(Canadian $ in millions, except as noted) Q4-2018 Q3-2018 Q4-2017 Fiscal 2018 Fiscal 2017 --- Net interest income 210 212 194 826 722 Non-interest revenue 1,359 1,326 1,490 5,468 5,492 --- Total revenue 1,569 1,538 1,684 6,294 6,214 Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 390 269 573 1,352 1,538 --- Revenue, net of CCPB 1,179 1,269 1,111 4,942 4,676 Provision for credit losses on impaired loans (1) 2 2 na 6 na Provision for (recovery of) credit losses on performing loans (1) 1 2 na na --- Total provision for (recovery of) credit losses (1) 3 4 6 8 Non-interest expense 880 875 841 3,509 3,351 --- Income before income taxes 296 390 270 1,427 1,317 Provision for income taxes 77 99 95 355 350 --- Reported net income 219 291 175 1,072 967 --- Amortization of acquisition-related intangible assets (2) 10 10 14 41 65 --- Adjusted net income 229 301 189 1,113 1,032 === Traditional Wealth businesses reported net income 192 202 192 805 729 Traditional Wealth businesses adjusted net income 202 212 206 846 794 Insurance reported net income 27 89 (17) 267 238 Net income growth (%) 25.3 8.3 (38.1) 11.0 24.5 Adjusted net income growth (%) 21.2 6.5 (37.9) 8.0 17.6 Revenue growth (%) (6.9) 6.7 30.9 1.3 5.2 Revenue growth, net of CCPB (%) 6.0 6.8 (8.0) 5.7 7.1 Non-interest expense growth (%) 4.7 5.0 1.0 4.7 0.4 Adjusted non-interest expense growth (%) 5.4 5.7 2.5 5.7 1.9 Return on equity (%) 14.1 18.9 11.6 17.8 15.9 Adjusted return on equity (%) 14.7 19.5 12.5 18.5 17.0 Operating leverage, net of CCPB (%) 1.3 1.8 (9.0) 1.0 6.7 Adjusted operating leverage, net of CCPB (%) 0.6 1.1 (10.5) 5.2 Efficiency ratio, net of CCPB (%) 74.7 68.9 75.7 71.0 71.7 Adjusted efficiency ratio (%) 55.3 56.0 48.9 54.9 52.6 Adjusted efficiency ratio, net of CCPB (%) 73.6 67.8 74.1 70.0 70.0 Assets under management 438,274 451,216 429,448 438,274 429,448 Assets under administration (3) 382,839 394,513 359,773 382,839 359,773 Average earning assets 32,784 31,704 28,754 31,167 28,026 Average gross loans and acceptances 21,559 20,736 18,538 20,290 18,068 Average net loans and acceptances 21,531 20,706 18,533 20,260 18,063 Average deposits 33,968 34,327 33,281 34,251 33,289 ---
(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 specific provisions. Refer to the Changes in Accounting Policies section on page 121 of BMO's 2018 Annual MD&A for further details. (2) Before tax amounts of $13 million in Q4-2018 and Q3-2018, $18 million in Q4-2017, $52 million for fiscal 2018 and $80 million for fiscal 2017 are included in non-interest expense. (3) Certain assets under management that are also administered by us and included in assets under administration. Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section. na - not applicable
Q4 2018 vs Q4 2017Reported 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. As outlined below, net income in the current quarter was impacted by elevated reinsurance claims and a legal provision. 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, 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.
Revenue of $1,569 million decreased $115 million or 7% from the prior year. Revenue, net of CCPB, was $1,179 million, an increase of $68 million or 6%. Revenue in traditional wealth was $1,100 million, an increase of $32 million or 3%, due to business growth from higher deposit and loan revenue, net new client assets and higher equity markets on average, partially offset by a legal provision in the current year and the impact of a divestiture of a non-core business in the prior year. Insurance revenue, net of CCPB, of $79 million increased $36 million from the prior year due to the drivers noted above.
Non--interest expense of $880 million increased $39 million or 5% and adjusted non-interest expense of $867 million increased $44 million or 5%, largely due to higher revenue-based costs and technology investments partially offset by the impact of the divestiture noted above.
Assets under management increased $8.8 billion or 2% from the prior year to $438.3 billion, primarily driven by growth in client assets. Assets under administration increased $23.1 billion or 6% from the prior year to $382.8 billion, primarily driven by growth in client assets. Year-over-year loans and deposits grew by 16% and 2%, respectively, as we continue to diversify our product mix.
Q4 2018 vs Q3 2018Reported net income of $219 million and adjusted net income of $229 million both decreased $72 million. Traditional wealth reported net income was $192 million compared with $202 million in the prior quarter and adjusted net income was $202 million, compared with $212 million in the prior quarter, primarily due to lower fee based revenue partially offset by the benefit of a favourable U.S. tax item. Insurance net income of $27 million decreased $62 million or 69% from the prior quarter, primarily due to elevated reinsurance claims and unfavourable market movements in the current quarter relative to favourable market movements in the prior quarter.
Revenue, net of CCPB, decreased $90 million or 7%. Revenue in traditional wealth decreased $24 million or 2%, primarily due to lower fee-based revenue. Net insurance revenue decreased $66 million or 46%, due to the drivers noted above.
Reported and adjusted non-interest expense both increased $5 million or 1%.
Assets under management decreased $12.9 billion or 3%, and assets under administration decreased $11.7 billion or 3%, mainly due to weaker equity markets. Quarter-over-quarter loans grew by 4%, while deposits were down 1%.
Adjusted results in this BMO Wealth Management section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.
BMO Capital Markets
(CONTINUA)
