Bank of Montreal

Good morning and welcome to the BMO Financial Group Q2 2022 Earnings Release and Conference Call for May 25th, 2022. Your host for today is Christine Villot. Please go ahead.

Thank you and good morning. We will begin today's call with remarks from Gerald White, BMO CEO, followed by Typhoon Tuzun, our Chief Financial Officer, and Pat Cronin, our Chief Risk Officer. Also present to take questions are Ernie Johanson from Canadian P&C, Dave Casper from USPNC, Dan Barkley from BMO Capital Markets, and Deland Kamenga from BMO Wealth Management. As noted on slide 2, 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. Daryl and Tysoon will be referring to adjusted results in their remarks unless otherwise noted as reported. And with that, I'll turn the call over to Daryl.

Thank you, Christine, and good morning, everyone. We continued to deliver good financial performance this quarter driven by broad-based customer loan growth in our North American P&C and wealth businesses and solid results in our market-sensitive businesses. Second quarter adjusted earnings per share improved to $3.23 with continued positive operating leverage and strong pre-provisioned pre-tax earnings growth of 6 percent. Year to date, PPPT is up 12 percent, driven by strong revenue growth and continued expense management that includes targeted investments for future growth. With operating leverage of 3.3 percent and an efficiency ratio of 54.7 percent year to date, we are delivering on our commitment for positive operating leverage for the year. This morning, we also announced a dividend increase of 6 cents to $1.39 per share, an increase of 5% over last quarter, and 31% over last year. We continued to strengthen our capital, including executing the planned equity issuance, and are well positioned to support both client-driven balance sheet growth and the Bank of the West acquisition. ROE remains our key area of focus, guiding our strategic investment decisions as we manage the bank and our businesses for sustained profitable growth. Year-to-date, ROE was 17.2% up from the same period last year as we continue to drive initiatives to improve the profitability of our businesses. These consistent results demonstrate the ongoing value of our advantage business mix, including strong contribution from our U.S. segment and the dynamic execution of our purpose-driven strategy. Our strategy is designed to deliver sustained performance, through the cycle, including disciplined capital allocation decisions. Our ongoing investments in talent and technology have delivered resilient performance through the pandemic, and we believe will drive sustained performance in a rising rate environment. The current backdrop presents both risks and opportunities for our customers and for the bank. In the face of some economic uncertainty, our longstanding track record of superior risk management through the cycle has proven to be resilient in protecting and growing the bank. It's underpinned by a strong risk culture and consistent risk appetite with a well-diversified commercial portfolio that is 85% secured, the vast majority of which has a sole or lead customer relationship. Now, with pandemic restrictions largely lifted, the economy is growing and businesses and consumers continue to adapt. Investments in our North American growth strategy, in climate transition, and in digital advancements position us to capture these opportunities as we support our customers in navigating the changing environment. As the eighth largest bank and a top five commercial lender in North America, we're uniquely positioned to advise our clients on both sides of the border as the trend to re-globalization accelerates. As supply chains shift, North American businesses are investing, automating, and building back inventories. With double-digit commercial loan growth in both Canada and the U.S. this quarter, we're already seeing these dynamics play out. We're further benefiting from ongoing investments to expand our commercial presence, to add talent, and extend product and digital capabilities that are attracting new clients and strengthening existing relationships. Our capital markets and commercial banking teams together are accelerating efforts to successfully partner to deliver world-class capital market services to our mid-market commercial clients. Our one client, one bank approach is a clear differentiator for existing and prospective clients. We've also positioned ourselves for the unprecedented investments that will be needed to catalyze climate action and shift to a cleaner energy production. We're leading key financing activities, leveraging our climate institute and energy transition teams to be our client's lead partner in achieving their energy transition goals and our collective ambition for a net zero world. BMO Capital Markets is a Canadian leader in sustainable financings, including ranking as the top underwriter of ESG bonds and the number one sustainability structuring agent. In addition, Our agreement with Export Development Canada will bring innovative sustainable finance solutions to Canadian exporting businesses and help them transition from carbon-intensive operations to those that can eliminate or significantly reduce emissions. And as the market share leader in ESG ETFs in Canada, we continue to expand our innovative suite of products, including a climate-focused solution, and are also seeing strong flows in our sustainable mutual funds. We're innovating for the future with an intentional digital first strategy, poised to capture the shift to advanced digital experiences. We've laid the groundwork with sustained investments in technology that are driving loyalty, efficiency, and growth by delivering leading employee and customer experiences that power real financial progress. For example, we're continuing to roll out enhancements to our online banking experience in Canada, making it faster and easier to use, and we recently ranked first in the Insider Intelligence Canada Mobile Banking Emerging Features Benchmark for 2022. The ranking reflected the strength of select emerging features offered on the BMO Mobile Banking app with top marks in the categories of digital money management, account management, and alerts. We continue to modernize our technology through cloud. For example, we're converting to a proprietary platform to support risk management analytics. which makes forecasting loan loss scenarios 10 times faster, more integrated, and cost effective. Our people are key to our success and our winning culture. Early adoption of technology and innovation has given us the ability to attract and retain the talent that will transform banking and create efficiency for modernizing our platforms. We're actively growing in key technology hubs in Canada and the US, including in cities where the Bank of the West has locations. Bank of the West will further enhance our natural advantages with complementary retail wealth and commercial businesses, a strong, sustainable lending team, digitally active customer base, and dedicated, talented employees. Typhoon will provide more detail on our integration planning process and the revenue synergies that our combined businesses are expected to deliver. As we continue to grow the bank, we're steadfast in our purpose-driven commitments to a thriving economy a sustainable future, and an inclusive society. We're proud to have been recognized by the Ethisphere Institute as one of the world's most ethical companies for the fifth consecutive year. This quarter, we announced a $5 billion commitment to support women business owners in Canada, recognizing the impact they have on our communities and the importance of helping them access the capital they need to grow their businesses and through them, our economy. To conclude, We have a proven, dynamic, purpose-driven strategy for growth that is underpinned by superior risk management and robust capital, and we're well positioned to deliver sustained performance in any environment. I'll now turn it over to Typhoon.