Bank of Montreal

Good morning and welcome to the BMO Financial Group's Q4 2025 Earnings Relief and Conference Call for December 4th, 2025. Your host for today is Christine Viau. Please go ahead.

Thank you and good morning. We will begin the call today with remarks from Daryl White, BMO CEO, followed by Typhoon Tuzun, our Chief Financial Officer, and Piyush Agrawal, our Chief Risk Officer. Also present to answer questions are our group heads. Matt Marotra from Canadian Personal and Business Banking, Sharon Hayward-Laird, Canadian Commercial Banking, Aaron Levine, U.S. Banking, Alan Tunnenbaum, BMO Capital Markets, Dellen Kamenga, BMO Wealth Management, and Daryl Hackett, BMO U.S. CEO. As our call will end by 9.30 and to give everyone a chance to participate, please limit your questions to one and requeue. 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. 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. This morning, we reported adjusted EPS of $3.28 for the fourth quarter and $12.16 for the year. Fiscal 2025 was a strong year for BEMA. We made meaningful progress against our financial and strategic commitments, strengthening profitability, delivering for our clients, and supporting the communities we serve. At this time last year, we laid out specific financial commitments and a clear path And through 2025, we delivered against each of those commitments with disciplined execution. Here are some highlights. Our top imperative is rebuilding our ROE together with profitable earnings growth. These priorities are not mutually exclusive, but mutually reinforcing, as we demonstrated in 2025. We increased full-year ROE by 150 basis points from 9.8% to 11.3%. and we exited Q4 with momentum at 11.8%. At the same time, we delivered EPS growth of 26% and record net income of $9.2 billion. We made progress across each of our four strategic levers. The most important driver was strong operating performance in each of our businesses, with PPPT up 18% for the year to $15.8 billion. We met our longstanding commitment to positive operating leverage, achieving 4% for the year. Operating leverage was positive in each segment, driven by disciplined expense management and solid revenue performance. Our efficiency ratio improved by 230 basis points to 56.3%. Strength in risk management remains a core differentiator for BMO. As expected, impaired provisions moderated from the peak in Q4 24 to 44 basis points this quarter. We built allowances during the first half of the year to account for a slower economy and trade uncertainty, and we are well reserved for potential risks in the environment. Finally, we're actively optimizing our capital position. Over the course of 2025, we returned over $8 billion in capital to our shareholders through buybacks and dividends, and today we announced a dividend increase of $0.04 to $1.67 per share, up 5% over last year. Our CET1 ratio of 13.3%, remains above our target, and we're maintaining steady execution of our share buyback program. Our strategy is clear and consistent, and Team BMO is executing with pace and momentum. Our digital-first AI-powered strategy is reshaping how we operate to serve our clients while putting AI in the hands of everyone. To support this, we recently introduced a leading gen AI productivity tool to all BMO employees, and award-winning learning modules to help them unlock the power of artificial intelligence with over 80% active users. We're creating value through strategic partnerships and investments we've made in data, risk governance, and talent that are accelerating our AI capabilities to realize even greater efficiencies and business growth. We've executed and captured benefits from gen AI tools like Lumi and Rover, digital assistants that support our frontline employees, enabling faster customer advice and insights. We're the first Canadian bank to access the IBM Quantum Network and are actively using machine and reinforcement learning models in credit and capital markets and across the bank. Turning to highlights in each of our businesses, starting with wealth management, our highest ROE business, which had a very strong year with record revenues and net income driven by continued growth in client assets and constructive markets. Clients are rewarding us with more business as we continue to deliver competitive investment returns and innovative solutions to meet their needs. This quarter, BMO Global Asset Management received 12 Lipper Fund Awards, recognizing continued excellence in delivering strong risk-adjusted returns for clients across a diverse range of investment solutions. And with Burgundy Asset Management joining BMO on November 1st, we're positioned to further expand private wealth solutions for the benefit of our clients. Capital markets, is a key contributor to BMO's diversified earnings. PPPT growth for the full year was strong, with each quarter above our expectations. We've strengthened our platform and enhanced client coverage to achieve and advance our position as a leader across priority markets and products, including in our globally leading metals and mining business, while expanding our equity derivatives and U.S. rate businesses. In Canadian investment banking, this year we ranked number one in M&A deals and number two and ECM league