the quarter was $131 million, compared
with a net loss of $158 million in the prior year. Corporate Services
adjusted net loss for the quarter was $68 million, compared with an
adjusted net loss of $102 million in the prior year. Adjusted results
increased mainly due to higher revenue excluding the teb adjustment
and lower expenses. The adjusted results exclude a benefit of $203
million after-tax from the remeasurement of an employee benefit
liability in the current period, a restructuring charge in the prior
year, and acquisition integration costs in both periods.

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 11.3% at October 31,
2018. The CET1 Ratio decreased from 11.4% at the end of the third
quarter, as retained earnings growth, net of share repurchases, was
more than offset by higher risk-weighted assets, including an
acquisition.

Provision for Credit Losses

The total provision for credit losses was $175 million, a decrease
of $27 million from the prior year. The provision for credit losses
on impaired loans of $177 million decreased $25 million from $202
million in the prior year, primarily due to lower provisions in the
P&C businesses and higher net recoveries in BMO Capital Markets and
Corporate Services. There was a $2 million net recovery of credit
losses on performing loans in the current quarter.

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
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 SEC's website at 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.

Financial Review

The Financial Review commentary is as of December 4, 2018. The
material that precedes this section comprises part of this Financial
Review. The Financial Review should be read in conjunction with the
unaudited interim consolidated financial statements for the period
ended October 31, 2018, included in this document, as well as the
audited annual consolidated financial statements for the year ended
October 31, 2018, and the MD&A for fiscal 2018.

The 2018 Annual MD&A includes a comprehensive discussion of our
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 of October 31, 2018, of
Bank of Montreal's disclosure controls and procedures (as defined in
the rules of the 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, 2018, 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.

Financial Highlights

(Canadian $ in Q4-2018 Q3-2018 Q4-2017 Fiscal Fiscal
millions, except as 2018 2017
noted)
Summary Income
Statement
Net interest income 2,669 2,607 2,535 10,313 10,007
Non-interest 3,253 3,213 3,120 12,724 12,253
revenue
Revenue 5,922 5,820 5,655 23,037 22,260
Insurance claims, 390 269 573 1,352 1,538
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,532 5,551 5,082 21,685 20,722
CCPB
Provision for 177 177 na 700 na
credit losses on
impaired loans (1)
Provision for (2) 9 na (38) na
(recovery of)
credit losses on
performing loans
(1)
Total provision for 175 186 202 662 746
credit losses (1)
Non-interest 3,224 3,386 3,375 13,613 13,330
