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"Strength In Consistency"
Remarks By Karen Maidment, Chief Financial And Administrative Officer, BMO Financial Group At Bank Of Montreal Annual Meeting Of Shareholders

Calgary, Alberta, March 2, 2006

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Follows Slides 1-4


Slide 5           Karen Maidment Title Slide


Thank you, David, and good morning.


It’s great to be able to report to shareholders this year in Calgary’s dynamic downtown. The confidence and optimism in this city remind me of our own outlook at BMO.


Slide 6           Caution Regarding Forward-Looking Statements


I would like to note that some of my comments will be forward-looking and I remind you of the caution noted at the beginning of the meeting.


Slide 7           Strong Consistent Business Growth


I’m very happy to be able to report that we had another good year in 2005, capping our third straight year of record results.


On average over the past three years, earnings per share grew by an outstanding 20% a year.


Earnings growth was quite consistent after factoring out the impact of the changing credit cycle: net income rose 12% in 2003, 9% in 2004, and 12% in 2005.


While there are many external factors we cannot control such as interest rates and other market forces, I think BMO colleagues can be justifiably proud of our success in focusing on the things we can control on behalf of our shareholders.


When it comes to lending, while we are not immune to our customers’ credit problems, we quite frankly do a better job than the competition of assessing and managing risk.


I’d like to talk more today about credit. It’s a major strength for BMO and a vivid illustration of how our consistency in providing loans to customers in good times and bad contributes to high-quality earnings for you, our shareholders.


But first, let’s look more closely at our financial performance.


Slide 8           Excellent Progress on Cash Productivity


As I have emphasized at this meeting for the past couple of years, a key priority in our efforts to improve operating results has been to substantially improve the ratio of expenses to revenues, or what we call the cash productivity ratio.


So far, we have made excellent progress, improving this ratio by a total of 540 basis points over the past three years through both revenue growth and strong expense management. In dollar terms, this improvement increased 2005 net income by over $300 million compared to three years ago.


We intend to continue to drive operating performance improvements as we work toward our long-term goal of becoming the top-performing financial services company in North America.


After all the progress we have made in improving the efficiency of our businesses, we are putting increased emphasis on revenue without taking our eyes off asset quality. After all, revenue is the primary driver of earnings per share growth for top-performing companies.


Maintaining the cost discipline we have developed throughout the organization, we are investing more in business growth and working hard to increase our overall sales effectiveness.


Slide 9           Fiscal 2005 Financial Results


Our heightened focus on revenue began to have a positive impact on financial results in 2005, especially in the final quarter.


Slide 10      All Operating Groups Contributing to Revenue Growth


Revenue reached almost $10 billion for the year, an increase of 5.0% over 2004, while expenses increased 2.8% as we continued to invest in our businesses to generate future earnings growth.


Our Private Client Group delivered double digit revenue growth, as did our personal and commercial businesses in the United States. In Canada, our personal and commercial businesses increased revenues just over 7%. And revenue was stable in the Investment Banking Group as robust trading revenues offset declines in our interest-rate-sensitive businesses.


Slide 11      Achieved or Exceeded Four of Five 2005 Financial Targets


While improving operating performance and delivering record earnings in 2005, we also achieved or exceeded four of our five financial targets for the year.


Our choice to continue to invest in future growth meant that we missed our targeted cash productivity improvement although we still delivered the second-best cash productivity ratio in our Canadian peer group. In fact, over the past three years we have led our peer group in cash productivity improvement by a significant margin.


Our credit management was also the best in the Canadian industry in 2005, with $219 million of specific provisions. Despite our excellent asset quality, however, as we moved through the credit cycle we had fewer loan sales and recoveries and therefore loan losses began to move up from historically low levels.


In summary, then, strong operating performance increased earnings by 12% and normal and expected credit headwinds reduced earnings by 8%, resulting in overall earnings growth of 4%.


Slide 12        Q1 2006 Financial Results


Operating performance continued to be a positive theme in the first-quarter results for 2006.


Slide 13      Higher Revenues Drive Improved Year-Over-Year Performance


Higher revenues drove improved year over year performance as net income reached $630 million for the quarter. Fiscal 2006 is off to a good start.


Earnings per share increased a solid 5.2% from a year ago — or 11% excluding a significant tax recovery in 2005.


Return on equity was 18.5%.


And our excellent credit performance continued.


Slide 14      Q1 Financial Highlights


This slide shows the components of our quarterly earnings.


With revenue of $2.5 billion and expenses of $1.5 billion, provisions for credit losses of $52 million and taxes of $285 million, we achieved $630 million in net income for the quarter.


This represents an increase of $60 million or 11% from a year ago, excluding the tax recovery I noted.


Slide 15      Revenue Growth in Operating Groups ($ Millions)


Reported revenue grew 3.0% year-over-year in the first quarter.


After excluding the impact of Harrisdirect, the U.S. direct investing business we sold in the fourth quarter of last year, and the weaker U.S. dollar, revenue grew 6.5% with contributions from all three operating groups.


Revenue will continue to be a priority as the year progresses.


Slide 16      2006 Financial Targets: On Track to Achieve


Looking ahead, we are on track to achieve our financial targets for 2006:

§         5.2% growth in earnings per share is in line with our annual target of 5% to 10%.

§         At 18.5%, return on equity is within our target range of 17% to 19%.

§         At $52 million, the specific provision for credit losses reflects the continuing strong performance of our lending portfolios. At the beginning of the fiscal year we anticipated $400 million of loan losses in 2006. Since actual losses are running below expectations, we now anticipate a specific provision of $325 million or less in fiscal 2006, which is $75 million better than the target initially communicated for the year.

§         And the Tier 1 capital ratio has improved to a very strong 10.38%, well above the target of at least 8.0%.

