F I R S T Q U A R T E R 2 0 0 2 RISK REVIEW M. G. Maila Executive Vice President and Head of Risk Management Group Quarterly Investor Presentation February 26, 2002 1
Credit Risk Highlights Q1 Specific Provisions for Credit Losses (PCL s) of $180MM for the quarter are within guidance New impaired loans during the quarter were $417MM, down $189MM or 31% from last quarter The Bank s disciplined underwriting and diversification standards continue to result in no undue concentrations or exposures, either on- or offbalance sheet 2
Q1 Specific Provisions For Credit Losses (PCL s) Of $180MM For The Quarter Are Within Guidance 2.00% Specific PCL s as a percent of Average Net Loans and Acceptances (including Repos) 1.50% 1.00% 1.07% Historical Averages: BMO Peer 12 Year: 0.41% 0.64% 0.50% 0.00% 0.30% 0.01% 0.60% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Q1 2002 BMO 5 Bank Cdn. Peer Avg. 0.49% 3
New Impaired Loans During The Quarter Were $417MM, Down $189MM Or 31% From Q4 100 Formations as a percent of Net Loans and Acceptances (including Repos) 75 Bps Basis Points 80 60 40 11 Bps $606 MM 42 Bps $417 MM 29 Bps 20 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 4
New GIL Formations Are Spread Across Many Industry Sectors, And... Q1 2002 New Formations: C$417MM Construction Retail Trade Other Financial Institutions Industrial Products Wholesale Trade Utilities Agriculture Other Communications Automotive Broadcasting Regulated Telecom Other Services Rental and Lease Other Manufacturing 5
... No Single Industry Sector Or Borrower Represented An Undue Impairment Concentration GIL s as at Quarter End: C$2,193MM Construction Energy Other Individuals Financial Institutions Wholesale Trade Industrial Products Retail Trade Automotive Consumer Products Utilities Electronics Other Mfg Agriculture Transportation Other Communications Broadcasting General Services Health Care Rental and Lease Other Services Regulated Telecom General Telecom 6
Market Risk Highlights Structural market risk continues to be managed within a narrow range and at a relatively low level Trading performance was profitable and relatively stable during the quarter 7
Structural Market Risk Continues To Be Managed Within A Narrow Range And At A Relatively Low Level C $ MM 400 300 200 100 Earnings Volatility (EV) 2 Market Value Exposure (MVE) 1 $258 MM $47 MM 0 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 2002 1 MVE = potential after tax impact on balance sheet values 2 EV = potential impact on after tax earnings over the next 12 months 8
Trading Performance Was Profitable And Relatively Stable In Q1 Trading Revenue Performance and Value at Risk for Q1, 2002 (C$MM) Total P&L Total VaR 45 C $ MM 35 25 15 5-5 11/1 11/6 11/9 11/15 11/20 11/23 11/28 12/3 12/6 12/11 12/14 12/19 12/24 12/31 1/4 1/9 1/14 1/17 1/22 1/25 1/30 Trading and Underwriting is comprised of Trading, Underwriting, and Money Market/Accrual Portfolios 9
Page Appendices 11 Sales of Impaired Loans to Companies in Bankruptcy Subsequent to Quarter End 12 Exposure to Argentina and Japan 13 Major Off-Balance Sheet Items 14 Major Equity Investment Portfolios 10
Sales of Impaired Loans to Companies in Bankruptcy Subsequent to Quarter End... As at Jan. 31, 2002 (C$MM) Name Pacific Gas & Electric Enron Corp Global Crossing 130 (out of 130 outstanding) 35 (out of 47 outstanding) 24 (out of 56 outstanding) 11
Exposure to Argentina and Japan As at Jan. 31, 2002 (C$MM) Country Exposure Outstanding Japan* 1,159 Argentina** 82 (of which 33 is impaired) * Exposures in Japan are primarily in short-term treasury products ** Exposures in Argentina are primarily in trade and project finance 12
Major Off-Balance Sheet Items As at January 31, 2002 Securitizations* - Balances 13.3 C$Billion Other Off-Balance Sheet Items - Risk Weighted Assets Commitments and Contingent Liabilities** 16.6 Derivative Financial Instruments*** 7.4 * Refer to page 18 in the Supplementary Financial Information ** Refer to page 22 in the Supplementary Financial Information *** Refer to page 21 in the Supplementary Financial Information 13
Major Equity Investment Portfolios Book Value As at Jan. 31, 2002 C$MM Sectoral Composition of Merchant Banking and Venture Capital Portfolios Media / Telecom Home Net. Hosting Optical Net. Technology Wireless Merchant Banking 397 Venture Capital (Cda) 188 High Grade Conduits (UK) 107 Common Equity Portfolio 105 CBO Equity 102 IT Services Consumer Products Financial Services Technology Mfg. Radio Broadcasting General Manufacturing & Services Life Sciences Energy Real Estate Auto & Durable Goods Mfg. 14
Forward-Looking Statements CAUTION REGARDING FORWARD-LOOKING STATEMENTS This financial presentation includes forward-looking statements, which are made pursuant to the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. 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. 15