Q4 2002 Karen Maidment Executive Vice President and Chief - PowerPoint PPT Presentation

F INANCIAL R ESULTS Q4 2002 Karen Maidment Executive Vice President and Chief Financial Officer Quarterly Investor Presentation November 26, 2002

Q4 Financial Snapshot Q4 2002 Q4 2001 Q3 2002 Excluding Non-Recurring Items Net Income ($MM) 109 360 423 Cash EPS – Diluted ($/share) 0.85 0.25 0.72 EPS – Diluted ($/share) 0.80 0.19 0.68 * Cash Return on Equity (%) 16.4 4.8 14.4 * Return on Equity (%) 15.5 3.8 13.5 Revenue Growth (%) (1.2) (4.1) 7.5 Productivity Ratio (%) 68.1 68.4 68.3 * PCL/Avg. Loans Accept. (%) 0.43 1.49 0.44 Capital: Tier 1 Ratio (%) 8.80 8.15 8.72 * Annualized 1 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Financial Highlights – Total Bank • Improved earnings attributable to accounting changes for goodwill, lower PCL, lower tax rates and improvements in operating group performance • Revenue growth favourably affected by acquisitions, but continued to be challenging in current economic conditions • Expense growth reflects acquisitions, initiative spending, performance-based compensation and severance costs 2 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Financial Highlights - Groups • Personal & Commercial net income increased by 32% from a year ago and the trend of increasing volumes continued • Private Client net income increased substantially due to acquisitions, revenue generating initiatives and cost control • Investment Banking net income increased strongly due to lower provision for credit losses 3 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Group Performance Net Income ($MM) Q4 2002 Q4 2001 Q3 2002 Personal & Commercial 256 194 256 Investment Banking 7 109 145 Private Client 11 26 38 Technology & Solutions (103) (31) (16) and Corporate Total Bank 423 109 360 4 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Revenue Growth … improvements in Investment Banking and continued growth in P&C Q4 ’02 vs Q3 ’02 ($MM) $MM 146 (6.9%) 126 (5.8%) Revenue Growth 22 (1.2%) 3 (0.1%) -5 (-0.2%) Q4 ’02 vs Q4 ’01 ($MM) 160 (7.5%) 65 (3.1%) 55 (2.6%) 39 (1.8%) 1 (0.0%) Total Growth Acquisitions Business Disposals & Investment Growth Initiatives Securities Losses 5 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Expense Growth … is nil over Q4 ’01, excluding acquisitions and severance costs $MM Q4 ’02 vs Q3 ’02 ($MM) 100 (6.8%) 50 (3.4%) 19 (1.3%) 17 (1.1%) NIX Growth 9 (0.7%) 5 (0.3%) Q4 ’02 vs Q4 ’01 ($MM) 116 (7.9%) 66 (4.6%) 54 (3.7%) 50 (3.5%) -9 (-0.5%) -45 (-3.4%) Total Growth Acquisitions Ongoing Disposals & Variable Severance Growth Initiatives Comp. Costs 6 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Expense-to-Revenue Ratio (%) Total Bank 68.3 68.4 68.1 Excl. Q4 66.4 66.3 66.1 Severances Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 7 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 P&C Delivers Strong Results Q4 P&C Delivers Strong Results Revenue & Net Income ($MM) • Volume growth in 1205 1172 1131 Canada and US 1100 1093 • US margin stable; Canada improved slightly • Offset by higher 256 256 performance based 229 227 194 compensation and spending on key initiatives • Significant improvement over Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 prior year Net Income Revenue 8 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 P&C Market Share (%) 1 Small Business Loans 19.48 19.28 ($ 0-5MM) 19.04 18.87 18.80 Residential Mortgages 14.77 14.67 14.77 14.69 14.59 (Incl.3 rd Party) 13.48 13.41 13.48 13.24 13.29 Personal Deposits 13.26 13.11 Personal Loans 13.10 13.03 12.89 (ex. cards) Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 1 Small Business Loans are on a calendar quarter and 3 month lag basis. 9 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 IBG Environment Remains Very Challenging Q4 IBG Environment Remains Very Challenging Revenue & Net Income ($MM) • Q4’01 affected by higher PCL and investment write- 720 715 downs 642 636 • Improvement over 536 Q3’02 due to improved M&A activity and lower write-downs 183 • Higher expenses 155 145 109 for revenue driven 7 compensation and severance in Q4’02 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Net Income Revenue 10 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 PCG Solid Performance In Challenging Markets Q4 PCG Solid Performance In Challenging Markets Revenue & Net Income ($MM) • Revenue growth driven (Excluding Non-Recurring) by acquisitions; other 440 438 businesses stable 432 despite market 387 362 environment • Investment in long-term growth strategy continues, balanced with strong cost management 39 38 32 • CSFB direct contributed 26 positive Cash Net 11 Income ($38MM acquisition-related Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 costs classified as non- recurring) Net Income Revenue 11 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 AUA/AUM Balances Reflect Acquisitions Q4 AUA/AUM Balances Reflect Acquisitions AUA / AUM ($B)* 276 273 270 247 237 77 77 75 AUM 77 73 199 196 195 AUA & Term 170 164 • AUA/AUM & Term year- over-year increase due to acquisitions, strategic initiatives and organic growth • Excluding acquisitions, AUA/AUM & Term year- over-year flat whereas TSE and S&P were down Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 9.2% and 16.4% * Certain Assets under Administration and Assets under Management have been reclassified respectively to confirm with the current period’s presentation. 12 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Technology & Solutions and Corporate Q4 Technology & Solutions and Corporate Net Income ($MM) • Increase from Q4 ’01 due to lower -16 PCL and income -31 taxes, partly offset by higher -77 pension and -103 severance costs • Improvement over -115 Q3’02 primarily due to lower tax rates and tax initiatives Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 13 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

