Mr. Darryl White reports

BMO FINANCIAL GROUP REPORTS THIRD QUARTER 2021 RESULTS

For the third quarter ended July 31, 2021, Bank of Montreal recorded net income of $2,275-million or $3.41 per share on a reported basis, and net income of $2,292-million or $3.44 per share on an adjusted basis.

"Operating momentum across our diversified businesses continues to drive strong financial performance. We recorded third quarter adjusted earnings per share of $3.44, with strong preprovision pretax earnings of $2.9-billion, up 12 per cent year over year, driven by revenue growth of 10 per cent," said Darryl White, chief executive officer, BMO Financial Group.

"We are executing strategies and investing in our businesses to deliver strong returns and efficiency improvements, which this quarter, delivered positive operating leverage of 2.1 per cent, an efficiency ratio of 55.7 per cent, a 110-basis-point improvement from last year, and return on equity of 17.6 per cent. Our leadership in risk and balance sheet management remains a key differentiator and contributed to continued strong credit metrics and a robust capital position with a CET1 ratio of 13.4 per cent.

"Our consistent financial performance enables us to deliver on our vision for a sustainable future. This quarter, we continued to advance our work to address the impact of climate change and champion inclusivity, and made a long-term pledge to supporting the development of affordable housing. With the economic recovery continuing to take hold, and as communities adapt to the most recent pandemic developments, we are committed to helping our clients make real financial progress and supporting their growth ambitions," concluded Mr. White.

Adjusted results in the current quarter excluded the impact of divestitures and a partial reversal of restructuring charges recorded in the fourth quarter of 2019, related to severance. Adjusted results also excluded the amortization of acquisition-related intangible assets and acquisition integration costs in both the current and prior years. Reported and adjusted net income increased from the prior year, driven by net revenue growth of 10 per cent, higher expenses, including higher performance-based compensation reflective of strong revenue, and the impact of lower provisions for credit losses. Net income increased across all operating groups.

Return on equity (ROE) was 17.5 per cent, an increase from 9.4 per cent in the prior year, and adjusted ROE was 17.6 per cent, an increase from 9.6 per cent. Reported and adjusted return on tangible common equity (ROTCE) was both 19.8 per cent in the current quarter, an increase from 11.1 per cent on both a reported and an adjusted basis in the prior year.

Concurrent with the release of results, BMO announced a fourth quarter 2021 dividend of $1.06 per common share, unchanged from the prior quarter and the prior year. The quarterly dividend of $1.06 per common share is equivalent to an annual dividend of $4.24 per common share.

Third quarter performance review

Canadian P&C (property and casualty)

Reported and adjusted net income was $815-million, both increasing $496-million from the prior year. Results were driven by a 14-per-cent increase in revenue with higher net interest income and non-interest revenue, higher expenses and a decrease in the provision for credit losses.

During the quarter, the bank was named best commercial bank in Canada by World Finance magazine for the seventh consecutive year, recognized for its innovative and client-centric approach, commitment to digital transformation and experience, and holistic understanding of market trends and changing client needs -- especially during the COVID-19 pandemic. This award speaks to the bank's continued focus and commitment to its clients, and its expertise across industries to meet clients' evolving and unique needs. In addition, to help its business clients through the challenging times brought on by the pandemic, the bank extended its Lifeworks Wellness Assistance program to Canadian business banking clients across Canada, at no additional cost.

U.S. P&C

Reported net income was $553-million, an increase of $290-million from the prior year, and adjusted net income was $559-million, an increase of $286-million.

Reported net income was $448-million (U.S.), an increase of $256-million (U.S.) from the prior year, and adjusted net income was $453-million (U.S.), an increase of $254-million (U.S.). Results were driven by a 7-per-cent increase in revenue with higher net interest income and non-interest revenue, modestly higher expenses and a decrease in the provision for credit losses.

During the quarter, BMO Harris Bank and Lively Inc., creators of the modern health savings account (HSA), announced that they will bring a modern HSA experience to eligible individual BMO customers and commercial banking clients. Beginning this fall, new HSAs will be delivered by Lively, providing BMO customers with a more engaging HSA experience, designed to help them make real financial progress through more powerful health savings tools.

