1、2023 Annual Report to ShareholdersBMO Financial Group|206th Annual ReportBusiness Review2 Who We Are4 Financial Performance5 Digital Strategy and Leadership6 Chairs Message7 Chief Executive Officers Message10 Economic Progress12 Sustainable Progress14 Equitable Progress16 One Client Leadership18 Boa
2、rd of Directors and Executive CommitteeFinancial Review19 Enhanced Disclosure Task Force20 Managements Discussion and Analysis126 Supplemental Information138 Statement of Managements Responsibility for Financial Information139 Independent Auditors Report142 Reports of Independent Registered Public A
3、ccounting Firm145 Consolidated Financial Statements150 Notes to Consolidated Financial StatementsResources and Directories135 Glossary of Financial Terms215 Where to Find More Information216 Shareholder InformationOur Purpose is comprised of three core commitments:For a thriving economy Providing ac
4、cess to capital and valuable financial advice investing in businesses,supporting home ownership and strengthening the communities we serve,while driving innovation that makes banking easierFor a sustainable futureBeing our clients lead partner in the transition to a net zero world,delivering on our
5、commitments to sustainable financing and responsible investingFor an inclusive society Committing to zero barriers to inclusion through investments,financial products and services,and partnerships that remove systemic barriers for under-represented customers,employees and communities and drive inclu
6、sion and equitable growth for everyoneA LEED Gold-certified building,the Nova Centre houses BMOs Atlantic Canada headquarters in Halifax,Nova Scotia.Photography:Dean Casavechia BMO Financial Group 206th Annual Report 2023 1Our StrategyAt BMO,were building a high-performing,digitally-enabled,future-r
7、eady bank with engaged employees and a winning culture.We are focused on helping our customers make real financial progress,and on financing our clients growth and innovation,while also investing in our workforce.Anchored by our Purpose,we are driven by our strategic priorities for growth,strengthen
8、ed by our approach to sustainability and guided by our values as we build a foundation of trust with our stakeholders.2 BMO Financial Group 206th Annual Report 2023Physical footprintDigital footprint NTNUYTBCABSKMNWAORCAUTCOTXGAALMSLAARTNKYWVSCNCVAOHPANYMEWIILINMIKSMOAZMBQCNBPENSFLNLNVIDWYMTOKIANESD
9、NDNMONMD-DCCTRIMANHVTNJDEABOUT BMOWho We AreEstablished in 1817,BMO Financial Group is the eighth largest bank in North America by assets,with total assets of$1.29 trillion.We are a highly diversified financial institution providing a broad range of personal and commercial banking,wealth management,
10、global markets and investment banking products and services.We serve 13 million customers across Canada and the United States,and in select markets globally,through three integrated operating groups.Personal and Commercial BankingProvides financial products and services to customers across North Ame
11、rica.Personal and Business Banking helps customers make real financial progress through an extensive network of branches,contact centres,digital banking platforms and automated teller machines.Commercial Banking offers valuable industry expertise,local presence and a comprehensive range of commercia
12、l products and services.BMO Wealth ManagementServes a full range of clients,from individuals and families to business owners and institutions,offering a wide spectrum of wealth,asset management and insurance products and services aimed at helping clients make real financial progress through planning
13、,growing,protecting and transitioning their wealth.Our asset management business is focused on making a positive impact and delivering innovative financial solutions and strategies for our clients.BMO Capital Markets Offers a comprehensive range of products and services to corporate,institutional an
14、d government clients.BMO Capital Markets has thousands of professionals around the world enabling the growth aspirations of our clients across the bank.BMOs Strategic Footprint spans strong regional economies,with branches and commercial,wealth management and capital markets offices across Canada an
15、d the United States.Our physical presence is supplemented by digital platforms that enable us to seamlessly serve customers throughout both countries.Our significant presence in North America is complemented by BMO Capital Markets operations in select international markets,allowing us to provide all
16、 our customers with access to economies and markets around the world.2 BMO Financial Group 206th Annual Report 2023Bank of Montreal brands the organizations member companies as BMO Financial Group.Note 26 of the consolidated financial statements lists the intercorporate relationships among Bank of M
17、ontreal and its significant subsidiaries.BMO Financial Group 206th Annual Report 2023 3BMOs brand presence on Hollywood Boulevard,Los Angeles,California.13 million customers globally$1.29 trillion in total assets1817 serving customers for 206 years and counting8th largest bank in North America by as
18、sets4 BMO Financial Group 206th Annual Report 20231 We have established medium-term financial objectives for certain important performance measures.Medium-term is generally defined as three to five years,and performance is measured on an adjusted basis.2 Net revenue measures and all adjusted measure
19、s are non-GAAP measures.For further information,see the Non-GAAP and Other Financial Measures section of Managements Discussion and Analysis(MD&A).Regarding the composition of non-GAAP and other financial measures,including supplementary financial measures,refer to the Glossary of Financial Terms in
20、 the MD&A.3 The 3-year EPS growth rate and operating leverage,net of CCPB,reflect compound annual growth rates(CAGR).4 The CET1 Ratio is disclosed in accordance with OSFIs Capital Adequacy Requirements(CAR)Guideline.5 As of October 31,2023.6 Percentages determined excluding results in Corporate Serv
21、ices.Earnings Per Share Growth(%)Return on Equity(%)Net Income(C$billions)Reported Adjusted2 Reported Adjusted2 Reported Adjusted214.916.722.915.26.012.32021202220230.414.39.85.68.01-year3-year5-year(12.5)8.74.413.59.07.88.7202120222023ReportedCanada/Other 97%55%U.S.3%45%AdjustedCanadian P&C 40%U.S.
22、P&C30%BMO WM12%BMO CM18%Reported Net Income by Operating Group6Net Income by Geography2023 financial performance3-year3 financial performanceReportedAdjusted2ReportedAdjusted2EPS growth of 7%to 10%(71.6)%(11.4)%(9.1)%15.0%ROE of 15%or more6.0%12.3%14.6%14.7%ROTCE of 18%or more8.2%15.8%16.8%17.1%Net
23、operating leverage2 of 2%or more(45.9)%(8.2)%(6.8)%Capital ratios that exceed regulatory requirements12.5%CET1 Ratio4naMedium-term objectives1Total Shareholder Return5(%)A 195-year dividend recordBMO Financial Group has the longest-running dividend payout record of any company in Canada,at 195 years
24、.BMO common shares had an annual dividend yield of 5.5%at October 31,2023.5.0%BMO 15-year8.9%BMO 5-yearCompound annual growth rateFinancial Performance BMO S&P/TSX Composite Index202120222023(11.4)53.372.768.02.1(71.6)ReportedCanada/Other 97%55%U.S.3%45%AdjustedBMO Financial Group 206th Annual Repor
25、t 2023 51 For more information,refer to Strategy and LeadershipBest Workplaces for InnovatorsBMO was the only financial institution named among the top 30 companies on Fast Companys fifth annual Best Workplaces for Innovators list,honouring organizations that demonstrate a commitment to encouraging
26、innovation enterprise-wide.J.D.Power 2023 Canada Online Banking Satisfaction StudyBMO received the highest score in the J.D.Power 2023 Canada Online Banking Satisfaction Study.The study analyzes feedback from thousands of online banking customers across Canada,and awarded BMO top marks in four key c
27、ategories:Information/content,navigation,speed and visual appeal.1Fintech Open Source Foundation(FINOS)BMO Capital Markets received the Breaking the Status Quo award in recognition of our significant progress on open source readiness,as well as the positive impact and contributions weve made to open
28、 source in financial services.2023 BAI Global Innovation AwardBMO Digital has won a 2023 BAI Global Innovation Award for the BMO New to Canada pre-arrival digital account opening application.The BAI Global Innovation Awards recognize financial institutions that embrace digital innovation to transfor
29、m the customer experience,drive business results and effect positive change.Our Digital First strategy is focused on delivering speed and scale to enable progress for our customers,unlock the power of our people,leverage data and analytics,harness the potential of emerging technologies and drive lea
30、ding loyalty,growth and efficiency.Were proud to be consistently recognized for our leadership and achievements.Its a testament to our employees,our innovative culture,and our ongoing commitment to creating excellent digital experiences for our customers,colleagues and communities.6 BMO Financial Gr
31、oup 206th Annual Report 2023George A.CopeChair of the BoardA new directorOver the course of the year,we added a new member to our board of directors,whom we will be nominating for election at our next Annual Meeting of Shareholders.Hazel Claxton,who was,until her 2018 retirement,Chief Human Resource
32、s Officer of Morneau Shepell Inc.(now part of TELUS Health)and,previously,a senior partner at PwC Canada,has joined the boards Audit and Conduct Review Committee.Our 14-member board now comprises seven women and seven men,in keeping with our commitment to maintain a gender-balanced board,and three o
33、f our board committee chairs are women.Because we want to ensure that we always have the full benefit of the varied talents,knowledge,and work and life experiences that diversity brings,we are continually taking steps to shape a board that is rich in diversity.As your representatives,we thank all ou
34、r fellow shareholders for the trust you place in us,and for supporting BMOs bold ambitions for growth and progress.Our long-term growth strategy continues to pay off as our businesses attract new customers and grow market share and the growth strategy has been accelerated by our strategic acquisitio
35、ns.The integration of Bank of the West was well executed,expanding BMOs footprint significantly in the Western and Midwestern parts of the United States,including California,the U.S.state with the largest economy.The acquisition strengthens our position in North America with increased scale and grea
36、ter access to growth opportunities in strategic new markets.Your bank continues to deliver solid financial results,reflecting the strength,diversification and active management of all our businesses in this evolving environment.As a board of directors,we recognize the excellent work of our people at
37、 BMO including our new colleagues who have joined from Bank of the West and the strong leadership of Darryl and the management team.I want to extend congratulations to our CEO,whose strategic skills and effectiveness were singled out by The Globe and Mails Report on Business magazine as they named h
38、im their Strategist of the Year and CEO of the Year.We have great confidence in our strategic direction as an organization,and the banks demonstrated ability to capitalize on opportunities as general economic conditions improve.The bank achieves these results by living Our Purpose Boldly Grow the Go
39、od in business and life and this is reflected in the recognition it receives,including being ranked among the Worlds Most Ethical Companies,as well as among the most sustainable corporations in the world.On your behalf,we acknowledge and appreciate the commitment shown by all BMO employees to contin
40、ue to meet and exceed such high expectations.George A.CopeChairs MessageBMO Financial Group 206th Annual Report 2023 72023 saw emerging challenges in the global economy,impacted by rising interest rates,weaker financial conditions and compounded by the escalation of geopolitical crises.While growth
41、of inflation fell sharply from four-decade highs across North America,further progress towards normalizing could be impeded by ongoing cost pressures in the services sector.With persistently high inflation and weaker global demand due to higher costs of borrowing,the potential for an economic downtu
42、rn remains elevated both in Canada and the U.S.,with higher risks north of the border.The clean energy transition,the accelerated at-scale availability of advanced technologies,artificial intelligence and otherwise,and rapidly reorganizing geopolitical relationships are three transversal trends impa
43、cting global economies and presenting new opportunities and risks to BMO and to our clients.Within this macroeconomic context,BMO has been reinforcing and expanding the foundations of our bank to position us strongly for the future and this year weve made tremendous progress on that agenda.Our succe
44、ssful acquisition of Bank of the West is now complete,and BMO is the most integrated North-South bank on the continent.The completion of this natural next step in our North American growth strategy has significantly expanded our market access to high-growth regions of the United States and strengthe
45、ned our competitive position as the eighth largest bank in North America by assets.Alongside other notable acquisitions,including the AIR MILES Reward Program,we are building a high-performing,digitally enabled,future-ready bank with leading efficiency,profitability and loyalty.Our newest colleagues
46、 are united and energized by our industry-leading winning culture.Serving our clients across a wider geographical footprint than ever before,we now have more opportunities to Boldly Grow the Good in business and life for all of our stakeholders.In a year with so much achieved by Team BMO,weve been p
47、roud to put our Purpose into action.It starts by helping our clients and communities make real financial progress because when they succeed,we succeed.For our customers,access to expert advice through a dynamic operating environment is key to achieving their financial goals today and into the future