§         The cash productivity improvement of 80 basis points is below the range we set of 100 to 150 basis points. This is consistent with our expectations for the quarter and we are on track to achieve the annual target.


Slide 17      Strong Consistent Dividend Growth


As we pursue these targets, we are determined to maintain BMO’s reputation for delivering consistent returns and building long-term shareholder value.


In 2005, shareholders benefited from two dividend increases and a dividend yield of 3.2%.


Yesterday we announced an 8.2% increase in dividends to $0.53 per common share, ushering in BMO’s 14th consecutive year of rising dividends.


The increase reflects the solid performance in the quarter, our recognition that dividends are important to investors in today's environment, and our desire to maintain a competitive dividend ratio.


Slide 18      Total Shareholder Return


Dividends make a significant contribution to BMO’s Total Shareholder Return, which was a very strong 19.1% in the first quarter. What is more significant, however, is our track record for delivering strong, long-term returns to shareholders.


This slide shows Total Shareholder Return over three, five and 20 years at the end of the first quarter of 2006.


As you can see, shareholders have earned an average annual return of 14% over the past five years and more than 16% over two decades. These returns are nearly double the average return of the S&P/TSX index for both periods.


Dividends are one of the four ways we manage BMO’s capital for the long term.


The others are:


§         Organic business growth. Examples include more loans, increased credit utilization and new branch construction.

§         Acquisitions. As Tony mentioned, the current emphasis is on personal and commercial deals. Our goal is to transform Harris into a “super-regional” player as the leading personal and commercial bank in the U.S. Midwest.

§         And a modest share buyback program.


Slide 19      Maintaining Our Credit Risk Management Advantage


Another significant factor in BMO’s attractive returns over the long term is our deeply ingrained lending expertise and superior asset quality.


Over the past 15 years, BMO’s average credit loss has been 36% below the average of our Canadian competitors.


The quality of our lending assets is very high. Our corporate and commercial portfolio is well diversified, with no material exposure to sectors under stress. And 90% of our consumer portfolio is secured, including credit cards.


We are very well positioned for investors concerned about a deteriorating credit environment.


Slide 20      Credit Risk Management What Sets Us Apart


What sets BMO apart in assessing and managing credit risk is not only our first-rate technical tools — vital as they are in this highly specialized field — because everyone can buy them.


Our big credit advantage comes from the right combination of tools, processes and people — people with the experience and motivation to use the sophisticated tools wisely.


Built up over decades, this lending expertise cannot be bought off the shelf. It takes many years of disciplined leadership and dedicated training.


What do I mean by BMO’s credit advantage? In addition to our people, let me boil it down to five key components:


  • our well-entrenched system of regional credit centres;


  • our “know your customer” approach to relationship management, which enables us to make informed decisions and provide value-added service;


  • compensation policies that reward our people based on the profitability or overall quality of a transaction, not simply the revenue generated;

  • a dual-signature process in which the relationship manager and an independent credit person must sign off;

  • plus an excellent monitoring process. We identify deteriorating accounts early and direct them to a workout team. This is important because the earlier specialized skills are applied, the more likely it is that the company can be returned to health and BMO can be protected from loss.


Slide 21      Regional Credit Centres


Bucking the trend toward centralization of lending decisions, BMO’s regional credit centres have large discretionary lending limits.


Here at our Calgary commercial centre, for example, decisions are made by lenders who live and work in this community, people who understand local business realities. And the discretionary limit is very large — up to $50 million for commercial loans.


Every day and in every way, we operate from our conviction that the surest route to high returns for shareholders is to deliver outstanding service to our customers and build long-term relationships.


Slide 22      Help Provided When Times Are Tough


We back this up with consistent decision-making plus extra efforts on customers’ behalf when times are tough.


You may have noticed our Help Provided program to support our beef cattle customers throughout the so-called mad cow crisis — and that our CEO took a strong personal stand on behalf of our customers at the height of this crisis. About 18 months ago, Tony gave a speech in Winnipeg in which he publicly called for an end to the U.S. trade ban on Canadian beef.


This steadfastness during economic downturns is something our customers never forget. I know this because many customers have told me so.


Of course, no one is immune from an upswing in loan defaults, BMO included. But it takes generations to create a credit orientation as ingrained as ours; and we are putting a lot of energy into maintaining and strengthening our competitive advantage.


Slide 23      BMO: A High-Return, Low-Risk Bank


I’d like to turn now to the favorite slide Tony mentioned, which shows that BMO is an excellent investment for shareholders with an appetite for high returns at relatively low risk.


Boston Consulting Group does an annual assessment of financial services companies worldwide based on total shareholder return adjusted for local stock markets and the risk to which shareholders have been exposed.


In the most recent global comparison on this measure, which covers the period from 2000 to 2004, BMO ranks number 2 in the world among large cap financial services companies.


Slide 24      Karen Maidment Title Slide


Proud as we are of this global ranking, and of the good business momentum we have been building at BMO, my final message to shareholders today is that we have only just begun.


In keeping with our top-performance ambitions, work is well under way on a number of fronts to continue to build on our strengths in order to grow revenue and deliver higher returns to shareholders.


In lending, for example, we are very conscious of how hard we must fight for new business in an intensely competitive banking industry with a lot of capital to invest. We are looking hard at ways to leverage our credit expertise in all our businesses to creatively pursue new areas of growth.


And we are continuing to make major investments to provide better service to customers and accelerate growth — everything from investing in our branches to developing the sophisticated analytical tools to manage our businesses better and drive higher results.


I look forward to reporting a year from now on our continued progress in improving operating performance, delivering value to customers, and increasing returns to you, our shareholders. And I thank you for your ongoing support.

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