BMO Financial Group Reports Third Quarter 2018 Results

Toronto (ots/PRNewswire) -

Financial Results Highlights

Third Quarter 2018 Compared With Third Quarter 2017:

- Net income of $1,536 million, up 11%; adjusted net income[1] of
$1,565 million, up 14%
- EPS[2] of $2.31, up 13%; adjusted EPS[1],[2 ]of $2.36, up 16%
- ROE of 14.7%, up from 13.4%; adjusted ROE[1] of 15.0%, up from
13.3%
- Provision for credit losses[3] (PCL) of $186 million compared with
$202 million on an adjusted basis in the prior year and $126
million on a reported basis; prior year reported provision for
credit losses includes a decrease in the collective allowance of
$76 million pre-tax
- Common Equity Tier 1 Ratio of 11.4%

Year-to-Date 2018 Compared With Year-to-Date 2017:

- Net income of $3,755 million, down 9%, reflecting the revaluation
of our U.S. net deferred tax asset[4] and a restructuring charge in
the current year[5] and a net gain[6] in the prior year; adjusted
net income[1] of $4,450 million, up 6%
- EPS[2],[4],[5] of $5.59, down 8%; adjusted EPS[1],[2] of $6.67, up
7%
- ROE of 12.3%, compared with 13.7%; adjusted ROE[1] of 14.6%, up
from 13.9%
- Provision for credit losses of $487 million[3] compared with $620
million on an adjusted basis and $544 million on a reported basis

For the third quarter ended July 31, 2018, BMO Financial Group
(TSX:BMO) (NYSE:BMO) recorded net income of $1,536 million or $2.31
per share on a reported basis, and net income of $1,565 million or
$2.36 per share on an adjusted basis.

"BMO delivered strong results and ongoing earnings momentum this
quarter. Adjusted net income was up 14% and adjusted earnings per
share grew 16% with a particularly good contribution from our U.S.
segment and from our competitively advantaged commercial businesses
on both sides of the border. Total Bank adjusted operating leverage
was 2.9% and was positive in each of our operating groups," said
Darryl White, Chief Executive Officer, BMO Financial Group.

"The bank is strong and growing. Our performance is a direct
result of efforts to simplify how we work across our organization and
with our customers and deliver the exceptional products and
experiences that our customers have come to expect. Together we are
making the bank more efficient and more competitive, positioning
ourselves to deliver long-term growth and shareholder value,"
concluded Mr. White.

Return on equity (ROE) was 14.7%, up from 13.4% in the prior year
and adjusted ROE was 15.0%, up from 13.3%. Return on tangible common
equity (ROTCE) was 17.9% compared with 16.5% in the prior year and
adjusted ROTCE was 18.0% compared with 16.0%.

(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 deductions for net income attributable to
non-controlling interest in subsidiaries and preferred share

dividends.

(3) Effective in 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. Refer to the Changes in Accounting
Policies section on page 27 of our Third Quarter 2018 Report to

Shareholders for further details. In prior periods, changes to
the collective allowance were an adjusting item. Refer to the
Non-GAAP

Measures section on page 3.

(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, which had a year-to-date negative impact of

approximately 10% on reported net income growth, and $0.66 to
EPS. See the Critical Accounting Estimates - Income Taxes and
Deferred

Tax Assets section on page 114 of BMO's 2017 Annual Report. For
further information see the Other Regulatory Developments section

on page 28 of our Third Quarter 2018 Report to Shareholders.

(5) Reported net income in the second quarter of 2018 included a $192
million 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.

(6) Net income in the prior year included a net gain of $133 million,
attributed to a $168 million gain on the sale of Moneris US and a

$35 million loss on the sale of a portion of the U.S. indirect
auto loan portfolio, and a decrease in the collective allowance of

$54 million.

Note: All ratios and percentage changes in this document are
based on unrounded

numbers.

Concurrent with the release of results, BMO announced a fourth
quarter 2018 dividend of $0.96 per common share, unchanged from the
preceding quarter and up $0.06 per share or 7% from the prior year.
The quarterly dividend of $0.96 per common share is equivalent to an
annual dividend of $3.84 per common share.

Our complete Third Quarter 2018 Report to Shareholders, including
our unaudited interim consolidated financial statements for the
period ended July 31, 2018, is available online at
http://www.bmo.com/investorrelations and at http://www.sedar.com.