48、.As a team of bankers aligned in our objective of meeting and exceeding our clients expectations,we are actively teaming up across our businesses to deliver industry-leading customer experience.The results are clear:this year,we were ranked#1 in personal banking customer satisfaction among Canadas“B
49、ig Five”banks in the J.D.Power 2023 Canada Retail Banking Satisfaction Study1.This recognition reinforces the trust our customers place in us and builds on our leading reputation of customer satisfaction in retail banking advice,earned by the expert guidance we provide our clients as they navigate t
50、he evolving economy.Digital FirstWe lead with a digital-first mindset to drive progress for our customers,unlock the power of our people and deliver loyalty,growth and efficiency.Digital is at the centre of how we operate,powering our teams to build solutions that free up more human capacity to do w
51、hat we do best:give expert advice.We have a strong track record of industry recognition for providing customer-centric experiences.Our leading digital money management tools and experiences received the highest score in the J.D.Power 2023 Canada Online Banking Satisfaction Study1.BMO also received C
52、elents Retail Digital Banking Transformation Award in recognition of our leadership in digital transformation,and its Customer Financial Resilience Award for our commitment to enhancing the customer experience.Our commercial banking digital offerings received a Datos Insights Impact Award for our le
53、ading use of artificial intelligence and advanced analytics,while our capital markets team was recognized with a Breaking the Status Quo award from Fintech Open Source Foundation for our progress on open source readiness.Darryl WhiteChief Executive OfficerChief Executive Officers Message1 For more i
54、nformation,refer to BMO Financial Group 206th Annual Report 2023CHIEF EXECUTIVE OFFICERS MESSAGEThe scope of digital goes deeper,not only for the quality of customer interactions,but also to powering technological change across our teams resulting in advanced analytics,stronger insights and agile de
55、cision-making.This was clearly evident as we successfully converted nearly 2 million new customers to our systems,a critical step in our integration of Bank of the West.We are extremely proud that BMO was the only financial institution named among the top 30 companies on Fast Companys fifth annual B
56、est Workplaces for Innovators list,honouring organizations that demonstrate a commitment to encouraging and developing innovation enterprise-wide.North American integrationSignificant advancements in our U.S.franchise laid the groundwork for our successful integration of Bank of the West the largest
57、 acquisition in Canadian banking history.Our strategic focus on North American growth,supported by a global presence that provides our clients access to the world,sets BMO apart from our competitors.While weve operated in the U.S.since 1818,our acquisition of Harris Bank in 1984 established a meanin
58、gful presence that was advanced with our 2011 acquisition of Marshall&Ilsley Corporation(M&I)and expanded in 2023 with Bank of the West.BMO is now a top 10 U.S.bank1,with over US$435 billion in assets and physical presence in 32 states.Combined with our global operations,our$1 trillion+balance sheet
59、 positions us strongly for future growth.Our three operating groups are integrated across robust North-South infrastructure,with commercial banking and capital markets operations approximately the same size on both sides of the border and our commercial bank now ranked among the top 5 in North Ameri
60、ca.Our personal banking business is growing strongly with peer-leading revenue growth in Canada as we gain market share in the communities we serve,and our wealth management group is primed for acceleration with continued net new asset growth,reflecting the trusted relationship we have built with ou
61、r clients.Our strategic prioritiesOur group strategic priorities align with and support our enterprise-wide strategy,positioning us well to drive competitive performance.Well-positioned for continued growthOur performance continues to reflect the fundamental strength and diversified portfolio of bus
62、inesses that make up BMO our powerful platform for growth and resilience in a challenging economic environment.To adjust to near-term industry headwinds and return to our well-established record of positive operating leverage in fiscal 2024 a key objective for our bank were dynamically managing our
63、businesses and taking action to align our resources to our dual objectives of growing our revenues and controlling expenses.Our superior risk management capabilities and ethical culture have guided the relentless execution of our strategy to strengthen and grow our bank.We expect that disciplined ex
64、pense management and targeted investments,combined with revenue and expense synergies from our recent acquisition,will continue to improve our efficiency ratio over time.North Americas potentialNorth Americas fundamental advantages position the region for considerable growth in the years ahead,and B
65、MO is well-positioned to serve more clients between the Canadian and American economies.The clean energy transition will benefit both Canada and the U.S.as reliable and trusted suppliers of sought-after resources and sustainability expertise.BMOs Climate Ambition,to be our clients lead partner in th
66、e transition to a net zero world,is backed by a$300 billion pledge to mobilize capital to clients sustainable outcomes by 2025 and were on track to exceed that goal this year.With support for sustainable bond underwriting,equity and debt financing,ESG advisory services,and loans for sustainable proj
67、ects,our Energy Transition and Sustainable Finance Groups are helping clients pursue opportunities in the global economys shift in the production and consumption of energy.1 Ranking by assets as at September 30,2023 and internal analysis.Source:SNL Financial.Top 10 U.S.JP Morgan,Bank of America,Citi
68、bank,Wells Fargo,U.S.Bank,PNC Bank,Truist Bank,TD Bank,Capital One,BMO.BMO Financial Group 206th Annual Report 2023 9Were also committed to empowering our employees.Our exceptionally engaged team has made significant strides in activating a winning culture in just a few short years,making substantia
69、l progress across every business and group to rank among the worlds strongest financial institutions.Every member of Team BMO is committed to building world-class loyalty and deepening client relationships by bringing the whole bank to our clients.Looking aheadWith the size,strength and stability of
70、 our bank,BMO is well positioned for growth and consistent performance through economic cycles.With the longest-running dividend payout record of any company in Canada at 195 years,we have a leading track record of delivering value for our shareholders.Following a year of successful acquisitions,wer
71、e moving into the future with the full strength of our North American footprint and global presence making our growth ambitions a reality,realizing opportunities in new markets,and driving progress for our clients,our communities and the planet.Darryl WhiteU.S.productivity is growing twice as fast a
72、s the G7 average and is among the worlds strongest.The U.S.also has the largest middle-class consumer market globally.Next door,Canadas rapidly growing population the fastest among G7 nations and its position as the only G7 economy with comprehensive free trade access to the entire G7 and European U
73、nion,offers significant global economic advantage.Canada and the U.S.share one of the largest bilateral trade relationships in the world,and BMO is serving our clients at the heart of each economy,helping to build a thriving economy,sustainable future and inclusive society across the region as a pur
74、pose-driven organization.BMOs clear North American positioning is now well established to serve the impressive potential of the North American region in a shifting global landscape.Our Purpose commitmentsOur performance enables us to put our Purpose into action and Boldly Grow the Good in business a
75、nd life.When we enter a new market,we commit to making progress for our clients and communities there.Thats why we are delivering on our plan to support the communities we serve across our U.S.footprint.Our BMO EMpower 2.0 plan will deliver more than$40 billion in lending to minority-owned small bus
76、inesses,community reinvestment in real estate,affordable housing and neighbourhood revitalization,and philanthropic giving to support under-represented communities and organizations.With input from more than 85 community groups,this five-year plan reinforces BMOs focus on increasing home ownership a
77、nd supporting the growth of small business in low-to moderate-income neighbourhoods and underserved communities.World-class loyalty and growth,powered by One Client leadershipWinning Culture driven by alignment,empowerment and recognitionDigital First for speed,scale and the elimination of complexit
78、yBe our clients lead partner in the transition to a net zero worldSuperior management of risk,capital and funding performance10 BMO Financial Group 206th Annual Report 2023Economic progressTHRIVING ECONOMY#1 in customer satisfaction BMO received the highest score in customer satisfaction among Canad
79、as“Big Five”banks in the J.D.Power 2023 Canada Retail Banking Satisfaction Study.The annual study analyzes direct feedback from thousands of customers across Canada and measures their satisfaction with their primary bank.1Innovative platformsWere meeting and engaging clients where they are.BMO was r
80、ecognized for innovation at the 2023 Cannes Lions festival,winning Gold for BMO NXT LVL,a first-of-its-kind gaming platform on Twitch that educates and informs gamers about personal finances.We also won two Gold Lions in the Creative Commerce and Social&Influencer categories.A wider U.S.footprint Wi
81、th the acquisition of Bank of the West,BMO has expanded our market presence in the U.S.West and Southwest while reinforcing our third-place market share position for deposits across our Midwest footprint.Hannalee Pervan,co-owner of One House Bakery.Photography:Marco Boscacci/BMO 1 For more informati
82、on,refer to Financial Group 206th Annual Report 2023 11US$16.5Bcommitted to lending for U.S.small businesses with owners who are Native American,Black,Latinx or women.Top 5commercial lender in North America1One House BakeryBenicia,California“As a small business,its important for me to take care of m
83、y employees and my community.I want to be Benicias bakery,”says Hannalee Pervan,co-owner of One House Bakery.Hannalee travelled a long road to open the business shes dreamed of since she was a little girl.After earning a basketball scholarship,she studied business at university,and then cooking at L
84、e Cordon Bleu Ottawa.For more than a decade afterwards,she worked at bakeries across Canada and the United States,learning everything from how to make different styles of pastry to how to manage wholesaling.At One House,bakers mill their own flour and use natural colours and ingredients.“I want ever
85、ything to be as delicious and healthy as it can be,”says Hannalee,who co-owns the bakery with her parents Catherine and Peter Pervan.And its truly a family affair:Peter handles payroll,and Catherine is a chocolatier.The bakerys name references the unity between front and back of the house at this ba
86、kery two realms that are typically separated at culinary establishments.Similar to BMOs One Client Leadership approach,Hannalee knows you get the best from your team when everyone works together.“Their philosophy is just like BMOs,”says Chris Wheeler,VP and Business Relationship Manager,BMO.“Their f
87、ocus is ensuring everyone works together to get to a better end result.”$8.3Bin loans,deposits and investments originated or administered by BMO for Canadian Indigenous communities and businesses,not far from our target of$9.5B by 2025.Benicia,California1 Share of commercial loans based upon publicl
88、y available U.S.regulatory filings (FR Y-9Cs and FFIEC 002s)and internal analysis.12 BMO Financial Group 206th Annual Report 2023Sustainable progressSUSTAINABLE FUTUREBenjamin Feagin Jr.,CEO of AgriTech North.Photography:Tony McGuire/TheymediaBMO Financial Group 206th Annual Report 2023 13A global l
89、eaderBMO was recognized as the worlds top-ranked financial institution for helping make progress in support of a just and sustainable economy by the World Benchmarking Alliance(WBA)1,which has developed transformative new benchmarks to measure companies impacts and encourage them to do better.The WB
90、A noted our leadership in governance and respect for planetary boundaries and human rights.Protecting biodiversity BMO was named to the United Nations Principles for Responsible Banking(PRB),Nature Target Setting Working Group,focused on developing guidance for biodiversity and nature-related target
91、 setting the only Canadian bank among 34 UN PRB signatories from 24 countries.Banking on ethicsBMO was named one of the Worlds Most Ethical Companies for the sixth consecutive year by Ethisphere,a global leader in defining and advancing the standards of ethical business practices one of only four ba
92、nks worldwide to be included in 2023,and the only Canadian bank to receive this designation since the awards inception in 2007.AgriTech NorthDryden,OntarioFood insecurity is a major issue in Canadas northern Indigenous communities,where food costs can be significantly higher than in urban centres.Be
93、njamin Feagin Jr.,CEO of AgriTech North and a member of the Mtis community,is on a mission to change that.AgriTech is a vertical farming company using innovation to enhance sustainability,food security and affordability in Canadas northern and remote Indigenous communities.“Were trying to innovate a
