BMO Financial Group Reports Fourth Quarter and Fiscal 2019 Results

Toronto (ots/PRNewswire) - Financial Results Highlights

Fourth Quarter 2019 Compared With Fourth Quarter 2018:

- Net income4,5 of $1,194 million, down 30%, reflecting a
restructuring charge in the current quarter and a benefit from the
remeasurement of an employee benefit liability in the prior year;
adjusted net income1 of $1,607 million, up 5%
- EPS2 of $1.78, down 31%; adjusted EPS1 of $2.43, up 5%
- Revenue, net of CCPB3,4, of $5,752 million, up 5%; revenue, net of
adjusted CCPB1, of $5,777 million, up 5%
- Provision for credit losses (PCL) of $253 million compared with
$175 million in the prior year; includes PCL on performing loans of
$22 million
- ROE of 9.9%, compared with 16.1%; adjusted ROE1 of 13.5%, compared
with 14.5%
- Common Equity Tier 1 Ratio of 11.4%
- Dividend increased $0.03 to $1.06, up 6% from the prior year

Fiscal 2019 Compared With Fiscal 2018:

- Net income4,5 of $5,758 million, up 6%; adjusted net income1 of
$6,249 million, up 4%
- EPS2 of $8.66, up 6%; adjusted EPS1 of $9.43, up 5%
- Revenue, net of CCPB3,4, of $22,774 million, up 6%
- PCL of $872 million compared with $662 million in the prior year;
includes PCL on performing loans of $121 million
- ROE of 12.6% compared with 13.3%; adjusted ROE1 of 13.7% compared
with 14.6%

- For the fourth quarter ended October 31, 2019, BMO Financial Group (TSX:BMO)
(NYSE:BMO) recorded net income of $1,194 million or $1.78 per share on a
reported basis, and net income of $1,607 million or $2.43 per share on an
adjusted basis.

"BMO finished the year with very strong performance, delivering $1.6 billion in
adjusted earnings and adjusted earnings per share of $2.43 in the fourth
quarter, up 5% year-over-year, with pre-provision pre-tax earnings growth of
11%, driven by positive operating leverage in all businesses and particularly
strong operating performance in Personal and Commercial banking in both Canada
and the U.S.," said Darryl White, Chief Executive Officer, BMO Financial Group.

"Our results for the year reflect the strength and quality of our diversified
businesses. Adjusted earnings per share were $9.43, up 5% from last year. We
continued to make significant progress on our strategic priorities and delivered
annual earnings growth of 23% in our U.S. business. With a clear bank-wide focus
on disciplined expense management, we continued to improve our overall
efficiency ratio with 130 basis points of improvement in the past two years and
good momentum throughout the year. We have a number of initiatives underway,
including today's announcement of a restructuring charge, that will serve to
accelerate our momentum and help us meet our efficiency objectives over the
long-term. In addition, we gained market share in key areas, including
commercial lending and retail deposits, in Canada and the U.S. Our credit
performance remains good and we ended the year with a strong CET1 capital ratio
of 11.4%."

"Looking ahead to 2020, we will continue to execute on our clearly articulated
strategic priorities and objectives. We remain focused on building on the
foundation of our integrated North American platform to grow our customer base
and broaden our customer relationships. I am confident that we are
well-positioned to deliver sustainable and resilient profitability through an
evolving economic environment," concluded Mr. White.

Reported net income in the current quarter included a restructuring charge of
$357 million after-tax ($484 million pre-tax), related to severance and a small
amount of real estate-related costs, to continue to improve our efficiency,
including accelerating delivery against key bank-wide initiatives focused on
digitization, organizational redesign and simplification of the way we do
business. Reported net income also included a $25 million pre-tax and after-tax
reinsurance adjustment for the net impact of major reinsurance claims from
Japanese typhoons that were incurred after our announced decision to wind down
our reinsurance business.

