Expecting Change

The new climate of heightened expectations is redefining incremental change. In banking, the impact promises to be dramatic, even disruptive – and, for those who are ready to take full advantage, highly rewarding.

William A. Downe

Chief Executive Officer, BMO Financial Group

In the fiscal year just completed, BMO Financial Group posted record net income of $4.2 billion and increased retained earnings by just under $1.7 billion. We paid common share dividends of $1.9 billion and repurchased $675 million of common stock, effectively returning over 60% of earnings to shareholders. And we contributed $1.7 billion in government levies and taxes.

We completed the final, most significant elements of the conversion and integration of our 2011 acquisition of Marshall & Ilsley, capturing cumulative annual run-rate expense savings approaching $400 million. And we positioned the bank for future growth in our four core customer segments: personal banking, commercial banking, capital markets and wealth management.

Most importantly, we made significant changes in the leadership structure of the bank to reduce layers of management and increase the proportion of our workforce in customer-facing roles. On November 1, 2013, most senior leaders in Canadian Personal and Commercial Banking assumed new roles designed to erase old boundaries and build customer loyalty. Our personal, commercial and wealth businesses throughout North America are now united under the leadership of Chief Operating Officer Frank Techar, who is overseeing a tightening of operating discipline and the acceleration of key priorities across the bank.

William A. Downe

Bill Downe at the BMO Company Meeting, May 2013.

More broadly, we have initiated longer-term measures to increase our responsiveness to evolving customer behaviour in a world where digital media and electronic commerce compel all companies to respond. The ways that customers are purchasing and consuming our products and services are undergoing profound change. It’s something all of us at BMO identify with – and we’re investing in capabilities that recognize this shift.

All four operating businesses are moving into 2014 with clear momentum and a great deal of confidence in our continued strong performance. We’re well positioned not only to meet expectations, but to anticipate and surpass them – which is why we’ve made this the central theme of our 196th annual report, a comprehensive review of the past year’s achievements and the decisive steps we’ve taken to advance BMO’s long-term strategy.

A BMO employee working with a client.

We work every day to help our customers have confidence in their financial decisions.

The world is far different from the one we faced a decade ago. What people expect from a bank – from any business – is rapidly changing. As customers increasingly rely on mobile communications and instant access to information, they assume an immediate response to their transactional needs is always within reach. And as we in turn work alongside them to help bring their financial goals within reach, they want to see regular confirmation of the value we add.

To deliver on these expectations, we’re asking more of ourselves – and more of our bank.

There are big things going on in our industry.

To say the changes underway around us are profound isn’t an overstatement.

Profit models are changing across our industry, redefining the drivers of success. Simultaneous shifts in consumer behaviour and levels of regulatory engagement call for a broad change agenda that speaks to both the growth of revenue and the management of expense. There is a premium on superb execution, on innovation and on agility in delivering strong, consolidated financial performance.

The pace of change is very rapid for us all.

We take pride in the quality of the products and services BMO offers to customers – they are the financial building blocks of peace of mind: the control of spending, the growth of savings, the prudent use of credit and wise investment. We also care greatly about the way in which customers experience our bank: responsiveness and attention are what build trust and confidence for all customer segments. But in an era of rapid social, technological and economic change, we remain intensely focused on the reason why our customers continue to look for our guidance and support in controlling their financial futures. This is something that goes far beyond convenience and product features. It is why our bankers are so committed to the work they do.

And we’re all confident it can be done better.

We’re confident in our ability to thrive in this period of rapid change, because we’ve been steadily deepening our long-standing focus on customers, building the capabilities that grow loyalty and advocacy.

The forces of change

Against the broader backdrop of change, our efforts going forward will be shaped by two significant forces:

  • Customers’ growing appetite for personalized service, in the moment. When someone has an experience that is simpler or perfectly tailored to their needs in one area of life, it influences their expectations in all other areas. In a modern world, customers’ expectations of their bank are being revised daily.
  • An unprecedented level of regulatory engagement. Around the globe, governments and supervisors are introducing rigorous reporting requirements against constantly evolving standards. To continue meeting them, we must securely analyze highly complex data in real time while simplifying the work of the bankers who are responsible for understanding it. As we maintain this balance, we’re guided by a long-held belief that what matters more than any one rule is the larger reason behind it. Effective regulation ensures integrity and strengthens trust – principles that are vital to our success as a business and have been ingrained in our values for nearly 200 years.

In some ways these forces seem to operate in opposition to one another. But we have confidence in our ability to respond fully in each of the market segments we serve, and to resolve the natural tension between simplifying the lives of our customers and maintaining confidence in a financial system that thrives in dealing with complex assignments.

