Investor Presentation Q2 11 - BMO information slides/3/1/Q2 11 Analyst...Investor Presentation Q2 11 May 25 y2011. Risk Review • May 25• 2011 2 Caution Regarding Forward-Looking

1Risk Review • May 25 • 2011

Investor Presentation Q2 11111111

May 25 2011


Caution Regarding Forward-Looking Statements

Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the safe harbour provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2011 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian and U.S. economies.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal or economic policy; the degree of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital and liquidity requirements and guidance; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions; critical accounting estimates; operational and infrastructure risks; general political conditions; global capital markets activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes.

With respect to the M&I transaction, such factors include, but are not limited to: the possibility that the proposed transaction does not close when expected or at all because required regulatory, or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all; the terms of the proposed transaction may need to be modified to satisfy such approvals or conditions; the anticipated benefits from the proposed transaction such as it being accretive to earnings and other impacts on earnings, expanding our North American presence and synergies are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations (including changes to capital requirements) and their enforcement, and the degree of competition in the geographic and business areas in which M&I operates; the ability to promptly and effectively integrate the businesses of M&I and BMO; reputational risks and the reaction of M&I’s customers to the transaction; diversion of management time on merger-related issues; and increased exposure to exchange rate fluctuations. A significant amount of M&I’s business involves making loans or otherwise committing resources to specific companies, industries or geographic areas. Unforeseen events affecting such borrowers, industries or geographic areas could have a material adverse effect on the performance of our integrated U.S. operations.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors could adversely affect our results. For more information, please see the discussion on pages 29, 30, 61 and 62 of BMO’s 2010 Annual Report, which outlines in detail certain key factors that may affect Bank of Montreal’s future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statements, 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-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented and our strategic priorities and objectives, and may not be appropriate for other purposes.

In calculating the pro-forma impact of Basel III on our regulatory capital and regulatory capital ratios, we have assumed our interpretation of the proposed rules announced by the Basel Committee on Banking Supervision (BCBS) as of this date and our models used to assess those requirements are consistent with the final requirements that will be promulgated by BCBS and the Office of the Superintendent of Financial Institutions Canada (OSFI). We have also assumed that the proposed changes affecting capital deductions, risk-weighted assets, the regulatory capital treatment for non-common share capital instruments (i.e. grandfathered capital instruments) and the minimum regulatory capital ratios are adopted as proposed by BCBS and OSFI. We also assumed that existing capital instruments that are non-Basel III compliant but are Basel II compliant can be fully included in such estimates. The full impact of the Basel III proposals has been quantified based on our financial and risk positions at April 30 or as close to April 30 as was practical. The impacts of the changes from IFRS are based on our analysis to date, as set out in Transition to International Financial Reporting Standards in the Future Changes in Accounting Policies – IFRS section in our 2010 Annual Report and later in this document. In calculating the impact of M&I on our capital position, our estimates reflect expected RWA and capital deductions at closing based on anticipated balances outstanding and credit quality at closing and our estimate of their fair value. It also reflects our assessment of goodwill, intangibles and deferred tax asset balances that would arise at closing. The Basel rules could be subject to further change, which may impact the results of our analysis. In setting out the expectation that we will be able to refinance certain capital instruments in the future, as and when necessary to meet regulatory capital requirements, we have assumed that factors beyond our control, including the state of the economic and capital markets environment, will not impair our ability to do so.

In determining the impact of reductions to overdraft fees and interchange fees in the U.S. Legislative Developments section, we have assumed that business volumes remain consistent with our expectations, that the rules on interchange fees are adopted as currently proposed and that certain management actions are implemented that will modestly reduce the impact of the rules on our revenues.

Assumptions about the performance of the Canadian and U.S. economies as well as overall market conditions and their combined effect on the bank’s business are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies.

Non-GAAP Measures

Bank of Montreal uses both GAAP and non-GAAP measures to assess performance. Readers are cautioned that earnings and other measures adjusted to a basis other than GAAP do not have standardized meanings under GAAP and are unlikely to be comparable to similar measures used by other companies. Reconciliations of GAAP to non-GAAP measures as well as the rationale for their use can be found in Bank of Montreal’s Second Quarter 2011 Report to Shareholders and 2010 Annual Report, all of which are available on our website at www.bmo.com/investorrelations.

Examples of non-GAAP amounts or measures include: productivity and leverage ratios; revenue and other measures presented on a taxable equivalent basis (teb); amounts presented net of applicable taxes; core net income and core productivity ratio which exclude impaired loans, Visa litigation and acquisition integration costs; as well as adjusted net income, revenues, earnings per share and other adjusted measures which excludes the impact of certain items.

Bank of Montreal provides supplemental information on combined business segments to facilitate comparisons to peers.