94、round existing technologies to find lower-tech ways to do the same job but that are more sustainable and less energy-intensive,”says Benjamin.For example,theyre exploring ways to combine vertical farming which generates heat,with greenhouse production which requires heat.Theyre also planning to work
95、 with First Nations governments to help them establish food sovereignty in their own communities.“We want to help others implement the successes we have in our area,”says Benjamin.BMO is focused on being our clients lead partner in the transition to a net zero world and Seleen Mostow,Relationship Ma
96、nager at BMO is excited to support AgriTechs mission to reduce food costs by 25%.“BMOs helping them remain sustainable so they can focus on achieving year-round growing that has net-zero emissions and is energy-independent,”she says.“We can make a difference at BMO by supporting businesses that do s
97、o much good in our communities this is why I love my job.”$300Bin capital to support clients pursuing sustainable outcomes.13 yearsBMO has been carbon neutral in our own operations since 2010.#1Corporate Knights most sustainable bank in North America,for the fourth year in a row.Dryden,Ontario1 Awar
98、ded in 2022.14 BMO Financial Group 206th Annual Report 2023Equitable progressINCLUSIVE SOCIETYCarmell Macklin,owner of Macklin Hauling Inc.Photography:Kevin A.RobertsCustom hat embroidery courtesy of Anish Branding,Nepean,ONBMO Financial Group 206th Annual Report 2023 15St.Louis,MissouriSupporting r
99、esearchBMO committed$5 million to the Centre for Addiction and Mental Health to support independent research and help build a new research centre the Krembil Centre for Neuroinformatics in Toronto,a global hub collecting and integrating large-scale research data,using machine learning and mathematic
100、al models to potentially transform our understanding of brain disorders.$40 billion+for communitiesBMO EMpower 2.0 is our five-year plan to address key barriers for minority businesses,communities and families.Weve committed more than$40billion in funding across the United States,with over$16 billio
101、n targeted for California.The plan goes beyond financial support these partnerships foster deep community engagement,creating meaningful change at the local level.An inclusive workplaceBMOs commitment to a diverse and inclusive workplace was recognized by several organizations in 2023.For example,we
102、 received a top score on the Disability Equality Index(DEI)Best Places to Work,the leading benchmark tool for disability inclusion in business.DEI is a joint initiative of Disability:IN and The American Association of People with Disabilities.Macklin Hauling Inc.St.Louis,MissouriAt 74 years old and
103、after recovering from a stroke that initially left him unable to walk Macklin Hauling owner Carmell Macklin was ready to restart his trucking business.A big fan of BMO,he trusted his banker of seven years,Branch Manager and VP Stephanie Tuomey,to help him get back on the road.But when his truck brok
104、e down shortly afterwards,he almost parked it for good.“I told him we didnt come this far just to come this far!”says Stephanie,noting that while Carmell had other sources of income,trucking is the work he loves to do.“Stephanie is truly an angel,along with her team.They gave me the courage and conf
105、idence along with the financial support to get me back trucking again,”says Carmell.“Every tool BMO had that would benefit Macklin Hauling,we used and they worked.”Stephanie set Carmell up with a business credit card using BMO EMpowers Zero Barriers to Business program so he could finance the repair
106、s without depleting his cash reserves,and a business savings account so hes better prepared for the next challenge.Carmell says BMO has always been there for him,and he tells everyone he can about the bank.“Carmell shared with me what an impact it made,just having someone believe in him,”says Stepha
107、nie.His son,who runs a trucking business of his own,has also moved his banking to BMO.“Zero Barriers to Business and EMpower are two of our most impactful programs,”says Stephanie.“They allow us to bring valuable tools and resources to the businesses that fuel our communities.”8 yearson the Bloomber
108、g Gender-Equality Index,for our commitment to gender equity and inclusion in the workplace and the community.90+%of BMO employees completed our Learn from Difference program,fostering a more inclusive workplace.$100Mcommitted to Business Within Reach:BMO for Black Entrepreneurs program,helping Black
109、-owned businesses in Canada start up,scale up and grow.16 BMO Financial Group 206th Annual Report 2023Victoria Fisheries Ltd.Neils Harbour,Nova ScotiaIn 2022,Quebec and Atlantic Canada were struck by Hurricane Fiona,one of the most powerful and destructive storms in Canadian history.The storm was de
110、vastating to families,communities and businesses across the Atlantic provinces including Nova Scotia-based Victoria Co-operative Fisheries Ltd.(Co-op),a BMO client since 2012.The Co-op,formed in 1955,works with more than 140 inshore commercial fishing vessels to purchase and process a variety of sea
111、food that is then shipped to Europe,Asia and the United States Most of the vessels are locally owned and operated by Co-op members,and their earnings to stay in the community.As the largest employer on the northern tip of Cape Breton Island,each year the Co-op contributes approximately$2 million in
112、payroll to the local economy.The Co-ops plant was severely damaged by Hurricane Fiona,and they lost over$500,000 in product.Luckily,no one was injured but the Co-ops future was at risk.Peter MacLeod,Senior Relationship Manager at BMO,and several colleagues sprang into action,assuring Osborne Burke,G
113、eneral Manager of the Co-op,that BMO would be there for them.From there,it was a joint effort between the commercial deal and risk management teams.BMO is one of few Canadian banks with extensive expertise in fisheries,and our risk management team understood the scope of the initial impact,enabling
114、BMO to act quickly to ensure the Co-op was able to pay critical bills and to rebuild as soon as possible.For the Co-op to survive,it would need to be operational in time for the beginning of the next fishing season in April 2023.“We needed the banks support to get started,not knowing what insurance
115、or other support would be available.We didnt know the extent of the damage ultimately it was more than$8 million but BMO stepped up to the plate.It wasnt an issue worrying about how wed pay the bills,”says Osborne.“BMO did what a lot of banks would never do for someone in our industry,”says Osborne.
116、The Co-op was able to start rebuilding right away and Osborne made sure they built back better than ever,with a more efficient facility made to withstand the next storm.One Client Leadership Neils Harbour,Nova ScotiaBusiness groups partner across BMO to deliver an industry-leading customer experienc
117、e.We work together as one team aligned in our objective of exceeding our customers expectations as we help them make real financial progress.“Very simply,we would have been out of business without BMO.”Osborne BurkeBMO Financial Group 206th Annual Report 2023 17BMOs One Client Leadership approach he
118、lped get the Co-op fully operational in time for the opening of snow crab season in April just seven months after the devastating hurricane.“We never missed a day of production,which would never have happened without the bank being there for us from the very first day.Very simply,we would have been
119、out of business without BMO,”says Osborne,who has gone on to recommend BMO to several others in the industry.“All the credit for the rebuild goes to Osborne,”says Peter.“He made it happen in record time.”At the same time,Peter is proud of the way his colleagues partnered across business groups to pr
120、ovide timely support and local expertise.Peter MacLeod,Senior Relationship Manager,BMO Commercial Bank and Osborne Burke,General Manager of Victoria Co-operative Fisheries Ltd.Photography:Riley Smith“All the credit for the rebuild goes to Osborne.He made it happen in record time.”Peter MacLeod“Worki
121、ng together as one team is ingrained within BMOs culture,”says Peter.“Our dedication to understanding the businesses we serve and how they impact their communities allows us to make a real difference.”A winning bankWorld Finance magazine recognized several BMO businesses in 2023:Best Commercial Bank
122、 in Canada for the ninth consecutive year Best Retail Bank in Canada for the second consecutive year Best Commercial Bank in the United States Best Private Bank in Canada for the 13th consecutive year Best Private Bank in the United StatesA top innovatorBMO InvestorLine ranked third in The Globe and
123、 Mail 2023 digital broker ranking for consistently driving digital innovation that focuses on client needs and delivering an exceptional client experience.International leadershipMaintaining BMOs global leadership in mining and metals,we were recognized as the worlds best Mining&Metals Investment Ba
124、nk by Global Finance magazine for the 14th consecutive year.18 BMO Financial Group 206th Annual Report 2023 Executive Committee1 Board of Directors11 As at November 1,2023.2 Appointed to the Board of Directors effective August 30,2023.George A.Cope,C.M.Corporate directorBoard/Committees:Board Chair,
125、Governance and Nominating,Human Resources Director since:2006Janice M.Babiak,CPA(US),CA(UK),CISM,CISA Corporate director Board/Committees:Audit and Conduct Review(Chair),Governance and Nominating Director since:2012Sophie Brochu,C.M.Corporate director Board/Committees:Governance and Nominating,Human
126、 Resources Director since:2011Craig W.BroderickCorporate director Board/Committees:Audit and Conduct Review,Governance and Nominating,Risk Review(Chair)Director since:2018Hazel Claxton Corporate director Board/Committees:Audit and Conduct Review Director since:20232 Stephen DentManaging Director and
127、 Co-Founder,Birch Hill Equity Partners Board/Committees:Risk Review Director since:2021Christine A.Edwards Corporate director Board/Committees:Governance and Nominating(Chair),Human Resources Director since:2010Dr.Martin S.Eichenbaum Charles Moskos Professor of Economics,Northwestern University Boar
128、d/Committees:Audit and Conduct Review,Risk Review Director since:2015David HarquailChair of the Board,Franco-Nevada Corporation Board/Committees:Human Resources,Risk ReviewDirector since:2018Linda S.Huber Chief Financial Officer,FactSet Research Systems Inc.Board/Committees:Audit and Conduct Review,
129、Risk Review Director since:2017 Eric R.La Flche President and Chief Executive Officer,Metro Inc.Board/Committees:Human Resources Director since:2012Lorraine Mitchelmore Corporate directorBoard/Committees:Governance and Nominating,Human Resources(Chair),Risk Review Director since:2015Madhu Ranganatha
130、n Executive Vice-Presidentand Chief Financial Officer,OpenText CorporationBoard/Committees:Audit and Conduct Review Director since:2021 Darryl White Chief Executive Officer,BMO Financial Group Director since:2017 Darryl WhiteChief Executive OfficerPiyush AgrawalChief Risk OfficerDarrel HackettU.S.Ch
131、ief Executive OfficerSharon Haward-LairdGeneral CounselNadim HirjiGroup Head,BMO Commercial Bank,North America and Co-Head,Personal and Commercial BankingErnie(Erminia)JohannsonGroup Head,North American Personal&Business Banking and Co-Head,Personal and Commercial BankingDeland KamangaGroup Head,BMO
132、 Wealth ManagementMona MaloneChief Human Resources Officer and Head,People,Culture and BrandAlan TannenbaumChief Executive Officer and Group Head,BMO Capital MarketsSteve TennysonChief Technology and Operations OfficerTayfun TuzunChief Financial Officer MD&A Enhanced Disclosure Task ForceThe Enhance
133、d Disclosure Task Force(EDTF)was established by the Financial Stability Board to provide guidance and recommendations for bestpractice risk disclosures for banks.We have adopted these recommendations at BMO in order to prepare and deliver high-quality,transparentrisk disclosures.The index below deta
134、ils these recommendations and references the presentation of the disclosures in our 2023 Annual Report,Supplementary Financial Information(SFI)and Supplementary Regulatory Capital Information(SRCI).Information on BMOs website,includinginformation within the SFI or SRCI,is not,and should not be consi
135、dered to be,incorporated by reference into this 2023 Annual Report.TopicEDTF DisclosurePage numberAnnual ReportSFISRCIGeneral1.Risk-related information in each report,including an index for easy navigation78-118IndexIndex2.Risk terminology,measures and key parameters82-118,126-1283.Top and emerging
136、risks78-804.Plans to meet new key regulatory ratios once applicable rules are finalized72Risk Governance,Risk Management andBusiness Model5.Risk management and governance framework,processes and key functions82-866.Risk culture,risk appetite and procedures to support the culture867.Risks that arise
137、from business models and activities84-858.Stress testing within the risk governance and capital frameworks85-86Capital Adequacy andRisk-Weighted Assets(RWA)9.Pillar 1 capital requirements70-735-6,1310.Composition of capital components and reconciliation of the accounting balancesheet to the regulato
138、ry balance sheet.A main features template can be foundat:https:/ statement of movements in regulatory capital,including changes inCommon Equity Tier 1 Capital,Additional Tier 1 Capital and Tier 2 Capital812.Capital management and strategic planning69,75-7613.Risk-weighted assets(RWA)by operating gro
139、up741414.Analysis of capital requirements for each method used in calculating RWA73-74,87-9014-15,22-44,51-62,83-8415.Tabulate credit risk in the banking book for Basel asset classes andmajor portfolios22-44,46-62,8416.Flow statement that reconciles movements in RWA by credit risk andmarket risk45,8
140、017.Basel validation and back-testing process,including estimated and actualloss parameter information11285-89Liquidity18.Management of liquidity needs and liquidity reserve held to meet those needs100-106Funding19.Encumbered and unencumbered assets disclosed by balance sheet category102-10336-3720.
