蒙特利爾銀行 (BMO) 2012年年度報告「TSX」.pdf

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1、BMO FINANCIAL GROUP 195TH ANNUAL REPORT 2012Bank of Montreal uses a unified branding approach that links the organizations member companies under the brand“BMO Financial Group”.Information about the intercorporate relationships among Bank of Montreal and its principal subsidiaries is provided on pag

2、e 182 of the 2012 financial statements,which page is incorporated herein by reference.These subsidiaries are incorporated under the laws of the state,province or country in which their head or principal office is located with the exception of:BMO Harris Financial Advisors,Inc.,BMO(US)Lending,LLC,BMO

3、 Global Capital Solutions,Inc.,BMO Capital Markets Corp.,BMO Harris Financing,Inc.,BMO Financial Corp.,BMO Asset Management Corp.,psps Holdings,LLC,and BMO Capital Markets GKST Inc.,each of which is incorporated in Delaware.Financial SnapshotReported1 Adjusted1,2As at or for the year ended October 3

4、1(Canadian$in millions,except as noted)2012 2011 2012 2011Revenue(p 36)16,130 13,943 15,067 13,742 Provision for credit losses(p 40)765 1,212 471 1,108Non-interest expense(p 42)10,238 8,741 9,513 8,453Net income(p 32)4,189 3,114 4,092 3,275Earnings per share diluted($)(p 32)6.15 4.84 6.00 5.10Return

5、 on equity(p 34)15.9%15.1%15.5%16.0%Basel II Common Equity Ratio(p 61)10.5%9.6%10.5%9.6%Basel III Common Equity Ratio pro-forma(p 62)8.7%6.9%8.7%6.9%Net Income by SegmentPersonal&Commercial Canada(p 46)1,784 1,773 1,794 1,781Personal&Commercial U.S.(p 49)517 352 581 387 Private Client Group(p 52)525

6、 476 546 486BMO Capital Markets(p 55)948 902 949 902Corporate Services(p 58)3 415(389)222(281)Net income(p 32)4,189 3,114 4,092 3,2751 As of November 1,2011,BMOs financial results have been reported in accordance with International Financial Reporting Standards(IFRS).Results for fiscal 2011 have bee

7、n restated accordingly.Certain other prior-year data has also been reclassified to conform with the current years presentation.See pages 43 and 44.2 Adjusted results are non-GAAP and are discussed in the Non-GAAP Measures section on page 98.Management assesses performance on a GAAP basis and on an a

8、djusted basis and considers both to be useful in the assessment of underlying business performance.Presenting results on both bases provides readers with an enhanced understanding of how management assesses results.3 Corporate Services,including Technology and Operations.Adjusted Revenue1$15.1 billi

9、onBasel III Pro-forma Common Equity Ratio8.7%Adjusted Net Income1$4.1 billionAdjusted Return on Equity(ROE)115.5%Adjusted net income increased 25%,or$0.8 billion.There was good revenue growth and a lower provision for credit losses.P 32Adjusted ROE decreased by 0.5 per-centage points.There was good

10、growth in both earnings and adjusted earnings available to common shareholders,as well as increased average common shareholders equity.P 34Business Review2 Our Vision4 President and Chief Executive Officers Message8 BMO at a Glance8 Our Strategic Footprint10 Customers12 Employees14 Society16 Value18

11、 Chairmans Message19 Corporate GovernanceFinancial Review21 CFOs Foreword to the Financial Review22 Financial Performance and Condition at a Glance24 Managements Discussion and Analysis 100 Supplemental Information119 Consolidated Financial Statements124 Notes to Consolidated Financial StatementsRes

12、ources and Directories182 Principal Subsidiaries183 Glossary185 Board of Directors186 Management Committee 187 Performance Committee188 Shareholder InformationIBC Where to Find More InformationDelivering on Our Strategic Priorities 2012 PerformanceAdjusted revenue increased$1.3 billion,or 10%,reflec

13、ting the benefits of the acquisition of Marshall&Ilsley Corporation and organic growth.P 36Strong capital position Our pro-forma Basel III Common Equity Ratio was 8.7%,well in excess of regulatory requirements and up from 6.9%in 2011.P 621 See footnote 2 to the Financial Snapshot section for informa

14、tion on the use of adjusted results.BMO Financial Group 195th Annual Report 2012 06 Its the people we help succeed who ultimately have the power to shape our success.The power to act.The power to change.The power to grow.Bank of Montreal uses a unified branding approach that links the organizations

15、member companies under the brand“BMO Financial Group”.Information about the intercorporate relationships among Bank of Montreal and its principal subsidiaries is provided on page 182 of the 2012 financial statements,which page is incorporated herein by reference.These subsidiaries are incorporated u

16、nder the laws of the state,province or country in which their head or principal office is located with the exception of:BMO Harris Financial Advisors,Inc.,BMO(US)Lending,LLC,BMO Global Capital Solutions,Inc.,BMO Capital Markets Corp.,BMO Harris Financing,Inc.,BMO Financial Corp.,BMO Asset Management

17、 Corp.,psps Holdings,LLC,and BMO Capital Markets GKST Inc.,each of which is incorporated in Delaware.Financial SnapshotReported1Adjusted1,2As at or for the year ended October 31(Canadian$in millions,except as noted)2012 2011 2012 2011Revenue(p 36)16,130 13,943 15,067 13,742 Provision for credit loss

18、es(p 40)765 1,212 471 1,108Non-interest expense(p 42)10,238 8,741 9,513 8,453Net income(p 32)4,189 3,114 4,092 3,275Earnings per share diluted($)(p 32)6.15 4.84 6.00 5.10Return on equity(p 34)15.9%15.1%15.5%16.0%Basel II Common Equity Ratio(p 61)10.5%9.6%10.5%9.6%Basel III Common Equity Ratio pro-fo

19、rma(p 62)8.7%6.9%8.7%6.9%Net Income by SegmentPersonal&Commercial Canada(p 46)1,784 1,773 1,794 1,781Personal&Commercial U.S.(p 49)517 352 581 387 Private Client Group(p 52)525 476 546 486BMO Capital Markets(p 55)948 902 949 902Corporate Services(p 58)3415(389)222(281)Net income(p 32)4,189 3,114 4,0

20、92 3,2751As of November 1,2011,BMOs financial results have been reported in accordance with International Financial Reporting Standards(IFRS).Results for fiscal 2011 have been restated accordingly.Certain other prior-year data has also been reclassified to conform with the current years presentation

21、.See pages 43 and 44.2Adjusted results are non-GAAP and are discussed in the Non-GAAP Measures section on page 98.Management assesses performance on a GAAP basis and on an adjusted basis and considers both to be useful in the assessment of underlying business performance.Presenting results on both b

22、ases provides readers with an enhanced understanding of how management assesses results.3 Corporate Services,including Technology and Operations.Adjusted Revenue1$15.1 billionBasel III Pro-forma Common Equity Ratio8.7%Adjusted Net Income1$4.1 billionAdjusted Return on Equity(ROE)115.5%Adjusted net i

23、ncome increased 25%,or$0.8 billion.There was good revenue growth and a lower provision for credit losses.P 32Adjusted ROE decreased by 0.5 per-centage points.There was good growth in both earnings and adjusted earnings available to common shareholders,as well as increased average common shareholders

24、 equity.P 34Business Review2 Our Vision4 President and Chief Executive Officers Message8 BMO at a Glance8 Our Strategic Footprint10 Customers12 Employees14 Society16 Value18 Chairmans Message19 Corporate GovernanceFinancial Review21 CFOs Foreword to the Financial Review22 Financial Performance and C

25、ondition at a Glance24 Managements Discussion and Analysis 100 Supplemental Information119 Consolidated Financial Statements124 Notes to Consolidated Financial StatementsResources and Directories182 Principal Subsidiaries183 Glossary185 Board of Directors186 Management Committee 187 Performance Comm

26、ittee188 Shareholder InformationIBC Where to Find More InformationDelivering on Our Strategic Priorities 2012 PerformanceCustomershave the last word on deciding their financial futures.P 10Employeesare empowered to make banking simpler for everyone.P 12Societyexpects banks to act responsibly in conn

27、ecting people with opportunities.P 14Banks build value for shareholdersby helping customers succeed.P 16Adjusted revenue increased$1.3 billion,or 10%,reflecting the benefits of the acquisition of Marshall&Ilsley Corporation and organic growth.P 36Strong capital position Ourpro-forma Basel III Common

28、 Equity Ratio was 8.7%,well in excess of regulatory requirements and up from 6.9%in 2011.P 621See footnote 2 to the Financial Snapshot section for information on the use of adjusted results.2 BMO Financial Group 195th Annual Report 2012Strategic priorities12Achieve industry-leading customer loyalty

29、by delivering on our brand promise.Enhance productivity to drive performance and shareholder value.A clear vision:To be the bank that defines great customer experience.2 BMO Financial Group 195th Annual Report 2012BMO Financial Group 195th Annual Report 2012 3345Leverage our consolidated North Ameri

30、can platform to deliver quality earnings growth.Expand strategically in select global markets to create future growth.Ensure our strength in risk management underpins everything wedo for our customers.BMO Financial Group 195th Annual Report 2012 34 BMO Financial Group 195th Annual Report 2012better

31、decisions with better information and have confidence in the choices they make.Never dictating and certainly never preaching,we uphold a simple commitment to making money make sense.Banking,like all disciplines,can be approached in many ways.Our preference is to work with customers side by side;to d

32、emonstrate that its better when employees are empowered to find better ways of doing things and that empowerment begins with confidence;to be passionate about eliminating clutter and waste,where fewer layers amount to greater simplicity;to insist that those who work here take seriously their duty to

33、 society as a whole;to live up to the expectation that we manage our bank responsibly;and finally to drive for higher performance on behalf of our shareholders,to whom were ultimately accountable.And so,when we thought about what to put on the cover of our annual report this year,we knew we werent t

34、alking about something new.It is the way of great companies they are defined by people.Breaking down complex questions into simple answers galvanizes this bank and drives our market-defining promise.It is who we are.The result is confident customers.We wouldnt have it any other way.Last year we spok

35、e of fundamental truths that continue to matter even in a world of persistent change,and how our commitment to customers would help them to make sense of an uncertain time.In the intervening 12 months the world has seen tangible progress on the path Appropriately,the 195th review of BMOs achievement

36、s and future goals pays tribute to the people whose interests we serve,whose support we depend on and whose successes are inextricably linked with our own.This report is intended to speak to the banks stakeholders,personally,about the ways in which our relationship with each of them contributes to b