Forward Looking Statements & Non-GAAP Measures


Bill DownePresident & Chief Executive Officer

BMO Financial Group

Strategic Highlights Q2 11

May 25 2011


Financial Results

Solid Y/Y revenue growth 5.5%

Credit losses continued overall improving trend

ROE continues to improve on a strong capital base

On a year-to-date basis, net income ahead 12% with revenue growth of 8.1%

Good second quarter results delivering net income of $800 million

10.15

61.2

15.7

1.30

776

2.0

0.25

3.3

10.67

62.9

16.7

1.34

800

2.0

0.15

3.2

9.83Common Equity Ratio (%)

60.0

16.4

1.26

745

1.8

0.25

3.0

Productivity Ratio (%)

ROE (%)

EPS ($)

Net Income (C$ millions)

Expense

PCL

Revenue

Q2 11

C$ billions unless otherwise indicated

Q1 11Q2 10

Strategic Highlights • May 25 • 2011


P & C Banking Canada

P & C Banking U.S.(US$)

Private ClientGroup

BMOCapital Markets

Q2 11

Personal and Commercial Banking U.S. net income figures in US dollars; all others in Canadian dollars.

Operating Group Performance

Q2 10

797

93226

472

845

85254

492

YTD 11YTD 10

C$ millions unless otherwise indicated

Q2 11Q2 10 Q2 11Q2 10 Q2 11Q2 10

YTD 11YTD 10 YTD 11YTD 10 YTD 11YTD 10

394

45115

260

401

43101

235

Group Net Income



Update on Marshall & Ilsley AcquisitionPlans to integrate M&I with Harris Bank on track as we move towards closing

1

2

3

4

5

Basel III estimated pro forma Common Equity Ratio including M&I strong at 6.9%1 at Apr 30, 2011

Close

Financial

Cost

Brand

Capital

Synergies

Continue to work towards closing by July 31, 2011; M&I shareholders approved transaction on May 17

Brand reinforced with introduction of new name for the U.S. retail business; positive response in the market

Expect to deliver cost synergies in excess of $300 million – continuing to pursue further cost savings

Medium-term aspiration for combined personal, commercial and wealth management businesses to generate $1 billion in earnings annually

Update

1 Estimate based on announced Basel III 2019 rules, the impact of adoption of IFRS, the estimated capital requirements for M&I at closing, the resulting share exchange with M&I shareholders, and assume no additional equity capital raise related to M&I. For further details regarding assumptions and factors used in our calculations refer to pages 5, 14 and 15 of Bank of Montreal’s Second Quarter 2011 Report to Shareholders.



Tom FlynnExecutive Vice President & Chief Financial Officer

BMO Financial Group

Financial Results Q2 11

May 25 2011


Financial Highlights

Another good quarter with net income of $800 millionROE at 16.7%, on a very strong capital base Continued trend of improvement in creditAdjusted net income1 of $804 million and adjusted EPS of $1.35*. Adjustments include (all after-tax):

Charge for hedge of fx on the offer to purchase M&I of $8 million; integration planning of $17 millionAmortization of acquisition intangibles $9 millionDecrease in general allowance $30 million

Capital remains strong - Common Equity ratio of 10.67%

Good second quarter results

10.67%$145MM(5.0)%62.9%16.7%$1.34$800MM$3,217MMQ2 11 (reported)

$3,228MM

Revenue Net Income EPS ROE Productivity Operating

LeverageTotal PCL

Common Equity Ratio

(Basel II)

Q2 11 (adjusted)1 $804MM $1.35 16.8% 61.6% (3.3)% $187MM 10.67%

* For details refer to page 7 of the Second Quarter 2011 Report to Shareholders1 Non-GAAP measures, see slide 2 of the Q2 11 Investor Presentation and page 26 of the Second Quarter 2011 Report to Shareholders

Financial Results • May 25 • 2011


Revenue growth of 5.5% Y/Y and down 3.8% Q/Q. Q/Q results impacted by three fewer days in the quarter, or 1%, and weaker U.S. dollar, or 1%

Adjusted revenue growth of 5.9% Y/Y and down 3.5% Q/Q

Y/Y solid growth in net interest income of 6.4%. Q/Q decreases in BMO Capital Markets and P&C Canada partially offset by higher net interest income in Private Client Group and Corporate Services. Q/Q results impacted by three fewer days in current quarter

NIR growth of 4.6% Y/Y and decline of 7.0% Q/Q. The Q/Q decline was due to decreases in trading and insurance revenues, the latter driven by $50 million earthquake-related reinsurance claims, or approximately 3%. Declines were partially offset by higher securitization revenues in Corporate Services

Net interest margin excluding trading was higher Y/Y due to improved loan spreads in P&C businesses and higher earning assets

Q/Q net interest margin, excluding trading, increased 8 basis points. Increase driven by higher net interest income in Corporate Services and improved spreads in P&C U.S., partially offset by decreased spreads in P&C Canada

U.S. dollar exchange rate decreased revenue growth by $50MM or 1.6% Y/Y and by $35MM or 1.0% Q/Q

