Bank of Montreal

This conference is being recorded. Cette conférence est enregistrée. All participants, please stand by. Your meeting is about to begin. Please be advised that this conference call is being recorded. Good morning and welcome to BMO Financial Group's Q3 2022 earnings release and conference call for August 30, 2022. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We will begin today's call with remarks from Daryl 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 Johansson from Canadian P&C, Dave Casper from US P&C, Dan Barkley from BMO Capital Markets, and Dallin Kamenga 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... Darrell and Typhoon will be referring to adjusted results in their remarks unless otherwise noted as reported. And with that, I will turn the call over to Darrell.

Thank you, Christine, and good morning, everyone. Our performance this quarter continues to demonstrate the strength and quality of our advantaged and diversified business mix, credit excellence, and the resilience of our earnings power. Third quarter adjusted earnings per share were $3.09, driven by a very strong performance in our North American P&C businesses. Robust loan growth and margin expansion drove record revenue and over 15% pre-provision pre-tax earnings growth in both Canadian and U.S. P&C, more than offsetting lower revenue in capital markets, which was impacted by more challenging market conditions. While the economic environment remains uncertain, there are signs that central bank actions aimed at taming inflation are having an effect. While economic activity is moderating, low unemployment and still high consumer and business savings are likely to provide some buffer to the downturn. In the context of slower growth For the Canadian and U.S. economies, we at BMO are operating from a position of strength. Credit remains benign with strong reserves for loan losses to which we added modestly this quarter. Our consistent PPPT performance positions us to support customers while delivering growth through the cycle. For the year to date, PPPT of $9.1 billion is up 7% with 1.5% operating leverage and an efficiency ratio of 55.4%. While operating leverage this quarter was impacted by underwriting markdowns due to changing market conditions and severance in capital markets, we continue to expect to deliver positive operating leverage for the year. Year-to-date ROE was 16% above our midterm target as we remain focused on driving improved returns and managing the bank for sustained growth. We're actively managing our capital positions. balancing the dynamic environment to support client-driven balances and the pending acquisition of Bank of the West. We expect, post-closing, our CET1 ratio to build comfortably above 11% during Q2 of 2023. We continue to make significant progress in building a high-performing, digitally-enabled, future-ready bank and believe that our relentless focus on employee engagement and customer loyalty is the key to the health of our organization and will deliver sustained advantage over time. Our highly engaged BMO team is activating our winning culture aligned to a one client, one bank approach, which has been a key contributor to resetting the bank's performance to a higher level. In a recent comprehensive high performance cultural employee survey, our results improved from the third to the first quartile, placing us among the world's best financial institutions. These results are a testament to our focus on a culture that creates conditions for sustained performance and differentiates us in attracting and retaining the best talent. And our commitment to providing our customers with exceptional experience and personalized advice in every interaction is now driving world-class client loyalty. This quarter, we received the highest customer satisfaction rating ranking in the J.D. Power 2022 Canada Retail Banking Advice Satisfaction Study, reclaiming the top spot among Canada's largest banks. In addition, we were again recognized by World Finance Magazine as the best commercial, private, and retail bank in Canada. These recognitions reflect the investments we're making across our businesses with expanded teams and enhanced digital and marketing capabilities that are driving record new customer acquisitions in our North American personal and business banking businesses. We're introducing new products to help customers progress, including our Smart Money account, which offers a low fee and no overdraft or NSF charges for our U.S. customers, and in Canada, Same Day Grace, the newly launched mobile and online banking feature that proactively helps customers manage their cash balance and avoid missing payments. Our North American commercial banking businesses are delivering strong loan growth, up 16% in Canada and 15% in the U.S. Growth is broad-based and has been driven by the quality and reputation of our experienced bankers with deep local market and industry expertise who bring the full strength of BMOS capabilities and provide outstanding client service and quick execution, all of which is underpinned by a differentiated risk culture and a consistent risk appetite that has delivered strong credit quality over time. The result can be seen in the consistently strong performance of our P&C businesses, with peer-leading year-to-date PPPT growth of 15% in Canada and 11% in the U.S., fueling ongoing strategic investments and positive operating leverage. Investments in our high-return North American wealth businesses deliver good underlying revenue growth despite market declines and a moderation of client trading activity with growth in net new client assets, loans and deposits. Last spring, we introduced a broad suite of free-to-trade ETFs together with enhanced investor education. A year later, this offering is driving strong new client acquisition and growing ETF assets on the platform. In our asset management business, we're expanding our Canadian franchise, adding more than 50 experienced investment professionals in key growth areas, including our global equity team, who focus on delivering higher returns for our clients. BMO Capital Markets results this quarter were impacted by the market conditions and lower client activity. Our well-diversified businesses have delivered an average of over $630 million of PPPT over the last four quarters, and remain positioned to build on the investments we've made to expand capabilities and grow client relationships. This quarter, we further advanced our leadership position in sustainability and our climate ambition to be our client's lead partner in the transition to a net-zero world. The announced acquisition of Radical Group will make BMO a leader in carbon credit development capabilities and the environmental commodity markets. The advantage of our diverse business mix is also evident in the performance of our U.S. segment overall, which is consistently contributing in the range of 35% of the bank's earnings with a year-to-date ROE and efficiency that is in line with the bank overall. We remain strongly positioned for the addition of the Bank of the West. As we continue to grow the bank, our purpose-driven commitments to a thriving economy, a sustainable future, and an inclusive society remain our guiding principle. This quarter, BMO was once again named to Corporate Night's ranking of Canada's 50 best corporate citizens, ranked first among major Canadian banks. To conclude, our high-performing bank is well-positioned for an evolving economic environment, with a proven track record of superior risk management, strong capital and liquidity, engaged employees, and loyal customers. We continue to strategically invest for growth to deliver long-term returns for our shareholders, and enable progress for the communities we serve, including preparing for the closing and integration of our acquisition of Bank of the West. I'll now turn it over to Typhoon.