Management’s Discussion and Analysis

Caution Regarding Forward-Looking Statements

BMO’s Chief Executive Officer and its Chief Financial Officer have signed a statement outlining management’s responsibility for financial information (PDF, 41 KB) in the annual consolidated financial statements and Management’s Discussion and Analysis (MD&A). The statement also explains the roles of the Audit and Conduct Review Committee and Board of Directors in respect of that financial information.

The MD&A comments on BMO’s operations and financial condition for the years ended October 31, 2013 and 2012. The MD&A should be read in conjunction with our consolidated financial statements for the year ended October 31, 2013. The MD&A commentary is as of December 3, 2013. Unless otherwise indicated, all amounts are stated in Canadian dollars and have been derived from financial statements prepared in accordance with International Financial Reporting Standards (IFRS). References to generally accepted accounting principles (GAAP) mean IFRS.

Since November 1, 2011, BMO’s financial results have been reported in accordance with IFRS. Results for years prior to 2011 have not been restated and are presented in accordance with Canadian GAAP as defined at that time (CGAAP). As such, certain growth rates and compound annual growth rates (CAGR) may not be meaningful. Certain other prior year data has also been reclassified to conform with the current year’s presentation, including restatements arising from methodology changes and transfers of certain businesses between operating groups. See pages 44 and 45 of the 2013 Review of Operating Groups Performance (PDF, 362 KB).

MD&A Index

Complete MD&A

Who We Are 

provides an overview of BMO Financial Group, explains the links between our financial objectives and our overall vision, and outlines “Reasons to Invest in BMO” along with relevant key performance data.

Enterprise-Wide Strategy 

outlines our enterprise-wide strategy and the context in which it is developed, as well as our progress in relation to our priorities.

Caution Regarding Forward-Looking Statements 

advises readers about the limitations and inherent risks and uncertainties of forward-looking statements.

Factors That May Affect Future Results 

outlines certain industry and company-specific factors that investors should consider when assessing BMO’s earnings prospects.

Economic Developments and Outlook 

includes commentary on the Canadian, U.S. and international economies in 2013 and our expectations for 2014.

Value Measures 

reviews financial performance on the four key measures that assess or most directly influence shareholder return. It also includes explanations of non-GAAP measures, a reconciliation to their GAAP counterparts for the fiscal year, and a summary of adjusting items that are excluded from results to assist in the review of key measures and adjusted results.

  • Total Shareholder Return
  • Non-GAAP Measures
  • Earnings per Share Growth
  • Net Economic Profit Growth
  • Return on Equity

2013 Financial Performance Review 

provides a detailed review of BMO’s consolidated financial performance by major income statement category. It also includes summaries of the impact of business acquisitions and changes in foreign exchange rates.

Operating Group Review 

outlines the strategies and key priorities of our operating groups and the challenges they face, along with their strengths and value drivers. It also includes a summary of their achievements in 2013, their focus for 2014, and a review of their financial performance for the year and the business environment in which they operate.

  • Summary
  • Personal and Commercial Banking
    • Canadian Personal and Commercial Banking
    • U.S. Personal and Commercial Banking
  • Wealth Management
  • BMO Capital Markets
  • Corporate Services, including Technology and Operations

Financial Condition Review 

comments on our assets and liabilities by major balance sheet category. It includes a review of our capital adequacy and our approach to optimizing our capital position to support our business strategies and maximize returns to our shareholders. It outlines proposed regulatory changes that are expected to impact capital and liquidity management as well as certain business operations. It also includes a review of off-balance sheet arrangements and certain select financial instruments and European balances.

  • Summary Balance Sheet
  • Enterprise-Wide Capital Management
  • Select Financial Instruments
  • Select Geographic Exposures
  • U.S. Regulatory Developments
  • Off-Balance Sheet Arrangements

Accounting Matters and Disclosure and Internal Control 

reviews critical accounting estimates and changes in accounting policies in 2013 and for future periods. It also outlines our evaluation of disclosure controls and procedures and internal control over financial reporting, and provides an index of disclosure recommended by the Enhanced Disclosure Task Force.

  • Critical Accounting Estimates
  • Changes in Accounting Policies in 2013
  • Future Changes in Accounting Policies
  • Transactions with Related Parties
  • Disclosure Controls and Procedures and Internal Control over Financial Reporting
  • Shareholders’ Auditors’ Services and Fees
  • Enhanced Disclosure Task Force

Enterprise-Wide Risk Management 

outlines our approach to managing key financial risks and other related risks we face.

  • Overview
  • Top and Emerging Risks
  • Framework and Risks
  • Credit and Counterparty Risk
  • Market Risk
  • Liquidity and Funding Risk
  • Operational Risk
  • Insurance Risk
  • Legal and Regulatory Risk
  • Business Risk
  • Model Risk
  • Strategic Risk
  • Reputation Risk
  • Environmental and Social Risk

2012 Financial Performance Review, Review of Fourth Quarter 2013 Performance and Summary Quarterly Earnings Trends

provide commentary on results for relevant periods other than fiscal 2013.

Supplemental Information 

presents other useful financial tables and more historical detail.

Regulatory Filings

Our continuous disclosure materials, including our interim financial statements and interim MD&A, annual audited consolidated financial statements and annual MD&A, Annual Information Form and Notice of Annual Meeting of Shareholders and Management Proxy Circular, are available on our website at, on the Canadian Securities Administrators’ website at and on the EDGAR section of the SEC’s website at BMO’s Chief Executive Officer and its Chief Financial Officer certify the appropriateness and fairness of BMO’s annual and interim consolidated financial statements, MD&A and Annual Information Form, and the effectiveness of BMO’s disclosure controls and procedures and material changes in our internal control over financial reporting.

Caution Regarding Forward-Looking Statements

Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the “safe harbor” provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2014 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian, U.S. and international economies.

By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements.

The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal or economic policy; the degree of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital, interest rate and liquidity requirements and guidance; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions; critical accounting estimates and the effect of changes to accounting standards, rules and interpretations on these estimates; operational and infrastructure risks; changes to our credit ratings; general political conditions; global capital markets activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; natural disasters and disruptions to public infrastructure, such as transportation, communications, power or water supply; technological changes; and our ability to anticipate and effectively manage risks associated with all of the foregoing factors.

We caution that the foregoing list is not exhaustive of all possible factors. Other factors could adversely affect our results. For more information, please see the discussion below, which outlines in detail certain key factors that may affect Bank of Montreal’s future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes.

Assumptions about the level of default and losses on default were material factors we considered when establishing our expectations regarding the future performance of the transactions into which our credit protection vehicle has entered. Among the key assumptions were that the level of default and losses on default will be consistent with historical experience. Material factors that were taken into account when establishing our expectations regarding the future risk of credit losses in our credit protection vehicle and risk of loss to Bank of Montreal included industry diversification in the portfolio, initial credit quality by portfolio, the first-loss protection incorporated into the structure and the hedges into which Bank of Montreal has entered.

Assumptions about the performance of the Canadian and U.S. economies, as well as overall market conditions and their combined effect on our business, are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies. See the Economic Developments and Outlook (PDF, 58 KB) section of this Annual Report.