expense
Provision for 438 443 278 1,960 1,296
income taxes
Net income 1,695 1,536 1,227 5,450 5,350
Attributable to 1,695 1,536 1,227 5,450 5,348
bank shareholders
Attributable to - - - - 2
non-controlling
interest in
subsidiaries
Net income 1,695 1,536 1,227 5,450 5,350
Adjusted net income 1,529 1,565 1,309 5,979 5,508
Common Share Data
($ except as noted)
Earnings per share 2.57 2.31 1.81 8.17 7.92
Adjusted earnings 2.32 2.36 1.94 8.99 8.16
per share
Earnings per share 41.9 13.0 (10.3) 3.1 14.5
growth (%)
Adjusted earnings 19.3 16.4 (7.6) 10.1 8.5
per share growth
(%)
Dividends declared 0.96 0.96 0.90 3.78 3.56
per share
Book value per 64.73 63.31 61.92 64.73 61.92
share
Closing share price 98.43 103.11 98.83 98.43 98.83
Number of common
shares outstanding
(in millions)
End of period 639.3 639.9 647.8 639.3 647.8
Average diluted 641.8 642.4 650.3 644.9 652.0
Total market value 62.9 66.0 64.0 62.9 64.0
of common shares ($
billions)
Dividend yield (%) 3.9 3.7 3.6 3.8 3.6
Dividend payout 37.2 41.4 49.5 46.2 44.8
ratio (%)
Adjusted dividend 41.3 40.6 46.2 41.9 43.5
payout ratio (%)
Financial Measures
and Ratios (%)
Return on equity 16.1 14.7 12.1 13.2 13.3
Adjusted return on 14.5 15.0 12.9 14.6 13.7
equity
Return on tangible 19.5 17.9 14.8 16.2 16.3
common equity
Adjusted return on 17.3 18.0 15.5 17.5 16.5
tangible common
equity
Net income growth 38.1 10.7 (8.8) 1.9 15.5
Adjusted net income 16.8 13.9 (6.2) 8.6 9.7
growth
Revenue growth 4.7 6.6 7.2 3.5 5.6
Revenue growth, net 8.9 6.6 (2.2) 4.6 6.0
of CCPB
Non-interest (4.5) 3.0 1.4 2.1 2.2
expense growth
Adjusted 6.0 3.7 (0.1) 3.4 3.6
non-interest
expense growth
Efficiency ratio, 58.3 61.0 66.4 62.8 64.3
net of CCPB
Adjusted efficiency 62.4 60.3 64.1 62.2 62.9
ratio, net of CCPB
Operating leverage, 13.4 3.6 (3.6) 2.5 3.8
net of CCPB
Adjusted operating 2.9 2.9 (2.1) 1.2 2.0
leverage, net of
CCPB
Net interest margin 1.49 1.49 1.57 1.51 1.55
on average earning
assets
Effective tax rate 20.6 22.4 18.5 26.5 19.5
Adjusted effective 19.7 22.4 19.3 20.7 19.8
tax rate
Total 0.18 0.19 0.22 0.17 0.20
PCL-to-average net
loans and
acceptances
(annualized)
PCL on impaired 0.18 0.18 0.22 0.18 0.22
loans-to-average
net loans and
acceptances
(annualized)
Balance Sheet (as
at, $ millions,
except as noted)
Assets 774,048 765,318 709,580 774,048 709,580
Gross loans and 404,215 395,295 376,886 404,215 376,886
acceptances
Net loans and 402,576 393,635 375,053 402,576 375,053
acceptances
Deposits 522,051 506,916 479,792 522,051 479,792
Common 41,387 40,516 40,114 41,387 40,114
shareholders'
equity
Cash and 29.9 28.2 28.5 29.9 28.5
securities-to-total
assets ratio (%)
Capital Ratios (%)
CET1 Ratio 11.3 11.4 11.4 11.3 11.4
Tier 1 Capital 12.9 12.9 13.0 12.9 13.0
Ratio
Total Capital Ratio 15.2 14.9 15.1 15.2 15.1
Leverage Ratio 4.2 4.2 4.4 4.2 4.4
Foreign Exchange
Rates ($)
As at Canadian/U.S. 1.3169 1.2997 1.2895 1.3169 1.2895
dollar
Average 1.3047 1.3032 1.2621 1.2878 1.3071
Canadian/U.S.
dollar