1,522 1,571 1,610 1,627 1,620

1,527 1,3361,619 1,719 1,597

Revenue

NII

NIR

Total Bank Revenue(C$MM)

3,049 2,907

Solid year over year revenue growth

189182189188188

235227234224 231

Q2 Q3 Q4 Q1 Q2

NIM NIM (excl. trading)

Net Interest Margin(bps)

F11F10

3,229 3,346 3,217



60.065.3

62.6 61.2 62.9

Q2 Q3 Q4 Q1 Q2

440 499 524 493 516

169 184 213 185 213150153 166

158 163163152 138 177 178

349 326382 434 369

559 584600 599 584

Q2 Q3 Q4 Q1 Q2

F10

Non-Interest Expense

F11

1,830 1,898

Higher Y/Y expenses largely due to higher performance-based compensation, in line with improved revenues, continued investments in the business including staffing increases across groups, and higher costs from acquisitions, including integration planning costsQ/Q employee compensation lower largely due to annual cost of stock-based compensation for employees eligible to retire that is expensed in the first quarter. There were increases in computerequipment costs and professional feesU.S. dollar exchange rate lowered expenses by $33MM or 1.8% Y/Y and by $23MM or 1.1% Q/QAdjusted non-interest expense increased $166 million or 9.2% from a year ago to $1,988 millionOn an Adjusted basis, including the earthquake-related insurance claims, productivity and operating leverage would be 60.7% and (1.6%) respectively

Continued investment in our businesses and focus on cost discipline across BMO

F11F10

Productivity Ratio (%)

Total Bank Non-Interest Expense(C$MM)

Computer Costs

Performance-Based Compensation

Benefits

Premises & Equip.

Salaries

Other1

1 Consists of amortization of intangible assets, communications, business and capital taxes, professional fees, travel and business development and other

2,023 2,046 2,023



Higher Common Equity Ratio Q/Q largely due to higher common equity and lower RWA

Basel II Common Equity and Tier 1 Ratio on pro forma basis at April 30, 2011, after including the impact of the M&I acquisition, announced during the first quarter, estimated to be 9.4% and 11.9% respectively2

On a Basel III basis, pro forma Common Equity and Tier 1 Ratio estimated to be 8.6% and 11.5% respectively, as at April 30, 2011, excluding the impact of the M&I acquisition3. Common Equity Ratio would be 6.9% including M&I2,3

Capital & Risk Weighted Assets

10.6710.1510.2610.279.83Common Equity Ratio (%)(1)

Basel II Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Tier 1 Capital Ratio (%) 13.27 13.55 13.45 13.02 13.82

Total Capital Ratio (%) 15.69 16.10 15.91 15.17 17.03

Assets-to-Capital Multiple (x) 14.23 14.27 14.46 14.80 13.74

RWA ($B) 159.1 156.6 161.2 165.3 158.7

Total As At Assets ($B) 390.2 397.4 411.6 413.2 413.2

17.8 18.3 18.8 19.1 19.2

Q2 Q3 Q4 Q1 Q2

Tier 1 Capital ($B)

Common Shareholders' Equity ($B)

F11

21.1 21.2 21.7

F10

Basel II Tier 1 Capital & Common Shareholders’ Equity

Strong capital position

1 Common equity ratio equals regulatory common equity less Basel II capital deductions divided by RWA. This ratio is also referred to as the Tier 1 common ratio

21.5 21.9

3 Estimates based on announced Basel III 2019 rules, the impact of adoption of IFRS, and assume no additional equity capital raise related to M&I. For further details regarding assumptions and factors used in our calculations refer to pages 5, 14 and 15 of Bank of Montreal’s Second Quarter 2011 Report to Shareholders.

2 Estimates include the estimated capital requirements for M&I at closing, the resulting share exchange with M&I shareholders, and assume no equity capital raise.



Revenue down $84MM or 9.2% Y/Y, from very strong levels in the same quarter last year Net income of $235MM, down $25MM or 9.4% Y/YROE of 21.4% Named the world’s Best Metals & Mining Investment Bank for the second year in a row by Global Finance magazine

Revenue growth of 11% Y/Y, 1.0% Q/QNet income U.S. $43MM down $2MM Y/Y and up $1MMQ/QCore1 net income U.S.$63MM, up $2MM Y/YProductivity ratio of 70.9%Core1 productivity ratio of 63.4%Net interest margin of 430 bps – up 75 bps Y/Y and 26 bps Q/Q

Operating Groups – Quick FactsP&C Canada P&C U.S.