Intensifying our efforts

In our four principal business groups we are meeting the challenge of rising expectations. We know that in making processes more efficient or services more accessible, we create more opportunities for our employees to have meaningful conversations with customers about their financial goals, delivering the unique value that differentiates our bank from our competitors.

Personal and Commercial Banking finished the year with very good momentum, reflecting the competitiveness of BMO’s position in the markets we serve. In Canada, where our commercial lending market share is close to 20%, we saw good balance growth: 12% in deposits and 11% in loans. In personal banking we again led the market with our emphasis on shorter-amortization, fixed-rate mortgages.

In the U.S., mid-market commercial lending continued to gain strength while initiatives targeted toward small business customers gained traction. In U.S. retail banking we are accelerating the move to digital fulfillment and sales while increasing the investment in technology that supports efficiency and growth.

BMO Capital Markets continued to demonstrate the simple truth that a quality book of business generates quality returns. We earned an 18.9% return on equity and were named Best Investment Bank in Canada by Global Finance magazine, and our strengthened U.S. business showed good growth and improving operating leverage.

Wealth Management at BMO is distinguished by a superior offering across multiple dimensions, from private banking and asset management to brokerage and insurance. Market momentum, growth created by changing demographics and disciplined investment all support the accelerating expansion of our wealth business.

Over the last decade, the bank has maintained strong momentum in the compound growth rate of both revenue and net income – 6% and 9%, respectively. With record reported results in 2013 and the highest Basel III common equity tier 1 ratio of the Canadian banks, BMO is well positioned to capitalize on the opportunities ahead. We are intensifying our pursuit of BMO’s five strategic priorities by focusing specifically in these areas:

  • Extending the digital experience across all channels. We’re developing strategies to further integrate the bank’s digital and physical channels – merging the online and mobile experience into our retail branch and ATM network. U.S. households actively using BMO mobile banking increased 60% in 2013.
  • Simplifying and automating for greater efficiency. By exploring new ways to streamline processes, modernize platforms and embed cost controls, we’re adding to the productivity and efficiency gains realized over the past two years.
  • Leveraging data insights to serve customers better. By enhancing the bank’s analytics capabilities, we’re sharpening our understanding of what customers are looking for, how they want to do business with us and, most importantly, why they need our help. Deeper insights will make us even more effective in attracting new customers, assessing risk, and tailoring and cross-selling products and services.
  • Continuing to build a strong, differentiated brand. As we extend a consistent identity and message throughout our expanded footprint, we reinforce existing relationships while fostering new ones. Across North America, millions of prospective customers are learning what BMO stands for – and why we stand out.
Inside BMO’s Meadowvale Customer Contact Centre.

At BMO’s Meadowvale Customer Contact Centre, we pay close attention to what’s on customers’ minds.

We’re sharpening our understanding of what customers are looking for, how they want to do business with us and, most importantly, why they need our help.

In embracing a future where constructive change is certain, we also recognize what’s not certain is how customers will respond to the contradictions of the coming decade. As people seek greater transparency and connectivity, their desire for security and privacy creates an opposite impulse. What we do know is that individuals and companies bring their business to our bank because of the trust built by our brand – our commitment to help them make better decisions with better information and have confidence in the decisions they make.

The power of expectations

The opportunity before us is to take everything BMO has been doing well, and do it better than ever. By ensuring the quality of what we provide, and by simplifying and accelerating how we deliver it, we can focus on why people choose to make us their financial partner. This is the next step in the realization of BMO’s brand promise. As customers see that we’re making their lives easier and helping them have confidence in their financial futures, we forge stronger, mutually rewarding relationships – which grow our customer base and increase market share. And as the value we deliver to customers continues to rise, the value we deliver to shareholders grows as well.

The new climate of heightened expectations is redefining incremental change. In banking, the impact promises to be dramatic, even disruptive – and, for those who are ready to take full advantage, highly rewarding. By embracing change, we can influence its pace and help guide its course. Rather than wait to see where the market is going, BMO will be ahead of it, leading through innovation, supported by unrivalled customer loyalty and grounded in a long history of trust – trust that we’ve earned by always living up to expectations.


Signature of William A. Downe

William A. Downe
Chief Executive Officer, BMO Financial Group



Strong Momentum in Revenue Growth (Canadian $ in billions)

10-year CAGR graph depicting a 6% increase between 2004 and 2013.

2010 and prior period information based on CGAAP.
Ten-year CAGR based on CGAAP in 2003 and on IFRS in 2013.


bank-of-montreal