Return on equity (ROE) was 9.9%, compared with 16.1% in the prior year and
adjusted ROE was 13.5%, compared with 14.5% in the prior year. Return on
tangible common equity (ROTCE) was 11.9%, compared with 19.5% in the prior year
and adjusted ROTCE was 15.7%, compared with 17.3% in the prior year.

Concurrent with the release of results, BMO announced a first quarter 2020
dividend of $1.06 per common share, up $0.03 per share or 3% from the prior
quarter and up $0.06 per share or 6%from the prior year. The quarterly dividend
of $1.06 per common share is equivalent to an annual dividend of $4.24 per
common share.

BMO's 2019 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.

(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
deducting
total
dividends on
preferred
shares and
distributions
on other
equity
instruments.
(3) On a basis
that nets
insurance
claims,
commissions
and changes in
policy benefit
liabilities
(CCPB) against
insurance
revenue.
(4) Q4-2019
reported net
income
included a
$357 million
after-tax
($484 million
pre-tax)
restructuring
charge,
related to
severance and
a small amount
of real
estate-related
costs, to
continue to
improve our
efficiency,
including
accelerating
delivery
against key
bank-wide
initiatives
focused on
digitization,
organizational
redesign and
simplification
of the way we
do business.
The current
quarter
reported net
income also
included a $25
million
(pre-tax and
after-tax) net
impact of
major
reinsurance
claims from
Japanese
typhoons that
were incurred
after our
announced
decision to
wind down our
reinsurance
business. The
restructuring
charge was
included in
non-interest
expense in
Corporate
Services and
the
reinsurance
adjustment was
included in
CCPB in BMO
Wealth
Management.
(5) In fiscal
2018, we
recorded 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 in the
first quarter;
a $192 million
after-tax
($260 million
pre-tax)
restructuring
charge,
primarily
related to
severance, in
the second
quarter; and a
benefit of
$203 million
after-tax
($277 million
pre-tax) from
the
remeasurement
of an employee
benefit
liability, as
a result of an
amendment to
our other
employee
future
benefits plan
for certain
employees, in
the fourth
quarter. The
second quarter
charge and
fourth quarter
benefit were
included in
non-interest
expense in
Corporate
Services. For
more
information on
the tax
charge, refer
to the
Critical
Accounting
Estimates -
Income Taxes
and Deferred
Tax Assets
section on
page 119 of
BMO's 2018
Annual Report.
Note: All
ratios and
percentage
changes in
this
document
are based
on
unrounded
numbers.

Fourth Quarter Operating Segment Overview

Canadian P&C

Reported net income was $716 million, an increase of $42 million or 6% and
adjusted net income was $716 million, an increase of $41 million or 6% from the
prior year. Adjusted net income excludes the amortization of acquisition-related
intangible assets. Results reflect strong revenue growth, partially offset by
higher provisions for credit losses and higher expenses.

During the quarter, we launched a new digital lending solution, the first of its
kind from a major Canadian financial institution. Customers are now able to
apply for a personal line of credit by completing a short, user-friendly digital
application and receive a decision on their loan application in minutes. We also
became the first Canadian financial institution to offer retail credit card
customers the option to report a lost or stolen card through online banking.
These new digital services and innovations reflect BMO's commitment to creating
digital solutions that better support our customers.

U.S. P&C

Reported net income was $393 million, an increase of $21 million or 6% and
adjusted net income was $404 million, an increase of $21 million or 5% from the
prior year. Adjusted net income excludes the amortization of acquisition-related
intangible assets.

Reported net income was US$297 million, an increase of US$12 million or 4% and
adjusted net income was US$305 million, an increase of US$11 million or 4%,
primarily due to higher revenue and lower provisions for credit losses,
partially offset by a favourable U.S. tax item in the prior year and higher
expenses.