37、uilding the value of the company.The beliefs we share here are the source of the strategic decisions we make and of our confidence in the banks ability to grow in a sustainable way.Taken as a whole,the annual report to shareholders speaks to both the banks financial measures of performanceand our co

38、nfidence in the strategic priorities that guide us as we pursue our longer-term objectives.But fundamentally,this report is about people:the passion and commitment of 46,000 employees who serve customers so well,every day,and the loyalty and repeat business of more than 12 million customers living a

39、nd working in Canada,the United States and markets beyond.It is about our relationship with thousands of suppliers,and as many communities,where our brand represents the banks clear commitment to what we believe matters to people.And its about whats important to the many millions of individual share

40、holders who own our shares outright or through mutual funds and retirement accounts and to those who manage investments on their behalf.Simplifying customers livesIt is our conviction that complexity can be translated.Central to this is the belief that it is our job to help customers have control of

41、 their financial lives,make The Power of ConfidencePresident and Chief Executive Officers MessageBMO Financial Group 195th Annual Report 2012 5 the U.S.effectively doubled with the integration of M&I.Adjusted earnings1 from our U.S.segment tripled from the previous year to more than$1 billion,reflec

42、ting strong business growth and credit performance that proved to be better than anticipated.This is the realization of a deliberate strategy to anchor our core business in the heartland of the continental economy a territory defined as much by shared values and aspirations as it is by geography.BMO

43、s enlarged continental footprint is centred in the vital Great Lakes economy that connects six key U.S.Midwest states and the two largest Canadian provinces,and whose combined population of more than 74 million generates a nominal GDP of about$3.3 trillion.Our significant and long-established presen

44、ce throughout the rest of Canada,with a network stretching from coast to coast,connects powerful regional economies driven by natural resources and agriculture.BMOs deep ties in the energy sector extend from the oilfields of Alberta and Saskatchewan southward through Colorado to Texas.And from strat

45、egically situated offices around the Pacific Rim,we facilitate financing and investment activity between North America and the rapidly growing economies of Asia.This,in broad strokes,is how we map the expanded market that our bank is now ideally positioned to serve.But what matters far more than any

46、 alignment of states and provinces is the character of the places where we feel most at home and where we see the greatest potential for creating value.The markets where BMO does business are populated by hardworking people who are focused on raising families,buying homes,building businesses and inv

47、esting for the future people who contribute every day,in large ways and small,to strong,competitive economies that are fully capable of holding their own in the global marketplace.to reducing financial leverage in developed economies,and toward strengthening the management and oversight of instituti

48、ons and markets.There may be no return to the expectations of the early 2000s,but the potential for economic growth now appears much greater than weve been conditioned,as a result of the past five years,to consider normal.BMO has never been better positioned to take advantage of the opportunity.A fu

49、ndamental repositioning of our bankBMO strives for market leadership with customers and employees.Were recognized not only as a great place to bank,but also a great place to work.Very purposefully,we have been repositioning the bank and this year passed an important point.Without doubt,we have funda

50、mentally changed our position in the marketplace:the opportunity before us now is equally about the experience we provide to customers and the geography we span,as we build long-term value throughout Canada and across the U.S.border in the middle of the continent.In extending BMOs global reach weve

51、been similarly selective,adding to our presence in overseas markets only where it is meaningful in relation to our core North American footprint.Still,a fundamental measure by which we define success remains our ability to attract new customers.Our expanded North American platform allows us to grow

52、our customer base on a more competitive scale.BMO is now the second-largest Canadian bank measured by number of retail branches in Canada and the U.S.The bank has the earnings momentum and scale to translate balance-sheet growth into market-share gains building on the confidence that comes from bein

53、g an industry leader in customer loyalty.Opportunity in the economic heartlandIn 2012 we marked our first full year of serving significantly more customers than ever before as BMOs footprint in William A.DownePresident and Chief Executive Officer6 BMO Financial Group 195th Annual Report 2012Canada70

54、%U.S.26%Other4%Canada85%U.S.10%Other5%It is here that our bank will find sustainable growth and where well make our contribution,in terms of higher shareholder returns and greater economic prosperity.Weve now refocused our collective efforts on growing BMOs customer base,and to that end were aggress

55、ively pursuing the new opportunities opening up every day in our redefined home market.Record results driven by sound strategy1BMOs strong consolidated operating results for 2012 reflect the collective actions of 46,000 employees to meet the high expectations of all our stakeholders.Adjusted net inc

56、ome grew to a record$4.1 billion an increase of 25%over 2011.Total adjusted revenue rose by 10%to an all-time high of$15.1 billion,with an adjusted return on equity of 15.5%.Adjusted earnings per share grew by 18%well above our target range of 8%to 10%and we maintained strong capital ratios exceedin

57、g regulatory requirements.Confidence in the long-term value of all four BMO businesses has advanced.We increased the dividend in 2012 while in the same period,our pro-forma Basel III common equity ratio was not simply rebuilt but stood above 8.7%,greater than prior to the expansion of our U.S.footpr

58、int.We have flexibility in deploying capital going forward.Within our larger North American footprint,Personal and Commercial Banking earned nearly$2.4 billion in adjusted net income in 2012.The Canadian contribution of nearly$1.8 billion was up 3%on an actual loss basis from the previous year,while

59、 the U.S.component,at US$579 million,reflected a gain of 48%.The Private Client Group achieved good growth in 2012.Adjusted net income increased 12%to$546 million,including a contribution of more than$100 million from the U.S.We made several strategic acquisitions during the year to extend our globa

60、l presence and enhance our wealth offering for both Asset Management and Private Banking customers.BMO Capital Markets delivered annual adjusted net income of$949 million,with a strong return on equity of 20.2%.Corporate and Institutional banking is now allocated about 20%of the banks total capital.

61、It is sized to contribute as a stable,well-diversified business.Setting clear priorities for the futureThe banks strategic priorities are a clear statement of intent through which we turn our strategy into action and by which we then measure our success.And while theyre discussed in detail elsewhere

62、 in this report,they merit comment here.Adjusted net income1 increased by 25%20122011PRESIDENT AND CHIEF EXECUTIVE OFFICERS MESSAGE$4.1 billion$3.3 billion1 Adjusted results are non-GAAP and are discussed in the Non-GAAP Measures section on page 98.Reported results are shown on the inside cover and

63、in Managements Discussion and Analysis.BMO Financial Group 195th Annual Report 2012 7 Underpinning every customer initiative we pursue is a rigorous and comprehensive approach to risk management.Our overall approach to lending and investing has been a long-time differentiator for BMO,whether were ad

64、vising customers to be judicious in their investment strategies or shortening mortgage maturity terms to reduce the potential risks of home ownership.If this means resisting temporary gains in overheated segments of the market,it also means that BMO customers and shareholders recognize the longer-te

65、rm benefits of holding to a moderate path through market peaks and valleys.When we talk about appropriate oversight and measured risk-taking,its with the knowledge that were upholding these principles consistent with our brand as much for the benefit of our customers as for our shareholders.Similarl

66、y,decisions about where and when to invest are centred around the creation of value.In 2012 we introduced a series of initiatives across the bank aimed at finding more efficient ways to deliver superior service to our customers.These efforts are designed to drive sustainable revenue growth while dee

67、pening existing customer relationships and forging new ones in a careful balancing of outcomes that translates into meaningful shareholder return.The work is beginning to take hold.Were ensuring that the banks resources both people and capital are put to their best possible use,making adjustments wh

68、ere the current approaches no longer make sense.Here,too,BMO employees play a critical role.Over the past year our people have invested a tremendous amount of energy and intelligence in finding ways to be“Breaking down complex questions into simple answers galvanizes this bank and drives our market-

69、defining promise.It is who we are.The result is confident customers.We wouldnt have it any other way.”faster to the market with innovation.This objective energizes us;the measurable progress were making in every area shows how the search for greater efficiency can further differentiate BMO and prope

70、l all our strategic priorities including the achievement of industry-leading customer loyalty.Inspiring continued confidence Looking ahead to 2013,weve set out clear strategies for organic growth across all of BMOs businesses.Fully repositioned with a consistent North American identity and an integr

71、ated banking platform were embracing the advantages of competing in a larger space with more avenues for innovation and growth.We have achieved critical mass in an undertaking that has been decades in the making.We have built a business grounded in the heart of a continental economy where the opport

72、unity to deliver sustained,quality earnings has never been better.Essential changes in the technology architecture of the bank and clear progress toward securing market leadership in customer loyalty across our footprint have transformed the foundation of our future success.Our outlook can be summed

73、 up in a single word:confidence.All the necessary elements for the success of the bank are in place and we are building a differentiated position in the market.The source of our advantage is grounded in the confidence our customers have in the choices they make.For it will always be the case that ou

74、r success will be in direct proportion to theirs the people with whom we do business.William A.Downe8 BMO Financial Group 195th Annual Report 2012 BMO at a Glance Who we areEstablished in 1817,BMO Financial Group serves more than 12 million personal,commercial,corporate and institutional customers i

75、n North America and internationally.We provide a broad range of retail banking,wealth management and investment banking products through our operating groups:Personal and Commercial Banking;Private Client Group;and BMO Capital Markets.Two years of growth Increase%Increase Measure 20101 20121(decreas

76、e)(decrease)Branches 1,234 1,571 337 27 Canada and other 913 933 20 2 United States 321 638 317 99BMO is the 2nd largest Canadian bank by retail branches in Canada and the U.S.ATMs 2,981 3,971 990 33Employees 37,629 46,272 8,643 23Assets($B)412 525 113 27AUM/AUA($B)2 373 579 206 55Deposits($B)249 32

77、4 75 30Loans and acceptances($B)177 257 80 45Book value per share($)34.09 40.25 6.16 18Book value($B)19.3 26.2 6.9 36Market capitalization($B)34.1 38.4 4.3 13BMO is the 8th largest bank in North America3Share price($)60.23 59.02(1.21)(2)1 Amounts are based on CGAAP in 2010 and IFRS in 2012.2 Assets

78、under management or administration.3 As measured by assets published by Bloomberg;asset rankings as at October 31,2012.GuangzhouHong KongShanghaiBeijingDelhiMumbai Our Strategic Footprint BMOs strategic footprint is anchored by our core business in the heartland of the continental economy a territor

79、y defined as much by shared values and aspirations as it is by geography.BMOs enlarged continental footprint is centred in the vital Great Lakes economy that connects six key U.S.Midwest states and the two largest Canadian provinces,and whose combined population of more than 74 million generates a n