tables. Our flagship Canadian P&C business delivered record revenue this year and strong PPPT growth of 8% as we're acquiring high-quality accounts and deepening client relationships through market-leading digital sales, engagement, and experience. We continue to offer innovative solutions to help clients make real financial progress, and this quarter, we launched joint programs with Instacart and Walmart to deliver convenience and savings to Canadians. In Canadian commercial banking, steady client growth supported by increased referrals between commercial wealth and capital markets and continued momentum and digital engagement led to good loan growth of 7% and deposit growth of 5% despite a complex environment. A key driver of client and deposit growth is through our leading North American treasury and payment solutions platform, which offers clients a comprehensive product suite, including real-time payments, virtual account management, and payment APIs that connect directly to their enterprise resource planning and treasury systems. Turning to US banking, this is the first quarter reporting under the unified structure with teams integrated to deliver the full power of BMO to our clients and momentum is building. We've made strong progress this year on improving the ROE in our US banking towards our 12% medium term target, executing against deliberate action plans to support this priority. Through a disciplined focus on stronger connectivity across our businesses, funding optimization, and redeployment of resources to higher returning relationships, profitability has strengthened across key metrics. Execution of pricing optimization led to increased deposit spreads and margin expansion of 15 basis points from Q4 of last year. To date, we've completed optimization actions for approximately 80% of the loans we identified as non-strategic and below our return targets, and reduced RWA by 4.6 billion US. We continue to expect these activities to be largely completed by the second quarter. At the same time, we've successfully grown recurring fee revenues up 10% this year. Commercial TPS fees grew 23% year over year, and strong growth in net new assets in AUM drove a 12% increase in private wealth fees. Momentum continues to build in retail banking with 60% higher growth in net new checking accounts year over year. The results are evident in our fiscal 2025 performance. PPPT growth accelerated to 7% with positive operating leverage of 3% and meaningful improvement in PCL, all leading to ROE improvement of 170 basis points to 8.1% for the full year. We recently announced the sale of 138 branches in certain markets where we did not have local scale to compete and are strategically reinvesting to strengthen our network and densify our presence in key markets where we can achieve local scale and have the greatest opportunity for long-term growth. We plan to add 150 new branches over the next five years with a focus on further densifying in California, where we recently opened a newly integrated financial center in Manhattan Beach. We've also invested in key talent positions, adding and promoting over 100 frontline commercial and private bankers in the U.S., building significant capacity to further accelerate performance. Overall, 2025 was a productive year, realigning our U.S. banking structure and optimizing the portfolio. We're now advancing to the next phase of our strategy, positioning the business for growth, leveraging the strength and scale of all three businesses to drive greater synergies and continued ROE improvements. As we look ahead to 2026, while the economic environment has remained resilient, GDP growth has been modest and is expected to grow 1.8% in the US and 1.4% in Canada. The Canadian unemployment rate is likely to remain above 7% through the middle of next year, presenting some challenges, particularly to consumer credit. While trade uncertainty persists pending the review of the USMCA agreement, At the same time, I'm encouraged that initiatives to invest in Canada and diversify trade relationships to strengthen the Canadian economy over the medium term are beginning to move forward. We're well positioned to benefit from a renewed CapEx cycle given our advantage position in commercial banking and in capital markets. At BMO, we've set the foundation for continued momentum in 2026 and are moving forward with pace. I'm pleased to announce that we plan to host an All-Bank Investor Day on March 26th, where we will share with you more details on our strategy and our progress. In summary, we're delivering world-class client experiences grounded in one-client leadership and fostering a high-performing, winning culture to drive progress for our clients and our performance. We continue to invest and leverage our digital-first AI-powered strategy, reshaping how we operate and serve our clients. Our consistent focus on superior risk management is foundational, and through continued discipline and improving credit market conditions, we expect PCL to continue to normalize over time. Our number one imperative continues to be our ROE rebuild, and I'm confident in the momentum we've built this year and that it will continue to deliver profitable growth and long-term shareholder value. With that, I'll turn it over to Typhoon.