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

BMO Wealth Management

Reported net income was $267 million, an increase of $48 million or 22% and
adjusted net income was $301 million, an increase of $72 million or 31% from the
prior year. Adjusted net income in the current quarter excludes the net impact
of major reinsurance claims and the amortization of acquisition-related
intangible assets in both the current and prior year. Traditional Wealth
reported net income was $237 million, an increase of $45 million or 24% and
adjusted net income was $246 million, an increase of $44 million or 22%, due to
the impact of a legal provision in the prior year, higher deposit and loan
revenue and higher fee-based revenue. Insurance reported net income was $30
million, an increase of $3 million or 9%, and adjusted net income of $55 million
increased $28 million, primarily due to benefits from changes in investments to
improve asset liability management.

For the second consecutive year, BMO Global Asset Management was named the best
manager in liability-driven investment by Financial News.

BMO Capital Markets

Reported net income was $269 million, compared with $298 million and adjusted
net income was $280 million, compared with $309 million in the prior year.
Adjusted net income excludes the amortization of acquisition-related intangible
assets and acquisition integration costs. Higher revenue was more than offset by
higher provisions for credit losses and higher expenses.

On September 25, 2019, BMO Capital Markets celebrated the 15th anniversary of
the Equity Through Education Trading Day, a BMO Capital Markets initiative that
donates all institutional equity trading commissions earned that day across
North America and Europe to charities helping underprivileged students through
scholarships, bursaries and other academic programs. This year, we raised $1.6
million, bringing the total amount raised since the introduction of the program
in 2005 to more than $21 million, and helping over 5,000 students. This is one
of the many initiatives that continue to highlight BMO's Purpose to Boldly Grow
the Good in business and life.

Corporate Services

Reported net loss was $451 million, compared with a reported net income of $134
million in the prior year. Adjusted net loss was $94 million, compared with an
adjusted net loss of $65 million in the prior year. Adjusted results in the
current quarter exclude a restructuring charge of $357 million after-tax.
Adjusted results in the prior year exclude a $203 million after-tax benefit from
the remeasurement of an employee benefit liability and acquisition integration
costs. Adjusted results decreased, primarily due to lower revenue excluding
taxable equivalent basis (teb) adjustments, partially offset by lower expenses.

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

Capital

BMO's Common Equity Tier 1 (CET1) Ratio was 11.4% as at October 31, 2019. The
CET1 Ratio was unchanged from the prior quarter as retained earnings growth,
which absorbed the restructuring charge, was offset by higher risk-weighted
assets from business growth.

Provision for Credit Losses

Total provision for credit losses was $253 million, an increase of $78 million
from the prior year. The provision for credit losses ratio was 23 basis points,
compared with 18 basis points in the prior year. The provision for credit losses
on impaired loans of $231 million increased $54 million from $177 million in the
prior year, primarily due to higher provisions in BMO Capital Markets and our
P&C businesses. The provision for credit losses on impaired loans ratio was 21
basis points, compared with 18 basis points in the prior year. There was a $22
million provision for credit losses on performing loans in the current quarter,
compared with a $2 million recovery of credit losses on performing loans in the
prior year. The year-over-year increase in the provision for credit losses on
performing loans was as a result of negative migration in the current quarter,
compared with positive migration in the prior year, and higher provisions in the
current quarter from changes in scenario weights, partially offset by lower
provisions in the current quarter from changes in the economic outlook.

Caution

The foregoing sections contain forward-looking statements. Please refer to 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
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.

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

Management's Discussion and Analysis (MD&A) commentary is as at December 3,
2019. 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, 2019, included in this
document, as well as the audited consolidated financial statements for the year
ended October 31, 2019, and the MD&A for fiscal 2019, contained in our 2019
Annual Report.

