Bank of Montreal

Good morning and welcome to the BMO Financial Group's Q2 2025 earnings release and conference call for May 28, 2025. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We will begin today's 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 this morning are Ernie Johansen, head of BMO North American Personal and Business Banking, Nadeem Herji, head of BMO Commercial Banking, Alan Tenenbaum, head of BMO Capital Markets, Dellen Kamenga, head of BMO Wealth Management, and Daryl Hackett, BMO U.S. CEO. I would ask you to limit to one question during the Q&A to give everyone a chance to participate. 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 useful in assessing underlying business performance. Darrell and Typhoon will be referring to adjusted results in their remarks unless otherwise noted as reported. And I will now turn the call over to Darrell.

Thank you, Christina, and good morning, everyone. Today we delivered another good quarter supporting year-to-date momentum in across key performance metrics. We had good revenue and PPPT growth with strength in each of our diversified businesses. We're actively managing for risks and uncertainties in the current environment and executing against a consistent strategy to deliver continued positive operating leverage and ROE improvement. In the quarter, adjusted net income and earnings per share increased 1% from last year to $2 billion and $2.62 respectively with PPPT growth of 12%. Impaired provisions continued to moderate as expected, and we bolstered our performing allowance. Over the last three quarters, we've added more than $850 million to our performing provision, giving us appropriate coverage for the environment and reflecting our disciplined and proactive approach to risk management. Our capital position remains robust with a CET1 ratio of 13.5% as we continue to support clients, invest for growth, and return capital to shareholders, including through share buybacks and dividend increases. We've now completed 50% of the NCIB program, and today we announced an increase in our dividend of $0.04, up 5% from last year. For the first half of the year, EPS grew 10%, driven by year-to-date revenue growth of 13%. Pre-provision pre-tax earnings of $7.8 billion were up 22%, with all bank operating leverage of 5.7%, having met our commitment to positive operating leverage for five consecutive quarters. ROE improved to 10.6% year to date. Rebuilding return on equity is our number one imperative, and we're executing against our plan. Typhoon today will provide more details on our progress in his remarks. Turning to the businesses, Each of our operating groups delivered solid results and PPPT growth as we continue to focus on enhanced customer experience, deeper one-client relationships, and trusted advice. In Canadian personal banking, we continued to see good customer growth and deeper engagement through the first half of the year, driven by product and digital innovation. For example, we've added over 10,000 new VI Porter loyalty cards in the first six weeks since the launch of our partnership with Canada's fastest growing airline. Our differentiated savings amplifier account recently surpassed $10 billion in deposits, over half representing new customers to BMO. Our award-winning digital offerings are making it easier for customers to bank with us, including access to detailed merchant data for debit and credit card purchases, the ability to convert transactions to installments, while also implementing enhanced security features. In USP&C, we continue to have good momentum in core customer acquisition across our markets, including 7% year-over-year growth in checking account acquisition in our West markets, where branch productivity and digital engagement continues to improve. We continue to invest in core markets, including in Chicago and the Midwest, where we're market leaders, and in our expanded West markets, where we're growing regional scale. California's economy is now the fourth largest in the world and growing at a faster rate than the U.S. overall. We're well positioned to capture opportunities to grow share in this attractive market. In commercial banking, business activity and loan demand in both countries is reflecting the impact from trade uncertainty and businesses are being cautious around the deployment of capital. At the same time, Our ability to attract, retain, and deepen one client relationships and diversify our revenue streams towards fee-generating income is reflected in the fact that more than 90% of our commercial borrowers choose us for additional services. At BMO, we take pride in delivering best-in-class treasury and payment solutions. Across corporate, commercial, and small business clients, TPS provides award-winning product solutions, seamless and leading cross-border capabilities, and trusted advice that powers efficiency and growth for our clients. TPS is a significant contributor to BMO's revenue, growing 20% year over year. It fuels core deposit growth and represents an important fee expansion initiative to drive higher ROE. BMO Wealth Management continues to perform well with a return on equity of 29% year to date, up from 24% a year ago. Growing this business is another key element in our overall ROE rebuild strategy. Net new asset growth this quarter was the second highest on record, including a strong contribution from the U.S. and market share gains in Canadian mutual funds, reflecting strategic investments we've made in these businesses. We continue to innovate and expand our product offering with new solutions, such as BMO's Canadian depository receipt lineup, enabling Canadian investors to gain exposure to international companies and enhance their portfolio diversification. We continue to add to our leading ETF offerings and ranked first in ETF flows for the quarter, building on our number two position in the market. The launch of the new BMO Link Workplace Savings Platform gives employers a one-stop digital solution to help their employees achieve their savings and retirement goals, a first among Canadian financial institutions. Our commitment to meeting the unique needs of private wealth clients was recognized at the 2025 Euromoney Global Private Banking Awards, where BMO was named Canada's best private bank for ultra high net worth clients and for philanthropic advisory services. Moving to BMO capital markets, PPPT of 684 million was above our guidance. We had strong trading revenue led by a record quarter in commodities and continued strength and securitization. Our leadership and strength as a trusted advisor drove resilient performance in key sectors and products, notably global metals and mining and Canadian M&A. Our capital markets team is also leading the way in leveraging data-driven AI insights and tools to enable our bankers and traders enhance client interactions and relationships and provide unmatched value while supporting client growth. The economic backdrop in North America continues to be challenged by the uncertain environment and GDP growth is now expected to slow to 1% in Canada and 1.3% in the US in 2025. In Canada, the recent outcome of the federal election is a renewed government with an aggressive economic growth agenda. We've seen promising early results by the federal and several provincial governments in support of eliminating barriers to interprovincial trade. We encourage a positive resolution in support of a stronger overall Canadian economy. Finally, as more plans are put into motion for infrastructure investment to boost economic capacity and Canadian productivity, our teams are here to help governments, companies, small businesses and families with access to financial services and advice to fuel that growth and continue to strengthen the communities we serve. While macro uncertainties drive levels of customer and market activity that are lower than expected at the beginning of this year, we're focused on continuing to execute on our strategic priorities and strong risk management practices to enhance shareholder returns. And with that, I'll turn it over to Typhoon.