BMO wealth management

Reported net income was $401-million, an increase of $60-million or 18 per cent from the prior year, and adjusted net income was $406-million, an increase of $57-million or 16 per cent. Results were driven by an 11-per-cent increase in net revenue, partially offset by higher expenses. Traditional wealth reported net income was $328-million, an increase of $57-million or 21 per cent, and adjusted net income was $333-million, an increase of $54-million or 19 per cent, driven by higher revenue, primarily from growth in client assets, including stronger global markets, partially offset by higher expenses. Insurance net income was $73-million, relatively unchanged from the prior year.

BMO has been recognized as the best private bank by World Finance magazine for the 11th consecutive year. This award speaks to BMO private wealth's dedicated support to its clients and their families, as they navigate the complexity of managing their wealth during times of uncertainty. In addition, BMO global asset management Canada was recognized at the Responsible Investment Association's 2021 leadership awards, receiving top honours in the stewardship and market education categories. BMO GAM won the stewardship award for its work to accelerate Canadian diversity and inclusion beyond gender, and the market education award for the development and launch of the MyESG analytics tool, a first-of-its-kind self-assessment tool that enables financial advisers to better achieve the bank's clients' ESG (environmental, social and corporate governance) objectives.

BMO capital markets

Reported net income was $558-million, an increase of $132-million or 31 per cent from the prior year, and adjusted net income was $564-million, an increase of $129-million or 30 per cent. Results were driven by continued strong revenue performance, with higher investment and corporate banking revenue partially offset by lower global markets revenue, higher expenses driven by increased performance-based compensation, and a recovery of credit losses, compared with elevated levels of provisions in the prior year.

During the quarter, BMO capital markets announced it is establishing a dedicated energy transition group to support its clients in their pursuit of energy transition opportunities. This new group is expected to accelerate BMO capital markets' participation in the economy's energy transition by providing knowledge, tools and support the bank's industry groups as the bank engages with clients on their energy transition endeavours. The bank also continues to leverage its deep industry expertise and insights across different sectors to support its clients, and acted as left lead arranger and left lead bookrunner to support OMERS's buyout of Gastro Health.

Corporate services

Reported and adjusted net loss for the quarter were $52-million, compared with a reported and adjusted net loss of $117-million in the prior year. Adjusted results increased due to higher revenue, driven by higher securities gains and treasury-related activities, partially offset by higher expenses.

Capital

BMO's common equity Tier 1 (CET1) ratio was 13.4 per cent as at July 31, 2021, an increase from 13.0 per cent at the end of the second quarter of fiscal 2021, driven by retained earnings growth.

Credit quality

Total recovery of credit losses was $70-million, compared with a provision for credit losses of $1,054-million in the prior year. The total recovery of credit losses ratio was six basis points, compared with a provision for credit losses ratio of 89 basis points in the prior year. The provision for credit losses on impaired loans was $71-million, a decrease of $375-million from $446-million in the prior year, largely due to lower commercial provisions in the bank's P&C businesses, and in BMO capital markets. The provision for credit losses on impaired loans ratio was six basis points, compared with 38 basis points in the prior year. There was a $141-million recovery of credit losses on performing loans in the current quarter, compared with a $608-million provision in the prior year. The $141-million recovery of credit losses in the current quarter reflected an improving economic outlook and positive credit migration, partially offset by the impact of the uncertain economic environment on future credit conditions, as well as balance growth, while the $608-million provision in the prior year reflected the impact of the extraordinary and highly uncertain environment on credit conditions, the economy and scenario weights.

Supporting a sustainable and inclusive recovery

At BMO, the bank has a long-standing commitment to support a sustainable future, a thriving economy and an inclusive society, and the bank is acting with purpose. In support of its customers, communities and employees, BMO recently:

• Announced a $12-billion commitment to finance affordable housing in Canada over a 10-year period;
• Deployed loans and investments as part of BMO EMpower, a $5-billion (U.S.) commitment over five years to address key barriers faced by minority businesses, communities and families in the United States;
• Pledged $200,000 in grants to women-owned businesses in Canada and the United States through BMO celebrating women, a bank-owned recognition program for women in North America;
• Continued to support economic self-sufficiency of indigenous communities, creating a long-term partnership with the Native Women's Association of Canada and making e-learning available to help foster greater understanding of indigenous perspectives through education;
• Assisted customers experiencing financial hardship caused by the COVID-19 pandemic, including facilitating access to relief programs introduced by the Canadian and U.S. governments, such as the Canada emergency business account (CEBA) program, the highly affected sector credit availability program (HASCAP) and the trade expansion lending program (TELP) in Canada, and the paycheck protection program (PPP) in the United States.