141、Consolidated total assets,liabilities and off-balance sheet commitments byremaining contractual maturity107-10821.Analysis of funding sources and funding strategy103-104Market Risk22.Linkage of trading and non-trading market risk to the consolidatedbalance sheet9923.Significant trading and non-tradi
142、ng market risk factors95-9924.Market risk model assumptions,validation procedures and back-testing95-99,11225.Primary techniques for risk measurement and risk assessment,including risk ofloss95-99Credit Risk26.Analysis of credit risk profile,exposures and concentration87-94,159-16624-3314-7927.Polic
143、ies to identify impaired loans and renegotiated loans159-161,16628.Reconciliation of opening and closing balances of impaired loans and allowancefor credit losses93,16429.Counterparty credit risk arising from derivative transactions87-88,94,178-17951-6730.Credit risk mitigation87-88,162,170,20921,46
144、-48,63Other Risks31.Discussion of other risks82-84,109-11832.Publicly known risk events involving material or potentially material loss events109-118BMO Financial Group 206th Annual Report 2023 19Managements Discussion and AnalysisBMOs Chief Executive Officer and Chief Financial Officer have signed
145、a statement outlining managements responsibility for financial informationin the audited annual consolidated financial statements and Managements Discussion and Analysis(MD&A).The statement also explains the rolesof the Audit and Conduct Review Committee and Board of Directors in respect of that fin
146、ancial information.The MD&A comments on our operations and financial condition for the years ended October 31,2023 and 2022.The MD&A should be readin conjunction with the audited annual consolidated financial statements for the year ended October 31,2023.The MD&A commentary is as atNovember 30,2023.
147、Unless otherwise indicated,all amounts are stated in Canadian dollars and have been derived from audited annual consolidatedfinancial statements prepared in accordance with International Financial Reporting Standards(IFRS)as issued by the International AccountingStandards Board.We also comply with i
148、nterpretations of IFRS by our regulator,the Office of the Superintendent of Financial Institutions(OSFI).References to generally accepted accounting principles(GAAP)mean IFRS.Index21Caution Regarding Forward-Looking Statements22About BMO23Financial Objectives and Value Measures26Supporting a Sustain
149、able and Inclusive Future27Financial Highlights28Non-GAAP and Other Financial Measures32Recent Acquisitions33Economic Developments and Outlook342023 Financial Performance Review422023 Operating Groups Performance Review42Summary43Personal and Commercial Banking44Canadian Personal and Commercial Bank
150、ing48U.S.Personal and Commercial Banking52BMO Wealth Management56BMO Capital Markets59Corporate Services,including Technology and Operations61Summary Quarterly Earnings Trends63Review of Fourth Quarter 2023 Performance642022 Financial Performance Review67Financial Condition Review67Summary Balance S
151、heet69Enterprise-Wide Capital Management76Off-Balance Sheet Arrangements78Enterprise-Wide Risk Management119Accounting Matters and Disclosure and Internal Control119Critical Accounting Estimates and Judgments122Future Changes in Accounting Policies123Other Regulatory Developments123Transactions with
152、 Related Parties124Shareholders Auditors Services and Fees125Managements Annual Report on Disclosure Controls and Proceduresand Internal Control over Financial Reporting126Supplemental Information135Glossary of Financial TermsRegulatory FilingsBMOs continuous disclosure materials,including our inter
153、im consolidated financial statements and interim MD&A,audited annual consolidated financial statementsand annual MD&A,Annual Information Form and Notice of Annual Meeting of Shareholders and Management Proxy Circular,are available on our website the Canadian Securities Administrators website at www.
154、sedarplus.ca and on the EDGAR section of the U.S.Securities and ExchangeCommissions(SEC)website at www.sec.gov.BMOs Chief Executive Officer and Chief Financial Officer certify the appropriateness and fairness of BMOs annual andinterim consolidated financial statements,annual MD&A and Annual Informat
155、ion Form,the effectiveness of BMOs disclosure controls and procedures and the effectivenessof,and any material weaknesses relating to,BMOs internal control over financial reporting.Information contained in,or otherwise accessible through,our website()or any third-party websites mentioned herein,does
156、 not form part of this document.CautionThe About BMO,Financial Objectives and Value Measures,Supporting a Sustainable and Inclusive Future,Recent Acquisitions,Economic Developments and Outlook,Provision for Income Taxes and Other Taxes,2024 Areas of Focus,Business Environment and Outlook,Enterprise-
157、Wide Capital Management,Off-Balance SheetArrangements,Enterprise-Wide Risk Management,Future Changes in Accounting Policies and Other Regulatory Developments sections contain certain forward-lookingstatements.By their nature,forward-looking statements require us to make assumptions and are subject t
158、o inherent risks and uncertainties.Refer to the CautionRegarding Forward-Looking Statements section for a discussion of such risks and uncertainties and the material factors and assumptions related to the statements setforth in such sections.20 BMO Financial Group 206th Annual Report 2023 MD&A MD&A
159、Factors That May Affect Future ResultsAs noted in the following Caution Regarding Forward-Looking Statements,all forward-looking statements and information,by their nature,aresubject to inherent risks and uncertainties,both general and specific,which may cause actual results to differ materially fro
160、m the expectationsexpressed in any forward-looking statement.The Enterprise-Wide Risk Management section describes a number of risks,including credit andcounterparty,market,insurance,liquidity and funding,operational non-financial,legal and regulatory,strategic,environmental and social,andreputation
161、 risk.Should our risk management framework prove ineffective,there could be a material impact on our financial position and results.Caution Regarding Forward-Looking StatementsBank of Montreals public communications often include written or oral forward-looking statements.Statements of this type are
162、 included in this document,and may beincluded 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 forward-looking statements under,th
163、e United States Private Securities Litigation Reform Act of 1995and any applicable Canadian securities legislation.Forward-looking statements in this document may include,but are not limited to,statements with respect to ourobjectives and priorities for fiscal 2024 and beyond,our strategies or futur
164、e actions,our targets and commitments(including with respect to net zero emissions),expectations for our financial condition,capital position,the regulatory environment in which we operate,the results of,or outlook for,our operations or the Canadian,U.S.and international economies,plans for the comb
165、ined operations of BMO and Bank of the West,and include statements made by our management.Forward-lookingstatements are typically identified by words such as“will”,“would”,“should”,“believe”,“expect”,“anticipate”,“project”,“intend”,“estimate”,“plan”,“goal”,“commit”,“target”,“may”,“might”,“schedule”,
166、“forecast”,“outlook”,“timeline”,“suggest”,“seek”and“could”or negative or grammatical variations thereof.By their nature,forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties,both general and specific in nature.There is significant risk that pre
167、dictions,forecasts,conclusions or projections will not prove to be accurate,that our assumptions may not be correct,and that actual resultsmay differ materially from such predictions,forecasts,conclusions or projections.We caution readers of this document not to place undue reliance on our forward-l
168、ookingstatements,as a number of factors many of which are beyond our control and the effects of which can be difficult to predict could cause actual future results,conditions,actions or events to differ materially from the targets,expectations,estimates or intentions expressed in the forward-looking
169、 statements.The future outcomes that relate to forward-looking statements may be influenced by many factors,including,but not limited to:general economic and marketconditions in the countries in which we operate,including labour challenges;the anticipated benefits from acquisitions,including Bank of
170、 the West,are not realized;changes to our credit ratings;the emergence or continuation of widespread health emergencies or pandemics,and their impact on local,national or internationaleconomies,as well as their heightening of certain risks that may affect our future results;cyber and cloud security,
171、including the threat of data breaches,hacking,identitytheft and corporate espionage,as well as the possibility of denial of service resulting from efforts targeted at causing system failure and service disruption;technologyresiliency;failure of third parties to comply with their obligations to us;po
172、litical conditions,including changes relating to,or affecting,economic or trade matters;climatechange and other environmental and social risks;the Canadian housing market and consumer leverage;inflationary pressures;technological innovation and competition;changes in monetary,fiscal or economic poli
173、cy;changes in laws,including tax legislation and interpretation,or in supervisory expectations or requirements,includingcapital,interest rate and liquidity requirements and guidance,and the effect of such changes on funding costs and capital requirements;weak,volatile or illiquid capital orcredit ma
174、rkets;the level of competition in the geographic and business areas in which we operate;exposure to,and the resolution of,significant litigation or regulatorymatters,our ability to successfully appeal adverse outcomes of such matters and the timing,determination and recovery of amounts related to su
175、ch matters;the accuracyand completeness of the information we obtain with respect to our customers and counterparties;our ability to execute our strategic plans,complete proposedacquisitions or dispositions and integrate acquisitions,including obtaining regulatory approvals;critical accounting estim
176、ates and judgments,and the effects of changes toaccounting standards,rules and interpretations on these estimates;operational and infrastructure risks,including with respect to reliance on third parties;global capitalmarkets activities;the possible effects on our business of war or terrorist activit
177、ies;natural disasters and disruptions to public infrastructure,such as transportation,communications,power or water supply;and our ability to anticipate and effectively manage risks arising from all of the foregoing factors.We caution that the foregoing list is not exhaustive of all possible factors
178、.Other factors and risks could adversely affect our results.For more information,please referto the discussion in the Risks That May Affect Future Results section,and the sections related to credit and counterparty,market,insurance,liquidity and funding,operational non-financial,legal and regulatory
179、,strategic,environmental and social,and reputation risk in the Enterprise-Wide Risk Management section,as updated byquarterly reports,all of which outline certain key factors and risks that may affect our future results.Investors and others should carefully consider these factors and risks,as well a