80、ominal GDP of about$3.3 trillion.Our significant presence across Canada and the U.S.is bolstered by global operations on five continents,allowing us to provide our North American customers with access to economies and markets around the world,and our customers from other countries with access to Nor

81、th America.Asia-Pacific Trading CorridorBMO facilitates financing,investment and wholesale banking activities between our North American base and strategically located offices in the rapidly growing economies of Asia.Natural ResourcesOur significant and long-established presence throughout Canada an

82、d the U.S.includes regional economies fuelled by natural resources and agriculture.BMOs deep connections and historical presence in the energy sector extend from the oilfields of Western Canada southward through to Texas.European PlatformOffices in four European countries and a regional representati

83、ve office in the Middle East provide us with a strong distribution platform for our wholesale banking activities as well as a presence in key markets for institutional asset management and investment banking.*BMO has retail banking branches across Canada and in the U.S.Midwest states of Illinois,Wis

84、consin,Indiana,Minnesota,Missouri and Kansas,as well as in Arizona and Florida.BMO Financial Group 195th Annual Report 2012 9 BMO Financial Group 195th Annual Report 2012 9 Abu DhabiDublinLondonParisZurich Our Strategic Footprint BMOs strategic footprint is anchored by our core business in the heart

85、land of the continental economy a territory defined as much by shared values and aspirations as it is by geography.BMOs enlarged continental footprint is centred in the vital Great Lakes economy that connects six key U.S.Midwest states and the two largest Canadian provinces,and whose combined popula

86、tion of more than 74 million generates a nominal GDP of about$3.3 trillion.Our significant presence across Canada and the U.S.is bolstered by global operations on five continents,allowing us to provide our North American customers with access to economies and markets around the world,and our custome

87、rs from other countries with access to North America.Core Retail Footprint*EdmontonReginaWinnipegYellowknifeMinneapolisSt.LouisKansas CitySeattleVancouverIndianapolisTorontoOttawaSt.JohnsFort McMurrayHalifaxFrederictonCharlottetownFort LauderdaleSarasotaWest Palm BeachMadisonCalgaryMontrealNew YorkM

88、ilwaukeeSouthern Market Presence HoustonChicagoWhitehorseSaskatoonDenverPhoenixSan FranciscoLos Angeles10 BMO Financial Group 195th Annual Report 2012The people who stand behind every great bank have incredible power.Because as customers they get the last word.When it comes to spending,saving,borrow

89、ing and investing,people count on banks to provide valuable expertise.Still,its customers who have the final say on their finances.They want a bank that helps them make better decisions without dictating,and certainly never preaching.And they want to feel assured that theyre making the right choices

90、.In the end a successful banking relationship hinges on this basic understanding:customers have the power to choose where they want to go and expect a bank to give them confidence that theyre on the best path to get there.chooseThetopowerFromm Family Foods In 2008,Wisconsin-based Fromm Family Foods

91、had been steadily winning new markets for its premium-quality pet foods.But to meet demand,the fourth-generation family-owned business needed to expand manufacturing.The banks U.S.commercial lending team reviewed the business case and quickly arranged$8 million in financing for the purchase of a fee

92、d mill and production equipment in Columbus,Wisconsin.“We approved the financing in June 2009,when credit was tight,”recalls Steve Gorzek,now a vice-president with BMO Harris Bank.“But based on our understanding of the business and the character of the people who run it,this was an easy decision.”Si

93、nce moving into the renovated facility,Fromm has continued to grow and revenues have nearly tripled.“Were able to continue meeting production demands,create new jobs for Wisconsin workers and pursue research and development,”says Tom Nieman,Fromms president.“People were skeptical,but I dont think I

94、ever doubted we could do it.You just need a bank that shares your values.BMO Harris Bank has helped us achieve our goals and grow.”BMO Financial Group 195th Annual Report 2012 11Tom Nieman,president of Fromm Family Foods,says,“BMO Harris Bank has been integral in helping us achieve our goals.”Online

95、 excellence was ranked number one among Canadian financial institutions for Overall Customer Experience,according to Keynote Systems,a global authority on mobile and internet performance.BMO InvestorLine was also recognized as the top bank-owned online brokerage by The Globe and Mail in its 2012 Onl

96、ine Brokers Survey.Top In 2012,BMO was recognized twice by the Ipsos Best Banking Awards in Canada,which honours financial institutions with top-ranked personal banking customer service.BMO was recognized in two categories:Financial Planning and Advice,and Value For Money.rankingNumber of Customers(

97、millions)10122010201212 BMO Financial Group 195th Annual Report 2012Being a great bank should be easy.Just do what people expect of any bank but do it simpler,smarter and better.To deliver a great customer experience,you have to be passionate about making things less complicated.That means empowerin

98、g employees to find better ways of meeting customers priorities while simplifying their lives.It means not only providing useful tools,but also getting rid of need less complexity.A great bank understands that finding ways to be more efficient and productive cannot just be about cutting costs and el

99、iminating waste.Its about erasing boundaries,both within the organization and across a global marketplace.And its about reducing layers between decision-makers and customers so that problems get solved and needs get addressed more quickly and effectively.This is the key to building customer loyalty

100、and shareholder value:make banking simpler.simplifyThetopowerBMO Financial Group 195th Annual Report 2012 13Jason Ekubor,Financial Services Coordinator,working with a BMO customer.96%of BMO employees believe they are contributing to our vision to be the bank that defines great customer experience.30

101、%25%50%less customer wait timeimprovement in qualityless branch processing25%The Mortgage Lab In 2012 we took a fresh look at BMOs Canadian mortgage approval process.Steps had been added over the years,and turnaround times could often be longer than ideal.To look for improvements,P&C Canada brought

102、together mortgage,underwriting and fulfill-ment specialists in a pilot called“The Mortgage Lab.”Collaborating outside traditional silos,the team explored ways to boost efficiency at every stage for instance,by creating communities linking key bank staff,as well as customers,to ensure everyone had im

103、mediate access to important information.Weve begun implementing The Mortgage Lab solutions across our retail network.By removing barriers and empowering staff to respond more flexibly to customers needs,weve reduced delays and processing costs.Employees are more engaged as they collaborate on solvin

104、g problems.And weve shown once again that improving productivity doesnt compromise service or quality,but in fact helps all of us focus on what we do best doing a great job for customers.Measurable ResultsThe process improvements developed during The Mortgage Lab pilot are reflected in these measure

105、s of success:BMOs annual employee giving campaign Generosity runs deep at BMO.Its part of a long-standing tradition one that is reinforced each autumn.In 2012,70.5%of BMO employees an exceptionally high level of employee engagement participated in the campaign,raising$13.2 million for United Way and

106、 other charities.BMO also hosts a North American employee volunteer day.In 2012,6,490 employees took part in this event,donating 16,604 hours to 428 projects at 235 charities.overall productivity gain14 BMO Financial Group 195th Annual Report 2012People count on a healthy financial system to drive e

107、conomic prosperity and expect banks to behave accordingly.Banks are in the business of connecting people with opportunities.Whether helping to launch new ventures,access untapped markets or invest in future prosperity,banks fuel customer initiatives that drive overall economic growth and in doing so

108、 assume a fundamental responsibility.Their crucial role in the financial system brings many benefits,along with the obligation to help keep the system healthy and stable.Only by managing their businesses responsibly,with a prudent approach to risk,can banks live up to the trust that society has plac

109、ed in them.trustThetopowerBMO Financial Group 195th Annual Report 2012 15$10 billion BMOs Open For Business campaign will make up to$10 billion in financing available to Canadian businesses over three years.Contributions to the Community(%)$55.7millionImperial CraneWhen B.J.Bohne took over Imperial

110、Crane Services in 2003,he hoped to transform the business his father founded into an industry leader.But financing that vision had its headaches:“We were dealing with 14 banks and 40 different loan officers,”B.J.recalls.“We needed one strong financial partner.”BMO Harris Bank understood B.J.s goals

111、and the challenges of the construction industry.“We worked together,”explains commer-cial banker Bill Thomson,“to craft a customized financial structure.”Today Chicago-based Imperial is the largest locally owned crane company in the U.S.Midwest.“Weve done well during the recovery,”says B.J.“The BMO

112、rela-tionship has enabled us to purchase equipment and add hundreds of jobs.And we have the security of knowing our capitalization is stable,so we can spend more time developing the business.”Now further expanding its customer base in the oil and gas,chemical and steel industries,Imperial can afford

113、 to set its sights high thanks to a solid financial platform.Enhancing knowledge of riskRotation programs that place talented risk professionals in each of our business groups strengthen risk management a long-time differentiator for BMO enterprise-wide.Employees from risk swap roles with colleagues

114、 in other busi-ness groups,which helps ensure all employees have a greater understanding and awareness of risk issues.Imperial Crane Services started with a single crane.Today the company has more than 200.24152810185Hospitals and Health CareCivic and Community InitiativesEducationFederated AppealsA

115、rts and CultureOther 16 BMO Financial Group 195th Annual Report 2012SteriMaxWhen Kenyan-born Mahen Acharya arrived in Canada in 1973,he had a pharmacy degree and entrepre-neurial ambitions.Today the 40-year BMO customer is CEO of SteriMax Pharmaceuticals Inc.,which has grown since 1998 into a leadin

116、g provider of drug products to hospitals and retail pharmacies.Now SteriMax is strength-ening its U.S.presence and directly developing drugs alongside those it distributes backed by a sig nificant increase in financing from BMO.Acharya has always had a keen eye for opportunities.He grew his first dr

117、ugstore into a regional chain that was acquired by a national player.Next,he built Canadas third-largest drug wholesaler before selling it to a Fortune 100 company.“SteriMax was also launched to fill a gap in the marketplace,”he explains.“We saw drugs that were in demand,but not in the huge volumes

118、that multinationals require.”As a nimble niche player,SteriMax can meet that demand more cost-effectively.“The key is to be ready to move when opportunities arise.BMO under-stands that and helps ensure were ready to act when the time is right.”Banks grow shareholder value by helping customers succee

119、d.It really isnt any more complicated than that.Delivering quality growth begins with building customer loyalty.To drive higher performance for shareholders,a bank must take good care of its customers.Their needs and aspirations shape the development of new products and services and inspire the endl

120、ess fine-tuning of every business process and personal interaction.To create lasting value is to build deeper relationships with existing customers while working to attract new ones.In other words,the people who engage with a bank whether in the branch,online or across a boardroom table ultimately h

121、ave the power to determine its future.When they succeed,they further the banks success.Its as simple as that.buildThetopowerBMO Financial Group 195th Annual Report 2012 17adviceDirect In 2012,BMO InvestorLine launched adviceDirect for online investors.The new service the first of its kind in Canada

