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"Clear Path Ahead"
Remarks by Tony Comper, President and CEO, BMO Financial Group, at Scotia Capital Financials Summit 2005

Toronto, ON, September 13, 2005

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Title Slide: Clear Path Ahead

Thanks Kevin and good morning everyone.

Slide 1 - Forward-Looking Statements

As always, I’m pleased to be here to participate in this conference.

Slide 2 - Why Buy / Hold BMO?

In my one-on-one discussions with shareholders about why BMO has been — and we believe will continue to be — such a terrific investment for those looking for strong returns at relatively low risk, I have observed that many of our investors are attracted by what I would characterize as BMO’s quiet but enduring strengths: our track record for stability, earnings consistency and strong dividend growth, our commitment to ongoing productivity improvement, our prudence and expertise in credit risk management, our balanced approach to capital management, and our shareholder-friendly compensation model. They also really appreciate our consistent and focused North American growth strategy, which positions us well for the future.

Slide 3 - Strong Returns for Shareholders

These enduring strengths, all of them honed over many years, resulted in an 18.9% five-year average annual Total Shareholder Return on an investment in BMO common shares in fiscal 2004. And despite the slower-growth environment in 2005, five-year TSR was 17.4% at the end of the third quarter. This was consistent with the six-bank average and compared very favourably with the S&P/TSX return for the same time period of 1.8%.

This morning I’ll zero in on some of the BMO strengths that create the greatest opportunities for growth in 2006 and beyond — notably our credit leadership, our commercial leadership in both Canada and the U.S., and the proven durability and unmatched potential of our integrated U.S. operations.

Slide 4 - Economic Outlook

This slide updates our economic outlook in light of recent events, including Hurricane Katrina, which is expected to contribute to slower interest rate hikes in the U.S.

A continuing challenge for BMO and the entire industry is the narrowing of margins. Nonetheless, our domestic bank has done a good job of maintaining margins; and we are encouraged to see that year-to-date financial performance in our Canadian personal and commercial and private client businesses is very strong and favourable compared to our peers.

We also anticipate continuing uncertainty regarding in-market mergers. Let me be clear: such speculation will not distract us from successful execution of our strategy.

In the United States, where we are active players in the consolidation of the financial services industry, we continue our hunt for personal and commercial properties that will accelerate progress toward Harris’s goal of becoming the leading personal and commercial bank in the U.S. Midwest.

Slide 5 - Focused on Annual Targets

As I indicated in August, we are on track to achieve four of the five financial targets we set for the year; and we remain focused on all of them, although achieving the productivity target will be challenging. BMO’s cash productivity ratio for 2005 improved 40 basis points year to date against our annual target of 150 to 200 basis points.

Let me put this challenge in perspective: From 2002 to the end of 2004, we succeeded in improving cash productivity by approximately 420 basis points. Our highly disciplined approach has already made us more competitive and we remain committed to bringing our cost of doing business in line with the best anywhere in the industry.

Slide 6 - Excellent Progress on Productivity

Productivity improvement this year was strong and indeed ahead of target in both our personal and commercial and private client groups, but the improvement was partially offset by productivity deterioration in the Investment Banking Group, where the revenue decline was concentrated primarily in interest rate sensitive businesses with relatively low variable costs. I would note, however, that investment banking has the lowest productivity ratio of our three operating groups and continues to rank among the best in our Canadian peer group.

As I have made clear on previous occasions, productivity improvement is an important long-term goal for BMO, but not at the expense of investments for future growth. While exercising exceptional discipline in containing costs, we must also make tough business decisions in response to changing competitive conditions and invest strategically to boost revenues. And I would remind you that, at BMO, performance-based or variable compensation is directly tied to success in achieving both revenue and expense targets. My leadership team accepts full accountability for the target we have set and we remain determined to achieve it.

Slide 7 - 2005 Strategic Priorities

There is no change in our overall growth strategy and strategic priorities for the year. We continue to believe we are executing the best strategy for this enterprise in these times. Our overall strategy is to grow our core Canadian operations and improve and selectively expand our U.S. businesses. Success will come from continued focus on executing this strategy in our drive to become the top-performing financial services organization in North America.

In Canada, we are building on existing strengths to grow our position in the commercial market; gain share in the rapidly growing wealth management market, and expand our share of wallet in investment banking. I’ll focus this morning on our strength in the commercial market (by which I mean businesses with loans up to $100 million).

