William A. Downe. CIBC World Markets Frontenac Institutional Investor Conference. Deputy Chair, BMO Financial Group. September 26, 2002

Transcription

1 William A. Downe Deputy Chair, BMO Financial Group CIBC World Markets Frontenac Institutional Investor Conference September 26, 2002

2 Focused Transnational Growth Strategy Invest in core Canadian franchise Expand in the U.S. Build on longstanding strengths C O N F E R E N C E 1

3 Solid Stand-Alone Businesses Form Basis For U.S. Growth Strategy 2

4 Moving Up The Canadian Bank Scorecard SCORECARD Cash ROE & EPS Rank Top Tier F2001 Q Mid Tier BMO Low Tier BMO Source: Q Canadian bank financial results 3

5 Relative Credit Advantage Continues In F % 1.75% 1.50% 1.25% 1.00% Specific Provision for Credit Losses as a Percent of Average Net Loans and Acceptances (including Reverse Repos) Historical Averages: BMO Cdn. Peers 1990 to 2001: 0.41% 0.64% 0.75% 0.50% 0.25% 0.00% '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 Q3 02 BMO 5 Cdn. Bank Peer Average (RBC, TD, CIBC, BNS, NA) * Annualized YTD based on Q3 Supplementary Financial Information Packages 4

6 Strong Dividend Track Record $0.53 Dividends Declared Per Share (C$) $0.56 $0.60 $0.66 $0.74 $0.82 $0.88 $0.94 $1.00 $

7 Strengthened Retail Franchise Improves Expense-To-Revenue Ratio % Q Q Q

8 Affirming Our 2002 Financial Targets Excluding Non-Recurring Items Cash EPS Growth (1) Cash ROE Provision For Credit Losses Tier 1 Capital 2002 Target 8 12% 14 15% bps (2) Minimum 8.0% 2002 YTD Actual (15.2%) 13.9% Annualized 60 bps Annualized 8.72% (1) Growth based on fiscal 2001 cash EPS of $2.68 per share. (2) On April 25, 2002, PCL target for fiscal 2002 was revised to $775 - $825 MM, or in a range about 55 bps. 7

9 2001 National Award in Governance (for Private Sector) - Sponsored by The Conference Board of Canada and Spencer Stuart 2000 Annual Report Gold Award Financial Institutions Category Overall Award of Excellence Excellence for Corporate Governance - Sponsored by CICA and Financial Post Continuing Strength In Corporate Governance August 2002 CEO and CFO signed voluntary certifications of BMO s Q results under Sarbanes-Oxley Act On August 14 th, Harris Bank CEO and CFO certified Harris Q results May 2002 BMO announced its intention to expense stock options F R O N T E C N I A B C C W O O N R F L E D R E M N A C R EK E T S C O N F E R E N C E 8

10 Growing Our U.S. Revenue % % BMO s U.S. Revenue as a Percentage of Total Bank Revenue 29.3% 33.7% YTD 9

11 Optimizing Our Business Mix Breakdown of $2.1 Billion Revenue From BMO s U.S. Operations (Excluding Corporate) YTD July 31, 2002 P&C 30.7% PCG 18.3% IBG 51.0% 10

12 Capitalizing On Chicago Area Opportunity 3rd largest metropolitan market in U.S. 8 million people Greater Chicago has GDP of approximately 40% of Canadian GDP Most fragmented market in U.S. with more than 250 banks Top three banks combine for 30% market share of retail deposits 11

13 Transformed Harris From A Small Wholesale Bank Into An Established Retail Franchise 160 Branches 145 1,200 Customers Retail Deposit Market Share* * Based on formula which seeks to eliminate corporate deposits from published total deposit data. 12

14 #1 Bank Financed Auto Loans #2 Home Equity Loans #2 Small Business Banking Achieving Momentum In Chicago Area Retail Banking C$MM / Canadian GAAP Net Income Q Through Q (Harris Fiscal / Calendar Year) Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/

15 Competitive Advantages Fuel U.S. Retail Banking Growth Brand image and reputation Unique community banking model BMO cross-border synergies Multi-channel distribution platform Low loan-to-deposit ratio Customer satisfaction/loyalty Wealth management partnership Acquirer of choice C O N F E R E N C E 14

