Bank of Montreal

Good morning and welcome to the BMO Financial Group's Q3 2021 earnings release and conference call for August 24th, 2021. Your host for today is Mrs. Christine Viau, Head of Investor Relations. Mrs. Viau, please go ahead.

Thank you and good morning. Welcome to BMO's third quarter 2021 results presentation. We will begin the call with remarks from Daryl White, BMO's CEO, followed by Typhoon Tuzun, our Chief Financial Officer, and Pat Cronin, our Chief Risk Officer. Also present to take questions today are Ernie Johanson from Canadian P&C, Dave Casper from US P&C, Dan Barkley from BMO Capital Markets, and Joanna Rotenberg from BMO Wealth Management. As noted on slide two, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darrell and Typhoon will be referring to adjusted results in their remarks unless otherwise noted as reported. And now I'll turn the call over to Darrell.

Thank you, Christine, and good morning, everyone. Operating momentum across our diversified businesses and the execution of our purpose-driven strategy continue. to drive strong and consistent financial performance. Today, we announced net income of $2.3 billion and earnings per share of $3.44, up from $3.13 last quarter. The key drivers of our very strong performance reflect the execution of our purpose-driven strategy and are consistent over time. Number one, an advantaged and diversified business mix, well positioned for growth, through a focus on customer loyalty and consistent investment in digital capabilities, product innovation, and customer-facing employees delivering leading financial advice. Number two, targeted actions to improve efficiency and returns and drive long-term profitability. Number three, differentiated risk management and capital allocation, driving consistent credit performance and increasing flexibility for capital deployment. And number four, a steadfast commitment to support the financial well-being of our customers and communities through the economic recovery and beyond. Our consistent financial performance allows us to continue to build on our long-standing commitment to support a sustainable future, a thriving economy, and an inclusive society. And we're acting with purpose and urgency. This quarter, we announced a 10-year, $12 billion financing commitment towards breaking down barriers to affordable housing in Canada and supporting the aspiration that all Canadians have a home they can afford that meets their needs. In support of mental health, we've extended our LifeWorks Wellness Assistance Program to Canadian business banking clients across Canada at no additional cost. We're focused on removing barriers to economic inclusion, with a new dedicated segment in the U.S. providing access to safe and affordable financial products and services for communities historically underserved by financial institutions, including the BankOn certified BMO Harris Smart Account. We're also continuing to advance our significant body of work to address the impact of climate change. This quarter, BMO Capital Markets announced the creation of a dedicated energy transition group to provide knowledge, tools, and support to clients in their pursuit of energy transition opportunities. Our commitments to building a sustainable future were again recognized in the Corporate Nights ranking of Canada's best 50 corporate citizens. Ranked first among Canadian banks, we received top quartile scores in clean investment, board gender diversity, executive diversity, as well as clean revenue. Turning now to our financial performance, on a year-to-date basis, We delivered adjusted pre-provision, pre-tax earnings of $8.5 billion, an increase of 21% from last year, with revenue up 10% and strong operating leverage of 7.3%. We continue to be disciplined in our approach to expense management to drive efficiency improvements. At the same time, we're making targeted investments to position our business for growth, including in marketing, sales force, and technology. Even with those investments, year-to-date expenses are up just 3% and have declined 1% after excluding higher performance-based costs. At our investor day in 2018, we set an efficiency ratio target of 58% or better by 2021. We reached that goal a year early. And we've made further progress this year with year-to-date efficiency of 56.2%. We remain focused on delivering positive operating leverage going forward, including the benefit from strategic actions we've taken to optimize capital and resource allocation. Our credit quality remains very strong, with low impaired provisions again this quarter. Return on equity this quarter was 17.6% and is also above target, and our capital position continues to strengthen with a CET1 ratio of 13.4% positioning us well for growth and the eventual relaxing of constraints on returning capital to shareholders. The economy and our customers have shown remarkable resilience to an evolving landscape of pandemic-related restrictions. With those now lifting and vaccination rates continuing to climb, the Canadian and US economies remain poised