122、puts investors in control by providing specific investment recommendations to help them manage their investment portfolios.adviceDirect is already receiving recognition,such as the Morningstar Canadian Investment Awards Best Use of Technology Award,given in recognition of the effective and innovativ

123、e use of technology.At the Mississauga,Ontario headquarters of SteriMax,BMO bankers confer with Mahen Acharya and his son Samir,the family-owned companys Executive Vice President in charge of new business development.Our award-winning businessesBMO Capital Markets was named M&A Investment Banker Tea

124、m of the Year Americas for 2012 by Global M&A Network.And for the second consecutive year,Global Banking&Finance Review named BMO Harris Private Banking the Best Private Bank in Canada.20104.754.814.845.10ReportedAdjusted6.156.002011201220104.754.814.845.106.0020112012Annual EPS11 Adjusted results a

125、re non-GAAP and are discussed in the Non-GAAP Measures section on page 98.18 BMO Financial Group 195th Annual Report 2012J.Robert S.Prichard Chairman of the BoardWe are losing two strong directors and contributors this year with the retirements of Guylaine Saucier and Harold Kvisle.Guylaine,who is w

126、idely acclaimed as a leading expert on governance,has served the shareholders of BMO Financial Group for 20 years the maximum permitted term under our term limits most recently as a member of the Audit and Conduct Review and Risk Review com mit tees.Hal,one of the most respected business leaders in

127、Canadas energy industry,has recently returned to a full-time chief executive officer role with a heavy travel schedule incon-sistent with his serving on our board.He has been on the board since 2005,and served on both the Human Resources and Risk Review committees.The insights Guylaine and Hal broug

128、ht to the boardroom were highly valued and will be missed.We thank them for their distinguished service.Our newest director is Jan Babiak,a former Managing Partner at Ernst&Young LLP.Jan brings to BMO financial and accounting expertise and broad international experience,combined with leadership role

129、s in technology,information security and risk services,public policy and sustainability.She serves on the Audit and Conduct Review Committee and will also join the Risk Review Committee in due course.We welcome Jan to her new responsibilities.She is a terrific addition to our board.It has been a goo

130、d year indeed a pivotal year in which the careful plans we had approved began to take shape with the full integration of BMOs U.S.acquisition,the broadening and strengthening of our platforms and the deepening of our customer experience.Our focus for 2013 is unequivocal and unchanged:ensuring that o

131、ur dialogue with our manage-ment team will produce the right conditions for delivering strong performance for you,our shareholders performance that will validate your confidence in BMO Financial Group.J.Robert S.Prichard In 2012,the bank made clear progress on a number of strategic fronts that laid

132、the foundations for future growth in revenue,profitability and shareholder value.The board was pleased with the year.Most notable among these advances were the achievement of scale in the banks U.S.operating platform,the delivery of essential changes in technology architecture across the bank and su

133、ccess in charting a clear path to enhancing the banks efficiency.These were achieved while maintaining the progress toward gaining sustainable advantage from a differentiated customer experience.Our management team,led by Bill Downe,has a sound strategy for growth and an ever-improving customer expe

134、rience.The strategy is working and we are growing stronger and better as a bank.As a Board of Directors,we are united behind this strategy and have confidence in Bill and the banks senior management team.Their steady leadership is a competitive advantage for BMO.We are keenly focused on the performa

135、nce of the company,as are all the banks employees,and we are determined to see steady continuing improvement.The board is small relative to most of our peers.That smaller size gives us a unity of purpose and collective ownership of the banks direction and performance.The board is strongly committed

136、to seeing the banks absolute and relative performance be a source of pride for all our shareholders and employees.I give full credit to my predecessor,David Galloway,for the boards commitment to good governance.Good governance is essential for a company to achieve its ambitions and we are fortunate

137、to have it deeply ingrained in our work and processes.Chairmans MessageBMO Financial Group 195th Annual Report 2012 19 The board,through its Audit and Conduct Review Committee,reviews the operation of FirstPrinciples.Each year,every director,officer and employee must sign an acknowledge ment that th

138、ey have read,understood and complied with FirstPrinciples.We also have an online FirstPrinciples course for all new and existing employees that reviews and tests for under-standing of FirstPrinciples.We encourage employees and officers to raise con-cerns about ethical conduct and violations of First

139、Principles.We investigate complaints and take appropriate action,escalating to the board and Audit and Conduct Review Committee if necessary.Our whistleblower procedures allow officers and employees to report concerns anon-ymously,through the Office of the Ombudsman,without fear of retaliation.Our b

140、oard and our chairman are independent of management We believe that good governance depends on the exercise of sound,objective and independent judgment by the board.The board,with help from the Governance and Nominating Committee,assesses the independence of directors against legal and regulatory cr

141、iteria.All directors are independent except for William Downe,our President and CEO.The Chairman of the Board is an inde-pendent director who ensures that the board operates separately from management and that directors have an independent leadership contact.Each board meeting includes time for inde

142、pendent directors to meet with the chairman,without management or non-independent directors present.Each board committee meeting also includes a session without management present.Similar meetings happen outside formal board and committee meetings.Our core values guide the boards oversight,its relat

143、ionship with management and its accountability to shareholders.Our governance responsibilities are integral to our performance and long-term sustainability.Our corporate governance standards reflect emerging best practices and meet or exceed legal and regulatory requirements.Governance is important

144、to our owners,our customers,our employees,our communities and to us.Our board has oversight over our business Our Board of Directors supervises the management of our business and affairs.Continuous review of the board ensures it has the appropriate number of members with relevant and diverse experti

145、se to enable it to make effective decisions.The board provides well-informed strategic direction and oversight,emphasizing long-term performance sustainability and strong corporate gover-nance over short-term financial performance.Our core values guide that strategic direction and oversight,as well

146、as the boards relationship with management and accountability to shareholders.Our governance practices promote ethical business conduct FirstPrinciples,our comprehensive code of business conduct and ethics,guides our ethical decision-making and conduct of our directors,officers and employees.Corpora

147、te GovernanceWe strive to earn and retain the trust of our shareholders and other stakeholders through our high standards of corporate governance.We work to embed rigorous oversight and governance practices in our culture.20 BMO Financial Group 195th Annual Report 2012CORPORATE GOVERNANCEThe board a

148、nd its committees act independently.Every board and committee meeting includes in-camera sessions without management present.Our Governance StructureShareholdersELECTELECTREPORTAPPOINTBoard of DirectorsManagementAPPOINTShareholdersAuditorsAPPOINTDisclosure CommitteeEnsures accurate and timely public

149、 disclosureLeadership CouncilAligns employees around enterprise and group strategies Management CommitteeSets and manages enterprise strategy and performancePerformance CommitteeDrives enterprise results and delivers on corporate prioritiesReputation Risk Management CommitteeReviews significant risk

150、s to our reputationRisk Management CommitteeOversees risk and governance at the highest levels of managementGovernance and Nominating CommitteeHuman Resources CommitteeRisk Review CommitteeAudit and Conduct Review CommitteeOur compensation programs reflect best practicesOur director and executive co

151、mpensation programs are strongly aligned with governance best practices.They are benchmarked to ensure they are competitive and fair.Our pay-for-performance executive compensation model includes clawbacks and discourages excessive risk-taking.We have share ownership requirements because we believe t

152、hat when directors and executives own shares they are motivated to act in shareholders best interests.Our policies prohibit directors and employees from hedging their economic interest in bank shares,securities or related financial instruments.Our board and management support open dialogue and excha

153、nge of ideas with shareholdersAs set out in our Shareholder Engagement Policy,we communicate with shareholders in a variety of ways including our annual shareholder meeting,the annual report,management proxy circular,quarterly reports,annual information form,news releases,website and industry confer

154、ences.Our website provides extensive information about the board and its mandate,the board committees and their charters,and our Financial Group 195th Annual Report 2012 21 We are well-positioned to deliver on our strategic priorities in the coming years,with a number of strengths that position us w

155、ell for continued sustainable growth:Our business mix is well-diversified with a retail focus.Our retail businesses represent 75%or more of operating group adjusted revenue and net income.We have proven strength in commercial banking across our North American platform.We are well-positioned to lever

156、age this expertise in a business-led recovery.We have an expanded and upgraded U.S.platform,which provides each of our business groups with an important source of operating leverage.We are focused on productivity to drive performance and shareholder value.We have a differentiated,customer-focused st

157、rategy which will drive growth by achieving industry-leading customer loyalty and delivering on our brand promise Making Money Make Sense.We have a strong capital position,finishing the year with a pro-forma Basel III Common Equity Ratio of 8.7%.Looking forward,we intend to build on our success this

158、 year,continuing to manage our business responsibly while executing on our strategic priorities to deliver on our commitments to all stakeholders of the bank.Thomas E.Flynn 2012 was a year of progress for BMO.We delivered record financial performance,successfully completed the conversion of our U.S.

159、core banking system and advanced our strategic agenda.Each of our businesses is well-positioned to build on this momentum and success in 2013.BMO had strong financial results in 2012,with reported net income of$4.2 billion.On an adjusted basis,net income rose to$4.1 billion,increasing 25%from last y

160、ear with significantly improved results from Personal and Commercial Banking and Private Client Group,solid net income growth from BMO Capital Markets and improved Corporate Services results.We also increased the dividend this year.These results reflect the success of our strategy and our commitment

161、 to our customers and our shareholders.In our MD&A,we examine our results in detail.We are committed to telling our financial story clearly and thoroughly with high standards of governance and trans-parency in our communications.We are proud that our commitment to good disclosure was again recognize

162、d during the year.For the second consecutive year,BMO received the Canadian Institute of Chartered Accountants Award of Excellence for Corporate Reporting in Financial Services.We were also recognized as having the Best Financial Disclosure Procedures among the Financials sector by IR Global Ranking

163、s.CFOs Foreword to the Financial ReviewFinancial ReviewThomas E.Flynn Executive Vice-President&Chief Financial Officer22 BMO Financial Group 195th Annual Report 2012Financial Performance and Condition at a GlanceOur Performance(Note 1)Three-Year Total Shareholder Return(TSR)BMO shareholders have ear

164、ned an average annual return of 10.8%over the past three years,above the 7.4%return on the S&P/TSX Composite Index.The one-year TSR in 2012 was 5.2%,above the 4.5%return on the S&P/TSX Composite Index.Three-Year TSR(%)The Canadian peer group average annual three-year TSR was 11.2%.The one-year TSR w