                                            FINANCIAL HIGHLIGHTS
                                       (in millions, except as noted)

                                           Q3 2021     Q2 2021     Q3 2020    YTD 2021    YTD 2020
Reported results
Revenue                                     $7,562      $6,076      $7,189     $20,613     $19,200
Insurance claims, commissions and
changes (loss) in policy benefit
liabilities (CCPB)                            (984)        283      (1,189)     (1,302)     (1,708)
Revenue, net of CCPB                         6,578       6,359       6,000      19,311      17,492
Total provision for credit (losses)             70         (60)     (1,054)       (146)     (2,521)
Non-interest (expense)                      (3,684)     (4,409)     (3,444)    (11,706)    (10,629)
Income before income taxes                   2,964       1,890       1,502       7,459       4,342
Provision for income taxes (loss)             (689)       (587)       (270)     (1,864)       (829)
Net income                                   2,275       1,303       1,232       5,595       3,513
EPS                                           3.41        1.91        1.81        8.35        5.18
Adjusting items (pretax)
Acquisition integration (costs)                 (3)         (2)         (5)         (8)        (11)
Amortization of acquisition-related
intangible assets (loss)                       (19)        (24)        (32)        (68)        (91)
Impact of divestitures (loss)                  (24)       (771)          -        (795)          -
Restructuring costs (reversals)                 24           -           -          24           -
Adjusting items included in
reported pretax income (loss)                  (22)       (797)        (37)       (847)       (102)
Adjusting items (after tax)
Acquisition integration (costs)                 (2)         (2)         (4)         (6)         (8)
Amortization of acquisition-related
intangible assets (loss)                       (15)        (18)        (23)        (52)        (70)
Impact of divestitures (loss)                  (18)       (772)          -        (790)          -
Restructuring costs (reversals)                 18           -           -          18           -
Adjusting items included in
reported net income after tax (loss)           (17)       (792)        (27)       (830)        (78)
Impact on EPS (loss)                         (0.03)      (1.22)      (0.04)      (1.28)      (0.12)
Adjusted results
Revenue                                      7,562       6,047       7,189      20,584      19,200
Insurance claims, commissions and
changes in policy benefit
liabilities (CCPB) (loss)                     (984)        283      (1,189)     (1,302)     (1,708)
Revenue, net of CCPB                         6,578       6,330       6,000      19,282      17,492
Total provision for credit (losses)             70         (60)     (1,054)       (146)     (2,521)
Non-interest (expense)                      (3,662)     (3,583)     (3,407)    (10,830)    (10,527)
Income before income taxes                   2,986       2,687       1,539       8,306       4,444
Provision for income taxes (loss)             (694)       (592)       (280)     (1,881)       (853)
Net income                                   2,292       2,095       1,259       6,425       3,591
EPS                                           3.44        3.13        1.85        9.63        5.30

Investor and media presentation

Investor presentation materials

Interested parties are invited to visit BMO's website to review the 2020 annual MD&A (management discussion and analysis) and audited annual consolidated financial statements, quarterly presentation materials, and supplementary financial and regulatory information package.

Quarterly conference call and webcast presentations

Interested parties are also invited to listen to the company's quarterly conference call on Tuesday, Aug. 24, 2021, at 8:15 a.m. Eastern Time. The call may be accessed by telephone at 416-406-0743 (from within Toronto) or 1-800-898-3989 (toll-free outside Toronto), entering pass code: 1365804 followed by the number sign. A replay of the conference call can be accessed until Sept. 21, 2021, by calling 905-694-9451 (from within Toronto) or 1-800-408-3053 (toll-free outside Toronto) and entering pass code: 9195676 followed by the number sign.

A live webcast of the call can be accessed on the bank's website. A replay can also be accessed on the website.

BMO's 2020 annual MD&A, audited consolidated financial statements, annual information form and annual report on form 40-F (filed with the U.S. Securities and Exchange Commission) are available on-line at the bank's website and on SEDAR. Printed copies of the bank's complete 2020 audited consolidated financial statements are available free of charge upon request at 416-867-6785 or corp.secretary@bmo.com.

Annual meeting 2022

The next annual meeting of shareholders will be held on Wednesday, April 13, 2022, in Toronto, Ont.

We seek Safe Harbor.