F2003 Reporting Changes • Harris Bankcorp, Inc. will deregister from SEC • Harris Bank continues to operate as a multibank holding company and remains subject to regulation by the US Board of Governors of the Federal Reserve Bank • Harris Bank’s Q4 press release will be the last such disclosure • BMO will provide expanded disclosure of US results beginning F2003 • Change is consistent with strategy and will promote better understanding of BMO’s US operations • BMO to begin recognizing compensation expense for new stock options granted after October 31, 2002 14 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Appendix 15 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Non-Recurring Items Q4 ’02 Q4 ’01 Q3 ’02 ($MM) 2002 2001 Non-interest Revenue (178) - • CBO Write-down (178) - - - - - • Sale of Canadian Branches - 12 - - • Sale of Bancomer Shares 321 - - - (178) - Total Non-interest Revenue - 155 Total Provisions For Credit - - 100 - - Losses 39 - 23 NIX Acquisition Related Costs 62 - (178) (23) Total Pre-tax Impact 55 (39) (62) - - Tax Asset Adjustment (25) - - (105) (14) Total After-tax Impact 93 (25) (39) 398 4 346 Net Income as Reported 1,417 1,471 - 0.65 Earnings per Share – Diluted ($) 2.66 0.75 2.68 14.6 (0.4) 12.9 Return on Equity (%) 13.4 13.8 16 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Earnings Per Share & Return on Equity Return on Equity (%) Earnings Per Share ($) 16.4 15.2 0.85 14.4 15.5 0.75 14.5 0.72 12.2 0.80 13.5 0.59 0.71 11.6 0.68 0.57 4.8 0.25 3.8 0.19 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Accrual Cash 17 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Net Interest Margins Decline Slightly Net Interest Margin (bps) 316 315 312 312 308 P&C 207 202 192 195 194 Total Bank 126 110 107 95 86 IBG Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 18 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Capital Remains Above 8% Target 12.93 12.48 Total Capital (%) 12.12 12.25 12.23 Tier 1 (%) 8.87 8.80 8.72 8.61 8.15 • Tier 1 ratio improved due to organic business growth and lower risk-weighted assets Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 19 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 Capital Adequacy Risk Weighted Assets ($B) Total Bank 135.8 132.5 131.3 131.1 130.1 68.5 67.3 65.8 64.7 64.3 P&C IBG 60.2 63.0 61.8 58.5 55.9 7.9 7.0 5.5 5.6 4.8 PCG & Other Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 20 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S

Q4 P&C Net Interest Margin • Margin improved in Canada and stable in US • Performance based compensation 3.16 3.15 3.12 3.12 3.08 and initiative spending increases the NIX/Revenue ratio • Cost containment and revenue growth drives NIX/Revenue ratio lower than prior year Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 NIX / Revenue Cash ROE 62.5 61.6 26.7 26.6 60.0 59.7 24.7 58.7 23.8 23.5 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 21 Q 4 2 0 0 2 F I N A N C I A L R E S U L T S