16 Chicagoland Banking County Branch Distribution Network Integrated Branch Network & Solid Multi-Channel Platform Lake Michigan Harris currently has close to 150 locations across greater Chicago Well-positioned in areas with highgrowth potential Completely integrated branch network 50 additional attractive sub-markets identified for five-year expansion project F R O N T E C N I B A C W C O N R F L E D R M E A N R C K EE T S C O N F E R E N C E 15

17 Sophisticated Infrastructure Provides Options For U.S. Retail Growth Strategy Expand branch network within Chicago metropolitan area Stepping out from Illinois to expand throughout Midwest Expand into high-growth areas that may be more geographically removed 16

18 IBG Products High Yield Foreign Exchange Global Financial Products Credit Derivatives Commodity Derivatives Global Distribution Mid-Market Offers Greatest Opportunity For IBG Growth Mid-market is defined as companies with revenue of US$ million per year 10,000 prospective Harris Nesbitt clients in Midwest Demographics suggest 80% will change ownership and require M&A advice and access to equity markets within 10 years C O N F E R E N C E 17

19 Specializing In Niche Sectors Energy Offices in Calgary and Houston Maintain continent-wide coverage of this consolidating industry Media and Communications Provider of integrated solutions Our professionals have a successful track record in merchant banking, mezzanine financing and senior lending 18

20 Decreasing Our Risk Weighted Assets C$Billions 15 Non-Relationship Portfolio Risk Weighted Assets Q Q

21 Ranked #1 for 22nd consecutive year by Brendan Wood International Strengthening Our Corporate & Investment Banking Capabilities Expand award-winning Canadian research product to include more U.S. companies Expand our distribution capabilities beyond current Canadian focus to include U.S. Add key element to Harris Nesbitt s integrated investment banking offering 20

22 Integrating Our Wealth Management Offering - A Key Component Of BMO s U.S. Strategy Financial Planning Family Office Services Full Service Investing Wealth Management Investment Management Customized Banking Direct Investing Insurance 21

23 Growing Our Valuable U.S. Asset Base Gross AUA, AUM and Term of $173 Billion, Net $149 Billion as of July 31, 2002 $57B ** $17B $0.6B $36B * $34B * Excludes Morgan Stanley Online Accounts Assets which will be reflected in Q4 ** Harris Private Bank and Harris Investment Management include $6B and $18B respectively of BMO Group of Companies mutual funds $28B ** 22

24 Strategic Acquisitions Enhance Wealth Management Platform Ranked #1 Top Online Broker in Canada Best Customer Service Ranked 6 th in North America in direct investing based on combined number of Harrisdirect & BMO InvestorLine accounts Updated technology platform to state-of-the art Possess technology, high-end clients and critical mass required for profitable growth 23

25 Composition of Harrisdirect Client Base CSFBdirect 63% Acquiring Serious Investors With Complex Investment Needs CSFBdirect Demographics - 70% are years old - 67% earn US$50, % have net worth of US$100,000+ Harris InvestorLine 17% Morgan Stanley Online 20% Morgan Stanley Online Demographics - 75% are years old - 2/3 from households earning US$75, % employed in professional occupations 24

26 Strategically Expanding In The U.S. Acquisitions must be a good strategic and cultural fit and pass the following hurdles: IRR of at least 15% Accretive to cash EPS within 2-3 years Focused primarily on U.S. expansion Retail acquisitions Wealth management acquisitions U.S. equity research & sales platform 25

27 William A. Downe Deputy Chair, BMO Financial Group CIBC World Markets Frontenac Institutional Investor Conference September 26, 2002

28 Forward-Looking Statements Caution Regarding Forward-looking Statements This presentation includes forward-looking statements, which are made pursuant to the safe harbor provisions of the United States Private Securities Litigation Reform Act of These forward-looking statements include, but are not limited to, comments with respect to our objectives, targets, strategies, financial condition, the results of our operations and our businesses, our outlook for our businesses and for the Canadian and U.S. economies, and risk management. By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this report not to place undue reliance on these forward-looking statements as a number of important factors could cause actual future results to differ materially from the plans, objectives, targets, expectations, estimates and intentions expressed in such forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by the following factors: fluctuations in interest rates and currency values; regulatory developments; statutory changes; the effects of competition in the geographic and business areas in which we operate, including continued pricing pressure on loan and deposit products; and changes in political and economic conditions including, among other things, inflation and technological changes. We caution that the foregoing list of important factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider the foregoing factors as well as other uncertainties and potential events. The Bank does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of the Bank. Investor Relations Phone: Fax: investor.relations@bmo.com 27

29 Q & A 28