Revenue growth of 4.7% Y/YNet income growth of 1.7% Y/Y Net income growth of 16% Y/Y, adjusted to reflect provisions on an actual loss basisNet interest margin of 293 bps – up 2 bps Y/Y and down 7 bps Q/QContinuing to invest in our strategic prioritiesVolume growth across most products

Revenue growth of 4.5% Y/YExcluding insurance, revenue up 15% Y/YNet income down 13% Y/YExcluding insurance, net income up $29MM or 41% Y/YInsurance net income lowered by $47MM due to earthquake related claimsAUA / AUM up $35B or 14% Y/Y adjusting to exclude the impact of the weaker U.S. dollar; acquisition of Lloyd George Management added $5B in AUM

1 Core: As reported results less impact of impaired loans, Visa litigation and acquisition integration

Private Client Group BMO Capital Markets

* BMO employs a methodology for segmented reporting purposes whereby expected credit losses are charged to the operating groups quarterly based on their share of expected credit losses. The difference between quarterly charges based on expected losses and required quarterly provisions based on actual losses, as well as changes in the general allowance are charged (or credited) to Corporate Services. See Note 26 on page 157 of BMO’s 2010 Annual Report



Operating Group PerformanceOver 70% of revenue and net income from retail businesses in Canada and the US (P&C and PCG)

* Operating segment results reported on an Expected Loss (EL) basis; see Note 26 on page 157 of BMO’s 2010 Annual Report

P&C (Personal & Commercial)

56%

Q2 11 Revenue by Operating Group (C$MM)

P&C (Personal & Commercial)

57%

Q2 11 Net Income by Operating Group (C$MM)

PCG (Wealth

Management) 13%

* Corporate Services net income $21MM

Total 779MM

BMO CM (Investment Banking)

30%

PCG (Wealth

Management) 18%

BMO CM (Investment Banking)

26%

* Corporate Services revenue $(25)MM

P&C US, 349

PCG, 582Canada -

Commercial, 555

Trading Products, 486

Inv & Corp Banking & Other, 350

Canada - Personal, 920 BMO CM

235

PCG 101

P&C US 42

P&C Canada 401

Total 3,242MM



291 296 299 300293

Q2 Q3 Q4 Q1 Q2

F11

Personal & Commercial Banking - Canada

F10


As Reported ($MM) Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q/Q

B/(W)Y/Y

B/(W)

Revenue 1,408 1,490 1,521 1,528 1,475 (4)% 5%

PCL* 121 129 132 136 136 - (13)%

Expenses 722 764 787 773 780 (1)% (8)%

Provision for Taxes 171 172 183 175 158 10% 8%

Net Income 394 425 419 444 401 (10)% 2%

Productivity (%) 51.2 51.3 51.7 50.6 52.8

Delivering on our strategy with good year-over-year volume growth

Y/Y net income growth of 16%, adjusted to reflect provisions on actual loss basis

Good volume growth year over year across personal and commercialbusinesses

Focused on maintaining productivity in low 50’s per cent range

Expanding distribution by investing in branch network, customer contact centre and increasing specialized sales force

Q/Q net income decreased driven by fewer days in the quarter andlower net interest margin

Q/Q NIM decline driven by continued low interest rates, in a competitive environment, resulting in lower mortgage, commercial loan and term deposit spreads; as well as the impact of unfavourable mix from a lower proportion of card balances and deposits




Revenue by Business ($MM)

1 “Personal” Includes Residential Mortgages, Personal Loans, Personal Deposits and Term Deposits, Personal Cards, Mutual Funds and Insurance revenue sharing revenue. “Commercial” Includes Loans, Deposits, Term, Cards, Diners and Moneris

Personal & Commercial Banking - Canada

Personal1( $40MM or 4.5% Y/Y; $36MM or 3.8.% Q/Q)

Y/Y increase driven by volume growth and higher spreads in personal lending products

Q/Q decrease driven by fewer days in the quarter and a lower netinterest margin. Margin decreased due to continued low interestrates, in a competitive environment, resulting in lower mortgageand term deposit spreads as well as the impact of unfavourable mix from a lower proportion of card balances and deposits

Commercial1( $27MM or 4.9% Y/Y; $17MM or 3.1% Q/Q)

Y/Y increase driven by volume growth, favourable product mix and net investment securities gains, partially offset by lower cards revenue

Q/Q decrease due to fewer days in the quarter, due to lower loan spreads in a competitive environment and lower cards revenue, partially offset by net investment securities gains

528563 560 572 555

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

880 927 961 956 920

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11



1 Core: As reported results less impact of impaired loans, Visa litigation and acquisition integration


63.464.067.667.763.8Core1 Productivity (%)

70.972.075.974.269.8Productivity (%)

4%-6363605461Core1 Net Income

38

21

256

30

345

Q3 10

38

20

276

30

364

Q4 10

45

24

229

29

327

Q2 10As Reported (US$MM) Q1 11 Q2 11 Q/Q

B/(W)Y/Y

B/(W)

Revenue 359 363 1% 11%

PCL* 36 37 (1)% (21)%

Expenses 259 257 1% (13)%

Provision for Taxes 22 26 (15)% (9)%

Net Income 42 43 5% (3)%

430404389370355

Q2 Q3 Q4 Q1 Q2

F10

Personal & Commercial Banking - U.S.