180、s other uncertainties and potential events,and the inherent uncertainty of forward-looking statements.We do not undertake to update any forward-lookingstatements,whether written or oral,that may be made from time to time by the organization or on its behalf,except as required by law.The forward-look
181、ing informationcontained in this document is presented for the purpose of assisting shareholders and analysts in understanding our financial position as at and for the periods ended onthe dates presented,as well as our strategic priorities and objectives,and may not be appropriate for other purposes
182、.Material economic assumptions underlying the forward-looking statements contained in this document include those set out in the Economic Developments andOutlook section,and the Allowance for Credit Losses section,as updated by quarterly reports.Assumptions about the performance of the Canadian and
183、U.S.economies,aswell as overall market conditions and their combined effect on our business,are material factors we consider when determining our strategic priorities,objectives andexpectations for our business.In determining our expectations for economic growth,we primarily consider historical econ
184、omic data,past relationships between economicand financial variables,changes in government policies,and the risks to the domestic and global economy.BMO Financial Group 206th Annual Report 2023 21MANAGEMENTS DISCUSSION AND ANALYSISAbout BMOEstablished in 1817,BMO Financial Group(BMO,Bank of Montreal
185、,the bank,we,our,us)is the eighth largest bank in North America by assets,with total assets of$1.29 trillion.We are a highly diversified financial institution providing a broad range of personal and commercial banking,wealthmanagement,global markets and investment banking products and services.We se
186、rve thirteen million customers across Canada and the UnitedStates,and in select markets globally,through three integrated operating groups:Personal and Commercial Banking,BMO Wealth Management andBMO Capital Markets.At BMO,we continue to build a high-performing,digitally-enabled,future-ready bank wi
187、th engaged employees and a winning culture.We are focused on helping our customers make real financial progress,and on financing our clients growth and innovation,while also investingin our workforce.Anchored by our Purpose,we are driven by our strategic priorities for growth,strengthened by our app
188、roach to sustainabilityand guided by our values as we build a foundation of trust with our stakeholders.Our Purpose:Boldly Grow the Good in business and lifeBMO has a deep sense of purpose to be a champion of progress and a catalyst for change.We are leveraging our position as a leading financialser
189、vices provider in order to create opportunities for our communities and our stakeholders to make positive,sustainable change because webelieve that success can and must be mutual.Our bold commitments for a thriving economy,a sustainable future and an inclusive society arereflected in our active,dire
190、ct response to todays most pressing challenges:Thriving economy Providing access to capital and valuable financial advice investing in businesses,supporting home ownership andstrengthening the communities we serve,while driving innovation that makes banking easier.Sustainable future Being our client
191、s lead partner in the transition to a net zero world,delivering on our commitments to sustainablefinancing and responsible investing.Inclusive society Committing to zero barriers to inclusion through investments,financial products and services,and partnerships that removesystemic barriers for under-
192、represented customers,employees and communities and drive inclusion and equitable growth for everyone.Our Strategic PrioritiesThe strength and consistency of our performance are essential to realizing our Purpose.We aim to deliver top-tier total shareholder return andachieve our financial objectives
193、 by aligning our operations with,and executing on,our strategic priorities.Keeping the fundamentals of ourstrategy consistent,we renewed our priorities for fiscal 2024 to reflect our strong momentum in an environment of ongoing transformation:World-class loyalty and growth,powered by One Client lead
194、ership,bringing the full suite of BMOs products,services and advice to our clientsWinning culture driven by alignment,empowerment and recognitionDigital First for speed,scale and the elimination of complexityBe our clients lead partner in the transition to a net zero worldSuperior management of risk
195、,capital and funding performanceOur group strategic priorities align with and support our enterprise-wide strategy,positioning us well to achieve competitive performance.The operating group strategies are outlined in the 2023 Operating Groups Performance Review.Our Approach to SustainabilityOur comm
196、itment to sustainability is embedded in our strategy and is fundamental to our Purpose.We identify the most significant effects of ourbusiness operations,products and services on our stakeholders and the communities in which we operate.We take steps to manage our businessin a manner that is consiste
197、nt with our sustainability objectives,while also considering the interests of our stakeholders.We apply a variety ofenvironmental,social and governance(ESG)practices and benchmarks to capture opportunities and manage risks in key areas such as sustainablefinance,climate change,human rights,and diver
198、sity,equity and inclusion.Our ValuesFour core values shape our culture and underpin our choices and actions:IntegrityDiversityResponsibilityEmpathyCautionThis About BMO section contains forward-looking statements.Please refer to the Caution Regarding Forward-Looking Statements.22 BMO Financial Group
199、 206th Annual Report 2023 MD&A MD&A Financial Objectives and Value MeasuresResults and measures in this section are presented on a reported and an adjusted basis,as well as a gross and net revenue basis,and managementconsiders all of these to be useful in assessing our performance.We believe that th
200、e non-GAAP measures and ratios presented here,read togetherwith our GAAP results,provide readers with a better understanding of how management assesses results and are a better reflection of ongoingbusiness performance.Adjusted results and measures in this section,including earnings per share(EPS),E
201、PS growth,return on equity(ROE),return on tangible commonequity(ROTCE),net income,revenue,non-interest expense,efficiency ratio and operating leverage,are non-GAAP amounts,measures and ratios,andare discussed in the Non-GAAP and Other Financial Measures section.We also present reported and adjusted
202、revenue on a basis that is net of insurance claims,commissions and changes in policy benefit liabilities(CCPB),and we calculate our efficiency ratio and operating leverage on a similar basis.Insurance revenue can experience variability arising fromfluctuations in the fair value of insurance assets,c
203、aused by movements in interest rates and equity markets,that is largely offset in CCPB.Presentingour revenue,efficiency ratio and operating leverage on a net basis allows for a better assessment of operating results.Measures and ratios on a net revenue basis are non-GAAP amounts.For more information
204、 on CCPB,refer to the Non-GAAP and Other FinancialMeasures section.Information regarding the composition of each of these measures is also provided in the Glossary of Financial Terms.Financial ObjectivesFinancial objectives(adjusted)Reported basisAdjusted basis(1)As at and for the periods ended Octo
205、ber 31,20231-year3-year(2)5-year(2)1-year3-year(2)5-year(2)Earnings per share growth(%)7-10%(71.6)(9.1)(7.0)(11.4)15.05.5Average return on equity(%)15%or more6.014.613.312.314.713.6Average return on tangible common equity(%)18%or more8.216.815.515.817.115.9Operating leverage,net of CCPB(%)(3)2%or mo
206、re(45.9)(6.8)(3.2)(8.2)0.7Common Equity Tier 1 Ratio(%)Exceed regulatory requirement12.5nananananaTotal shareholder return(%)Top-tier(12.5)14.35.6nanana(1)Adjusted results and measures are non-GAAP amounts and measures and are discussed in the Non-GAAP and Other Financial Measures section.(2)The 3-y
207、ear and 5-year EPS growth rate and operating leverage,net of CCPB,reflect compound annual growth rates(CAGR).(3)Operating leverage,net of CCPB,on a reported and adjusted basis presented in this table are non-GAAP measures and are discussed in the Non-GAAP and Other Financial Measures section.na not
208、applicableBMOs business planning process is rigorous,sets ambitious goals and considers prevailing economic conditions,our risk appetite,our customersevolving needs and the opportunities available across our lines of business.It includes clear and direct accountability for annual performance that is
209、measured against both internal and external benchmarks and progress toward our strategic priorities.We have established medium-term financial objectives for certain important performance measures,which are set out above.Medium-term isgenerally defined as three to five years,and performance is assess
210、ed on an adjusted basis.We aim to deliver top-tier total shareholder return andachieve our financial objectives by aligning our operations with,and executing on,our strategic priorities.These objectives serve as guideposts and they assume a normal business environment.Our ability to meet these objec
211、tives in any single periodmay be adversely affected by changes in the economic environment,or extraordinary developments.We recognize that in managing our operationsand our exposure to risk,current profitability and our ability to meet these objectives in a single period must be balanced with the ne
212、ed to invest inour businesses for long-term sustainability and future growth.Our financial objectives and our performance against these objectives are outlined in the table above and described in the sections that follow.Earnings per Share GrowthAll references to earnings per share(EPS)are to dilute
213、d EPS,unless otherwise indicated.EPS was$5.68 in 2023,a decrease of$14.31 or 72%from$19.99 in 2022.Adjusted EPS was$11.73,adecrease of$1.50 or 11%from$13.23 in 2022.The decrease in EPS reflected lower earnings and a highernumber of common shares outstanding.Net income available to common shareholder
214、s decreased 70%year-over-year on a reported basis,and decreased 5%on an adjusted basis.The average number of dilutedcommon shares outstanding increased 7%from 2022,reflecting common shares issued during the year througha public offering,private placements,the dividend reinvestment plan,acquisitions
215、and the stock option plan.EPS($)ReportedAdjusted11.585.6819.9913.2311.7312.96202220232021Earnings per Share(EPS)is calculated by dividing net income attributable to bank shareholders,afterdeducting preferred share dividends and distributions on other equity instruments,by the average numberof common
216、 shares outstanding.Adjusted EPS is calculated in the same manner,using adjusted net incomeattributable to bank shareholders.Diluted EPS,which is BMOs basis for measuring performance,adjustsfor possible conversions of financial instruments into common shares if those conversions would reduce EPS,and
217、 is more fully explained in Note 23 of the audited annual consolidated financial statements.BMO Financial Group 206th Annual Report 2023 23MANAGEMENTS DISCUSSION AND ANALYSISReturn on Equity and Return on Tangible Common EquityReported return on equity(ROE)was 6.0%in 2023 and adjusted ROE was 12.3%,
218、compared with 22.9%and 15.2%,respectively,in 2022.Reported ROE decreased due to lower net income,primarily due to lowerrevenue in the current year resulting from the impact of fair value management actions related to the acquisitionof Bank of the West,and higher expenses in the current year due to h