Operating Segment Overview

Canadian P&C

Reported net income of $642 million increased $29 million or 5%
and adjusted net income of $642 million increased $28 million or 5%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Results reflect revenue
growth, partially offset by higher expenses and higher provision for
credit losses.

During the quarter, we were named Best Commercial Bank - Canada by
World Finance for the fourth consecutive year. The award recognized
our personalized and partnership-based relationships with clients, as
well as our continued specialized focus on three major sectors:
technology, agriculture and healthcare.

U.S. P&C

Reported net income of $364 million increased $96 million or 36%
and adjusted net income of $376 million increased $97 million or 34%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets.

Reported net income of US$279 million increased US$73 million or
35% and adjusted net income of US$288 million increased US$73 million
or 34% from the prior year, due to good revenue growth, the tax
reform benefit and lower provisions for credit losses, partially
offset by higher expenses.

During the quarter, we improved our customer ranking to second
among 40 of the largest U.S. banks in the 2018 Survey of Bank
Reputations published by American Banker, which assesses perceptions
of a banking institution's governance, products and services, and
innovation.

BMO Wealth Management

Reported net income of $291 million increased $22 million or 8%
and adjusted net income of $301 million increased $17 million or 6%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets. Traditional wealth reported
net income of $202 million increased $10 million or 6% and adjusted
net income of $212 million increased $5 million or 3% from the prior
year, due to growth across our diversified businesses and improved
equity markets, partially offset by a legal provision and technology
investments. Insurance net income of $89 million increased $12
million or 15% due to business growth and a benefit from more
favourable market movements in the current quarter.

BMO Private Bank was named Best Private Bank, Canada by World
Finance for the eighth consecutive year, recognizing our private
banking expertise and industry leading best practices.

BMO Capital Markets

Reported net income of $301 million increased $20 million or 7%
and adjusted net income of $303 million increased $21 million or 7%
from the prior year. Adjusted net income excludes the amortization of
acquisition-related intangible assets and acquisition integration
costs. Results reflect stronger revenues across both Trading Products
and Investment and Corporate Banking.

BMO Capital Markets was recognized as a 2018 Greenwich Quality
Leader in Canadian equity sales trading and execution service. We
were also named as best institutional forex provider in North America
and China by Global Banking and Finance Review for the eighth
consecutive year. On August 15, 2018, BMO Capital Markets launched a
pilot fixed income issuance transaction with a franchise client using
blockchain technology to mirror the transaction, a first of its kind
in the Canadian marketplace.

Corporate Services

Corporate Services net loss for the quarter was $62 million
compared with a net loss of $44 million in the prior year. Corporate
Services adjusted net loss for the quarter was $57 million compared
with an adjusted net loss of $85 million in the prior year. Adjusted
results exclude acquisition integration costs in both periods, as
well as a decrease in the collective allowance in the prior year.

Adjusted results in this Operating Segment Overview section are
non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP
Measures section.

Capital

BMO's Common Equity Tier 1 (CET1) Ratio was 11.4% at July 31,
2018. The CET1 Ratio increased from 11.3% in the second quarter,
driven by the impact of higher retained earnings, partially offset by
higher risk-weighted assets (RWA) from business growth and share
repurchases during the quarter.

Provision for Credit Losses

The total provision for credit losses was $186 million, an
increase of $60 million from the prior year. Adjusted provision for
credit losses, which excludes a $76 million pre-tax decrease in the
collective allowance in the prior year, decreased $16 million. The
provision for credit losses on impaired loans of $177 million
decreased $25 million from $202 million in the prior year, primarily
reflecting lower provisions in U.S. P&C. There was a $9 million
provision for credit losses on performing loans in the quarter.

Caution

The foregoing sections contain forward-looking statements. Please
see the Caution Regarding Forward-Looking Statements.

Regulatory Filings

Our continuous disclosure materials, including our interim
filings, annual Management's Discussion and Analysis and audited
consolidated financial statements, Annual Information Form and Notice
of Annual Meeting of Shareholders and Proxy Circular are available on
our website at http://www.bmo.com/investorrelations, on the Canadian
Securities Administrators' website at http://www.sedar.com and on the
EDGAR section of the SEC's website at http://www.sec.gov.

