Managements Discussion and Analysis BMOs President & Chief - PDF document

MANAGEMENT’S DISCUSSION AND ANALYSIS Management’s Discussion and Analysis BMO’s President & Chief Executive Officer and Chief Financial Officer have signed a statement outlining management’s responsibility for financial information in the annual consolidated financial statements and Management’s Discussion and Analysis (MD&A). The statement, which can be found on page 108, also explains the roles of the Audit Committee and Board of Directors in respect of that financial information. The MD&A comments on BMO’s operations and financial condition for the years ended October 31, 2010 and 2009. The MD&A should be read in conjunction with our consolidated financial statements for the year ended October 31, 2010. The MD&A commentary is as of December 7 , 2010. Unless otherwise indicated, all amounts are stated in Canadian dollars and have been derived from financial statements prepared in accordance with Canadian generally accepted accounting principles (GAAP). Certain prior year data has been reclassified to conform with the current year’s presentation, including restatements arising from transfers of certain businesses between operating groups. See pages 42 and 43. MD&A Index 51 Private Client Group 27 Who We Are provides an overview of BMO Financial Group, 54 BMO Capital Markets explains the links between our objectives and our overall vision, 57 Corporate Services, including Technology and Operations presents key performance data and outlines “Reasons to invest in BMO.” Financial Condition Review discusses our assets and liabilities by major balance sheet category. It reviews our 28 Enterprise-Wide Strategy outlines our enterprise-wide strategy capital adequacy and our approach to ensuring we optimize and the context in which it is developed, as well as our progress our capital position to support our business strategies and in relation to our strategic priorities. maximize returns to our shareholders. It discusses proposed regulatory changes that are expected to impact capital 29 Caution Regarding Forward-Looking Statements advises and liquidity management as well as certain business readers about the limitations and inherent risks and uncertainties operations. It also discusses off-balance sheet arrangements of forward-looking information. and financial instruments. 29 Factors That May Affect Future Results outlines certain industry 57 Summary Balance Sheet and company-specific factors that investors should consider 59 Enterprise-Wide Capital Management when assessing BMO’s earnings prospects. 63 Select Financial Instruments 67 U.S. Regulatory Developments 31 Economic Developments includes commentary on the impact of 68 Off-Balance Sheet Arrangements economic developments on our businesses in 2010 and expectations for the Canadian and U.S. economies in 2011. Accounting Matters and Disclosure and Internal Control reviews critical accounting estimates and changes in accounting Value Measures reviews financial performance on the four key policies in 2010 and for future periods. It also discusses our measures that assess or most directly influence shareholder return. evaluation of disclosure controls and procedures and internal 32 Total Shareholder Return control over financial reporting. 33 Earnings per Share Growth 34 Return on Equity 68 Critical Accounting Estimates 34 Net Economic Profit Growth 71 Changes in Accounting Policies in 2010 71 Future Changes in Accounting Policies – IFRS 35 2010 Financial Performance Review provides a detailed review 74 Disclosure Controls and Procedures and Internal Control of BMO’s consolidated financial performance by major income over Financial Reporting statement category. It also includes the impact of business acquisi- 74 Shareholders’ Auditors’ Services and Fees tions, changes in foreign exchange, and a summary of notable items affecting results. 75 Enterprise-Wide Risk Management outlines our approach to managing the key financial risks and other related risks we face. Operating Group Review outlines the strategies of our operating groups, the paths they choose to differentiate their businesses 91 Non-GAAP Measures includes explanations of non-GAAP and the challenges they face, along with their strengths and key measures and their reconciliation to their GAAP counterparts. value drivers. It also includes a summary of their achievements in 2010, their priorities for 2011 and a review of their financial 92 2009 Financial Performance Review, Review of Fourth performance for the year. Quarter Performance and Quarterly Earnings Trends provide commentary on results for relevant periods other 42 Summary than fiscal 2010. 44 Personal and Commercial Banking 96 Supplemental Information presents many useful financial 45 Personal and Commercial Banking Canada tables and provides more historical detail. 48 Personal and Commercial Banking U.S. Regulatory Filings Our continuous disclosure materials, including our interim management’s discussion and analysis and interim financial statements, and annual audited consolidated financial statements, Annual Information Form and Notice of Annual Meeting of Shareholders & Proxy Circular, are available on our website at www.bmo.com, on the Canadian Securities Administrators’ website at www.sedar.com and on the EDGAR section of the SEC’s website at www.sec.gov. BMO’s President & Chief Executive Officer and Chief Financial Officer each certify the appropriateness and fairness of BMO’s annual and interim consolidated financial statements and MD&A and Annual Information Form, and the effectiveness of BMO’s disclosure controls and procedures and material changes in our internal control over financial reporting. 26 BMO Financial Group 193rd Annual Report 2010