(1) Effective 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. The
provision for
credit losses
in periods
prior to the
first quarter
of 2018 is
comprised of
both specific
and
collective
provisions.
Refer to the
Changes in
Accounting
Policies
section on
page 121 of
BMO's 2018
Annual MD&A
for further
details.
Certain
comparative
figures have
been
reclassified
to conform
with the
current
period's
presentation.
Adjusted
results are
non-GAAP
amounts or
non-GAAP
measures.
Please see
the Non-GAAP
Measures
section.
na - not
applicable

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 they have been derived from our audited annual
consolidated 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 following
table. 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 on page 7 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. Presenting results on both
bases provides readers with a better understanding of how management
assesses results. It also permits readers to assess the impact of
certain specified items on results for the periods presented, and to
better assess results excluding those items that may not be
reflective of ongoing results. As such, the presentation may
facilitate readers' analysis of trends, as well as comparisons with
our competitors. Except as otherwise noted, management's discussion
of changes in reported results in this document applies equally to
changes in the corresponding adjusted results. Adjusted results and
measures are non-GAAP and as such do not have standardized meanings
under GAAP. They are unlikely to be comparable to similar measures
presented by other companies and should not be viewed in isolation
from, or as a substitute, for GAAP results.

Non-GAAP Measures

(Canadian $ in Q4-2018 Q3-2018 Q4-2017 Fiscal Fiscal
millions, except as 2018 2017
noted)
Reported Results
Revenue 5,922 5,820 5,655 23,037 22,260
Insurance claims, (390) (269) (573) (1,352) (1,538)
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,532 5,551 5,082 21,685 20,722
CCPB
Total provision for (175) (186) (202) (662) (746)
credit losses
Non-interest (3,224) (3,386) (3,375) (13,613) (13,330)
expense
Income before 2,133 1,979 1,505 7,410 6,646
income taxes
Provision for (438) (443) (278) (1,960) (1,296)
income taxes
Net Income 1,695 1,536 1,227 5,450 5,350
EPS ($) 2.57 2.31 1.81 8.17 7.92
Adjusting Items
(Pre-tax) (1)
Acquisition (18) (8) (24) (34) (87)
integration costs
(2)
Amortization of (31) (28) (34) (116) (149)
acquisition-related
intangible assets
(3)
Restructuring costs - - (59) (260) (59)
(4)
Decrease in the - - - - 76
collective
allowance for
credit losses (5)
Benefit from the 277 - - 277 -
remeasurement of an
employee benefit
liability (6)
Adjusting items 228 (36) (117) (133) (219)
included in
reported pre-tax
income
Adjusting Items
(After tax) (1)
Acquisition (13) (7) (15) (25) (55)
integration costs
(2)
Amortization of (24) (22) (26) (90) (116)
acquisition-related
intangible assets
(3)
Restructuring costs - - (41) (192) (41)
(4)
Decrease in the - - - - 54
collective
allowance for
credit losses (5)
Benefit from the 203 - - 203 -
remeasurement of an
employee benefit
liability (6)
U.S. net deferred - - - (425) -
tax asset
revaluation (7)
Adjusting items 166 (29) (82) (529) (158)
included in
reported net income
after tax
Impact on EPS ($) 0.25 (0.05) (0.13) (0.82) (0.24)
Adjusted Results
Revenue 5,922 5,820 5,655 23,037 22,260
Insurance claims, (390) (269) (573) (1,352) (1,538)
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,532 5,551 5,082 21,685 20,722
CCPB
Total provision for (175) (186) (202) (662) (822)
credit losses
Non-interest (3,452) (3,350) (3,258) (13,480) (13,035)
expense
Income before 1,905 2,015 1,622 7,543 6,865
income taxes
Provision for (376) (450) (313) (1,564) (1,357)
income taxes
Net income 1,529 1,565 1,309 5,979 5,508
EPS ($) 2.32 2.36 1.94 8.99 8.16

(1) Adjusting items are
generally included
in Corporate
Services, with the
exception of the
amortization of
acquisition-related
intangible assets
and certain
acquisition
integration costs,
which are charged
to the operating
groups.
(2) Acquisition
integration costs
related to BMO
Transportation
Finance are charged
to Corporate
Services, since the
acquisition impacts
both Canadian and
U.S. P&C
businesses.
KGS-Alpha
acquisition
integration costs
are reported in BMO
Capital Markets.
Acquisition
integration costs
are recorded in
non-interest
expense.
(3) These expenses were
charged to the
non-interest
expense of the
operating groups.
Before-tax and
after-tax amounts
for each operating
group are provided
on pages 14, 15,
16, 18 and 20.
(4) In Q2-18, we
recorded a
restructuring
charge, primarily
related to
severance costs, as
a result of an
ongoing bank-wide
initiative to
simplify how we
work, drive
increased
efficiency and
invest in
technology to move
our business
forward. A
restructuring
charge in Q4-17 was
also taken as we
continued to
accelerate the use
of technology to
enhance customer
experience and
focused on driving
operational
efficiencies.
Restructuring costs
are included in
non-interest
expense in
Corporate Services.
(5) Adjustments to the
collective
allowance for
credit losses are
recorded in
Corporate Services
provision for
credit losses in
2017 and prior
years.
(6) The current quarter
included a $277
million pre-tax
benefit from the
remeasurement of an
employee benefit
liability as a
result of an
amendment to our
other employee
future benefits
plan for certain
employees that was
announced in the
fourth quarter of
2018. This amount
has been included
in Corporate
Services in
non-interest
expense.
(7) Charge related 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. For more
information see the
Critical Accounting
Estimates - Income
Taxes and Deferred
Tax Assets section
on page 119 of
BMO's 2018 Annual
MD&A for further
details.
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 in this document
may include, but are not limited to, statements with respect to our
objectives and priorities for fiscal 2019 and beyond, our strategies
or future actions, our targets, expectations for our financial
condition or share price, the regulatory environment in which we
operate and the results of or outlook for our operations or for the
Canadian, U.S. and international economies, and include statements of
our management. Forward-looking statements are typically identified
by words such as "will", "would", "should", "believe", "expect",
"anticipate", "project", "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;
the Canadian housing market, 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; failure of third parties to comply with
their obligations to us; 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, including with
respect to reliance on third parties; 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 2018
Annual MD&A, and 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, in the Enterprise-Wide Risk Management section on
page 78 of BMO's 2018 Annual MD&A, all of which outline certain key
factors and risks that may affect our 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. We do 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 Economic
Developments and Outlook section on page 30 of BMO's Annual MD&A.
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.