In the relatively opportunity-laden United States, where industry consolidation has a long way to go, we are also building on our strengths to accelerate the growth of Harris’s personal and commercial operations. With the recent sale of Harrisdirect anticipated to close by fiscal year-end, we can redeploy the capital and other resources in building out Harris to become the leading personal and commercial bank in the U.S. Midwest.

Slide 8 - Focused on Driving Revenue Growth

In today’s revenue-challenging and highly competitive environment, we believe the key to higher revenue is a total customer orientation throughout BMO. All colleagues know that job #1 is to build lasting relationships through exceptional service. We have undertaken numerous broad-based initiatives to build stronger and deeper relationships with clients, including investing hundreds of millions of dollars in leading-edge technology for our front-line sales staff and implementing incentive plans that reward a strong orientation toward sales and service.

We are doing a better job of coordinating and intensifying our efforts to meet a larger share of our customers’ needs. We are promoting a customer-focused dedication to cross-business referrals through Sales Councils in Canada and the One Harris initiative in the U.S. I am following these efforts closely and am very encouraged by the progress we are making.

We have also ramped up revenue-boosting activities on a business-by-business basis. All of these activities are resulting in good volume growth that we anticipate will be matched by stronger revenue growth in a more favourable interest rate environment.

Slide 9 - Priorities for Capital Deployment

Our priorities for capital investments are organic business growth through, for example, increased credit utilization and new branch construction in Chicago; personal and commercial banking acquisitions in the U.S. Midwest; dividends; and a modest share buyback program primarily used to offset dilution from the exercise of stock options. And, with our Tier 1 capital ratio growing by approximately 35 basis points with the pending sale of Harrisdirect, we will have more capital to allocate to opportunities that will drive growth.

BMO’s 11% quarterly increase in dividends so far this year follows a 26% quarterly increase during fiscal 2004. This is our 13th consecutive year of dividend increases and reflects this leadership team’s confidence in our strong capital position, the quality of our earnings, and our competitive advantages, notably: our ingrained credit culture and superior asset quality; our leadership in corporate governance; our strength in commercial banking; and our exceptionally well-positioned U.S. holdings.

Slide 10 - Ingrained Credit Culture & Superior Asset Quality

It is hard to overstate the degree to which BMO’s strong and consistent credit performance has produced a superior asset quality base for ongoing earnings capability. Our approach allows us to be consistent in our risk-taking activities through all parts of the credit cycle. This is a very significant differentiator for BMO and much appreciated by our customers, especially commercial clients.

Excellence in managing credit enables us to provide more predictable and consistent returns for shareholders over time than many of our peers. From 1990 to 2004, our credit losses on loans and acceptances, excluding reverse repos, averaged 38 basis points compared with a Canadian peer group average of 60 basis points. BMO led the Canadian peer group in 14 of these 15 years, a dramatic illustration of our leadership. The only exception was 2001, when our credit culture led us to be early recognizers of emerging problems that hit our peers’ results later in 2002. We believe credit will increasingly differentiate BMO as we enter into a more normalized part of the credit cycle and investors recognize the value of our consistently disciplined approach.

Our competitive advantage manifests itself in both our retail/consumer portfolios, which have a 15-year loss history average of 24 basis points versus 36 basis points for our peers, and in our commercial and corporate portfolios, which have a 15-year loss history average of 52 basis points versus 89 basis points for our peers.

In the third quarter, as expected, we saw a return to a more normalized credit environment in contrast to the high recoveries and reduction in the general allowance in 2004 that resulted from our superior credit capabilities and asset quality. However the trend line shows that our leadership continues.

Following the lessons we learned from the real estate and energy sector problems in the’70s and ’80s, we fundamentally changed the way we handle credit at BMO. It has taken many years to develop such a deeply ingrained credit culture in which we don’t avoid risk but rather manage risks in a professional and disciplined manner.

While we are not immune to periodic problems, our consistent application of credit policies and processes and our portfolio diversification have and will continue to provide protection from some of the more notable exposures experienced elsewhere.

Slide 11 - Credit Performance Drives Earning Power

This slide shows how credit performance drove BMO’s earning power over the full economic cycle from 1990 through 2004. Our net interest margin averaged 2.32% over this period, just above the Canadian peer group average. However, when the provision for credit losses and non-earning assets are excluded, BMO’s margin averaged 2.53% — a strong #1 ranking over 15 years. And in any individual year we never ranked lower than #3 on this revealing measure.