BMO's 2019 Annual Report 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 at October 31, 2019, 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, 2019, 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 Q4-2019 Q3-2019 Q4-2018 Fiscal Fiscal
millions, except as 2019 2018
noted)
Summary Income
Statement
Net interest income 3,364 3,217 3,015 12,888 11,438
(1)
Non-interest 2,723 3,449 2,878 12,595 11,467
revenue (1)(2)
Revenue (2) 6,087 6,666 5,893 25,483 22,905
Insurance claims, 335 887 390 2,709 1,352
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,752 5,779 5,503 22,774 21,553
CCPB
Provision for 231 243 177 751 700
(recovery of)
credit losses on
impaired loans
Provision for 22 63 (2) 121 (38)
(recovery of)
credit losses on
performing loans
Total provision for 253 306 175 872 662
credit losses
Non-interest 3,987 3,491 3,193 14,630 13,477
expense (2)
Provision for 318 425 438 1,514 1,961
income taxes (3)
Net income 1,194 1,557 1,697 5,758 5,453
attributable to
equity holders of
the bank
Adjusted net income 1,607 1,582 1,531 6,249 5,982
Common Share Data
($, except as
noted)
Earnings per share 1.78 2.34 2.58 8.66 8.17
Adjusted earnings 2.43 2.38 2.32 9.43 8.99
per share
Earnings per share (30.7) 1.0 42.4 6.0 3.3
growth (%)
Adjusted earnings 4.8 0.8 19.7 4.9 10.3
per share growth
(%)
Dividends declared 1.03 1.03 0.96 4.06 3.78
per share
Book value per 71.54 70.88 64.73 71.54 64.73
share
Closing share price 97.50 98.80 98.43 97.50 98.43
Number of common
shares outstanding
(in millions)
End of period 639.2 639.0 639.3 639.2 639.3
Average diluted 640.4 640.4 641.8 640.4 644.9
Total market value 62.3 63.1 62.9 62.3 62.9
of common shares ($
billions)
Dividend yield (%) 4.2 4.2 3.9 4.2 3.8
Dividend payout 57.6 43.9 37.2 46.8 46.1
ratio (%)
Adjusted dividend 42.3 43.2 41.3 43.0 41.9
payout ratio (%)
Financial Measures
and Ratios (%)
Return on equity 9.9 13.2 16.1 12.6 13.3
Adjusted return on 13.5 13.5 14.5 13.7 14.6
equity
Return on tangible 11.9 15.8 19.5 15.1 16.2
common equity
Adjusted return on 15.7 15.8 17.3 16.1 17.5
tangible common
equity
Net income growth (29.6) 1.3 38.6 5.6 2.1
Adjusted net income 5.0 1.1 17.1 4.5 8.8
growth
Revenue growth 3.3 15.1 5.0 11.3 3.6
Revenue growth, net 4.5 4.6 9.1 5.7 4.8
of CCPB
Non-interest 24.9 3.9 (4.4) 8.6 2.2
expense growth
Adjusted 1.2 4.1 6.2 5.0 3.5
non-interest
expense growth
Efficiency ratio, 69.3 60.4 58.0 64.2 62.5
net of CCPB
Adjusted efficiency 60.0 59.9 62.2 61.4 61.9
ratio, net of CCPB
Operating leverage, (20.4) 0.7 13.5 (2.9) 2.6
net of CCPB
Adjusted operating 3.8 0.5 2.9 0.8 1.3
leverage, net of
CCPB
Net interest margin 1.71 1.67 1.68 1.70 1.67
on average earning
assets
Effective tax rate 21.0 21.5 20.6 20.8 26.5
(3)
Adjusted effective 22.0 21.5 19.7 21.1 20.7
tax rate
Total 0.23 0.28 0.18 0.20 0.17
PCL-to-average net
loans and
acceptances
(annualized)
PCL on impaired 0.21 0.22 0.18 0.17 0.18
loans-to-average
net loans and
acceptances
(annualized)
Balance Sheet (as
at, $ millions,
except as noted)
Assets 852,195 839,180 773,293 852,195 773,293
Gross loans and 451,537 444,390 404,215 451,537 404,215
acceptances
Net loans and 449,687 442,588 402,576 449,687 402,576
acceptances
Deposits 568,143 553,383 520,928 568,143 520,928
Common 45,728 45,295 41,381 45,728 41,381
shareholders'
equity
Cash and 28.9 28.3 29.9 28.9 29.9
securities-to-total
assets ratio (%)
Capital Ratios (%)
CET1 Ratio 11.4 11.4 11.3 11.4 11.3
Tier 1 Capital 13.0 13.0 12.9 13.0 12.9
Ratio
Total Capital Ratio 15.2 15.3 15.2 15.2 15.2
Leverage Ratio 4.3 4.3 4.2 4.3 4.2
Foreign Exchange
Rates ($)
As at Canadian/U.S. 1.3165 1.3198 1.3169 1.3165 1.3169
dollar
Average 1.3240 1.3270 1.3047 1.3290 1.2878
Canadian/U.S.
dollar