Bank of Montreal uses a unified branding approach that links all
of the organization's member companies. Bank of Montreal, together
with its subsidiaries, is known as BMO Financial Group. As such, in
this document, the names BMO and BMO Financial Group mean Bank of
Montreal, together with its subsidiaries.

Non-GAAP Measures

Results and measures in this document are presented on a GAAP
basis. Unless otherwise indicated, all amounts are in Canadian
dollars and have been derived from financial statements prepared in
accordance with International Financial Reporting Standards (IFRS).
References to GAAP mean IFRS. They are also presented on an adjusted
basis that excludes the impact of certain items as set out in the
table below. Results and measures that exclude the impact of
Canadian/U.S. dollar exchange rate movements on our U.S. segment are
non-GAAP measures (please see the Foreign Exchange section for a
discussion of the effects of changes in exchange rates on our
results). Management assesses performance on a reported basis and on
an adjusted basis and considers both to be useful in assessing
underlying ongoing business performance, and providing readers with a
better understanding of management's perspective on our performance.
Except as otherwise noted, management's discussion of changes in
reported results in this document applies equally to changes in
corresponding adjusted results. Adjusted results and measures are
non-GAAP and as such do not have standardized meaning under GAAP.
They are unlikely to be comparable to similar measures presented by
other companies.

Non-GAAP Measures

(Canadian $ in millions, except as noted) Q3-2018 Q2-2018
Q3-2017 YTD-2018 YTD-2017
Reported Results
Revenue 5,820 5,617
5,459 17,115 16,605
Insurance claims, commissions
and changes in policy benefit
liabilities (CCPB) (269) (332)
(253) (962) (965)
Revenue, net of CCPB 5,551 5,285
5,206 16,153 15,640
Total provision for credit losses (186) (160)
(126) (487) (544)
Non-interest expense (3,386) (3,562)
(3,286) (10,389) (9,955)
Income before income taxes 1,979 1,563
1,794 5,277 5,141
Provision for income taxes (443) (317)
(407) (1,522) (1,018)
Net Income 1,536 1,246
1,387 3,755 4,123
EPS ($) 2.31 1.86
2.05 5.59 6.11
Adjusting Items (Pre-tax) (1)
Amortization of
acquisition-related
intangible assets (2) (28) (29)
(35) (85) (115)
Acquisition integration costs (3) (8) (4)
(20) (16) (63)
Restructuring costs (4) - (260)
- (260) -
Decrease in the collective
allowance for credit losses (6) - -
76 - 76
Adjusting items included
in reported pre-tax income (36) (293)
21 (361) (102)
Adjusting Items (After tax) (1)
Amortization of acquisition-related
intangible assets (2) (22) (23)
(28) (66) (90)
Acquisition integration costs (3) (7) (2)
(13) (12) (40)
Restructuring costs (4) - (192)
- (192) -
U.S. net deferred tax asset revaluation (5) - -
- (425) -
Decrease in the collective
allowance for credit losses (6) - -
54 - 54
Adjusting items included in
reported net income after tax (29) (217)
13 (695) (76)
Impact on EPS ($) (0.05) (0.34)
0.02 (1.08) (0.11)
Adjusted Results
Revenue 5,820 5,617
5,459 17,115 16,605
Insurance claims, commissions and
changes in policy benefit liabilities (CCPB) (269) (332)
(253) (962) (965)
Revenue, net of CCPB 5,551 5,285
5,206 16,153 15,640
Total provision for credit losses (186) (160)
(202) (487) (620)
Non-interest expense (3,350) (3,269)
(3,231) (10,028) (9,777)
Income before income taxes 2,015 1,856
1,773 5,638 5,243
Provision for income taxes (450) (393)
(399) (1,188) (1,044)
Net income 1,565 1,463
1,374 4,450 4,199
EPS ($) 2.36 2.20
2.03 6.67 6.22

(1) Adjusting items are included in Corporate Services, with the
exception of the amortization of

acquisition-related intangible assets and certain acquisition
integration costs, which are charged to the operating groups.

(2) These expenses were charged to the non-interest expense of the
operating groups. Before and after-tax amounts

for each operating group are provided on pages 16, 17, 19, 21 and
23 of our Third Quarter 2018 Report to Shareholders.

