Second Quarter Report 2004 I am pleased to present BMO Financial - PDF document

For the period ended April 30, 2004 Second Quarter Report 2004 I am pleased to present BMO Financial Group’s Second Quarter 2004 Report to Shareholders. Tony Comper President and Chief Executive Officer May 26, 2004

Financial Highlights (Canadian $ in millions except as noted) For the three months ended For the six months ended April 30, January 31, October 31, July 31, April 30, Change from April 30, April 30, Change from 2004 2004 2003 2003 2003 April 30, 2003 2004 2003 April 30, 2003 Income Statement Highlights Total revenue $ 2,437 $ 2,363 $ 2,369 $ 2,307 $ 2,164 12.6% $ 4,800 $ 4,443 8.0% Total revenue (teb) (a) 2,476 2,401 2,411 2,334 2,208 12.1 4,877 4,526 7.7 Provision for credit losses 5 15 95 90 120 (95.8) 20 270 (92.6) Non-interest expense 1,565 1,561 1,545 1,485 1,484 5.4 3,126 3,057 2.2 Net income 602 532 513 504 409 46.9 1,134 808 40.3 Common Share Data ($) Diluted earnings per share $ 1.12 $ 1.00 $ 0.97 $ 0.95 $ 0.77 $ 0.35 $ 2.12 $ 1.52 $ 0.60 Diluted cash earnings per share (a) 1.17 1.03 1.00 0.99 0.81 0.36 2.20 1.60 0.60 Dividends declared per share 0.40 0.35 0.35 0.33 0.33 0.07 0.75 0.66 0.09 Book value per share 23.82 22.87 22.09 21.92 21.34 2.48 23.82 21.34 2.48 Closing share price 51.90 57.79 49.33 44.65 40.10 11.80 51.90 40.10 11.80 Total market value of common shares ($ billions) 26.1 29.0 24.6 22.2 19.9 6.2 26.1 19.9 6.2 As at April 30, January 31, October 31, July 31, April 30, Change from 2004 2004 2003 2003 2003 April 30, 2003 Balance Sheet Highlights Assets $ 273,056 $ 265,394 $ 256,494 $ 257,685 $ 257,928 5.9% Net loans and acceptances 156,436 149,585 146,156 147,275 150,724 3.8 Deposits 184,927 178,069 171,551 170,902 165,435 11.8 Common shareholders’ equity 11,963 11,490 11,036 10,918 10,580 13.1 For the three months ended For the six months ended April 30, January 31, October 31, July 31, April 30, April 30, April 30, 2004 2004 2003 2003 2003 2004 2003 Primary Financial Measures (%) (b) Average annual five year total shareholder return 14.8 15.2 12.9 7.3 3.8 14.8 3.8 Diluted earnings per share growth 45.5 33.3 29.3 46.2 35.1 39.5 18.8 Diluted cash earnings per share growth (a) 44.4 30.4 26.6 41.4 37.3 37.5 19.4 Return on equity 20.4 18.3 17.9 18.0 15.2 19.4 14.7 Cash return on equity (a) 21.1 19.0 18.5 18.8 15.9 20.1 15.5 Net economic profit (NEP) growth (a) +100 94.9 74.1 +100 +100 +100 67.8 Revenue growth 12.6 3.7 4.7 8.9 (1.3) 8.0 1.6 Revenue growth (teb) (a) 12.1 3.6 5.4 8.9 (0.6) 7.7 2.2 Non-interest expense-to-revenue ratio 64.2 66.1 65.2 64.4 68.6 65.1 68.8 Non-interest expense-to-revenue ratio (teb) (a) 63.2 65.0 64.0 63.7 67.2 64.1 67.5 Cash non-interest expense-to-revenue ratio (teb) (a) 62.2 63.9 63.1 62.6 66.0 63.0 66.3 Provision for credit losses-to-average loans and acceptances (annualized) 0.01 0.04 0.25 0.24 0.32 0.03 0.36 Gross impaired loans and acceptances-to-equity and allowance for credit losses 9.04 11.03 12.15 12.91 14.88 9.04 14.88 Cash and securities-to-total assets ratio 29.2 29.1 29.1 28.6 26.3 29.2 26.3 Tier 1 capital ratio 9.67 9.65 9.55 9.21 9.10 9.67 9.10 Credit rating Standard & Poor’s AA- AA- AA- AA- AA- AA- AA- Moody’s Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Aa3 Other Financial Ratios (% except as noted) (b) Twelve month total shareholder return 33.1 44.1 33.4 30.6 9.8 33.1 9.8 Dividend yield 3.1 2.4 2.8 3.0 3.3 2.9 3.3 Price-to-earnings ratio (times) 12.5 15.4 14.1 13.6 13.5 12.5 13.5 Market-to-book value (times) 2.18 2.53 2.23 2.04 1.88 2.18 1.88 Net economic profit ($ millions) (a) 302 238 221 220 140 540 262 Return on average assets 0.88 0.79 0.77 0.74 0.64 0.84 0.63 Net interest margin 1.74 1.87 1.85 1.81 1.89 1.80 1.89 Net interest margin (teb) (a) 1.80 1.92 1.91 1.84 1.96 1.86 1.95 Non-interest revenue-to-total revenue 51.3 46.8 47.8 47.0 44.2 49.1 45.1 Non-interest revenue-to-total revenue (teb) (a) 50.5 46.0 47.0 46.5 43.3 48.3 44.3 Non-interest expense growth 5.4 (0.7) (3.6) (0.2) 0.5 2.2 4.0 Total capital ratio 11.53 11.67 12.09 12.09 12.02 11.53 12.02 Tier 1 capital ratio – U.S. basis 9.28 9.25 9.17 8.79 8.62 9.28 8.62 Equity-to-assets ratio 5.5 5.4 5.5 5.4 5.3 5.5 5.3 All ratios in this report are based on unrounded numbers. generally accepted accounting principles (GAAP) do not have standardized meanings under (a) Refer to the “Non-GAAP Measures” section on page 5 for an explanation of cash results, reporting GAAP and are unlikely to be comparable to similar measures used by other companies. on a taxable equivalent basis (teb) and net economic profit. Securities regulators require that (b) For the period ended, or as at, as appropriate. companies caution readers that earnings and other measures adjusted to a basis other than