165、as 11.7%.The North American peer group average annual three-year TSR was 7.3%,well below the Canadian average,reflecting negative returns for our U.S.peer banks in 2011.The one-year TSR in 2012 was 39.2%.EPS Growth(%)The Canadian peer group average EPS increased 17%,with all but one bank in the peer

166、 group recording double-digit percentage increases in EPS.Average EPS growth for the North American peer group was 15%,with significant variability among U.S.peer banks.ROE(%)The Canadian peer group average ROE of 18.1%was in line with the average return of 18.2%in 2011.Average ROE for the North Ame

167、rican peer group was 12.6%,also in line with the average return in 2011.NEP Growth(%)Revenue Growth(%)Revenue growth for the Canadian peer group averaged 9.2%,in line with results in 2011.Average revenue growth for the North American peer group was 6.6%,an improvement from 2011,with five U.S.peers r

168、eporting higher revenues.Effi ciency Ratio(%)The Canadian peer group average efficiency ratio was 58.3%,an improvement from 59.1%in 2011.The average efficiency ratio for the North American peer group was 61.4%,slightly worse than in 2011 and also worse than the average of the Canadian peer group.Ear

169、nings per Share(EPS)Growth Adjusted net income grew$817 million or 25%to$4,092 million in 2012,and adjusted EPS grew 18%to$6.00,reflecting increased earnings,the inclusion of eight additional months of results of M&I in 2012,and a significant increase in out standing shares in July 2011.Reported net

170、 income grew$1,075 million or 35%to$4,189 million,and reported EPS grew 27%to$6.15.On both reported and adjusted bases,there was notable revenue growth and a significant decrease in provisions for credit losses.Return on Equity(ROE)Adjusted ROE was 15.5%and reported ROE was 15.9%in 2012,compared wit

171、h 16.0%and 15.1%,respectively,in 2011.There was notable growth in both earnings and adjusted earnings available to common shareholders.Average common shareholders equity also increased,due to the issuance of common shares to M&I shareholders in July 2011 as consideration for the acquisition,as well

172、as internally generated capital.BMO has achieved an ROE of 13%or better in 22 of the past 23 years.Net Economic Profit(NEP)Growth Adjusted NEP,a measure of added economic value,was$1,246 million,up$198 million or 19%from 2011.Reported NEP was$1,439 million,up$498 million or 53%from 2011.The improvem

173、ents were attributable to an increase in earnings,net of a higher charge for capital as a result of the increase in shareholders equity.Adjusted NEP per share was$1.92,up from$1.73 in 2011.Revenue Growth Adjusted revenue increased$1,325 million or 10%in 2012 to$15,067 million,following growth of 12%

174、in 2011.Reported revenue increased$2,187 million or 16%to$16,130 million.These growth rates reflect the benefits of the M&I acquisition,as well as organic growth.Efficiency Ratio(Expense-to-Revenue Ratio)The adjusted efficiency ratio was 63.1%,up 160 basis points from 2011.The reported efficiency ra

175、tio increased 80 basis points to 63.5%.There was notable growth in revenue,but the ratios were affected by continued investments in our businesses,including technology development initiatives.Note 1:NEP and adjusted results in this section are non-GAAP.Please see the Non-GAAP Measures section on pag

176、e 98.As of November 1,2011,BMOs fi nancial results and those of our Canadian peers have been reported in accordance with IFRS.The consolidated fi nancial statements for comparative periods in fi scal year 2011 have been restated.Results for years prior to 2011 have not been restated and are presente

177、d in accordance with Canadian GAAP as defi ned at that time(CGAAP).As such,certain growth rates for 2011 may not be meaningful.Certain other prior year data has also been reclassifi ed to conform with the current years presentation,including restatements arising from transfers of certain businesses

178、between operating groups.U.S.peer group data continues to be reported in accordance with U.S.GAAP.BMO reportedBMO adjustedCanadian peer group averageNorth American peer group average2012201120109.715.75.712.313.910.620122011201063.163.562.061.562.762.220122011201015.515.915.016.015.114.9P 31P 34P 33

179、P 36P 42P 3220122011201017.44.510.8Peer Group Performance*North American peer group data for 2010 is not to scale.All EPS measures are stated on a diluted basis.BMO data for 2010 is not to scale.201220112010101.528.115.053.018.91302.92012201120101.927.16.017.654.219.7*Peer group NEP data is unavaila

180、ble.BMO Financial Group 195th Annual Report 2012 23 Our Performance(Note 1)Provision for Credit Losses as a%of AverageNet Loans and Acceptances The Canadian peer group average PCL represented 38 basis points of average net loans and acceptances,down slightly from 40 basis points in 2011.The North Am

181、erican peer group average PCL represented 50 basis points,down from 68 basis points in 2011,but higher than the average PCL for the Canadian peer group.Gross Impaired Loans and Acceptances as a%of Equity and Allowances for Credit Losses The Canadian peer group average ratio of GIL as a percentage of

182、 equity and allowances for credit losses was 7.8%in 2012,up from 7.3%in 2011.The average ratio for our North American peers improved from a year ago to 10.5%,but continues to be higher than the average for the Canadian peer group.Capital Adequacy The Canadian peer group average Tier 1 Capital Ratio

183、on a Basel II basis was 13.0%in 2012,relatively unchanged from 2011.Impaired Loans Gross impaired loans and acceptances(GIL),excluding purchased credit impaired loans,increased to$2,976 million from$2,685 million in 2011,and represented 9.3%of equity and allowances for credit losses,compared with 9.

184、0%a year ago.Formations of new impaired loans and acceptances,a key driver of provisions for credit losses,were$3,101 million,up from$1,992 million in 2011,due to a$1,317 million increase in formations in the M&I purchased performing loan portfolio that was acquired in July 2011.The potential for im

185、pairment and losses on this portfolio was adequately provided for in the credit mark.Formations in BMOs legacy portfolio have been trending lower.Capital Adequacy The Tier 1 Capital Ratio on a Basel II basis was 12.6%,up from 12.0%in 2011,and well in excess of regulatory requirements.The Common Equi

186、ty Ratio on a Basel II basis strengthened to 10.5%,up 95 basis points from 2011.Capital ratios were higher due to an increase in common equity and a reduction in risk-weighted assets.On a pro-forma basis,BMOs Basel III capital ratios at October 31,2012,exceeded OSFIs fully implemented Basel III expe

187、ctations,with a pro-forma Tier 1 Capital Ratio of 10.5%and pro-forma Common Equity Ratio of 8.7%.Credit Rating Credit ratings for BMOs senior long-term debt are listed below.There were no changes in credit ratings in 2012 and all four ratings are considered to indicate high-grade,high-quality issues

188、.On October 26,2012,Moodys Investors Service placed the senior long-term debt rating of BMO and four of our Canadian peers on review for downgrade.On January 28,2013,subsequent to BMOs year end,Moodys completed its review and lowered the senior long-term debt rating for each of the banks on review b

189、y one notch.At that time,Moodys also lowered the subordinated debt ratings of BMO and all of our Canadian peers.Moodys affirmed BMOs short-term rating.Credit Rating Moodys Canadian peer group median credit rating was lower in 2012 compared with 2011,as the rating for one of our Canadian peers was do

190、wngraded two notches.The credit ratings awarded by the three remaining ratings agencies were unchanged,with each rating considered high-grade and high-quality.S&P downgraded the long-term debt ratings of two of our Canadian peers byone notch on December 14,2012,and as a result,the Canadian peer grou

191、p median rating fell from AA to A+at that time.The North American peer group median credit ratings were unchanged from 2011,but remained slightly lower than the median of the Canadian peer group for three of the ratings,as economic conditions remain more difficult in the United States.The Canadian p

192、eer group averages are based on the performance of Canadas six largest banks:BMO Financial Group,Canadian Imperial Bank of Commerce,National Bank of Canada,RBC Financial Group,Scotiabank and TD Bank Group.The North American peer group averages are based on the performance of 13 of the largest banks

193、in North America.These include the Canadian peer group,except National Bank of Canada,as well as BB&T Corporation,Bank of New York Mellon,Fifth Third Bancorp,Key Corp.,The PNC Financial Services Group Inc.,Regions Financial,SunTrust Banks Inc.and U.S.Bancorp.Results are as at or for the years ended

194、October 31 for Canadian banks and as at or for the years ended September 30 for U.S.banks.*Data for all years refl ects the peer group composition in the most recent year.BMO reportedBMO adjustedCanadian peer group averageNorth American peer group average2012201120100.210.310.610.540.560.61P 40,75,8

195、0P 41,80P 61P 88Peer Group PerformanceCredit Losses The adjusted provision for credit losses(PCL)fell to$471 million from$1,108 million in 2011.Reported PCL fell to$765 million from$1,212 million.Adjusted PCL as a percentage of average net loans and acceptances improved to 21 basis points from 54 ba

196、sis points a year ago,and reported PCL as a percentage improved to 31 basis points from 56 basis points.These improvements reflect recoveries on the M&I purchased credit impaired loan portfolio and an improved credit environment.2012201120109.39.012.120122011201013.512.012.620122011AAAAAAAa2A+AAAa2A

197、+2010AAAAAa2A+DBRSFitchMoodysS&P20122010AAAAAa1AAAAAAAa2AA2011AAAAAa1AADBRSFitchMoodysS&P20122010AALAAAa3A+AALAAAa3A+2011AALAAAa3A+DBRSFitchMoodysS&PCanadian peer group median*BMO Financial GroupNorth American peer group median*MD&AMANAGEMENTS DISCUSSION AND ANALYSISManagements Discussion and Analys

198、isBMOs President and Chief Executive Officer and its Executive Vice-President and Chief Financial Officer have signed a statement outliningmanagements responsibility for financial information in the annual consolidated financial statements and Managements Discussion and Analysis(MD&A).The statement,

199、which can be found on page 116,also explains the roles of the Audit and Conduct Review Committee and Board of Directorsin respect of that financial information.The MD&A comments on BMOs operations and financial condition for the years ended October 31,2012 and 2011.The MD&A should be read inconjunct

200、ion with our consolidated financial statements for the year ended October 31,2012.The MD&A commentary is as of December 4,2012.Unlessotherwise indicated,all amounts are stated in Canadian dollars and have been derived from financial statements prepared in accordance with Interna-tional Financial Rep

201、orting Standards(IFRS).References to generally accepted accounting principles(GAAP)mean IFRS,unless indicated otherwise.As of November 1,2011,BMOs financial results have been reported in accordance with IFRS.The consolidated financial statements for com-parative periods in fiscal year 2011 have been