(1) Effective
Q1-2019,
certain
dividend income
in our Global
Markets
business has
been
reclassified
from
non-interest
revenue to net
interest
income. Results
for prior
periods and
related ratios
have been
reclassified to
conform with
the current
period's
presentation.
(2) Effective
Q1-2019, the
bank adopted
IFRS 15,
Revenue from
Contracts with
Customers (IFRS
15) and elected
to
retrospectively
present prior
periods as if
IFRS 15 had
always been
applied. As a
result, loyalty
rewards and
cash promotion
costs on cards
previously
recorded in
non-interest
expense are
presented as a
reduction in
non-interest
revenue. In
addition,
certain
out-of-pocket
expenses
reimbursed to
BMO from
customers have
been
reclassified
from a
reduction in
non-interest
expense to
non-interest
revenue.
(3) Q1-2018
reported net
income included
a $425 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. For more
information,
refer to the
Critical
Accounting
Estimates -
Income Taxes
and Deferred
Tax Assets
section on page
119 of BMO's
2018 Annual
Report.
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 refer
to the
Non-GAAP
Measures
section.

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 refer to 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. 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.
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 Q4-2019 Q3-2019 Q4-2018 Fiscal Fiscal
millions, except as 2019 2018
noted)
Reported Results
Revenue 6,087 6,666 5,893 25,483 22,905
Insurance claims, (335) (887) (390) (2,709) (1,352)
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,752 5,779 5,503 22,774 21,553
CCPB
Total provision for (253) (306) (175) (872) (662)
credit losses
Non-interest (3,987) (3,491) (3,193) (14,630) (13,477)
expense
Income before 1,512 1,982 2,135 7,272 7,414
income taxes
Provision for (318) (425) (438) (1,514) (1,961)
income taxes
Net income 1,194 1,557 1,697 5,758 5,453
EPS ($) 1.78 2.34 2.58 8.66 8.17
Adjusting Items
(Pre-tax) (1)
Acquisition (2) (3) (18) (13) (34)
integration costs
(2)
Amortization of (38) (29) (31) (128) (116)
acquisition-related
intangible assets
(3)
Restructuring costs (484) - - (484) (260)
(4)
Reinsurance (25) - - (25) -
adjustment (5)
Benefit from the - - 277 - 277
remeasurement of an
employee benefit
liability (6)
Adjusting items (549) (32) 228 (650) (133)
included in
reported pre-tax
income
Adjusting Items
(After tax)(1)
Acquisition (2) (2) (13) (10) (25)
integration costs
(2)
Amortization of (29) (23) (24) (99) (90)
acquisition-related
intangible assets
(3)
Restructuring costs (357) - - (357) (192)
(4)
Reinsurance (25) - - (25) -
adjustment (5)
Benefit from the - - 203 - 203
remeasurement of an
employee benefit
liability (6)
U.S. net deferred - - - - (425)
tax asset
revaluation (7)
Adjusting items (413) (25) 166 (491) (529)
included in
reported net income
after tax
Impact on EPS ($) (0.65) (0.04) 0.26 (0.77) (0.82)
Adjusted Results
Revenue 6,087 6,666 5,893 25,483 22,905
Insurance claims, (310) (887) (390) (2,684) (1,352)
commissions and
changes in policy
benefit liabilities
(CCPB)
Revenue, net of 5,777 5,779 5,503 22,799 21,553
CCPB
Total provision for (253) (306) (175) (872) (662)
credit losses
Non-interest (3,463) (3,459) (3,421) (14,005) (13,344)
expense
Income before 2,061 2,014 1,907 7,922 7,547
income taxes
Provision for (454) (432) (376) (1,673) (1,565)
income taxes
Net income 1,607 1,582 1,531 6,249 5,982
EPS ($) 2.43 2.38 2.32 9.43 8.99

