TORONTO, February 27, 2018 /PRNewswire/ --
Financial Results Highlights:
First Quarter 2018 Compared with First Quarter 2017:
- Net income of $973 million, down 35% reflecting a revaluation of the U.S. net deferred tax asset of $425 million related to U.S. tax reform and a net gain in the prior year - Adjusted net income[1] of $1,422 million, down 7% reflecting the net gain in the prior year - EPS[2] of $1.43, down 36%; adjusted EPS[1],[2 ]of $2.12, down 7% - Good operating performance in retail businesses - Provisions for credit losses (PCL) of $141 million, including a $33 million recovery of credit losses on performing loans[3], compared with $167 million in the prior year - Common Equity Tier 1 Ratio of 11.1%
For the first quarter ended January 31, 2018, BMO Financial Group recorded net income of $973 million or $1.43 per share on a reported basis, and net income of $1,422 million or $2.12 per share on an adjusted basis.
"BMO had a good start to the year, with adjusted net income of $1.4 billion and adjusted earnings per share of $2.12. These results reflect strong operating revenue growth in Personal and Commercial Banking in Canada and the U.S., driven by good loan and deposit growth and the benefit of higher interest rates, as well as strong credit performance which is reflective of our consistent approach to effective risk management and building deep, long-term customer relationships," said Darryl White, Chief Executive Officer, BMO Financial Group.
"The constructive economic environment, particularly in the U.S., plays to the strengths of our business mix, with another quarter of increased contribution from our U.S. segment, which grew at a higher rate than the bank overall. We have made progress against our strategic areas of focus, including making the bank more efficient and continuing to invest in our digital agenda, our people and our communities. Looking ahead, we see attractive opportunities to deliver organic growth and achieve our financial objectives," concluded Mr. White.
Reported net income in the quarter 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 [4], which had a negative impact of approximately 29% on reported net income growth, and $0.65 to earnings per share. As previously disclosed, this is a one-time non-cash charge resulting from the reduction in the U.S. federal tax rate. Going forward, there is expected to be a benefit from the lower tax rate on BMO's future U.S. earnings.
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. The net gain had a negative impact of approximately 9% on reported and adjusted net income growth.
Return on equity (ROE) was 9.4% compared with 14.9% in the prior year, and adjusted ROE was 13.9% compared with 15.3%. Return on tangible common equity (ROTCE) was 11.5% compared with 18.5% in the prior year, and adjusted ROTCE was 16.7% compared with 18.6%.
[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 22 of our First Quarter 2018 Report to Shareholders for further details.
[4] 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 24 of our First Quarter 2018 Report to Shareholders. Note: All ratios and percentage changes in this document are based on unrounded numbers.
Concurrent with the release of results, BMO announced a second quarter 2018 dividend of $0.93 per common share, unchanged from the preceding quarter and up $0.05 per share or 6% from a year ago. The quarterly dividend of $0.93 per common share is equivalent to an annual dividend of $3.72 per common share.
Our complete First Quarter 2018 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended January 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 $647 million decreased $97 million or 13% and adjusted net income of $647 million decreased $98 million or 13% from the prior year. Adjusted net income excludes the amortization of acquisition-related intangible assets. A gain on the sale of Moneris US in the prior year had a negative impact of approximately 25% on net income growth. Good operating revenue growth and a gain related to the restructuring of Interac Corporation was partially offset by higher expenses, including a legal reserve, in the current quarter.
During the quarter, we continued to enhance our digital capabilities, introducing BMO for Amazon Alexa, which allows customers with Alexa-enabled devices to access information such as nearby BMO automated teller machine locations, up-to-date foreign exchange rates and information on BMO products.
U.S. P&C
Reported net income of $310 million increased $61 million or 24% and adjusted net income of $321 million increased $60 million or 23% from a year ago. Adjusted net income excludes the amortization of acquisition-related intangible assets.
Reported net income of US$247 million increased US$59 million or 31% from a year ago and adjusted net income of US$256 million increased US$59 million or 30%, mainly due to higher revenue, including the impact of a prior year US$27 million after-tax loss on a loan sale, the more favourable tax rate as a result of U.S. tax reform and a lower provision for credit losses, partially offset by higher expenses. The prior year loss on the loan sale contributed approximately 16% to reported and adjusted net income growth.
BMO Harris Bank earned an Outstanding rating for the Community Reinvestment Act performance from the Office of the Comptroller of the Currency, recognizing the bank's commitment to help support low- and moderate- income communities.
BMO Wealth Management
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