202、 restated.Note 30 on page 177 of the financial statements contains reconciliations and descriptions ofthe effects on BMOs financial results of the transition from Canadian GAAP to IFRS.Results for years prior to 2011 have not been restated and arepresented in accordance with Canadian GAAP as defined

203、 at that time(CGAAP).As such,certain growth rates and compound annual growth rates(CAGR)may not be meaningful.Certain other prior year data has also been reclassified to conform with the current years presentation,includingrestatements arising from transfers of certain businesses between operating g

204、roups.See pages 43 and 44.Index25Who We Are provides an overview of BMO Financial Group,explainsthe links between our financial objectives and our overall vision,andoutlines“Reasons to invest in BMO”along with relevant key perform-ance data.26Enterprise-Wide Strategy outlines our enterprise-wide str

205、ategy andthe context in which it is developed,as well as our progress in relationto our priorities.27Caution Regarding Forward-Looking Statements advises readersabout the limitations and inherent risks and uncertainties of forward-looking statements.28Factors That May Affect Future Results outlines

206、certain industry andcompany-specific factors that investors should consider when assessingBMOs earnings prospects.30Economic Developments includes commentary on the impact of theeconomy on our businesses in 2012 and our expectations for theCanadian and U.S.economies in 2013.Value Measures reviews fi

207、nancial performance on the four keymeasures that assess or most directly influence shareholder return.Italso includes a summary of adjusting items that are excluded fromresults to assist in the review of key measures and adjusted results.31Total Shareholder Return32Adjusting Items32Earnings per Shar

208、e Growth33Net Economic Profit Growth34Return on Equity34Acquisition of Marshall&Ilsley Corporation(M&I)provides anupdate on the major acquisition completed in 2011.352012 Financial Performance Review provides a detailed review ofBMOs consolidated financial performance by major income statementcatego

209、ry.It also includes summaries of the impact of business acquis-itions and changes in foreign exchange rates.Operating Group Review outlines the strategies of our operatinggroups,how they choose to differentiate their businesses and thechallenges they face,along with their strengths and key value dri

210、vers.It also includes a summary of their achievements in 2012,their prior-ities for 2013,the business environment in which they operate and areview of their financial performance for the year.43Summary45Personal and Commercial Banking46Personal and Commercial Banking Canada49Personal and Commercial

211、Banking U.S.52Private Client Group55BMO Capital Markets58Corporate Services,including Technology and OperationsFinancial Condition Review comments on our assets and liabilitiesby major balance sheet category.It includes a review of our capitaladequacy and our approach to optimizing our capital posit

212、ion tosupport our business strategies and maximize returns to our share-holders.It outlines proposed regulatory changes that are expected toimpact capital and liquidity management as well as certain businessoperations.It also includes a review of off-balance sheet arrange-ments and certain select fi

213、nancial instruments and European balances.59Summary Balance Sheet60Enterprise-Wide Capital Management64Select Financial Instruments67Select Geographic Exposures69U.S.Regulatory Developments70Off-Balance Sheet ArrangementsAccounting Matters and Disclosure and Internal Control reviewscritical accounti

214、ng estimates and changes in accounting policies in2012 and for future periods.It also outlines our evaluation ofdisclosure controls and procedures and internal control over financialreporting.70Critical Accounting Estimates73Changes in Accounting Policies in 201273Future Changes in Accounting Polici

215、es74Disclosure Controls and Procedures and Internal Control overFinancial Reporting74Shareholders Auditors Services and Fees75Enterprise-Wide Risk Management outlines our approach tomanaging the key financial risks and other related risks we face.932011 Performance Review,Review of Fourth Quarter 20

216、12 Per-formance and Quarterly Earnings Trends provide commentary onresults for relevant periods other than fiscal 2012.98Non-GAAP Measures includes explanations of non-GAAP measuresand a reconciliation to their GAAP counterparts for the fiscal year andfourth quarter.100Supplemental Information prese

217、nts other useful financial tables andmore historical detail.Regulatory FilingsOur continuous disclosure materials,including our interim financial statements and interim MD&A,annual audited consolidated financial statements and annual MD&A,Annual Information Form and Notice of Annual Meeting of Share

218、holders and Management Proxy Circular,are available on our website at ,on the CanadianSecurities Administrators website at and on the EDGAR section of the SECs website at www.sec.gov.BMOs President and Chief Executive Officer and itsExecutive Vice-President and Chief Financial Officer certify the ap

219、propriateness and fairness of BMOs annual and interim consolidated financial statements,MD&A andAnnual Information Form,and the effectiveness of BMOs disclosure controls and procedures and material changes in our internal control over financial reporting.24 BMO Financial Group 195th Annual Report 20

220、12MD&AWho We AreEstablished in 1817,BMO Financial Group is a highly diversified financial services provider based in North America.With total assets of$525 billion and46,000 employees,BMO provides a broad range of retail banking,wealth management and investment banking products and services to more

221、than12 million customers.We serve more than seven million customers across Canada through our Canadian retail arm,BMO Bank of Montreal.We alsoserve customers through our wealth management businesses:BMO Nesbitt Burns,BMO InvestorLine,BMO Private Banking,BMO Global Asset Manage-ment and BMO Insurance

222、.BMO Capital Markets,our investment and corporate banking division,provides a full suite of financial products and services toour North American and international clients.In the United States,BMO serves customers through BMO Harris Bank,an integrated financial servicesorganization based in the U.S.M

223、idwest with more than two million retail,small business and commercial customers.BMO Financial Group conductsbusiness through three operating groups:Personal and Commercial Banking,Private Client Group and BMO Capital Markets.Our Financial ObjectivesBMOs vision,guiding principle and medium-term fina

224、ncial objectivesfor certain important performance measures are set out in the adjacentchart.We believe that we will deliver top-tier total shareholder returnand meet our medium-term financial objectives by aligning our oper-ations with,and executing on,our strategic priorities as outlined on thefoll

225、owing page.We consider top-tier returns to be top-quartile share-holder returns relative to our Canadian and North American peer group.BMOs business planning process is rigorous and considers theprevailing economic conditions,our customers evolving needs and theopportunities available across our lin

226、es of business.It includes clearand direct accountability for annual performance that is measuredagainst internal and external benchmarks and progress towards ourstrategic priorities.Over the medium term,our financial objectives on an adjusted basisare to achieve average annual earnings per share(ad

227、justed EPS)growthof 8%to 10%,earn average annual return on equity(adjusted ROE)ofbetween 15%and 18%,generate average annual operating leverage of2%or more,and maintain strong capital ratios that exceed regulatoryrequirements.These objectives are key guideposts as we executeagainst our strategic prio

228、rities.Our operating philosophy is to increaserevenues at rates higher than general economic growth rates,whilelimiting expense growth to achieve average annual adjusted operatingleverage(defined as the difference between the growth rates ofadjusted revenue and adjusted non-interest expense)of 2%or

229、more.Inmanaging our operations,we balance current profitability with the needto invest in our businesses for future growth.Our VisionTo be the bank that defines great customer experience.Our Guiding PrincipleWe aim to deliver top-tier total shareholder return and balance ourcommitments to financial

230、performance,our customers,our employ-ees,the environment and the communities where we live and work.Our Medium-Term Financial ObjectivesOver the medium term,achieve average annual adjusted EPS growthof 8%to 10%,earn average annual adjusted ROE of between 15%and 18%,generate average annual adjusted o

231、perating leverage of2%or more,and maintain strong capital ratios that exceed regu-latory requirements.Reasons to Invest in BMOOperating leverage from our expanded U.S.platformFocused on generating revenue growth by achieving industry-leading customer experience and loyaltyEnhancing productivity to d

232、rive performanceProven strength in commercial banking across our NorthAmerican platformWell-diversified business mix with a retail focusStrong capital positionAs at or for the periods ended October 31,2012(%,except as noted)1-year5-year*10-year*Compound annual total shareholder return5.24.29.1Compou

233、nd growth in annual EPS27.18.48.7Compound growth in annual adjusted EPS17.62.07.5Average annual ROE15.913.014.8Average annual adjusted ROE15.515.116.5Compound growth in annualdividends declared per share0.70.88.9Dividend yield at October 314.95.34.4Price-to-earnings multiple9.6012.412.9Market value/

234、book value ratio1.471.531.91Common Equity Ratio(Basel II basis)10.5nana*5-year and 10-year growth rates reflect growth based on CGAAP in 2007 and 2002,respectively,and IFRS in 2012.na not applicableAdjusted results in this section are non-GAAP and are discussed in the Non-GAAP Measuressection on pag

235、e 98.The Our Financial Objectives section above and the Enterprise-Wide Strategy and Economic Developments sections that follow contain certain forward-looking statements.By their nature,forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties.Ple

236、ase refer to the Caution RegardingForward-Looking Statements on page 27 of this MD&A for a discussion of such risks and uncertainties and the material factors and assumptions related to the statementsset forth in such sections.BMO Financial Group 195th Annual Report 2012 25MD&AMANAGEMENTS DISCUSSION

237、 AND ANALYSISEnterprise-Wide StrategyOur VisionTo be the bank that defines great customer experience.Our Guiding PrincipleWe aim to deliver top-tier total shareholder return and balance our commitments to financial performance,our customers,our employees,the envi-ronment and the communities where we

238、 live and work.Our Strategy in ContextChanges in the economic environment,and their effects on our customers,are ongoing.Our focus on helping our customers succeed and giving themthe confidence they are making the right financial choices Making Money Make Sense serves as a compass for us in all econ

239、omic environments.Italso drives our employees to deliver their best,every day.Our strategy has proven robust despite continued market uncertainty and global regulatory change.We believe that the strength of our businessmodel,balance sheet,risk management framework and leadership team,along with the

240、benefits we expect from our expanded North Americanplatform,will continue to generate sustainable growth and help us deliver on our brand promise of bringing clarity to customers financial decisions.Our commitment to our customers and our shareholders is evidenced in our focus on delivering an indus

241、try-leading customer experience,managing our revenue and expenses to achieve our productivity goals,and continuing our prudent approach to risk management.We are makinggood progress on our enterprise strategic priorities,with select accomplishments outlined below,as well as on our group strategies,d

242、etailed in thesections that follow.Our Priorities and Progress1.Achieve industry-leading customer loyalty by delivering on ourbrand promise.Developed innovative new capabilities that provide our customerswith guidance and advice,with an emphasis on digital banking andinvesting,to help bring clarity

243、to their financial decisions:oBMO InvestorLine launched in Canada adviceDirect,an innovativeand personal service that provides investing advice to onlineinvestors,a first in Canada.oIntroduced BMO Harris Mobile Banking in the United States,allowing retail and small business customers to use their mo