(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, and the
reinsurance
adjustment, which
is included in BMO
Wealth Management.
(2) 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.
KGS-Alpha
acquisition
integration costs
are reported in BMO
Capital Markets.
Acquisition
integration costs
are recorded in
non-interest
expense.
(3) These amounts were
charged to the
non-interest
expense of the
operating groups.
Before-tax and
after-tax amounts
for each operating
group are provided
in the Review of
Operating Group's
Performance
section.
(4) Q4-2019 reported
net income included
a restructuring
charge of $357
million after-tax
($484 million
pre-tax), related
to severance and a
small amount of
real estate-related
costs, to continue
to improve our
efficiency,
including
accelerating
delivery against
key bank-wide
initiatives focused
on digitization,
organizational
redesign and
simplification of
the way we do
business. The
restructuring
charge in 2018 was
also a result of a
similar bank-wide
program.
Restructuring costs
are included in
non-interest
expense in
Corporate Services.
(5) Q4-2019 reported
net income included
a reinsurance
adjustment of $25
million (pre-tax
and after-tax) in
claims, commissions
and changes in
policy benefit
liabilities for the
net impact of major
reinsurance claims
from Japanese
typhoons that were
incurred after our
announced decision
to wind down our
reinsurance
business. This
reinsurance
adjustment is
included in BMO
Wealth Management.
(6) Q4-2018 reported
net income included
a benefit of $203
million after-tax
($277 million
pre-tax) from the
remeasurement of an
employee benefit
liability, as a
result of an
amendment to our
other employee
future benefits
plan for certain
employees. This
amount was included
in non-interest
expense in
Corporate Services.
(7) Q1-2018 reported
net income 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. For more
information, refer
to the Critical
Accounting
Estimates - Income
Taxes and Deferred
Tax Assets section
on page 119 of
BMO's 2018 Annual
Report.
Certain
comparative
figures have
been
reclassified
to conform
with the
current
period'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 2020 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, privacy and cyber security, including the
threat of data breaches, 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 refer to the discussion in the Risks That May Affect Future
Results section, and the sections related to credit and counterparty, market,
insurance, liquidity and funding, operational, legal and regulatory, business,
strategic, environmental and social, and reputation risk, in the Enterprise-Wide
Risk Management section that begins on page 68 of BMO's 2019 Annual Report, 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 18 of BMO's 2019 Annual Report. 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 decreased relative to the third quarter of 2019 and increased
relative to the fourth quarter of 2018 due to changes in the U.S. dollar. The
table below indicates the relevant average Canadian/U.S. dollar exchange rates
and the impact of changes in those 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 BMO's U.S. segment.

Changes in exchange rates will affect future results measured in Canadian
dollars, and the impact on those results is a function of the periods in which
revenue, expenses and provisions for (recoveries of) credit losses arise.

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 enter into hedging transactions in order to mitigate the impact of foreign
exchange rate movements on net income.

Refer to the Enterprise-Wide Capital Management section on page 59 of the 2019
Annual Report 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 as a result of the
translation of our investment in foreign operations.

