(Canadian $ in millions, except as noted) Q4-2018 Q3-2018 Q4-2017 Fiscal 2018 Fiscal 2017 --- Net interest income (teb) 147 135 315 659 1,233 Non-interest revenue 982 968 800 3,696 3,336 --- Total revenue (teb) 1,129 1,103 1,115 4,355 4,569 Provision for (recovery of) credit losses on impaired loans (1) (3) 3 na (17) na Provision for (recovery of) credit losses on performing loans (1) (4) 4 na (1) na --- Total provision for (recovery of) credit losses (1) (7) 7 4 (18) 44 Non-interest expense 763 698 679 2,851 2,778 --- Income before income taxes 373 398 432 1,522 1,747 Provision for income taxes (teb) 75 97 116 366 472 --- Reported net income 298 301 316 1,156 1,275 --- Acquisition integration costs (2) 9 2 11 Amortization of acquisition-related intangible assets (3) 2 2 2 --- Adjusted net income 309 303 316 1,169 1,277 === Trading Products revenue 629 638 645 2,539 2,694 Investment and Corporate Banking revenue 500 465 470 1,816 1,875 Net income growth (%) (5.6) 7.0 (18.4) (9.4) 3.2 Adjusted net income growth (%) (2.3) 7.5 (18.4) (8.5) 3.3 Revenue growth (%) 1.4 4.8 (4.8) (4.7) 5.9 Non-interest expense growth (%) 12.3 1.1 2.9 2.6 7.9 Adjusted non-interest expense growth (%) 10.3 0.8 3.0 2.1 7.9 Return on equity (%) 12.2 13.2 15.7 12.8 15.3 Adjusted return on equity (%) 12.6 13.3 15.7 13.0 15.4 Operating leverage (teb) (%) (10.9) 3.7 (7.7) (7.3) (2.0) Adjusted operating leverage (teb) (%) (8.9) 4.0 (7.8) (6.8) (2.0) Efficiency ratio (teb) (%) 67.5 63.3 61.0 65.5 60.8 Adjusted efficiency ratio (teb) (%) 66.3 63.1 60.9 65.1 60.8 Net interest margin on average earning assets (teb) (%) 0.21 0.19 0.49 0.24 0.47 Average earning assets 284,248 276,780 257,153 271,839 263,128 Average assets 317,655 312,369 295,097 307,087 302,518 Average gross loans and acceptances 47,972 46,653 46,831 46,724 48,217 Average net loans and acceptances 47,909 46,590 46,808 46,658 48,191 Average deposits 143,849 139,051 138,217 138,440 144,357 ---
(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 the specific provisions. Refer to the Changes in Accounting Policies section on page 121 of BMO's 2018 Annual MD&A for further details. (2) KGS-Alpha acquisition integration costs before tax amounts of $12 million in Q4- 2018, $2 million in Q3-2018 and $14 million for fiscal-2018 are included in non-interest expense. (3) Before tax amounts of $2 million in Q4-2018, $nil in Q3-2018 and Q4-2017, $3 million for fiscal 2018 and fiscal 2017 are included in non-interest expense. 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 $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.
Revenue of $1,129 million increased $14 million or 1%. Excluding the impact of the stronger U.S. dollar, revenue was relatively unchanged. Investment and Corporate Banking revenue increased, mainly due to higher corporate banking-related revenue, while underwriting and advisory revenue decreased slightly from a strong quarter a year ago. Trading Products revenue decreased primarily due to softer interest rate trading and lower new equity issuances, partially offset by the impact of the acquisition of KGS-Alpha in the quarter.
Total net recovery of credit losses was $7 million, compared with total net provisions of $4 million in the prior year. The net recovery of credit losses on impaired loans was $3 million, compared with a $4 million provision in the prior year. There was a $4 million net recovery of credit losses on performing loans in the current quarter.
Non--interest expense of $763 million increased $84 million or 12% and adjusted non-interest expense of $749 million increased $70 million or 10%, or 9% excluding the impact of the stronger U.S. dollar, largely due to continued investment in the business, including the impact of the acquisition.
Q4 2018 vs Q3 2018Reported net income of $298 million decreased $3 million or 1%, and adjusted net income of $309 million increased $6 million or 2% from the prior quarter, primarily due to higher revenue, the benefit of a favourable U.S. tax item and recovery of credit losses, partially offset by higher expenses.
Revenue increased $26 million or 2% from the prior quarter. Investment and Corporate Banking revenue increased primarily driven by higher corporate banking-related revenue, while underwriting and advisory revenue decreased slightly from a strong prior quarter. Trading Products revenue decreased due to softer interest rate trading and lower new equity issuances, partially offset by the impact of the acquisition.
Total net recovery of credit losses was $7 million, compared with total net provisions of $7 million in the prior quarter. The net recovery of credit losses on impaired loans was $3 million, compared with a provision of $3 million in the prior quarter. There was a $4 million net recovery of credit losses on performing loans, compared with a $4 million provision in the prior quarter.
Non--interest expense of $763 million increased $65 million or 9% and adjusted non-interest expense of $749 million increased $53 million or 8%, largely due to continued investment in the business, including the impact of the acquisition.
Adjusted results in this BMO Capital Markets section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.
Corporate Services
(Canadian $ in millions, except as noted) Q4-2018 Q3-2018 Q4-2017 Fiscal 2018 Fiscal 2017 --- Net interest income before group teb offset (52) (74) (61) (243) (193) Group teb offset (67) (62) (176) (313) (567) --- Net interest income (teb) (119) (136) (237) (556) (760) Non-interest revenue 77 78 43 249 177 --- Total revenue (teb) (42) (58) (194) (307) (583) Provision for (recovery of) credit losses on impaired loans (1) (1) (2) na (13) na Provision for (recovery of) credit losses on performing loans (1) (2) na (2) na --- Total provision (recovery of) credit losses (1) (3) (2) 4 (15) (78) Non-interest expense (159) 81 213 436 635 --- Income (loss) before income taxes 120 (137) (411) (728) (1,140) Provision for (recovery of) income taxes (teb) (11) (75) (253) (2) (710) --- Reported net income (loss) 131 (62) (158) (726) (430) --- Acquisition integration costs (2) 4 5 15 14 55 Restructuring costs (3) 41 192 41 Decrease in the collective allowance for credit losses (4) (54) U.S. net deferred tax asset revaluation (5) 425 Benefit from the remeasurement of an employee benefit liability (6) (203) (203) --- Adjusted net loss (68) (57) (102) (298) (388) ===
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