Maintaining core earnings through organic revenue growth and expense management

F11

Y/Y revenue and operating expense increases primarily reflect contribution from the Rockford, Illinois-based bank transaction of US$19MM and US$15MM, respectively

Results impacted by higher expenses associated with managing impaired loans. Core expenses are trending down, as reflected in our core productivity improvement Q/Q and Y/Y

Net interest margin improvement driven by increase in loan/deposit spreads and deposit balance growth

Personal business continues to see good household growth while increasing customer loyalty scores; commercial momentum reflected in strong pipelines for new deposit balances and loan originations that is expected to lift loan utilization



153 153 160 167 169

101 99 104 109 115

Q2 Q3 Q4 Q1 Q2

Private Client Group

F10

AUA/AUM ($B)

AUA

AUM

Strong results in traditional wealth; Insurance negatively impacted by earthquake claims

254 252 264 276

Net income declined given negative impact in Insurance from the earthquakes in Japan and New Zealand

Excluding impact of earthquakes productivity ratio improved 300 basis points to 69.1% and operating leverage ratio was 4.7%

Net income in PCG, excluding insurance improved 41% Y/Y and 24% Q/Q

Revenue in PCG, excluding insurance improved 15% Y/Y

Expenses increased Y/Y due to revenue-based costs associated with revenue growth in PCG, excluding insurance, and selective investments to benefit future revenue growth

AUA / AUM grew 14% Y/Y (in source currency). The acquisition of Lloyd George Management increased AUM by $5B in Q2 11

* Operating segment results reported on an Expected Loss (EL) basis; see Note 26 on page 157 of BMO’s 2010 Annual ReportF11

284


75.0

101

42

437

2

582

Q2 11As Reported ($MM) Q2 10 Q3 10 Q4 10 Q1 11 Q/Q

B/(W)Y/Y

B/(W)

Revenue 558 544 593 661 (12)% 5%

PCL* 2 1 2 2 - -

Expenses 402 404 417 459 5% (9)%

Provision for Taxes 39 34 45 47 8% (13)%

Net Income 115 105 129 153 (34)% (13)%

Productivity Ratio (%) 72.1 74.4 70.3 69.5


100

71 8171

86

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Net Income by Business ($MM)

Private Client Group

4434 43

72

1

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Insurance ( $43MM or 98% Y/Y, $71MM or 99% Q/Q )

PCG Excluding Insurance ( $29MM or 41% Y/Y, $19MM or 24% Q/Q )

Net income declined significantly Y/Y as growth in net premium revenue was more than offset by unusually high earthquake reinsurance claims related to events in Japan and New Zealand reducing Q2 11 net income by $47MM Net income declined significantly Q/Q, from strong Q1 results, primarily due to earthquake reinsurance claims and adverse effects of unfavourable market movements on policyholder liabilities relative to the previous quarter For the remainder of F2011, any further reinsurance losses resulting from natural catastrophes are limited to $40MM

Net income grew 41% Y/Y with revenue growth across all of businesses from our continued focus on attracting new client assets and improving equity marketsNet income grew 24% Q/Q with revenue growth across most of businesses. Expenses declined as we continue to focus on expense management. Q1 11 included stock-based compensation costs for employees eligible to retire




21.421.920.1

11.8

24.9

Q2 Q3 Q4 Q1 Q2

BMO Capital Markets

F10 F11

Return on Equity (%)


B/(W)Y/Y

B/(W)

Revenue 920 679 836 963 836 (13)% (9)%

PCL* 67 66 66 30 30 - 55%

Expenses 469 422 463 493 468 5% -

Provision for Taxes 124 61 93 183 103 43% 17%

Net Income 260 130 214 257 235 (9)% (9)%

Trading revenues decreased Q/Q and Y/Y driven by lower client activity and fewer trading opportunities

Increased M&A and debt underwriting fees, higher securities commissions, and higher revenues from interest-rate-sensitive businesses Y/Y. Decreased investment banking fees and decreased revenues from interest-rate-sensitive businesses Q/Q were offset by increased net investmentsecurities gains and higher securities commissions

Corporate banking revenues decreased Q/Q and Y/Y mainly due to lower lending fees

Expenses have decreased Q/Q due to lower variable compensation costs, in line with revenue performance. Expenses were relatively flat Y/Y

Previous quarter results included a provision for prior periods’ income taxes in the U.S. segment


Continued good financial performance due to focus on our clients and our diversified portfolio of businesses



Revenue by Business ($MM)

BMO Capital Markets

350368337282304

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Investment & Corporate Banking ( $46 MM or 15% Y/Y, $18MM or 5% Q/Q)

Trading Products ( $130MM or 21% Y/Y, $109MM or 18% Q/Q)

Y/Y higher revenue mainly due to strong M&A performance, higher debt underwriting fees, and to a lesser extent increased net investment securities gains. This was partially offset by lower corporate banking revenue due to lower lending feesQ/Q lower revenue mainly due to decreased equity underwriting, M&A, and lending fees, partially offset by increased net investment securities gains