219、igher acquisition and integration-relatedcosts.Reported and adjusted ROE decreased due to the impact of share issuances,as well as lower earnings.There was a decrease of$9,272 million in reported net income available to common shareholders and adecrease of$476 million in adjusted net income availabl
220、e to common shareholders in the current year.Averagecommon shareholders equity increased$9.4 billion or 16%from 2022,primarily due to the issuance of commonshares and growth in retained earnings,partially offset by a decrease in accumulated other comprehensiveincome.Reported return on tangible commo
221、n equity(ROTCE)was 8.2%,compared with 25.1%in 2022,and adjustedROTCE was 15.8%,compared with 16.6%in 2022.Reported and adjusted ROTCE decreased due to lower earnings,partially offset by lower tangible common equity.Book value per share increased 2%from the prior yearto$97.17,reflecting the increase
222、in shareholders equity.ROE(%)ReportedAdjusted22.914.96.016.715.212.3202220232021ROTCE(%)Reported17.025.1Adjusted18.916.62022202320218.215.8Return on Common Shareholders Equity(ROE)is calculated as net income,less preferred dividends anddistributions on other equity instruments,as a percentage of ave
223、rage common shareholders equity.Commonshareholders equity comprises common share capital,contributed surplus,accumulated other comprehensiveincome(loss)and retained earnings.Adjusted ROE is calculated using adjusted net income rather thanreported net income.Return on Tangible Common Equity(ROTCE)is
224、calculated as net income available to common shareholders,adjusted for the amortization of acquisition-related intangible assets,as a percentage of average tangiblecommon equity.Average tangible common equity comprises common shareholders equity,less goodwill andacquisition-related intangible assets
225、,net of related deferred tax liabilities.Adjusted ROTCE is calculated usingadjusted net income rather than reported net income.Efficiency Ratio and Operating LeverageBMOs reported gross efficiency ratio was 68.0%in 2023,compared with 48.0%in 2022.On a net revenuebasis(1),the reported efficiency rati
226、o was 72.5%,compared with 47.1%in 2022,and the adjusted efficiency ratiowas 59.8%,compared with 55.8%in 2022.The increase in the efficiency ratio reflected revenue growth that wasmore than offset by higher expense growth,as well as the impact of Bank of the West,which operated at ahigher efficiency
227、ratio.Reported operating leverage was negative 38.5%.On a net revenue basis,reported operating leverage wasnegative 45.9%,and adjusted operating leverage was negative 8.2%.(1)Net revenue comprises revenue,net of insurance claims,commissions and changes in policy benefit liabilities(CCPB).Reported Ef
228、ficiency Ratio,Net of CCPBAdjusted Efficiency Ratio,Net of CCPBEfficiency Ratio,Net of CCPB(%)20232021202272.559.860.156.555.847.1ReportedAdjusted202220232021(45.9)Operating Leverage,Net of CCPB(%)0.429.06.11.3(8.2)Efficiency Ratio(or expense-to-revenue ratio)is a measure of productivity.It is calcu
229、lated as non-interestexpense divided by total revenue(on a taxable equivalent basis in the operating groups),expressed as apercentage.Efficiency Ratio,net of insurance claims,commissions and changes in policy benefits(CCPB),iscalculated as non-interest expense divided by total revenue,net of CCPB(on
230、 a taxable equivalent basis in theoperating groups),expressed as a percentage.Adjusted efficiency ratio,net of CCPB,is calculated in the samemanner as efficiency ratio,net of CCPB,utilizing adjusted revenue,net of CCPB,and adjusted non-interestexpense.Operating Leverage is the difference between the
231、 growth rates of revenue and non-interest expense,andadjusted operating leverage is the difference between the growth rates of adjusted revenue and adjustednon-interest expense.Operating Leverage,net of insurance claims,commissions and changes in policy benefit liabilities(CCPB),is the difference be
232、tween the growth rates of revenue,net of CCPB(net revenue)and non-interestexpense.Adjusted operating leverage,net of CCPB,is calculated using the growth rates of adjusted netrevenue and adjusted non-interest expense.The bank evaluates performance using adjusted net revenue.24 BMO Financial Group 206
233、th Annual Report 2023 MD&A MD&A Common Equity Tier 1 RatioOur Common Equity Tier 1(CET1)Ratio was 12.5%as at October 31,2023,compared with 16.7%as atOctober 31,2022.Our CET1 Ratio was elevated at the end of fiscal 2022,primarily driven by fair valuemanagement actions related to the acquisition of Ba
234、nk of the West.The CET1 Ratio decreased from the prioryear,primarily as a result of the acquisition and integration of Bank of the West.CET1 Ratio(%)20212022202312.513.716.7Common Equity Tier 1(CET1)Ratio is calculated as CET1 capital,which comprises common shareholdersequity,net of deductions for g
235、oodwill,intangible assets,pension assets,certain deferred tax assets and otheritems(which may include a portion of expected credit loss provisions),divided by risk-weighted assets.The CET1 Ratio is calculated in accordance with OSFIs Capital Adequacy Requirements(CAR)Guideline.Total Shareholder Retu
236、rnFor the year ended October 31202320222021202020193-yearCAGR(1)5-yearCAGR(1)Closing market price per common share($)104.79125.49134.3779.3397.509.71.3Dividends paid($per share)5.725.114.244.213.9910.89.0Dividend yield(%)5.54.33.25.34.2nmnmIncrease(decrease)in share price(%)(16.5)(6.6)69.4(18.6)(0.9
237、)nmnmTotal annual shareholder return(%)(2)(12.5)(3.1)75.9(14.6)3.214.35.6Canadian peer group average(excluding BMO)(3)(8.8)(6.2)56.1(11.5)11.410.05.5(1)Compound annual growth rate(CAGR)expressed as a percentage.(2)Total annual shareholder return assumes reinvestment of quarterly dividends and theref
238、ore does not equal the sum of dividend and share price returns in the table.(3)As at October 31,2023;peers:BNS,CIBC,NB,RBC,TD.nm not meaningfulThe average annual total shareholder return(TSR)is a key measure of shareholder value,and over time,we expect that execution on ourstrategic priorities will
239、drive value creation for our shareholders.The one-year,three-year and five-year average annual TSR was negative 12.5%,positive 14.3%and positive 5.6%,respectively,compared with our Canadian peer group average(excluding BMO)of negative 8.8%,positive 10.0%and positive 5.5%,respectively.The table above
240、 summarizes dividends paid on BMOs common shares over the past five years and the movements in our share price.An investment of$1,000 in BMO common shares made at the beginning of fiscal 2019 would have been worth$1,315 as at October 31,2023,assuming reinvestment of dividends,for a total return of 3
241、1.5%.Dividends declared per common share in fiscal 2023 totalled$5.80,an increase of$0.36 from$5.44 in the prior year.Dividends paid overa five-year period have increased at an average annual compound rate of approximately 9%.The annual Total Shareholder Return(TSR)represents the average annual tota
242、l return earned on an investment in BMO common shares madeat the beginning of the respective period.The return includes the change in share price and assumes dividends received were reinvested inadditional common shares.CautionThis Financial Objectives and Value Measures section contains forward-loo
243、king statements.Please refer to the Caution Regarding Forward-Looking Statements.BMO Financial Group 206th Annual Report 2023 25MANAGEMENTS DISCUSSION AND ANALYSISSupporting a Sustainable and Inclusive FutureIn support of our customers,communities and employees,in 2023 we:Launched BMO EMpowerTM2.0,p
244、ledging more than US$40 billion to support organizations in communities across the United States focusedon advancing home ownership,growing small businesses,strengthening communities,and creating a more equitable society.Exceeded BMOs annual Employee Giving Campaign target with our employees contrib
245、uting more than$31 million to the United Way andthousands of other community organizations across North America,while also setting a new record for pledges.Announced the 2022 recipients of$150,000 in grants awarded to twelve Canadian women entrepreneurs as part of the BMO CelebratingWomen Grant Prog
246、ram for women-owned businesses across Canada,in collaboration with Deloitte.The program is in its third year and hassupported 56 women-owned businesses to date in Canada,with grants totalling$530,000.Were named to the United Nations Principles for Responsible Banking,Nature Target Setting Working Gr
247、oup,focused on developing guidancefor setting biodiversity and nature targets the only Canadian bank among 34 signatories from 24 countries.Invested$15 million in the Feel Out Loud campaign,sponsored by Kids Help Phone to expand access to clinical care and services in Canadathrough its e-mental heal
248、th platform for youth.As a founding partner of Kids Help Phone,and with the help of our employees,we have raisedmore than$40 million to support this campaign to date.Continued to drive progress for mental health treatment with a$5 million donation to the Centre for Addiction and Mental Health(CAMH)t
249、osupport independent research at its Krembil Centre for Neuroinformatics and help build a research centre.We also donated$2 million to the RoyalOttawa Health Care Group(The Royal)to support the newly-established BMO Innovative Clinic for Depression,providing more treatment options forpeople living w
250、ith depression.Released Wcihitowin,our third annual Indigenous Partnerships and Progress Report,highlighting our focus on advancing education,employmentand economic empowerment in First Nations,Inuit and Mtis communities.In addition,we announced six new members of our IndigenousAdvisory Council(IAC)
251、,which now includes leaders from across Canada.BMOs leadership continues to be recognized in a significant number of rankings,including:Ranked among the most sustainable companies on the Dow Jones Sustainability Indices(DJSI).In addition,BMO ranked in the 95thpercentileamong banks globally and earne
252、d the highest possible score in the areas of Environmental Reporting,Social Reporting and Financial Inclusion.Named one of Corporate Knights 2023 Global 100 Most Sustainable Corporations in the World and,for the fourth consecutive year,ranked as NorthAmericas most sustainable bank.We ranked eighth i
253、n the world and in the top 15%of banks globally for Sustainable Revenue and received highmarks for diversity on our Board of Directors and the representation of diversity in our senior leadership.Included in Corporate Knights list of Canadas Best 50 Corporate Citizens,with top-quartile scores in boa
254、rd gender diversity and the representationof visible minorities in our executive leadership the only Canadian bank named to this listing.We also received a top-quartile Sustainable Revenuescore,demonstrating our ongoing commitment to sustainable financing and responsible investing.Recognized by the
255、World Benchmarking Alliance(WBA)as the worlds top-ranked financial institution for supporting progress toward a just andsustainable economy.Included for the eighth consecutive year in the Bloomberg Gender-Equality Index(GEI),in recognition of BMOs global leadership in genderequity and inclusion with
256、in the workplace and the community,and for publicly demonstrating our commitment to equality and the advancementof women.Recognized by Ethisphere Institute as one of the Worlds Most Ethical Companies for the sixth consecutive year,remaining the only Canadian bankto be honoured with this designation