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

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

Q4-2019
(Canadian $ vs. vs.
in millions, Q4-2018 Q3-2019
except as
noted)
Canadian/U.S.
dollar
exchange rate
(average)
Current 1.3240 1.3240
period
Prior period 1.3047 1.3270
Effects on
U.S. segment
reported
results
Increased 17 (3)
(decreased)
net interest
income
Increased 11 (2)
(decreased)
non-interest
revenue
Increased 28 (5)
(decreased)
revenues
Decreased (1) -
(increased)
provision for
credit losses
Decreased (20) 3
(increased)
expenses
Decreased (1) 1
(increased)
income taxes
Increased 6 (1)
(decreased)
reported net
income
Impact on 0.01 -
earnings per
share ($)
Effects on
U.S. segment
adjusted
results
Increased 17 (3)
(decreased)
net interest
income
Increased 11 (2)
(decreased)
non-interest
revenue
Increased 28 (5)
(decreased)
revenues
Decreased (1) -
(increased)
provision for
credit losses
Decreased (20) 3
(increased)
expenses
Decreased (1) 1
(increased)
income taxes
Increased 6 (1)
(decreased)
adjusted net
income
Impact on 0.01 -
adjusted
earnings per
share ($)

Adjusted
results
in this
section
are
non-GAAP
amounts
or
non-GAAP
measures.
Please
refer to
the
Non-GAAP
Measures
section.

Net Income

Q4 2019 vs. Q4 2018

Reported net income was $1,194 million, compared with $1,697 million in the
prior year, and adjusted net income was $1,607 million, an increase of $76
million or 5% from the prior year. Adjusted net income excludes a $357 million
restructuring charge, related to severance and a small amount of real
estate-related costs, to continue to improve our efficiency, including
accelerating delivery against key bank-wide initiatives focused on digitization,
organizational redesign and simplification of the way we do business, as well as
a $25 million reinsurance adjustment for the net impact of major reinsurance
claims from Japanese typhoons that were incurred after our announced decision to
wind down our reinsurance business in the current quarter, the amortization of
acquisition-related intangible assets and acquisition integration costs in both
periods, and a $203 million benefit from the remeasurement of an employee
benefit liability in the prior year. Reported EPS of $1.78 decreased $0.80 or
31% and adjusted EPS of $2.43 increased $0.11 or 5% from the prior year.

Results reflect good performance in our P&C businesses and higher net income in
BMO Wealth Management, partially offset by a decrease in BMO Capital Markets and
a higher net loss in Corporate Services. Prior year results included a
favourable tax item in our U.S. segment.

Q4 2019 vs. Q3 2019

Reported net income decreased $363 million or 23% from the prior quarter and
adjusted net income increased $25 million or 2%. Adjusted net income excludes
the restructuring charge and reinsurance adjustment in the current quarter, and
the amortization of acquisition-related intangible assets and acquisition
integration costs in both the current and prior quarter. Reported EPS decreased
$0.56 or 24% and adjusted EPS increased $0.05 or 2% from the prior quarter.

Results reflect higher net income in our P&C businesses, with particularly
strong performance in Canadian P&C, and in BMO Wealth Management, partially
offset by a higher net loss in Corporate Services and a decrease in BMO Capital
Markets.

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

Revenue (1)(2)

Q4 2019 vs. Q4 2018

Revenue was $6,087 million, an increase of $194 million or 3% from the prior
year and revenue, net of insurance claims, commissions and changes in policy
benefit liabilities (CCPB), was $5,752 million, an increase of $249 million or
5%.

Results reflect good performance in our P&C businesses and increases in BMO
Wealth Management and BMO Capital Markets, partially offset by a decrease in
Corporate Services.

Net interest income was $3,364 million, an increase of $349 million or 12%, or
11% excluding the impact of the stronger U.S. dollar. On an excluding trading
basis, net interest income was $2,979 million, an increase of $210 million or
8%, or 7% excluding the impact of the stronger U.S. dollar, largely due to
higher loan and deposit balances across all operating groups, partially offset
by lower loan margins.

Average earning assets were $778.4 billion, an increase of $66.7 billion or 9%,
or $62.7 billion or 9% excluding the impact of the stronger U.S. dollar, due to
loan growth, higher securities and higher securities borrowed or purchased under
resale agreements. BMO's overall net interest margin increased 3 basis points,
primarily due to higher net interest income from trading activities and a higher
margin in Canadian P&C, partially offset by a higher volume of assets in BMO
Capital Markets and Corporate Services, which have a lower spread than the bank,
as well as a lower m