486595

499397

616

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Y/Y lower revenue mainly due to lower trading revenue resulting from a combination of lower client activity and fewer trading opportunities. There were also decreased net investment securities gains. Partially offsetting these lower revenues were higher commissions, higher revenues from interest-rate-sensitive businesses, and higher debt underwriting feesQ/Q significantly lower trading revenue resulting from less favourable trading environment as noted above, and to a lesser extent lower revenues from interest-rate-sensitive businesses and decreased net investment securities gains



Corporate Services (Including Technology and Operations)

Higher revenues and lower PCL driving improved bottom line

• Operating segment results reported on an Expected Loss (EL) basis; see Note 26 on page 157 of BMO’s 2010 Annual Report1 See Non-GAAP measures on slide 2 of the Q2 11 Investor Presentation and Notes to Users: Taxable Equivalent Basis, in the Q2 11 Supplementary Financial Information package


B/(W)Y/Y

B/(W)

Revenue (teb)1 (173) (167) (99) (168) (25) 86% 86%

PCL* – Specific 28 (13) 22 43 (16) +100% +100%

– General -- -- -- -- (42) +100% +100%

Expenses 3 40 69 60 91 (56)% +(100)%

Provision for Taxes (152) (182) (146) (169) (97) (42)% (36)%

Net Income (70) (31) (62) (120) 21 +100% +100%

Y/Y net income higher by $91 million mostly due to lower provisions for credit losses and higher revenues

PCL was better by $86 million, including a reduction in the general allowance this quarter, contributing $60 million to the improvement

Revenue was better by $148 million mostly due to higher interest on the settlement of certain income tax matters, a lower Group TEB offset, unfavourable impact of hedging activities in Q2 2010 and higher securitization revenues, mainly due to credit card securitization this quarter

Expense growth driven by higher technology investment spending, M&I integration planning costs and higher employee costs

Q/Q net income higher by $141 million due to lower provisions for credit losses and higher revenues

PCL was better by $101 million, including a reduction in the general allowance this quarter, contributing $71 million to the improvement

Revenue was better by $143 million largely due to higher interest on settlement of certain income tax matters, higher securitization revenues, mainly due to a credit card securitization this quarter and lower Group TEB offset



15% 14% 14% 13% 13%

85% 86% 86% 87% 87%

Businesses and governments ( $2.3B) Individuals ( $0.5B)Banks, used in trading activities ( $0.5B) Weaker U.S. dollar reduced balances by $3.8B

Consumer instalment & other personal ( $0.3B)Non-residential mortgages ( $0.4B)Residential mortgages ( $0.6B)Credit cards ( $0.3B)Businesses and governments ( $0.04B) Customers’ liability under acceptances & allowance for credit losses ( $0.1B)Weaker U.S. dollar decreased balances by $2.0BY/Y average Canadian assets increased $16.2B or 6.3% driven by increase of

$9.2B in P&C Banking$6.5B, or 6.6%, increase in personal lending$2.5B, or 7.1%, increase in commercial lending

$6.3B in BMO CM

42% 42% 42% 43% 43%

58% 58% 58% 57% 57%

Q2 Q3 Q4 Q1 Q2

Wholesale Banking Retail BankingF11

Average Deposits (C$B)

240 244 248

F10

Average Net Loans & Acceptances (C$B)

170 173

Balance Sheet

Average Deposits Average Deposits Average Deposits Average Deposits ( $2.3B Q/Q)

Average Net Loans & Acceptances Average Net Loans & Acceptances Average Net Loans & Acceptances Average Net Loans & Acceptances ( $0.04B Q/Q)

1 Corporate Services is included in Retail Banking’s average net loans and acceptances, and in Wholesale Banking’s average deposits

1 1

175

255

176 176

252



P&C Canada – Market Share & Product BalancesPe

rson

alC

omm

’lPe

rson

alC

omm

erci

al

Sources: Mutual Funds – IFIC, Consumer Loans, Residential Mortgages & Personal Deposits – Bank of Canada, Personal Cards NRS – CBA1Personal Cards NRS are issued on a one fiscal quarter lag basis. (N/A means not available)2Personal share statistics are issued on a one-month lag basis. (Q2 11: Mar 2011)3Business loans (Banks) data is issued by CBA on a one calendar quarter lag basis (Q2 11: Dec 2010)