Foreign Exchange

The Canadian dollar equivalents of BMO's U.S. results that are
denominated in U.S. dollars increased relative to the third quarter
of 2018 and the fourth quarter of 2017 due to the stronger U.S.
dollar. The table below indicates the relevant average Canadian/U.S.
dollar exchange rates and the impact of changes in the rates on our
U.S. segment results. References in this document to the impact of
the U.S. dollar do not include U.S.-dollar-denominated amounts
recorded outside of BMO's U.S. segment.

Economically, our U.S. dollar income stream was unhedged to
changes in foreign exchange rates during the current and prior year.
We regularly determine whether to execute hedging transactions to
mitigate the impact of foreign exchange rate movements on net income.

See the Enterprise-Wide Capital Management section on page 69 of
the 2018 Annual MD&A for a discussion of the impact that changes in
foreign exchange rates can have on our capital position. Changes in
foreign exchange rates will also affect accumulated other
comprehensive income, primarily from the translation of our
investments in foreign operations.

This Foreign Exchange section contains forward-looking statements.
Please see the Caution Regarding Forward Looking Statements.

Effects of Changes in Exchange Rates on BMO's U.S. Segment
Reported and Adjusted Results

Q4-2018
(Canadian $ in millions, except as noted) vs. Q4-2017 vs. Q3-2018
Canadian/U.S. dollar exchange rate (average)
Current period 1.3047 1.3047
Prior period 1.2621 1.3032
Effects on U.S. segment reported results
Increased net interest income 33 1
Increased non-interest revenue 26 1
Increased revenues 59 2
Increased provision for credit losses (3) -
Increased expenses (44) (1)
Increased income taxes (2) (1)
Increased reported net income 10 -
Impact on earnings per share ($) 0.02 0.00
Effects on U.S. segment adjusted results
Increased net interest income 33 1
Increased non-interest revenue 26 1
Increased revenues 59 2
Increased provision for credit losses (2) -
Increased expenses (42) (1)
Increased income taxes (4) (1)
Increased adjusted net income 11 -
Impact on adjusted earnings per share ($) 0.02 0.00

Adjusted
results in
this section
are non-GAAP
amounts or
non-GAAP
measures.
Please see
the Non-GAAP
Measures
section.
Certain
comparative
figures have
been
reclassified
to conform
with the
current
year's
presentation.

Net IncomeQ4 2018 vs Q4 2017

Reported net income was $1,695 million, up $468 million or 38% from
the prior year. Adjusted net income was $1,529 million, up $220
million or 17% from the prior year. Adjusted net income excludes a
benefit of $203 million after-tax from a remeasurement of an employee
benefit liability in the current year, a restructuring charge in the
prior year, and the amortization of acquisition-related intangible
assets and acquisition integration costs in both periods. EPS of
$2.57 was up $0.76 or 42% from the prior year. Adjusted EPS of $2.32
was up $0.38 or 19%.

Results reflect strong growth in U.S. P&C, good performance in
Canadian P&C and a lower Corporate Services loss, partially offset by
lower income in BMO Capital Markets. Wealth Management results
increased, largely reflecting less elevated reinsurance claims in the
current year.

Q4 2018 vs Q3 2018

Reported net income was up $159 million or 10% and adjusted net
income was down $36 million or 2% from the prior quarter. Adjusted
net income excludes the remeasurement benefit in the current quarter
and the amortization of acquisition-related intangible assets and
acquisition integration costs in both periods. EPS was up $0.26 or
11% and adjusted EPS was down $0.04 or 2%.

Results reflect higher income in the P&C businesses and BMO
Capital Markets, more than offset by lower income in Wealth
Management and Corporate Services.

Adjusted results in this Net Income section are non-GAAP amounts
or non-GAAP measures. Please see the Non-GAAP Measures section.

Revenue
Q4 2018 vs Q4 2017
Revenue of $5,922 million increased $267 million or 5% from the prior
year, or 4% excluding the impact of the stronger U.S. dollar. On a
basis that nets insurance claims, commissions and changes in policy
benefit liabilities (CCPB) against insurance revenue (net revenue),
revenue of $5,532 million increased $450 million or 9%, or 8%
excluding the impact of the stronger U.S. dollar. Revenue increased
in all operating groups compared with the prior year.

Net interest income of $2,669 million increased $134 million or
5%, or $100 million or 4% excluding the impact of the stronger U.S.
dollar. Net interest income, excluding trading of $2,774 million
increased $187 million or 7%, largely due to higher deposit and loan
volumes in the P&C businesses. Average earning assets of $711.7
billion increased $69.1 billion or 11%, or 9% excluding the impact of
the stronger U.S. dollar, due to loan growth, higher securities,
higher securities borrowed or purchased under resale agreements and
increased cash resources. BMO's overall net interest margin decreased
8 basis points, and 7 basis points on an excluding trading basis,
primarily driven by lower spreads in BMO Capital Markets, mainly due
to higher volumes of lower spread assets.