for the strongest growth in decades. Despite uncertainty around the emergence of variants of the virus, and ongoing supply chain and labor issues. GDP in Canada is expected to grow 6% this year and 4.5% in 2022. And in the US, 6% this year and 4% in 2022. We're already seeing consumer activity increasing with pent-up demand and savings driving higher credit card spend. Small businesses are coming back and commercial lending is beginning to grow, as Typhoon will discuss. We're embracing the future as a digital-first bank with a strong technology foundation built to navigate change and lead in loyalty, profitability, and efficiency improvement. Digital isn't just a channel at BMO. It's the way we operate every part of the business with leading cloud, data, and AI capabilities, user-friendly tools, and common platforms for better, faster service. Engaging in productive partnerships is accelerating our digital transformation. This quarter, we selected AWS as our strategic cloud provider to further modernize banking platforms and build digital financial service applications. In addition, in the U.S., we're expanding our relationship with financial technology leader FIS with a major multi-year modernization program that accelerates mobile digital solutions, supporting continued growth across U.S. markets. We're also working with Lively, an industry-leading health savings account solutions provider in the U.S. to bring a modern and personalized HSA experience to customers, providing them with financial tools to tackle rising healthcare costs. We continue to deploy a series of market-leading capabilities and offers while shifting service transactions to digital, allowing our employees to focus on advice and sales. With the balance sheet approaching a trillion dollars, We're continuing to build an integrated scale advantage across our North American platform. Which brings me to our U.S. segment, which continues to be a driver of earnings growth, contributing 39% of total bank earnings year-to-date. Pre-provision, pre-tax earnings were up 34% year-to-date, with an efficiency ratio of 55.2%. We're a leader in the Midwest and growing nationally with over 50% of revenue coming from outside our Midwest footprint. Our integrated approach brings the full value and scale of BMO to our North American customers. As the fastest growing part of the bank with an accretive efficiency and comparable ROE, the opportunities to continue to expand, share and grow are significant. On a year-to-date basis, each of our businesses delivered strong PPPT growth and positive operating leverage. Our flagship Canadian P&C business is delivering peer-leading performance. Year-to-date PPPT growth of 14% was supported by continued strong consumer balance growth across mortgages, checking and saving products, and diversified commercial lending growth. We continue to strengthen core digital experience capabilities and drive top-tier digital sales, helping more customers make real financial progress. In US P&C, PPPT was up 18% year to date. We've shown strong growth in commercial deposits and core retail checking balances and are continuing to see momentum in commercial pipelines and expect lending to accelerate as the economy expands and supply chain issues ease. This quarter, we added new commercial banking offices in Denver and Orlando. expanding our operations in areas with strong demographic and economic indicators, and we're continuing to add clients and deepen relationships. In BMO Wealth Management, we had a very strong quarter. PPPT growth was 36% year-to-date. We're delivering best-in-class experience with mutual fund sales year-to-date more than four times all of last year and leading ETF flows. We're investing in key areas of competitive strength in private wealth, Canadian asset management, and digital investing. This quarter, BMO InvestorLine introduced enhancements that elevate and personalize our clients' digital trading experience, and we began offering commission-free trading for more than 80 ETFs, further enabling self-directed investors to build well-diversified portfolios. BMO Capital Markets is an important source of diversified earnings to the overall bank and had another strong quarter, delivering year-to-date PPPT growth of 36%. Investment in corporate banking had a second consecutive quarter of record revenue in a robust M&A environment and year-to-date was ranked number one in the Canadian Equity Capital Markets League tables. Global markets continued to perform very well in normalizing market conditions. The deliberate actions and investments we've made in the business over the past few years have strengthened and repositioned us for sustained performance. To conclude, we believe our commitment to support a sustainable future, a thriving economy, and an inclusive society, and our financial performance are inextricably linked. Supporting our customers, our communities, and our employees is how BMO will continue to drive long-term shareholder value. I'll now turn it over to Typhoon to talk about the third quarter financial results.