(3) Acquisition integration costs related to the acquired BMO
Transportation Finance business are charged to Corporate Services,

since the acquisition impacts both Canadian and U.S. P&C
businesses. KGS - Alpha acquisition integration costs are

reported in BMO Capital Markets. Acquisition integration costs
are recorded in non-interest expense.

(4) In Q2-18, we recorded a 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 costs are included in
non-interest expense in Corporate Services.

(5) Charge due to the revaluation of our U.S. net deferred tax asset
as a result of the enactment of the U.S.

Tax Cut and Jobs Act. For more information see the Other
Regulatory Developments section on page 28 of

our Third Quarter 2018 Report to Shareholders.

(6) In Q3-17, the adjustment to the collective allowance for credit
losses was excluded from Corporate

Services adjusted provision for (recovery of) credit losses.

Certain comparative figures have been reclassified to conform
with the current year's presentation.

Adjusted results and measures in this table are non-GAAP amounts
or non-GAAP measures.

Caution Regarding Forward-Looking Statements

Bank of Montreal's public communications often include written or
oral forward-looking statements. Statements of this type are included
in this document, and may be included in other filings with Canadian
securities regulators or the U.S. Securities and Exchange Commission,
or in other communications. All such statements are made pursuant to
the "safe harbor" provisions of, and are intended to be
forward-looking statements under, the United States Private
Securities Litigation Reform Act of 1995 and any applicable Canadian
securities legislation. Forward-looking statements may involve, but
are not limited to, comments with respect to our objectives and
priorities for fiscal 2018 and beyond, our strategies or future
actions, our targets, expectations for our financial condition or
share price, and the results of or outlook for our operations or for
the Canadian, U.S. and international economies. Forward-looking
statements are typically identified by words such as "will",
"should", "believe", "expect", "anticipate", "intend", "estimate",
"plan", "goal", "target", "may" and "could".

By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties, both
general and specific in nature. There is significant risk that
predictions, forecasts, conclusions or projections will not prove to
be accurate, that our assumptions may not be correct, and that actual
results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this document not
to place undue reliance on our forward-looking statements, as a
number of factors - many of which are beyond our control and the
effects of which can be difficult to predict - could cause actual
future results, conditions, actions or events to differ materially
from the targets, expectations, estimates or intentions expressed in
the forward-looking statements.

The future outcomes that relate to forward-looking statements may
be influenced by many factors, including but not limited to: general
economic and market conditions in the countries in which we operate;
weak, volatile or illiquid capital and/or credit markets; interest
rate and currency value fluctuations; changes in monetary, fiscal, or
economic policy and tax legislation and interpretation; the level of
competition in the geographic and business areas in which we operate;
changes in laws or in supervisory expectations or requirements,
including capital, interest rate and liquidity requirements and
guidance, and the effect of such changes on funding costs; judicial
or regulatory proceedings; the accuracy and completeness of the
information we obtain with respect to our customers and
counterparties; our ability to execute our strategic plans and to
complete and integrate acquisitions, including obtaining regulatory
approvals; critical accounting estimates and the effect of changes to
accounting standards, rules and interpretations on these estimates;
operational and infrastructure risks; changes to our credit ratings;
political conditions, including changes relating to or affecting
economic or trade matters; global capital markets activities; the
possible effects on our business of war or terrorist activities;
outbreaks of disease or illness that affect local, national or
international economies; natural disasters and disruptions to public
infrastructure, such as transportation, communications, power or
water supply; technological changes; information and cyber security,
including the threat of hacking, identity theft and corporate
espionage, as well as the possibility of denial of service resulting
from efforts targeted at causing system failure and service
disruption; and our ability to anticipate and effectively manage
risks arising from all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all
possible factors. Other factors and risks could adversely affect our
results. For more information, please see the discussion in the Risks
That May Affect Future Results section on page 79 of BMO's 2017
Annual MD&A, the sections related to credit and counterparty, market,
insurance, liquidity and funding, operational, model, legal and
regulatory, business, strategic, environmental and social, and
reputation risk, which begin on page 86 of BMO's 2017 Annual MD&A,
the discussion in the Critical Accounting Estimates - Income Taxes
and Deferred Tax Assets section on page 114 of BMO's 2017 Annual
MD&A, and the Risk Management section in this document, all of which
outline certain key factors and risks that may affect Bank of
Montreal's future results. Investors and others should carefully
consider these factors and risks, as well as other uncertainties and
potential events, and the inherent uncertainty of forward-looking
statements. Bank of Montreal does not undertake to update any
forward-looking statements, whether written or oral, that may be made
from time to time by the organization or on its behalf, except as
required by law. The forward-looking information contained in this
document is presented for the purpose of assisting our shareholders
in understanding our financial position as at and for the periods
ended on the dates presented, as well as our strategic priorities and
objectives, and may not be appropriate for other purposes.