Net non-interest revenue of $2,863 million increased $316 million
or 12%. Excluding trading revenue, net non-interest revenue increased
$141 million or 6%, with increases in most non-interest revenue
categories.

Gross insurance revenue decreased $144 million from the prior year
due to increases in long-term interest rates decreasing the fair
value of investments in the current year, compared with decreases in
long-term interest rates increasing the fair value of investments in
the prior year and weaker equity markets in the current year,
partially offset by higher annuity sales. Insurance revenue can
experience variability arising from fluctuations in the fair value of
insurance assets. The investments which support policy benefit
liabilities comprise predominantly fixed income and some equity
assets. These investments are recorded at fair value with changes in
fair value recorded in insurance revenue in the Consolidated
Statement of Income. These fair value changes are largely offset by
changes in the fair value of policy benefit liabilities, the impact
of which is reflected in CCPB, as discussed on page 10. We generally
focus on analyzing revenue net of CCPB given the extent to which
insurance revenue can vary and that this variability is largely
offset in CCPB.

Q4 2018 vs Q3 2018

Revenue increased $102 million or 2% from the prior quarter. Net
revenue decreased $19 million as lower Wealth Management revenue was
partially offset by growth in other businesses.

Net interest income of $2,669 million increased $62 million or 2%,
compared with the prior quarter. Net interest income excluding
trading of $2,774 million increased $43 million or 2%, compared with
the prior quarter, mainly driven by higher deposit and loan volumes
in the P&C businesses. Average earning assets increased $19.6 billion
or 3%, largely driven by higher securities, loan growth and increased
cash resources. BMO's overall net interest margin of 1.49% was
unchanged. On an excluding trading basis, net interest margin
decreased 2 basis points to 1.84% mainly due to higher volumes of
lower spread assets in BMO Capital Markets.

Net non-interest revenue decreased $81 million or 3%. Excluding
trading revenue, net non-interest revenue decreased $55 million or
2%, primarily due to lower net insurance revenue and underwriting and
advisory fees.

Gross insurance revenue increased $58 million due to higher
annuity sales in the current quarter, partially offset by increases
in long-term interest rates decreasing the fair value of investments
in the current quarter, compared with the prior quarter and weaker
equity markets in the current quarter. The increase in insurance
revenue was largely offset by higher insurance claims, commissions
and changes in policy benefit liabilities as discussed on page 10.

Net interest income and non-interest revenue are detailed in the
unaudited interim consolidated financial statements.

Provision for Credit Losses

Effective 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 in prior years. The provision for
credit losses on performing loans replaced the collective provision
under IAS 39. Refer to the Changes in Accounting Policy section on
page 121 of BMO's Annual MD&A for an explanation of the provision for
credit losses. Prior periods have not been restated.

Q4 2018 vs Q4 2017

The total provision for credit losses was $175 million, a decrease
of $27 million from the prior year. The provision for credit losses
on impaired loans of $177 million decreased $25 million from $202
million in the prior year, primarily due to lower provisions in the
P&C businesses and net recoveries in BMO Capital Markets and
Corporate Services, compared with provisions in the prior year. There
was a decrease for credit losses on performing loans of $2 million,
as net recoveries of credit losses in Canadian P&C, BMO Capital
Markets, and Corporate Services were largely offset by provisions in
U.S P&C.

Q4 2018 vs Q3 2018

The total provision for credit losses was down $11 million from
the prior quarter. The provision for credit losses on impaired loans
was flat at $177 million. There was a $2 million net recovery of
credit losses on performing loans in the quarter, compared with a
provision for credit losses on performing loans of $9 million in the
prior quarter.

Provision for Credit Losses by Operating Group (1)

(Canadian Canadian U.S. Total WealthManagement BMO CorporateServices Total
$ in P&C P&C P&C CapitalMarkets (2) Bank
millions)
Q4-2018
Provision 118 61 179 2 (3) (1) 177
for
(recovery
of) credit
losses on
impaired
loans
Provision (15) 18 3 1 (4) (2) (2)
for
(recovery
of) credit
losses on
performing
loans
Total 103 79 182 3 (7) (3) 175
provision
for
(recovery
of) credit
losses
Q3-2018
Provision 120 54 174 2 3 (2) 177
for
(recovery
of)