244、bilephones for account transactions,and deposit cheques remotelythrough image capture using Mobile Deposit.This same service hadbeen available for many years to our M&I customers.Since itsintroduction in July,and with our converted M&I customers,morethan 144,000 users have embraced this service,repr

245、esentingalmost 25%of our active online banking customers.oIntroduced innovative new mobile capabilities in Canada,includingaccount alerts to help customers monitor account activity in realtime,and Mobile PayPass Tag to allow customers to pay for pur-chases by tapping their mobile phones.oIntroduced

246、online booking of appointments with our Canadianbranch staff.Customers booked more than 14,000 appointmentswithin six months of launch.oEnhanced our BMO Capital Markets client experience by moving toa more unified coverage model across product areas,deepeningexpertise within core sectors and continu

247、ing to provide top-rankedresearch.Continued our focus on instilling a customer-first mindset in ourpeople and culture:oEmbedded customer experience as a core element of our learning,recruiting and talent programs.oRolled out and enhanced customer loyalty measurement systemsacross most of our busines

248、ses.Recognized externally with awards across our groups,including BestPrivate Bank in Canada(Global Banking and Finance Review),BestInvestment Bank in Canada(World Finance magazine),Best TradeBank in Canada(Trade Finance magazine),and Excellence in Tele-phone Banking(Synovate/IPSOS).2.Enhance produc

249、tivity to drive performance and shareholdervalue.Continued the redesign of our core processes to achieve a high-quality customer experience,create capacity for customer-facingemployees and reduce costs:oIntroduced eStatements,with over one million accounts in Canadaand the United States moving to on

250、line statements instead ofpaper,reducing printing and postage costs,while helping theenvironment.oLaunched lean mortgage redesign to process applications faster,with higher quality,lower cost and improved customer experience;and are rolling out similar lean redesign changes to other coreprocesses,in

251、cluding commercial lending.oIn BMO Capital Markets,launched a new high-performance tradingplatform that delivers world-class execution(including time toquote)and enhanced risk management.Reviewed our cost structure to find pathways to greater efficiency:oAdjusted our organizational structure to rati

252、onalize managementspans and layers,increasing nimbleness and lowering costs.oIntroduced new branch formats offering smaller,more flexible andcost-effective points of distribution across our network.oOptimized our U.S.branch network,closing 49 branches to mini-mize overlapping coverage.oImplemented n

253、ew office space standards to increase real estateefficiency.Grew our distribution capacity:oBuilt sales capacity in our Canadian branch network with a focus onattractive growth locations,opening or upgrading 51 branches andsignificantly expanding our automated banking machine(ABM)network.oRolled out

254、 technology to identify and respond to customer needs inreal time,delivering tailored sales leads for branches and contactcentres.3.Leverage our consolidated North American platform to deliverquality earnings growth.Integrated our acquired M&I businesses,and continued to developconsolidated North Am

255、erican capabilities and platforms in priorityareas:oCompleted the core U.S.banking systems conversion andintegrated all businesses.oAdvanced our agenda to build consolidated north-south platformsto leverage scale and transfer best practices,including our contactcentres,payments and commercial busine

256、sses.Continued to expand our businesses and capabilities in the United States:oLaunched Premier Services,offering a unique planning-focusedwealth management and banking client experience,with strongresults to date.oOpened more than 15,000 savings accounts through Helpful Stepsfor Parents,which helps

257、 parents teach children to manage moneyresponsibly.oBroadened our commercial capabilities by creating a franchisefinance specialty and opening new offices to drive growth indealership finance,equipment finance,food&consumer,andcorporate banking.26 BMO Financial Group 195th Annual Report 2012MD&AoEnh

258、anced our wealth management and alternative investmentresearch capabilities with the acquisition of CTC Consulting,complementing our award-winning mutual fund and retirementservices platforms.oFilled a number of key roles,including a new Head of U.S.Anti-Money Laundering and a Chief Regulatory Offic

259、er responsible forproviding leadership on emerging legislative and regulatorydevelopments.Introduced attractive new offers in Canada to establish andstrengthen client relationships:oPromoted our award-winning mortgage product,helping Canadiansbecome mortgage-free faster,pay less interest and protect

260、 them-selves against rising interest rates.With the success of this product,weve seen strong customer acquisition.oLaunched our Open for Business campaign,making up to$10 billionof financing available to Canadian businesses over three years toassist their businesses,helping them improve productivity

261、 andexpand into new markets.4.Expand strategically in select global markets to create futuregrowth.Only Canadian bank and one of only three North American banks withan established subsidiary bank in China.Continued to build our Asian wealth management platform throughthe acquisition of a 19.9%equity

262、 interest in COFCO Trust Co.,in arapidly growing area of the wealth management market,and agreedto acquire a wealth management business in Hong Kong and Singa-pore.Grew Trade Finance and International Financial Institutions businesssubstantially,supported by shifts in the global credit environment.5

263、.Ensure our strength in risk management underpins everythingwe do for our customers.Reinforced our risk culture,focusing on risk independence and ourthree-lines-of-defence approach to managing risk across theenterprise.Executed a formalized risk practice benchmarking program to assessour processes,i

264、dentify best practices and implement enhancementsin high-priority risk areas.Developed and implemented risk appetite and performance metricsat the line of business level and integrated them into our strategicplanning process.Launched an effort to upgrade our risk technology infrastructure toprovide

265、data and tools that will support enhanced risk managementcapabilities.Proactively managed our businesses to understand and address theimpact of regulatory changes.Caution Regarding Forward-Looking StatementsBank of Montreals public communications often include written or oral forward-looking stateme

266、nts.Statements of this type are included in this Annual Report,and maybe included in other filings with Canadian securities regulators or the U.S.Securities and Exchange Commission,or in other communications.All such statements are madepursuant to the“safe harbor”provisions of,and are intended to be

267、 forward-looking statements under,the United States Private Securities Litigation Reform Act of 1995and any applicable Canadian securities legislation.Forward-looking statements may involve,but are not limited to,comments with respect to our objectives and prioritiesfor 2013 and beyond,our strategie

268、s or future actions,our targets,expectations for our financial condition or share price,and the results of or outlook for our operations orfor the Canadian and U.S.economies.By their nature,forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties.

269、There is significant risk thatpredictions,forecasts,conclusions or projections will not prove to be accurate,that our assumptions may not be correct and that actual results may differ materially fromsuch predictions,forecasts,conclusions or projections.We caution readers of this Annual Report not to

270、 place undue reliance on our forward-looking statements as anumber of factors could cause actual future results,conditions,actions or events to differ materially from the targets,expectations,estimates or intentions expressed inthe forward-looking statements.The future outcomes that relate to forwar

271、d-looking statements may be influenced by many factors,including but not limited to:general economic and marketconditions 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

272、policy;the degree of competition in the geographic and business areas in which we operate;changes in laws or in supervisory expectations orrequirements,including capital,interest rate and liquidity requirements and guidance;judicial or regulatory proceedings;the accuracy and completeness of the info

273、rmationwe obtain with respect to our customers and counterparties;our ability to execute our strategic plans and to complete and integrate acquisitions;critical accountingestimates and the effect of changes to accounting standards,rules and interpretations on these estimates;operational and infrastr

274、ucture risks;changes to our creditratings;general political conditions;global capital markets activities;the possible effects on our business of war or terrorist activities;disease or illness that affects local,national or international economies;natural disasters and disruptions to public infrastru

275、cture,such as transportation,communications,power or water supply;techno-logical changes;and our ability to anticipate and effectively manage risks associated with all of the foregoing factors.We caution that the foregoing list is not exhaustive of all possible factors.Other factors could adversely

276、affect our results.For more information,please see thediscussion below,which outlines in detail certain key factors that may affect Bank of Montreals future results.When relying on forward-looking statements to makedecisions with respect to Bank of Montreal,investors and others should carefully cons

277、ider these factors,as well as other uncertainties and potential events,and theinherent uncertainty of forward-looking statements.Bank of Montreal does not undertake to update any forward-looking statements,whether written or oral,that may bemade from time to time by the organization or on its behalf

278、,except as required by law.The forward-looking information contained in this document is presented for thepurpose 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 andobjectives,and may not

279、 be appropriate for other purposes.In calculating the pro-forma impact of Basel III on our regulatory capital,risk-weighted assets(including Counterparty Credit Risk and Market Risk)and regulatorycapital ratios,we have assumed that our interpretation of OSFIs draft implementation guideline of rules

280、and amendments announced by the Basel Committee on BankingSupervision(BCBS)as of this date,and our models used to assess those requirements,are consistent with the final requirements that will be promulgated by the Office ofthe Superintendent of Financial Institutions Canada(OSFI).We have also assum

281、ed that the proposed changes affecting capital deductions,risk-weighted assets,the regu-latory capital treatment for non-common share capital instruments(i.e.grandfathered capital instruments)and the minimum regulatory capital ratios will be adopted byOSFI as proposed by BCBS,unless OSFI has express

282、ly advised otherwise.We have also assumed that existing capital instruments that are non-Basel III compliant but areBasel II compliant can be fully included in the October 31,2012,pro-forma calculations.The full impact of the Basel III proposals has been quantified based on our financialand risk pos

283、itions at year end or as close to year end as was practical.In setting out the expectation that we will be able to refinance certain capital instruments in thefuture,as and when necessary to meet regulatory capital requirements,we have assumed that factors beyond our control,including the state of t

284、he economic and capitalmarkets environment,will not impair our ability to do so.Assumptions about the level of asset sales,expected asset sale prices,net funding cost,credit quality,risk of default and losses on default of the underlying assets ofthe structured investment vehicle were material facto

285、rs we considered when establishing our expectations regarding the structured investment vehicle discussed in thisAnnual Report,including the adequacy of first-loss protection.Key assumptions included that assets will continue to be sold with a view to reducing the size of the struc-tured investment

286、vehicle,under various asset price scenarios,and that the level of default and losses will be consistent with the credit quality of the underlying assets andour current expectations regarding continuing difficult market conditions.Assumptions about the level of default and losses on default were mate

287、rial factors we considered when establishing our expectations regarding the future perform-ance of the transactions into which our credit protection vehicle has entered.Among the key assumptions were that the level of default and losses on default will beconsistent with historical experience.Materia

288、l factors that were taken into account when establishing our expectations regarding the future risk of credit losses in ourcredit protection vehicle and risk of loss to BMO included industry diversification in the portfolio,initial credit quality by portfolio,the first-loss protection incorporated i

289、ntothe structure and the hedges that BMO has entered into.Assumptions about the performance of the Canadian and U.S.economies,as well as overall market conditions and their combined effect on our business,arematerial factors we consider when determining our strategic priorities,objectives and expect

290、ations 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 the Canadian and U.S.governments and their agencies.Seethe Economic Developments section of this Annual Report.BMO

291、Financial Group 195th Annual Report 2012 27MD&AMANAGEMENTS DISCUSSION AND ANALYSISFactors That May Affect Future ResultsAs noted in the preceding Caution Regarding Forward-Looking State-ments,all forward-looking statements and information,by their nature,are subject to inherent risks and uncertainti

292、es,both general and specific,which may cause actual results to differ materially from the expect-ations expressed in any forward-looking statement.The Enterprise-WideRisk Management section starting on page 75 describes a number ofrisks,including credit and counterparty,market,liquidity and funding,

293、operational,insurance,legal and regulatory,business,model,strategic,reputation,and environmental and social.Should our risk managementframework prove ineffective,there could be a material adverse impacton our financial position.The sections that follow outline someadditional risks and uncertainties.