N/A13.113.013.113.2Personal Cards (Net Retail Sales) 1

19.9

13.5

11.9

10.2

Q2 10

20.2

13.5

11.9

10.2

Q3 10

20.3

13.4

11.8

10.2

Q4 10

20.2

13.5

11.6

10.2

Q2 11

10.2Total Personal Lending

Market Share (%) 1 Q1 11

Personal Deposits2 11.7

Mutual Funds2 13.4

Commercial Loans $0 - $5MM3 20.4

37.836.736.736.235.3Commercial Loans & Acceptances

103.5102.6101.399.397.0Total Personal Lending

31.6

1.7

65.9

7.2

63.6

33.4

Q2 10

32.5

1.7

66.7

7.3

64.3

35.0

Q3 10

33.1

1.7

66.6

7.4

64.9

36.4

Q4 10

34.8

1.6

66.1

7.2

65.5

38.0

Q2 11

7.5Personal Cards

Balances ($B)(Owned & Managed) Q1 11

Personal Loans 37.3

Residential Mortgages 65.3

Personal Deposits 66.2

Commercial Cards 1.7

Commercial Deposits 34.7

PersonalTotal Personal lending balances increased Y/Y and Q/Q, driven by growth in branch-originated mortgages and Homeowner ReadiLine products. Market share remained flat Y/Y and Q/QPersonal deposit balances increased Y/Y but decreased Q/Q, driven by a decrease in term deposits. Market share declined Y/Y and Q/Q Personal Cards balances flat Y/Y and decreased Q/Q

CommercialContinue to rank second in Canadian business lending market shareCommercial loans up $2.5B Y/Y or 7.1% Commercial deposit balances increasing over the past 8 quarters, up $3.2B or 10.3% Y/Y, reflecting focus on meeting customer needs



3.63.63.73.73.6Serviced Mortgages

Personal Products –Average Balances (US$B) Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Mortgages 4.5 4.4 4.2 4.2 4.1

Other Personal Loans 5.0 5.1 5.1 4.9 4.8

Indirect Auto 4.2 4.3 4.3 4.4 4.4

Deposits 14.6 15.9 16.0 15.6 15.9

11.111.710.710.09.7Commercial Deposits

Commercial Products –Average Balances (US$B)

Q2 10 Q3 10 Q4 10 Q1 11 Q2 11

Commercial Loans 12.0 12.0 12.1 12.1 11.7

P&C U.S. – Product Balances

Personal

Mortgage pipeline and originations both better than Q2’10, $116MM or 30% and $83MM or 28%, respectivelyDecline in mortgage balances primarily driven by amortization/run off of outstandings and new originations being sold in secondary marketIndirect Auto balances up $140MM or 3% from Q2’10Core Deposit growth of $267MM from previous quarter and $451MM from start of the fiscal year

Commercial

Excluding the Rockford, Illinois-based bank transaction’s $1.0B of average loans and $0.4B of average deposits, commercial loans declined Y/Y, reflecting impact of lower client loan utilization and run off of exit portfolio. Deposits grew due to sales efforts

Core commercial banking business (excluding exit portfolio) saw commercial loan growth of $88MM or 1% Q/Q



Q2 11

May 25 2011

Surjit Rajpal Executive Vice President & Chief Risk Officer

BMO Financial Group

Risk Review


Services5%

Consumer Loans31%

Residential Mortgages

31%

Other27%

Other18%

Consumer Loans28%

Residential Mortgages

14%

Financial11%

Manufacturing7%

Services7%

1 Other Countries portfolio, C$8B not shown in graphs.

2 Other includes Portfolio Segments that are each <5% of the total.

P&C Commercial41%

BMO CM15%

P&C Consumer44%

Canada(C$138B)

US(C$30B)

By Line of BusinessBy Segment1 (C$176B)

Loan Portfolio – Well Diversified by Segment and Business

Canadian and US portfolios well diversified. Canadian portfolio 78% of loans, US portfolio 17%.

P&C banking business represents the majority of loans.

Retail portfolios are predominantly secured – 87% in Canada and 98% in the US.

Canadian portfolios performance sound.

US Loan Portfolio:

Consumer portfolio is $13.5B, relatively evenly split between Home Equity, Residential Mortgages and the Auto portfolios.

Commercial Real Estate/Investor Owned Mortgages at $2.7B ($2.2B excluding the Q2 '10 acquired portfolio) not large at 9% of US loans and less than 2% of total loans.

The Investor-Owned Mortgage portfolio is $1.6B. Prudent lending practices maintained and portfolio has a largely Midwestern footprint (73% IL).

Developer portfolio continues to reduce and is ~2% of the total US portfolio. Majority of the portfolio is impaired.

Real estate markets remain weak.

2

2

Owner Occupied

Commercial Mortgages

6%

CRE/Investor Owned Mortgages

9%


6%

P&C Commercial29%

BMO CM7%

P&C Consumer64%


Forest Products10%

Retail21%

Agriculture10%

Services8%

Manufacturing10%Mining

5%

Other18%


13%

Other8%

Services7%

Manufacturing8%

US73%

Canada27%

Impaired Loans and FormationsQ2 '11 formations lower than last quarter and a year ago at $147MM (Q1 '11: $283MM, Q2 '10: $366MM). Q2 '11 Canadian formations $39MM (Q1 '11: $120MM) well spread across sectors.Q2 '11 US formations of $108MM (Q1 '11: $163MM) with CRE/Investor Owned Mortgages the largest sector.Gross Impaired Loans (GIL) on a core basis of $2,501MM versus $2,777MM in Q1. GIL balances $2,792MM (Q1 '11: $3,066MM) including GILs from the Q2 '10 US bank acquisition covered by FDIC loss share agreement1.

