BMO Financial Group Reports Second Quarter 2019 Results (1)

Financial Results Highlights

Second Quarter 2019 Compared With Second Quarter 2018:

-- Net income of $1,497 million, up 20%; adjusted net income(1) of $1,522 million, up 4% -- EPS(2) of $2.26, up 22%; adjusted EPS(1, 2 )of $2.30, up 5% -- Net revenue(3) of $5,652 million, up 8% -- ROE of 13.6%, up from 12.6%; adjusted ROE(1) of 13.9% compared with 14.9% -- Provision for credit losses (PCL) of $176 million compared with $160 million in the prior year -- Common Equity Tier 1 Ratio of 11.3% -- Dividend increased $0.03 from the prior quarter to $1.03, up 7% from the prior year

Year--to-Date 2019 Compared With Year-to-Date 2018:

-- Net income of $3,007 million, up 35%; adjusted net income(1,4,5) of $3,060 million, up 6% -- EPS(2) of $4.54, up 38%; adjusted EPS(1,2 )of $4.62, up 7% -- Net revenue(3) of $11,243 million, up 7% -- ROE of 13.6%, up from 11.0%; adjusted ROE(1) of 13.9% compared with 14.4% -- Provision for credit losses of $313 million compared with $301 million in the prior year

TORONTO, May 29, 2019 /PRNewswire/ -- For the second quarter ended April 30, 2019, BMO Financial Group recorded net income of $1,497 million or $2.26 per share on a reported basis, and net income of $1,522 million or $2.30 per share on an adjusted basis.

"BMO's continued strong performance this quarter is highlighted by good momentum across our U.S. platform and in our North American Commercial Banking business, reflecting our differentiated approach to growing customer relationships. For the first half of the year, adjusted earnings per share are up 7% and our U.S. segment contributed 35% to BMO's adjusted earnings," said Darryl White, Chief Executive Officer, BMO Financial Group.

"This growth is supported by our strong capital position, a stable credit environment, and the continued resiliency of the Canadian and U.S. economies. We are taking disciplined actions to grow each of our businesses, including optimizing our teams and developing innovative solutions that enhance customer experience. These actions are deepening loyalty and trust and position the bank for long-term growth," concluded Mr. White.

Return on equity (ROE) was 13.6%, up from 12.6% in the prior year, and adjusted ROE was 13.9% compared with 14.9%. Return on tangible common equity (ROTCE) was 16.4%, up from 15.6% in the prior year and adjusted ROTCE was 16.4% compared with 18.0% in the prior year.

Concurrent with the release of results, BMO announced a third quarter 2019 dividend of $1.03 per common share, up $0.03 or 3% from the preceding quarter and up $0.07 per share or 7%from the prior year. The quarterly dividend of $1.03 per common share is equivalent to an annual dividend of $4.12 per common share.

(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 preferred share dividends. (3) Net revenue is reported on a basis that nets insurance claims, commissions and changes in policy benefit liabilities (CCPB) against insurance revenue. (4) Reported net income in the first quarter of 2018 included a $425 million (US$339 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. (5) Reported net income in the second quarter of 2018 included a $192 million after-tax ($260 million pre- tax) restructuring charge, primarily related to severance, as a result of an ongoing bank-wide initiative to simplify how we work, drive increased efficiency, and invest in technology to move our business forward. Restructuring cost is included in non-interest expense in Corporate Services. Note: All ratios and percentage changes in this document are based on unrounded numbers.

Our complete Second Quarter 2019 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended April 30, 2019, is available online at www.bmo.com/investorrelations [https://c212.net/c/link/?t=0&l=en&o=2479250-1&h=4025666608&u...] and at www.sedar.com [https://c212.net/c/link/?t=0&l=en&o=2479250-1&h=3514734326&u...].

Second Quarter Operating Segment Overview

Canadian P&C
Reported net income of $615 million increased $27 million or 5% and adjusted net income of $615 million increased $26 million or 5% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. Results reflect good revenue growth, partially offset by higher expenses and higher provisions for credit losses.

During the quarter, we won two Celent 2019 Model Bank Awards. The Celent Model Bank Award for Payment Services Hub Implementation recognizes delivery of our new BMO Payment Hub, a technology platform that integrates multiple payment services in one central location, which will enable us to deliver new products more quickly and cost-effectively. The Celent Model Bank Award for Innovation Enablement recognizes our BMO InnoV8 program, which tests and develops ideas to transform a customer's financial journey and is the foundation for multiple award-winning digital banking solutions and patent applications. These awards are a testament to our commitment to creating and investing in services to better support our customers.

U.S. P&C
Reported net income of $406 million increased $58 million or 17% and adjusted net income of $417 million increased $58 million or 16% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets.

Reported net income of US$306 million increased US$35 million or 13% and adjusted net income of US$314 million increased US$35 million or 12% from the prior year, largely due to good revenue growth and lower provisions for credit losses, partially offset by higher expenses.

(CONTINUA)