Management’s Discussion and Analysis of Operations and Financial Condition (MD&A) Year-over-Year Operating Highlights: Revenue 2 growth of 12% and expense growth of 5% Net income of $602 million, up 47% ▪ ▪ Productivity ratio 2 improves to 63.2% from 67.2% and cash productivity Higher operating group results and improved credit performance drive growth ▪ ▪ EPS 1 of $1.12, up 45%, and cash EPS 2 of $1.17, up 44% ratio 2 improves 380 basis points to 62.2% ▪ ROE of 20.4% Strong Tier 1 Capital Ratio of 9.67%, up from 9.10% ▪ ▪ A specific provision for credit losses of $45 million and a $40 million ▪ reduction of the general allowance for credit losses result in a net provi- sion for credit losses of $5 million, compared with a specific provision of $120 million a year ago 1 All Earnings per Share (EPS) measures in the MD&A refer to diluted EPS unless specified otherwise. GAAP counterparts are outlined. Revenues and income taxes in the financial statements are 2 The adjustments that change results under generally accepted accounting principles (GAAP) to stated in accordance with GAAP . Otherwise, all revenues and income taxes and measures that cash results and GAAP revenue and income taxes to a taxable equivalent basis (teb) are outlined include revenues or income taxes in the MD&A are stated on a taxable equivalent basis. in the Non-GAAP Measures section on page 5, where all non-GAAP measures and their closest Bank of Montreal uses a unified branding approach that links all of the organization’s member companies. Bank of Montreal, together with its subsidiaries, is known as BMO Financial Group. As such, in this quarterly report, the names BMO and BMO Financial Group mean Bank of Montreal. Summary Data Increase/(Decrease) Increase/(Decrease) Increase/(Decrease) ($ millions, except per share data and as noted) Q2-2004 vs. Q2-2003 vs. Q1-2004 YTD-2004 vs. YTD-2003 Revenue per financial statements 2,437 273 13% 74 3% 4,800 357 8% Taxable equivalent basis adjustment 39 (5) (13%) 1 2% 77 (6) (7%) Revenue (teb) (1) 2,476 268 12% 75 3% 4,877 351 8% Provision for credit losses 5 (115) (96%) (10) (67%) 20 (250) (93%) Non-interest expense 1,565 81 5% 4 – 3,126 69 2% Income taxes per financial statements 250 115 86% 10 4% 490 214 78% Taxable equivalent basis adjustment 39 (5) (13%) 1 2% 77 (6) (7%) Income taxes (teb) (1) 289 110 62% 11 4% 567 208 58% Net income 602 193 47% 70 13% 1,134 326 40% Amortization of intangible assets (after tax) 19 (1) (5%) – – 38 (4) (9%) Cash net income (1) 621 192 45% 70 13% 1,172 322 38% Earnings per share – diluted ($) 1.12 0.35 45% 0.12 12% 2.12 0.60 39% Cash earnings per share – diluted ($) (1) 1.17 0.36 44% 0.14 14% 2.20 0.60 38% Return on equity (ROE) 20.4% 5.2% 2.1% 19.4% 4.7% Cash ROE (1) 21.1% 5.2% 2.1% 20.1% 4.6% Non-interest expense-to-revenue ratio 64.2% (4.4%) (1.9%) 65.1% (3.7%) Non-interest expense-to-revenue (teb) ratio (1) 63.2% (4.0%) (1.8%) 64.1% (3.4%) Cash non-interest expense-to-revenue (teb) ratio (1) 62.2% (3.8%) (1.7%) 63.0% (3.3%) Net interest margin 1.74% (0.15%) (0.13%) 1.80% (0.09%) Net interest margin (teb) (1) 1.80% (0.16%) (0.12%) 1.86% (0.09%) Operating Group net income: Personal and Commercial Client Group 211 (6) (3%) (35) (14%) 457 19 4% Private Client Group 63 36 +100% 8 16% 118 56 92% Investment Banking Group 213 47 28% 1 1% 425 78 23% Corporate Support, including T&S 115 116 +100% 96 +100% 134 173 +100% BMO Financial Group net income 602 193 47% 70 13% 1,134 326 40% (1) These are non-GAAP amounts or non-GAAP measures. Please see footnote 2 above and the Non-GAAP Measures section on page 5, which outline the use of non-GAAP measures in this MD&A. BMO Financial Group Second Quarter Report 2004 1