257、since its inception in 2007.The designation affirms our commitment to doing what is right and operating withtransparency,good governance and integrity in support of a thriving economy,a sustainable future and an inclusive society.Included for the third consecutive year in the 2023 Women Lead Here li
258、st published by the Globe and Mail in its Report on Business magazine torecognize Canadian businesses for excellence in gender diversity in executive roles.Our objective for gender equality in our senior leadership hasbeen above 40%since 2016,and we continue to support advancing diversity,equity and
259、 inclusion across the bank.Received a top score on the Disability Equality Index(DEI)for the eighth consecutive year.BMO was named one of the Best Places to Work forDisability Inclusion by Disability:IN and the American Association of People with Disabilities(AAPD),in recognition of our continued fo
260、cus andprogress on building an inclusive society for our employees and the communities we serve.CautionThis Supporting a Sustainable and Inclusive Future section contains forward-looking statements.Please refer to the Caution Regarding Forward-Looking Statements.26 BMO Financial Group 206th Annual R
261、eport 2023 MD&A MD&A Financial Highlights(Canadian$in millions,except as noted)20232022Summary Income Statement(1)Net interest income18,68115,885Non-interest revenue12,51817,825Revenue31,19933,710Insurance claims,commissions and changes in policy benefit liabilities(CCPB)1,939(683)Revenue,net of CCP
262、B(2)29,26034,393Provision for credit losses on impaired loans1,180502Provision for(recovery of)credit losses on performing loans998(189)Total provision for credit losses(PCL)2,178313Non-interest expense21,21916,194Provision for income taxes1,4864,349Net income4,37713,537Net income available to commo
263、n shareholders4,03413,306Adjusted net income8,6759,039Adjusted net income available to common shareholders8,3328,808Common Share Data($,except as noted)(1)Basic earnings per share5.6920.04Diluted earnings per share5.6819.99Adjusted diluted earnings per share11.7313.23Book value per share97.1795.60Cl
264、osing share price104.79125.49Number of common shares outstanding(in millions)End of period720.9677.1Average basic709.4664.0Average diluted710.5665.7Market capitalization($billions)75.585.0Dividends declared per share5.805.44Dividend yield(%)5.54.3Dividend payout ratio(%)102.027.1Adjusted dividend pa
265、yout ratio(%)49.441.0Financial Measures and Ratios(%)(1)Return on equity6.022.9Adjusted return on equity12.315.2Return on tangible common equity8.225.1Adjusted return on tangible common equity15.816.6Efficiency ratio68.048.0Adjusted efficiency ratio,net of CCPB(2)59.855.8Operating leverage(38.5)19.6
266、Adjusted operating leverage,net of CCPB(2)(8.2)1.3Net interest margin on average earning assets1.631.62Net interest margin on average earning assets excluding trading revenue and trading assets1.821.72Effective tax rate25.324.3Adjusted effective tax rate22.322.8Total PCL-to-average net loans and acc
267、eptances0.350.06PCL on impaired loans-to-average net loans and acceptances0.190.10Liquidity coverage ratio(LCR)(3)128135Net stable funding ratio(NSFR)(3)115114Balance Sheet and Other Information(as at October 31,$millions,except as noted)Assets1,293,2761,139,199Average earning assets1,145,632979,341
268、Gross loans and acceptances668,396567,191Net loans and acceptances664,589564,574Deposits909,676769,478Common shareholders equity70,05164,730Total risk-weighted assets(4)424,197363,997Assets under administration808,985744,442Assets under management332,947305,462Capital Ratios(%)(4)Common Equity Tier
269、1 Ratio12.516.7Tier 1 Capital Ratio14.118.4Total Capital Ratio16.220.7Leverage Ratio4.25.6TLAC Ratio27.033.1Foreign Exchange Rates($)As at October 31,Canadian/U.S.dollar1.38681.3625Average Canadian/U.S.dollar1.34921.2918(1)Adjusted results exclude certain items from reported results and are used to
270、calculate our adjusted measures as presented in the above table.Management assesses performance on a reported basisand an adjusted basis,and considers both to be useful.Revenue,net of CCPB,as well as reported ratios calculated net of CCPB,and adjusted results,measures and ratios in this table are no
271、n-GAAPamounts.For further information,refer to the Non-GAAP and Other Financial Measures section;for details on the composition of non-GAAP amounts,measures and ratios,as well as supplementaryfinancial measures,refer to the Glossary of Financial Terms.(2)We present revenue,efficiency ratio and opera
272、ting leverage on a basis that is net of CCPB,which reduces the variability in insurance revenue resulting from changes in fair value that are largely offset bychanges in the fair value of policy benefit liabilities,the impact of which is reflected in CCPB.For further information,refer to the Insuran
273、ce Claims,Commissions and Changes in Policy Benefits section.(3)LCR and NSFR are disclosed in accordance with the Liquidity Adequacy Requirements(LAR)Guideline as set out by the Office of the Superintendent of Financial Institutions(OSFI),as applicable.(4)Capital ratios and risk-weighted assets are
274、disclosed in accordance with the Capital Adequacy Requirements(CAR)Guideline,as set out by OSFI,as applicable.BMO Financial Group 206th Annual Report 2023 27MANAGEMENTS DISCUSSION AND ANALYSISNon-GAAP and Other Financial MeasuresResults and measures in this document are presented on a generally acce
275、pted accounting principles(GAAP)basis.Unless otherwise indicated,allamounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance withInternational Financial Reporting Standards(IFRS)as issued by the International Accounting St
276、andards Board.References to GAAP mean IFRS.We usea number of financial measures to assess our performance,as well as the performance of our operating segments,including amounts,measures andratios that are presented on a non-GAAP basis,as described below.We believe that these non-GAAP amounts,measure
277、s and ratios,read togetherwith our GAAP results,provide readers with a better understanding of how management assesses results.Non-GAAP amounts,measures and ratios do not have standardized meanings under GAAP.They are unlikely to be comparable to similarmeasures presented by other companies and shou
278、ld not be viewed in isolation from,or as a substitute for,GAAP results.For further information regarding the composition of non-GAAP and other financial measures,including supplementary financial measures,refer to the Glossary of Financial Terms.Our non-GAAP measures broadly fall into the following
279、categories:Adjusted measures and ratiosManagement considers both reported and adjusted results and measures to be useful in assessing underlying ongoing business performance.Adjusted results and measures remove certain specified items from revenue,non-interest expense,provision for credit losses and
280、 income taxes,as detailed in the following table.Adjusted results and measures presented in this document are non-GAAP amounts.Presenting results on both areported basis and an adjusted basis permits readers to assess the impact of certain items on results for the periods presented,and to better ass
281、essresults excluding those items that may not be reflective of ongoing business performance.As such,the presentation may facilitate readers analysisof trends.Except as otherwise noted,managements discussion of changes in reported results in this document applies equally to changes in thecorrespondin
282、g adjusted results.Measures net of insurance claims,commissions and changes in policy benefit liabilitiesWe also present reported and adjusted revenue on a basis that is net of insurance claims,commissions and changes in policy benefit liabilities(CCPB),and our efficiency ratio and operating leverag
283、e are calculated on a similar basis.Measures and ratios presented on a basis net of CCPB are non-GAAPamounts.Insurance revenue can experience variability arising from fluctuations in the fair value of insurance assets caused by movements in interestrates and equity markets.The investments that suppo
284、rt policy benefit liabilities are predominantly fixed income assets recorded at fair value,withchanges in fair value recorded in insurance revenue in the Consolidated Statement of Income.These fair value changes are largely offset by changesin the fair value of policy benefit liabilities,the impact
285、of which is reflected in CCPB.The presentation and discussion of revenue,efficiency ratios andoperating leverage on a net basis reduces this variability,which allows for a better assessment of operating results.For more information,refer to theInsurance Claims,Commissions and Changes in Policy Benef
286、it Liabilities section.Tangible common equity and return on tangible common equityTangible common equity is calculated as common shareholders equity,less goodwill and acquisition-related intangible assets,net of related deferredtax liabilities.Return on tangible common equity is commonly used in the
287、 North American banking industry and is meaningful because it measuresthe performance of businesses consistently,whether they were acquired or developed organically.CautionThis Non-GAAP and Other Financial Measures section contains forward-looking statements.Please refer to the Caution Regarding For
288、ward-Looking Statements.28 BMO Financial Group 206th Annual Report 2023 MD&A MD&A Non-GAAP and Other Financial Measures(Canadian$in millions,except as noted)202320222021Reported ResultsNet interest income18,68115,88514,310Non-interest revenue12,51817,82512,876Revenue31,19933,71027,186Insurance claim
289、s,commissions and changes in policy benefit liabilities(CCPB)(1,939)683(1,399)Revenue,net of CCPB29,26034,39325,787Provision for credit losses(2,178)(313)(20)Non-interest expense(21,219)(16,194)(15,509)Income before income taxes5,86317,88610,258Provision for income taxes(1,486)(4,349)(2,504)Net inco
290、me4,37713,5377,754Diluted EPS($)5.6819.9911.58Adjusting Items Impacting Revenue(Pre-tax)Impact of divestitures(1)(21)29Management of fair value changes on the purchase of Bank of the West(2)(2,011)7,713Legal provision(including related interest expense and legal fees)(3)(30)(515)Impact of Canadian t
291、ax measures(4)(138)Impact of adjusting items on revenue(pre-tax)(2,179)7,17729Adjusting Items Impacting Provision for Credit Losses(Pre-tax)Initial provision for credit losses on purchased performing loans(pre-tax)(5)(705)Adjusting Items Impacting Non-Interest Expense(Pre-tax)Acquisition and integra
292、tion costs(6)(2,045)(326)(9)Amortization of acquisition-related intangible assets(7)(357)(31)(88)Impact of divestitures(1)(16)(886)Legal provision(including related interest expense and legal fees)(3)3(627)Restructuring(costs)reversals(8)24Impact of Canadian tax measures(4)(22)Impact of adjusting it
293、ems on non-interest expense(pre-tax)(2,421)(1,000)(959)Impact of adjusting items on reported net income(pre-tax)(5,305)6,177(930)Adjusting Items Impacting Revenue(After-tax)Impact of divestitures(1)(23)22Management of fair value changes on the purchase of Bank of the West(2)(1,461)5,667Legal provisi
294、on(including related interest expense and legal fees)(3)(23)(382)Impact of Canadian tax measures(4)(115)Impact of adjusting items on revenue(after-tax)(1,599)5,26222Adjusting Items Impacting Provision for Credit Losses(After-tax)Initial provision for credit losses on purchased performing loans(after
295、-tax)(5)(517)Adjusting Items Impacting Non-Interest Expense(After-tax)Acquisition and integration costs(6)(1,533)(245)(7)Amortization of acquisition-related intangible assets(7)(264)(23)(66)Impact of divestitures(1)(32)(864)Legal provision(including related interest expense and legal fees)(3)2(464)R