Material economic assumptions underlying the forward-looking
statements contained in this document are set out in the 2017 Annual
MD&A under the heading "Economic Developments and Outlook", as
updated by the Economic Review and Outlook section set forth in this
document. Assumptions about the performance of the Canadian and U.S.
economies, as well as overall market conditions and their combined
effect on our business, are material factors we consider when
determining our strategic priorities, objectives and expectations for
our business. In determining our expectations for economic growth,
both broadly and in the financial services sector, we primarily
consider historical economic data provided by governments, historical
relationships between economic and financial variables, and the risks
to the domestic and global economy. See the Economic Review and
Outlook section of our Third Quarter 2018 Report to Shareholders.

INVESTOR AND MEDIA PRESENTATION

Investor Presentation Materials

Interested parties are invited to visit our website at
http://www.bmo.com/investorrelations to review our 2017 Annual MD&A
and audited annual consolidated financial statements, quarterly
presentation materials and supplementary financial information
package.

Quarterly Conference Call and Webcast Presentations

Interested parties are also invited to listen to our quarterly
conference call on Tuesday, August 28, 2018, at 2:00 p.m. (EDT). At
that time, senior BMO executives will comment on results for the
quarter and respond to questions from the investor community. The
call may be accessed by telephone at 416-641-2144 (from within
Toronto) or 1-888-789-9572 (toll-free outside Toronto) Passcode:
5126346. A replay of the conference call can be accessed until
Monday, December 3, 2018, by calling 905-694-9451 (from within
Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering
Passcode: 5740558.

A live webcast of the call can be accessed on our website at
http://www.bmo.com/investorrelations. A replay can also be accessed
on the site.

Shareholder Dividend Reinvestment and Share Purchase

Plan (the Plan)

Average market price as defined under the Plan

May 2018: $101.54

June 2018: $101.80

July 2018: $104.05

For dividend information, change in shareholder address

or to advise of duplicate mailings, please contact

Computershare Trust Company of Canada

100 University Avenue, 8th Floor

Toronto, Ontario M5J 2Y1

Telephone: 1-800-340-5021 (Canada and the United States)

Telephone: (514) 982-7800 (international)

Fax: 1-888-453-0330 (Canada and the United States)

Fax: (416) 263-9394 (international)

E-mail: service@computershare.com

For other shareholder information, including the notice for our

normal course issuer bid, please contact

Bank of Montreal

Shareholder Services

Corporate Secretary's Department

One First Canadian Place, 21st Floor

Toronto, Ontario M5X 1A1

Telephone: (416) 867-6785

Fax: (416) 867-6793

E-mail: corp.secretary@bmo.com

For further information on this document, please contact

Bank of Montreal

Investor Relations Department

P.O. Box 1, One First Canadian Place, 10th Floor

Toronto, Ontario M5X 1A1

To review financial results and regulatory filings and disclosures

online, please visit our website at
http://www.bmo.com/investorrelations.

Our 2017 Annual MD&A, audited annual consolidated financial
statements and annual report on Form 40-F (filed with the U.S.
Securities and Exchange Commission) are available online at
http://www.bmo.com/investorrelations and at http://www.sedar.com.
Printed copies of the bank's complete 2017 audited financial
statements are available free of charge upon request at 416-867-6785
or corp.secretary@bmo.com.

Annual Meeting 2019

The next Annual Meeting of Shareholders will be held on Tuesday,
April 2, 2019 in Toronto, Ontario.

® Registered trademark of Bank of Montreal

Media Relations Contacts: Paul Gammal, Toronto,
paul.gammal@bmo.com, +1-416-867-3996; Investor Relations Contacts:
Jill Homenuk, Head, Investor Relations, jill.homenuk@bmo.com,
+1-416-867-4770; Christine Viau, Director, Investor Relations,
christine.viau@bmo.com , +1-416-867-6956

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