294、General Economic and Market Conditions in the Countriesin which We Conduct BusinessWe conduct business in Canada,the United States and other countries.Factors such as the general health of capital and/or credit markets,including liquidity,level of activity,volatility and stability,could havea materi

295、al impact on our business.As well,interest rates,foreignexchange rates,consumer saving and spending,consumer borrowingand repayment,business investment,government spending and therate of inflation affect the business and economic environments inwhich we operate.Therefore,the amount of business we co

296、nduct in aspecific geographic region and its local economic and business con-ditions may have an effect on our revenues and earnings.For example,a regional economic decline may result in an increase in credit losses,adecrease in loan growth and reduced capital markets activity.In addi-tion,the finan

297、cial services industry is characterized by interrelationsamong financial services companies.As a result,defaults by other finan-cial services companies in Canada,the United States or other countriescould adversely affect our earnings.Given the interconnectedness ofglobal financial markets and the im

298、portance of trade flows,deteriorationof the still-unresolved European sovereign debt situation could affect thesupply and cost of credit and constrain the pace of economic growth inNorth America.Fiscal,Monetary and Interest Rate PoliciesOur earnings are affected by fiscal,monetary,interest rate and

299、economicpolicies that are adopted by Canadian,U.S.and other regulatory author-ities.Such policies can have the effect of increasing or reducing competi-tion and uncertainty in the markets.Such policies may also adverselyaffect our customers and counterparties in the countries in which weoperate,caus

300、ing an increased risk of default by these customers andcounterparties.As well,expectations in the bond and money marketsabout inflation and central bank monetary policy have an impact on thelevel of interest rates.Changes in market expectations and monetarypolicy are difficult to anticipate and pred

301、ict.Fluctuations in interest ratesthat result from these changes can have an impact on our earnings.Thecurrent prolonged low interest rate policies have had a negative impacton results and a continuation of such policies would likely continue topressure earnings.Refer to the Market Risk section on p

302、ages 82 to 86 fora more complete discussion of our interest rate risk exposures.As dis-cussed in our Critical Accounting Estimates section,a reduction in incometax rates could lower the value of our deferred tax asset.Changes in Laws,Regulations and Approach to SupervisionRegulations are in place to

303、 protect our customers,investors and thepublic interest.Considerable changes in laws and regulations that relateto the financial services industry have been proposed and enacted,including changes related to capital and liquidity requirements.Changesin laws and regulations,including their interpretat

304、ion and application,and in approaches to supervision could adversely affect our earnings.Forexample,such changes could limit the products or services we canprovide and the manner in which we provide them and,potentially,lower our ability to compete,while also increasing the costs of com-pliance.As s

305、uch,they could have a negative impact on earnings andreturn on equity.These changes could also affect the levels of capitaland liquidity we choose to maintain.In particular,the Basel III globalstandards for capital and liquidity,which are discussed in the Enterprise-Wide Capital Management section t

306、hat starts on page 60,and enact-ment of the Dodd-Frank Wall Street Reform and Consumer ProtectionAct,which is discussed in the U.S.Regulatory Developments section onpage 69,will have an impact on our results and activities.Liquidity andfunding risk is discussed starting on page 86.In addition to the

307、 factorsoutlined here,our failure to comply with laws and regulations couldresult in sanctions and financial penalties that could adversely affect ourstrategic flexibility,reputation and earnings.Execution of StrategyOur financial performance is influenced by our ability to executestrategic plans de

308、veloped by management.If these strategic plans donot meet with success or if there is a change in these strategic plans,our earnings could grow at a slower pace or decline.In addition,ourability to execute our strategic plans is dependent to a large extent onour ability to attract,develop and retain

309、 key executives,and there is noassurance we will continue to do so successfully.AcquisitionsWe conduct thorough due diligence before completing an acquisition.However,it is possible that we might make an acquisition that sub-sequently does not perform in line with our financial or strategicobjective

310、s.Our ability to successfully complete an acquisition may besubject to regulatory and shareholder approvals and we may not be ableto determine when or if,or on what terms,the necessary approvals willbe granted.Changes in the competitive and economic environment aswell as other factors may lower reve

311、nues,while higher than anticipatedintegration costs and failure to realize expected cost savings could alsoadversely affect our earnings after an acquisition.Integration costs mayincrease as a result of increased regulatory costs related to an acquis-ition,unanticipated costs that were not identifie

312、d in the due diligenceprocess or more significant demands on management time than antici-pated,as well as unexpected delays in implementing certain plans thatin turn lead to delays in achieving full integration.Our post-acquisitionperformance is also contingent on retaining the clients and keyemploy

313、ees of acquired companies,and there can be no assurance thatwe will always succeed in doing so.Level of CompetitionThe level of competition among financial services companies is high.Furthermore,non-financial companies have increasingly been offeringservices traditionally provided by banks.Customer

314、loyalty and retentioncan be influenced by a number of factors,including service levels,pricesfor products or services,our reputation and the actions of our com-petitors.Also,laws and regulations enacted by regulatory authorities inthe United States and other jurisdictions in which we operate mayprov

315、ide benefits to our international competitors that could affect ourability to compete.Changes in these factors or any subsequent loss ofmarket share could adversely affect our earnings.Currency RatesThe Canadian dollar equivalents of our revenues,expenses,assets andliabilities denominated in currenc

316、ies other than the Canadian dollar aresubject to fluctuations in the value of the Canadian dollar relative tothose currencies.Changes in the value of the Canadian dollar relative tothe U.S.dollar may also affect the earnings of our small business,corpo-rate and commercial clients in Canada.A strengt

317、hening of the U.S.dollarcould increase our risk-weighted assets,lowering our capital ratios.28 BMO Financial Group 195th Annual Report 2012MD&ARefer to the Foreign Exchange section on page 36,the Enterprise-WideCapital Management section on page 60 and the Market Risk section onpages 82 to 86 for a

318、more complete discussion of our foreign exchangerisk exposures.Changes to Our Credit RatingsCredit ratings are important to our ability to raise both capital andfunding to support our business operations.Maintaining strong creditratings allows us to access the capital markets at competitive pricing.

319、Should our credit ratings experience a material downgrade,our costs offunding would likely increase significantly and our access to funding andcapital through capital markets could be reduced.A material downgradeof our ratings could also have other consequences,including those setout in Note 10 on p

320、age 140 of the financial statements.Operational and Infrastructure RisksWe are exposed to many of the operational risks that affect large enter-prises conducting business in multiple jurisdictions.Such risks includethe risk of fraud by employees or others,unauthorized transactions byemployees,and op

321、erational or human error.We face risk of loss due tocyber attack and also face the risk that computer or telecommunicationssystems could fail,despite our efforts to maintain these systems in goodworking order.Some of our services(such as online banking)or oper-ations may face the risk of interruptio

322、n or other security risks due to thenature of the risks related to the use of the internet in these services oroperations,which may impact our customers and infrastructure.Giventhe high volume of transactions we process on a daily basis,certainerrors may be repeated or compounded before they are dis

323、covered andrectified.Shortcomings or failures of our internal processes,employeesor systems,or those provided by third parties,including any of ourfinancial,accounting or other data processing systems,could lead tofinancial loss and damage our reputation.In addition,despite the con-tingency plans we

324、 have in place,our ability to conduct business may beadversely affected by a disruption in the infrastructure that supportsboth our operations and the communities in which we do business,including but not limited to disruption caused by public health emergen-cies or terrorist acts.Judicial or Regula

325、tory Judgments and Legal andRegulatory ProceedingsWe take reasonable measures to comply with the laws and regulationsof the jurisdictions in which we conduct business.Should these meas-ures prove not to be effective,it is possible that we could be subjectto a judicial or regulatory judgment or decis

326、ion which results in fines,damages,other costs or restrictions that would adversely affect ourearnings and reputation.We are also subject to litigation arising in theordinary course of our business.The unfavourable resolution of anylitigation could have a material adverse effect on our financial res

327、ults.Damage to our reputation could also result,harming our future busi-ness prospects.Information about certain legal and regulatory pro-ceedings we currently face is provided in Note 28 on page 169 of thefinancial statements.Critical Accounting Estimates and Accounting StandardsSince November 1,20

328、11,we have prepared our financial statements inaccordance with International Financial Reporting Standards(IFRS).Periods prior to November 1,2010,have not been restated.Changes bythe International Accounting Standards Board to international financialaccounting and reporting standards that govern the

329、 preparation of ourfinancial statements can be difficult to anticipate and may materiallyaffect how we record and report our financial results.Significantaccounting policies and the impact of the adoption of IFRS are discussedin Note 1 on page 124 and Note 30 on page 177,respectively,of thefinancial

330、 statements.The application of IFRS requires that management make significantjudgments and estimates that can affect when certain assets,liabilities,revenues and expenses are recorded in our financial statements andtheir recorded values.In making these judgments and estimates,werely on the best info

331、rmation available at the time.However,it ispossible that circumstances may change or new information maybecome available.Our financial results would be affected in the period in which anysuch new information or change in circumstances became apparent,andthe extent of the impact could be significant.

332、More information isincluded in the discussion of Critical Accounting Estimates on page 70.Accuracy and Completeness of Customer andCounterparty InformationWhen deciding to extend credit or enter into other transactions withcustomers and counterparties,we may rely on information provided byor on beha

333、lf of those customers and counterparties,including auditedfinancial statements and other financial information.We also may relyon representations made by customers and counterparties that theinformation they provide is accurate and complete.Our financialresults could be adversely affected if the financial statements or otherfinancial information provided by customers and counterparties ismateriall