Canada & Other impaired balances account for 33%, US 67%. Largest segment in Canada being the Consumer portfolio. Largest segments in US relate to Commercial Real Estate.

1 As part of the purchase agreement BMO is indemnified against 80% of the losses associated with this portfolio by the FDIC.

2 Other includes Portfolio Segments that are each <5% of the total.

GIL Formations(C$147MM)

Canada(C$39MM)

US(C$108MM)


56%Owner Occupied

Commercial Mortgages

21%

694549

735

456366

242

461283

147

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Quarterly Formations

2009 2010 2011

2

2

Owner Occupied Commercial Mortgages

5%


Quarterly

372 357 386 333249 214 253 248

(42)

187

60

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Specific PCL General PCL

Provision for Credit Losses

(48)(46)(55)Losses on Securitized Assets

532PCG

249-

249

(4)12

(16)

10134

67

20550

155

Q2 ‘10

2124Commercial – P&C Canada

145(42)

187

00

0

7936

43

151

130

Q2 '11

8Capital Markets Canada & Other

(8)Capital Markets US

0Total Capital Markets

61Consumer – P&C US

70Commercial – P&C US

131Total P&C US

248Total PCL-Change in General Allowance

248Specific Provisions

160Total P&C Canada

136Consumer – P&C Canada

Q1 '11 Business Segment

(By Business Line Segment)

(C$ MM)

Specific provisions at $187MM are down from last quarter (Q1 '11: $248MM).P&C Canada provisions at $151MM are down quarter/quarter (Q1 '11: $160MM) and significantly lower year/year (Q2 '10: $205MM). P&C US provisions lower quarter/quarter, benefitting from lower provisions in CRE/Investor Owned and Residential Mortgage sectors. On a net basis there were no provisions in Capital Markets.Total provisions include a decrease in the General Allowance of $42MM.

1

1 P&C Canada Consumer includes losses associated with securitized assets which are accounted for as negative NIR in Corporate, not as PCL on the income statement, were F‘10: $203MM ( F'09: $172MM).


Consumer Loans35%

Cards5%

Residential Mortgages18%

Construction6%

Other2%

Manufacturing 10%

Consumer Loans40%

Services6%

Other9%

Cards35%

Canada52%

US48%

US(C$90MM)

Canada (C$98MM)

Specific Provision Segmentation1

By Portfolio

Canadian provisions lower at $98MM (Q1 '11: $116MM, Q2 '10: $139MM), continue to be centred in the Consumer portfolio. Commercial provisions were well diversified.

US provisions lower at $90MM (Q1 '11: $132MM, Q2 '10: $123MM). The Consumer sector represents approximately half of provisions with Commercial Real Estate related the largest sector within Commercial & Corporate.

1 Excludes losses on securitized assets of $48MM in P&C Canada Consumer that are accounted for as negative NIR in the Corporate segment.

2 Chart excludes recoveries of $1MM in Other Countries.3 Other includes Portfolio Segments that are each <5% of the total.

By Geography(C$187MM) ² 3


19%

Owner Occupied Commercial Mortgages

15%

3


(30)

(20)

(10)

0

10

20

30

40

50

01-F

eb-1

1

07-F

eb-1

1

11-F

eb-1

1

17-F

eb-1

1

24-F

eb-1

1

02-M

ar-1

1

08-M

ar-1

1

14-M

ar-1

1

18-M

ar-1

1

24-M

ar-1

1

30-M

ar-1

1

05-A

pr-1

1

11-A

pr-1

1

15-A

pr-1

1

21-A

pr-1

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28-A

pr-1

1

Daily Revenues Total Trading & Underwriting MVE Interest Rate VaR (AFS)

Trading & Underwriting Net Revenues vs. Market Value Exposure

February 1, 2011 to April 30, 2011 (Presented on a Pre-Tax Basis)

February 15$24.2MM

February 28$29.0MM

April 15$(20.7)MM

April 29$38.9MM

The largest daily P&L gains for the quarter are as follows: ▪ February 15 – CAD $24.2MM: Primarily reflects normal trading activity and credit valuation adjustments.▪ February 28 – CAD $29.0MM: Primarily reflects normal trading and activity and credit valuation adjustments.▪ April 29 – CAD $38.9MM: Primarily reflects normal trading activity and valuation adjustments.

The largest daily P&L loss for the quarter was April 15 – CAD $(20.7)MM which primarily reflects credit valuation adjustments.


Investor Relations Contact Information

VIKI LAZARISSenior Vice [email protected]

E-mail: [email protected]

www.bmo.com/investorrelations

Fax: 416.867.3367

ANDREW CHINSenior [email protected]

Investor Presentation Q2 11 - BMO information slides/3/1/Q2 11 Analyst...Investor Presentation Q2 11 May 25 y2011. Risk Review • May 25• 2011 2 Caution Regarding Forward-Looking

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