296、estructuring(costs)reversals(8)18Impact of Canadian tax measures(4)(16)Impact of adjusting items on non-interest expense(after-tax)(1,811)(764)(919)Adjusting Items Impacting Provision for Income TaxesImpact of Canadian tax measures(4)(371)Impact of adjusting items on reported net income(after-tax)(4
297、,298)4,498(897)Impact on diluted EPS($)(6.05)6.76(1.38)Adjusted ResultsNet interest income19,09416,35214,310Non-interest revenue14,28410,18112,847Revenue33,37826,53327,157Insurance claims,commissions and changes in policy benefit liabilities(CCPB)(1,939)683(1,399)Revenue,net of CCPB31,43927,21625,75
298、8Provision for credit losses(1,473)(313)(20)Non-interest expense(18,798)(15,194)(14,550)Income before income taxes11,16811,70911,188Provision for income taxes(2,493)(2,670)(2,537)Net income8,6759,0398,651Diluted EPS($)11.7313.2312.96BMO Financial Group 206th Annual Report 2023 29MANAGEMENTS DISCUSSI
299、ON AND ANALYSIS(1)Reported net income included the impact of divestitures related to the sale of our EMEA and U.S.Asset Management businesses and our Private Banking business.Fiscal 2022 included a gain of$6 million($8 million pre-tax)related to the transfer of certain U.S.asset management clients a
300、nd a$29 million(pre-tax and after-tax)loss related to foreign currency translation reclassified fromaccumulated other comprehensive income,both recorded in non-interest revenue,and expenses of$32 million($16 million pre-tax),including taxes of$22 million on closing of the sale of thebusiness recorde
301、d in non-interest expense.Fiscal 2021 included a$779 million(pre-tax and after-tax)write-down of goodwill related to the sale of our EMEA and U.S.Asset Management businessesrecorded in non-interest expense,a$22 million($29 million pre-tax)net gain on the sale of our Private Banking business recorded
302、 in non-interest revenue,and$85 million($107 million pre-tax)ofdivestiture-related costs for both transactions recorded in non-interest expense.These amounts were recorded in Corporate Services.(2)Fiscal 2023 reported net income included a loss of$1,461 million($2,011 million pre-tax)related to the
303、acquisition of Bank of the West resulting from the management of the impact of interestrate changes between the announcement and closing of the acquisition on its fair value and goodwill,comprising$1,628 million of mark-to-market losses on certain interest rate swaps recordedin trading revenue and$3
304、83 million of losses on a portfolio of primarily U.S.treasuries and other balance sheet instruments recorded in net interest income.Fiscal 2022 included revenue of$5,667 million($7,713 million pre-tax),comprising$7,665 million of mark-to-market gains and$48 million of non-trading interest income.The
305、se amounts were recorded in Corporate Services.For further information on this acquisition,refer to the Recent Acquisitions section.(3)Fiscal 2023 reported net income included the impact of a lawsuit associated with a predecessor bank,M&I Marshall and Ilsley Bank,of$21 million($27 million pre-tax),c
306、omprising interest expenseof$30 million and a net non-interest expense recovery of$3 million.Fiscal 2022 included a provision of$846 million($1,142 million pre-tax),comprising interest expense of$515 million andnon-interest expense of$627 million.These amounts were recorded in Corporate Services.For
307、 further information,refer to the Provisions and Contingent Liabilities section in Note 24 of the auditedannual consolidated financial statements.(4)Fiscal 2023 reported net income included the impact of certain tax measures enacted by the Canadian government.These tax measures included a one-time t
308、ax expense of$371 million,comprising aCanada Recovery Dividend(CRD)of$312 million and$59 million related to the pro-rated fiscal 2022 impact of the 1.5%tax rate increase,net of a deferred tax asset remeasurement,and a charge of$131 million($160 million pre-tax)related to the amended GST/HST definiti
309、on for financial services,comprising$138 million recorded in non-interest revenue and$22 million recorded in non-interestexpense.These amounts were recorded in Corporate Services.(5)Fiscal 2023 reported net income included a provision for credit losses of$517 million($705 million pre-tax)on the purc
310、hased Bank of the West performing loan portfolio,recorded inCorporate Services.(6)Fiscal 2023 reported net income included acquisition and integration costs of$1,533 million($2,045 million pre-tax),comprising$1,520 million($2,027 million pre-tax)related to Bank of the West,$4 million($5 million pre-
311、tax)related to Radicle and Clearpool,and$9 million($13 million pre-tax)related to AIR MILES.Fiscal 2022 included acquisition and integration costs of$245 million($326 million pre-tax),comprising$237 million($316 million pre-tax)related to Bank of the West and$8 million($10 million pre-tax)related to
312、 Radicle,Clearpool and KGS-Alpha.Fiscal 2021 includedacquisition and integration costs of$7 million($9 million pre-tax)related to Clearpool and KGS-Alpha.These amounts were recorded in non-interest expense.Bank of the West acquisition andintegration costs were recorded in Corporate Services;Radicle,
313、Clearpool and KGS-Alpha costs were recorded in BMO Capital Markets;and AIR MILES costs were recorded in Canadian P&C.(7)Amortization of acquisition-related intangible assets of$264 million($357 million pre-tax)in fiscal 2023,$23 million($31 million pre-tax)in fiscal 2022,and$66 million($88 million p
314、re-tax)in fiscal 2021 were recorded in non-interest expense in the related operating group.(8)Fiscal 2021 reported net income included a partial reversal of$18 million($24 million pre-tax)of restructuring charges related to severance recorded in 2019 in non-interest expense,inCorporate Services.Summ
315、ary of Reported and Adjusted Results by Operating Segment(Canadian$in millions,except as noted)Canadian P&CU.S.P&CTotal P&CBMO WealthManagementBMO CapitalMarketsCorporateServicesTotal BankU.S.Segment(1)(US$in millions)2023Reported net income(loss)3,7182,7246,4421,1261,682(4,873)4,37790Acquisition an
316、d integration costs9941,5201,5331,124Amortization of acquisition-relatedintangible assets6234240420264186Management of fair value changes onthe purchase of Bank of the West1,4611,4611,093Legal provision(including related interestexpense and legal fees)212115Impact of Canadian tax measures502502Initi
317、al provision for credit losses on purchasedperforming loans517517379Adjusted net income(loss)3,7332,9586,6911,1301,706(852)8,6752,8872022Reported net income3,8262,4976,3231,2511,7724,19113,5376,079Acquisition and integration costs8237245185Amortization of acquisition-relatedintangible assets15631423
318、17Impact of divestitures5555(45)Management of fair value changes onthe purchase of Bank of the West(5,667)(5,667)(4,312)Legal provision(including related interestexpense and legal fees)846846621Adjusted net income(loss)3,8272,5026,3291,2541,794(338)9,0392,545(1)U.S.segment reported and adjusted resu
319、lts comprise net income recorded in U.S.P&C and our U.S.operations in BMO Wealth Management,BMO Capital Markets and Corporate Services.Refer to footnotes(1)to(8)in the Non-GAAP and Other Financial Measures table for further information on adjusting items.MD&A 30 BMO Financial Group 206th Annual Repo
320、rt 2023 MD&A Net Revenue,Efficiency Ratio and Operating Leverage(Canadian$in millions,except as noted)For the year ended October 31202320222021ReportedNet interest income18,68115,88514,310Non-interest revenue12,51817,82512,876Revenue31,19933,71027,186Insurance claims,commissions and changes in polic
321、y benefit liabilities(CCPB)1,939(683)1,399Revenue,net of CCPB29,26034,39325,787Non-interest expense21,21916,19415,509Efficiency ratio(%)68.048.057.0Efficiency ratio,net of CCPB(%)72.547.160.1Revenue growth(%)(7.5)24.07.9Revenue growth,net of CCPB(%)(14.9)33.49.8Non-interest expense growth(%)31.04.49
322、.4Operating leverage(%)(38.5)19.6(1.5)Operating leverage,net of CCPB(%)(45.9)29.00.4Adjusted(1)Net interest income19,09416,35214,310Non-interest revenue14,28410,18112,847Revenue33,37826,53327,157Insurance claims,commissions and changes in policy benefit liabilities(CCPB)1,939(683)1,399Revenue,net of
323、 CCPB31,43927,21625,758Non-interest expense18,79815,19414,550Efficiency ratio(%)56.357.353.6Efficiency ratio,net of CCPB(%)59.855.856.5Revenue growth,net of CCPB(%)15.55.79.7Non-interest expense growth(%)23.74.43.6Operating leverage,net of CCPB(%)(8.2)1.36.1(1)Refer to footnotes(1)to(8)in the Non-GA
324、AP and Other Financial Measures table for further information on adjusting items.Return on Equity and Return on Tangible Common Equity(Canadian$in millions,except as noted)For the year ended October 31202320222021Reported net income4,37713,5377,754Net income attributable to non-controlling interest
325、in subsidiaries12Net income attributable to bank shareholders4,36513,5377,754Dividends on preferred shares and distributions on other equity instruments(331)(231)(244)Net income available to common shareholders(A)4,03413,3067,510After-tax amortization of acquisition-related intangible assets2642366N
326、et income available to common shareholders after adjusting for amortization of acquisition-relatedintangible assets(B)4,29813,3297,576After-tax impact of other adjusting items(1)4,034(4,521)831Adjusted net income available to common shareholders(C)8,3328,8088,407Average common shareholders equity(D)
327、67,48658,07850,451Goodwill(13,466)(5,051)(5,836)Acquisition-related intangible assets(2,197)(130)(381)Net of related deferred liabilities856251271Average tangible common equity(E)52,67953,14844,505Return on equity(%)(=A/D)6.022.914.9Adjusted return on equity(%)(=C/D)12.315.216.7Return on tangible co
328、mmon equity(%)(=B/E)8.225.117.0Adjusted return on tangible common equity(%)(=C/E)15.816.618.9(1)Refer to footnotes(1)to(8)in the Non-GAAP and Other Financial Measures table for further information on adjusting items.BMO Financial Group 206th Annual Report 2023 31MANAGEMENTS DISCUSSION AND ANALYSISRe
329、turn on Equity by Operating Segment(1)2023(Canadian$in millions,except as noted)Canadian P&CU.S.P&CTotal P&CBMO WealthManagementBMO CapitalMarketsCorporateServicesTotal BankU.S.Segment(2)(US$in millions)ReportedNet income available to common shareholders3,6772,6726,3491,1181,648(5,081)4,03456Total a
330、verage common equity13,67227,88941,5616,35611,8567,71367,48627,203Return on equity(%)26.99.615.317.613.9na6.00.2Adjusted(3)Net income available to common shareholders3,6922,9066,5981,1221,672(1,060)8,3322,853Total average common equity13,67227,88941,5616,35611,8567,71367,48627,203Return on equity(%)
331、27.010.415.917.714.1na12.310.52022(Canadian$in millions,except as noted)Canadian P&CU.S.P&CTotal P&CBMO WealthManagementBMO CapitalMarketsCorporateServicesTotal BankU.S.Segment(2)(US$in millions)ReportedNet income available to common shareholders3,7832,4616,2441,2431,7324,08713,3066,052Total average
332、 common equity11,79813,81525,6135,28211,55615,62758,07817,081Return on equity(%)32.117.824.423.515.0na22.935.4Adjusted(3)Net income available to common shareholders3,7842,4666,2501,2461,754(442)8,8082,518Total average common equity11,79813,81525,6135,28211,55615,62758,07817,081Return on equity(%)32.
333、117.824.423.615.2na15.214.7(1)Return on equity is based on allocated capital.In fiscal 2023,following the closing of the Bank of the West acquisition,capital was allocated from Corporate Services to U.S.P&C andBMO Wealth Management.For further information,refer to the How BMO Reports Operating Group Results section.(2)U.S.segment reported and adjusted results comprise net income and allocated capi
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