Bank of Montreal

Good morning and welcome to BMO Financial Group's Q1 2024 earnings release and conference call for February 27, 2024. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We'll begin the call with remarks from Darryl White, BMO CEO, followed by Typhoon Tuzun, our Chief Financial Officer, and Piyush Agrawal, our Chief Risk Officer. Also present today to take questions are Ernie Johanson, head of BMO North American Personal and Business Banking, Nadine Hergy, head of BMO Commercial Banking, Alan Tannenbaum, head of BMO Capital Markets, Dellen Kamenga, head of BMO Wealth Management, and Gerald Hackett, BMO U.S. CEO. 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. I will now turn the call over to Darrell.

Thank you, Christine, and good morning, everyone. Today, we announced net income of $1.9 billion and adjusted earnings per share of of $2.56, and against a challenging economic backdrop, continued to demonstrate the strength and resilience of our diversified businesses. While the environment has constrained revenue growth in market-sensitive businesses in the near term, the strength of our personal and commercial businesses further enhanced through the integration of strategic acquisitions, delivered revenue growth of 10% and pre-provisioned pre-tax earnings growth of 3% from last year. We're executing against a simple, clear, and well-defined plan by optimizing our businesses and balance sheet, controlling costs, and growing customer relationships to drive long-term sustainable growth. We significantly strengthened our capital position with a CET1 ratio of 12.8%, up 30 basis points from last quarter, and up 60 basis points since closing the Bank of the West transactions. Through disciplined balance sheet optimization, we've absorbed regulatory impacts and credit normalization and are well positioned to support client growth going forward. Given the outcomes of our actions, the resulting strong position and consistent internal capital generation, we've removed the drip discount as of this quarter. We're delivering against the expense management commitments we announced last year, including the full achievement of the US $800 million run rate cost synergies at Bank of the West as of February 1st, one year after closing, and 20% higher than our initial plan. We're also on track to deliver the additional $400 million of expense savings by the end of 2024 from the early actions put in place last year to enhance bank-wide operational efficiency. The benefits of these programs are now accelerating. In fact, we've reduced expenses by 4% from last quarter and remain focused on returning to positive operating leverage beginning next quarter. Credit remains well managed. While impaired loss provisions have increased from very low levels and are consistent and disciplined risk management practices and the expertise within our lending teams and the quality of our client selection, are resulting in good overall credit performance in line with our expectations. As we've been saying for several quarters, the near-term growth outlook industry-wide is muted by slowing GDP growth. We expect North American economic growth to remain subdued in the first half of this year before recovering towards the end of the year on the back of lower interest rates. While directionally similar, we do expect a meaningful difference in the landing between Canadian and US economies. In Canada, real GDP is expected to fall from 3.8% in 2022 to 0.8% in 2024. The US, while also slowing, is expected to show much better growth of 2.2% in 2024. We foresaw these trends emerging and we're dynamically managing our businesses to succeed and further strengthen our competitive advantage as the environment improves.