TORONTO, May 30, 2018 /PRNewswire/ --
Financial Results Highlights
Second Quarter 2018 Compared with Second Quarter 2017:
- Net income of $1,246 million, unchanged reflecting the restructuring charge in the current quarter; adjusted net income[1] of $1,463 million, up 13% - EPS[2] of $1.86, up 1%; adjusted EPS[1],[2] of $2.20, up 15% - ROE of 12.6%, unchanged; adjusted ROE[1] of 14.9%, up from 13.1% - Provisions for credit losses (PCL) of $160 million, including a $12 million recovery of credit losses on performing loans[3], compared with $251 million in the prior year - Common Equity Tier 1 Ratio of 11.3% - Dividend increased by $0.03 from the prior quarter to $0.96, up 7% from the prior year
Year-to-Date 2018 Compared with Year-to-Date 2017:
- Net income of $2,219 million, down 19%, reflecting the revaluation of our U.S. net deferred tax asset[4] and the restructuring charge in the current year and a net gain [5] in the prior year; adjusted net income[1] of $2,885 million, up 2% - EPS[2],[4] of $3.29, down 19%; adjusted EPS[1],[2] of $4.31, up 3% - ROE of 11.0%, compared with 13.8%; adjusted ROE[1] of 14.4%, up from 14.2% - Provisions for credit losses of $301 million, including a $45 million recovery of credit losses on performing loans[3], compared with $418 million
For the second quarter ended April 30, 2018, BMO Financial Group recorded net income of $1,246 million or $1.86 per share on a reported basis, and net income of $1,463 million or $2.20 per share on an adjusted basis.
"BMO's results this quarter demonstrate strong performance and momentum in our U.S. and Canadian P&C banking and wealth businesses, which drove adjusted earnings per share of $2.20, up 15% from a year ago, and very strong adjusted operating leverage of 3.5%," said Darryl White, Chief Executive Officer, BMO Financial Group.
"Across the company we're positioning BMO for accelerated growth. Our commercial business is a core strength and is delivering results. Our U.S. segment, which contributed 27% to year-to-date adjusted earnings, is a key differentiator and we'll continue to grow it faster than the rest of the bank. We're transforming how we work and how we compete - unlocking efficiency and creating value for our customers.
"I am confident that with our team of dedicated employees, and through ongoing investment in our technology and innovation agenda, we will continue to enhance loyalty, increase efficiency and deliver sustainable shareholder value," concluded Mr. White.
In the current quarter, we recorded a restructuring charge of $192 million after-tax ($260 million pre-tax), 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.
(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 26 of our Second Quarter 2018 Report to Shareholders for further details. (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 16% on reported net income growth, and $0.66 to earnings per share. 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 27 of our Second Quarter 2018 Report to Shareholders. (5) 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 year-to-date negative impact of approximately 5% on reported and adjusted net income growth, and $0.20 to earnings per share. Note: All ratios and percentage changes in this document are based on unrounded numbers.
Return on equity (ROE) was 12.6%, unchanged from the prior year and adjusted ROE was 14.9% up from 13.1%. Return on tangible common equity (ROTCE) was 15.6% compared with 15.7% in the prior year and adjusted ROTCE was 18.0% compared with 15.9%.
Concurrent with the release of results, BMO announced a third quarter 2018 dividend of $0.96 per common share, up $0.03 from the preceding quarter and up $0.06 per share or 7% from a year ago. The quarterly dividend of $0.96 per common share is equivalent to an annual dividend of $3.84 per common share.
Our complete Second Quarter 2018 Report to Shareholders, including our unaudited interim consolidated financial statements for the period ended April 30, 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 $590 million increased $60 million or 11% and adjusted net income of $591 million increased $61 million or 11% 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.
During the quarter, we launched a new suite of Small Business credit cards with market-leading features and benefits, competitive annual fees and an expedited application process. In addition, we piloted a new Small Business lending platform that provides an improved lending experience with faster turnaround times. These new products and platform are expected to enhance growth in this important market segment, and respond to the unique needs and challenges of small business owners.
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