Bank of Montreal

Good morning and welcome to the BMO Financial Group Q1 2023 Earnings Release and Conference Call for February 28, 2023. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We will begin the call with remarks from Darrell White, BMO CEO, followed by Typhoon Tuzun, our Chief Financial Officer, and Piyush Agrawal, our Chief Risk Officer. Also present to take questions are our group heads, Ernie Johansson from Canadian P&C, Dave Casper from US P&C, 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 Typhoon will be referring to adjusted results in their remarks unless otherwise noted as reported. I will now turn the call over to Daryl.

Thank you, Christine, and good morning, everyone. We had a very good start to the year with record revenue, adjusted earnings per share of $3.22, and net income of $2.3 billion for the first quarter. The benefit of our balanced and well-diversified business model was front and center again this quarter with record revenue and PPPT in our P&C businesses and significantly improving momentum in BMO capital markets. The strategic investments we've been making in talent and technology are driving good growth in each of our businesses. Risk remains well managed with strong performance across our portfolios. Each of our operating groups delivered return on equity above 15%, even with the higher regulatory capital levels. Our P&C businesses continued to deliver positive operating leverage, while negative operating leverage at the all-bank level this quarter reflected the particularly strong revenue performance in capital markets in Q1 last year, as well as the impact of investments we've made over the past year to drive growth. We expect expense growth to moderate through this year with continued momentum in revenue. We remain committed to delivering positive full-year operating leverage on a BMO standalone basis, as we have for the last five years. While the macroeconomic environment remains uncertain, we're well situated to win in any environment. With inflation still at high levels, we expect rates to remain elevated, slowing the economy in the near term. Real GDP in both Canada and the U.S. is expected to rise only modestly this year, and we expect central banks to hold off from reducing policy rates until 2024. We've made deliberate strategic choices to change the shape of our business and further strengthen our performance. We've continued to bolster our capital position in light of the new regulatory capital requirements while supporting customer growth, and we expect our CET1 ratio to be above 11.5% in the second quarter now that the Bank of the West acquisition has closed. The completion of our acquisition of the Bank of the West on February 1st is a historic moment for BMO and the natural next step in our North American growth strategy. We're excited to welcome thousands of new employees and 1.8 million customers to the BMO family as we come together with a shared vision to drive progress for our customers and communities. I've personally spent a lot of time in market and the energy level and enthusiasm of the teams and the customers I've met is palpable. Together, we double our U.S. footprint, meaningfully expand our scale, and solidify BMO's position as a leading North American bank. We're now a top ten bank in the United States with a top five position in multiple MSAs. We've expanded our premium commercial banking franchise, which also ranks in the top five in North America. adding complementary verticals and talented bankers in areas like agriculture, food and beverage, and wine, and adding new expertise in technology and healthcare banking. Our enhanced presence is further augmented by a national strategy that extends across the country with digital retail and payments platforms that serve customers across all 50 states, as well as the leading national specialty businesses such as transportation and equipment finance, leasing, RV Marine, and asset-based lending, to name a few. Our one client and north-south integration enables our teams to support clients with our differentiated cross-border expertise, as well as wealth and capital markets capabilities. We're taking this opportunity to fully unify our brand, bringing the strength of BMO to new and existing markets and communities. Over many years, our US segment has been a key contributor to the growth of our business and our success, with a strong foundation and a long track record of combining organic growth with highly successful acquisitions. Through effective integration, strong leadership, and our focus on building client relationships, we've delivered consistent market share gains across our businesses. We've steadily increased the contribution from the US significantly improved ROE and efficiency to be accretive to the overall bank, all underpinned by superior risk management. The closing this month follows a year of collaboration that positioned us to hit the ground running. In fact, we executed our first one client transaction on February 1st, and in just 28 days, we've already delivered on opportunities across our combined teams to deepen client relationships and expand product offerings and the momentum is building. Once fully cost synergized, we expect the U.S. to contribute approximately 45 percent to the bank's earnings on a pro forma basis, up from 27 percent five years ago, which helps fundamentally increase the size and the performance of the bank overall. By the end of 2025, we anticipate that the Bank of the West acquisition will add over $2 billion U.S. in run rate, pre-provision, pre-tax earnings to BMO. Turning back to our Q1 results in our operating groups. In Canadian P&C, revenue and PPPT were both up 9% this quarter, with strong consumer and commercial loan growth and deposit growth driving market share gains. Our performance reflects strategic investments over the last few years in the expansion of our sales teams and technology, that have improved our sales-to-service ratio, delivering top-tier digital sales, and drove customer acquisition. Just yesterday, we announced an exclusive partnership with Immigration.ca, a leading provider of immigration resources and essential tools aimed at helping newcomers establish their financial life in Canada. This partnership complements our existing New Start and Smart Progress programs to help customers make real financial progress and support a smooth transition. In US P&C, PPPT was up 12% over the last year as we continued to gain momentum in customer growth and satisfaction. We've introduced several new automated solutions in commercial banking to improve efficiency and deliver best-in-class client and employee experiences. And in partnership with Blend, we introduced a fully digitized mortgage refinancing process boosting convenience for customers. In BMO Wealth Management, while lower markets reduced revenue compared to last year, our ongoing investments in talent and technology are delivering strong growth in new client assets. We're driving progress for our clients by investing in innovation, such as the launch of BMO InvestorLine's ESG Insights tool that helps investors make informed decisions that align with their strategies and with their values. For the 12th consecutive year, we were number one in net ETF inflows and received the most awards of any ETF provider at this year's annual FundData Awards, reflecting our leadership in delivering strong risk-adjusted performance for our investors. BMO Capital Markets' diversified businesses displayed growing momentum with the second highest quarter of revenue ever and PPPT of $636 million. The investments we've made in areas like expanding our U.S. rates business, adding radicals carbon credit and emissions trading capabilities, and expanding electronic trading through Clearpool are addressing real client needs and contributing to the growth that we need now and for the future. Clearpool is a good example of how we're building on acquisitions, having expanded into Europe within the last year while tripling BMO's electronic trading revenue. In addition to our financial progress, we're continuously advancing our purpose commitments and are consistently recognized as a global leader in sustainable business practices and financing activities. I want to recognize the incredible contribution by BMO's employees this year who, during our employee giving campaign, rallied together to contribute over $31 million to the United Way and thousands of other community organizations across North America. a new BMO record. This culture of community giving is equally embedded in the culture of our new colleagues at Bank of the West, and I look forward to the good that we will be able to grow together. As we all look forward to a successful integration, we're equally focused on continuing to drive performance in all our businesses. We're starting this year from a position of strength. My confidence in our future has never been higher. I'll now turn it over to Saifu.