Our ability to maintain the same underwriting standards throughout the credit cycle results in a good alignment of BMO values with the values and needs of our clients. Volatile clients tend to self-select out as we build deeper relationships with clients grateful for our support through good and bad times. We typically gain market share when others turn inward to resolve a growing bad loan book in the worst part of the cycle and sometimes even withdraw from sectors, leaving clients wondering whether they can count on their bank when the going gets tough. Our clients know they can count on BMO.

This approach has enabled us to gain a market leadership position in commercial banking while being paid very well by the market when our loan loss experience and spread are combined and compared with the industry average.
I should also mention that the degree to which credit expertise is ingrained in our culture is reflected in the large number of BMO senior executives who have credit experience, me included.

Slide 12 - Leader in Corporate Governance and Financial Disclosure

A closely aligned strength that also cannot be replicated quickly is corporate governance and financial disclosure. Recent external recognition of BMO’s leadership includes: being named Canada’s best corporate citizen for 2005 by the Corporate Knights organization; a #1 ranking in Canadian Business magazine’s annual corporate governance survey; and the #1 global ranking in the Financial and Performance Reporting category in the latest annual report of annual reports by e.com.

We believe that BMO’s leadership in aligning compensation with shareholder interests — not just in the short term but in the mid and long term as well — will have a positive influence on our relative performance over time. Investors who track compensation trends closely have told me many times that this sets BMO apart from the competition.

Our leading-edge governance processes, which are championed by our Enterprise Risk and Portfolio Management teams, ensure that senior management and Board committees are fully informed of the scope and extent of our risk-taking activities at all times. BMO has an independent credit team, which reports to an independent Chief Credit Officer in providing objective second opinions on credit-granting activities. We believe this dual signing process enables us to do better deals.

Slide 13 - Growth Potential in Canadian Commercial

While we are using our credit strength to drive growth in all our businesses, we believe it will be particularly helpful in building out our strong commercial businesses in both Canada and the United States. The senior leadership team views commercial as a particularly good growth engine for BMO in the future, and we speak from experience. Key leaders including Rob Pearce, Bill Downe, and Frank Techar all have hands-on experience as commercial bankers — and Frank’s last job before taking on leadership of Harris was as head of business banking in Canada.

I talked earlier about how our leadership in credit enables us to stand by our customers when the going gets tough. A recent example of this customer support in action was BMO’s quick and sustained response when the American border was closed to the Canadian beef and cattle industry. We implemented special programs to support customers through the so-called mad cow disease crisis with negligible negative impact on our PCL. Most recently we introduced a relief program to help our Manitoba farming customers hurt by summer flooding.

Customers tell us how much they appreciate our initiative, our consistency and our dedication. This long-term approach has increased customer loyalty and enabled us to double market share in Canada from the early Nineties to almost 19% today. Even in an increasingly competitive market where others are re-focusing on personal and commercial businesses, our relationship-building focus has enabled us to maintain our #2 position and grow market share over time.

Slide 14 - Growth Potential in Harris Commercial

Harris has also become a leading commercial player in the Chicago area, adding US$1 billion in business banking loans and US$800 million in business banking deposits from 2001 to 2004. At mid-year, Harris had achieved a business banking retention score of 94% compared to the industry average of 83% — while maintaining business lending net losses that are consistently lower than its peer groups. Furthermore, third-party market share research has just arrived showing that Harris is in the Top 3 position and climbing in the commercial mid-market segment; and effectively is in a dead heat for first with two other competitors in both the small and micro business segments.

Given all the work we have done and are continuing to do to meet more of our customers’ needs through cross-business referrals, we see our commercial customers as a pipeline to build out our personal banking and wealth management businesses. And we are gathering anecdotal evidence of a new growth area in meeting the needs of customers with business and/or personal financial interests in both Canada and the United States. More frequently these days I hear from customers thanking us for providing seamless financial solutions as they move from one country to the other. None of our competitors is as well positioned as we are to fill this growing need.

Slide 15 - Exceptional U.S. Platform for Growth

The migration of our commercial expertise from Canada to the U.S. is just one way in which we have used longstanding Canadian strengths to build out our U.S. businesses and create an exceptional U.S. platform for growth.

We have invested $3.8 billion in acquisitions since we bought Harris in 1984, transforming a handful of private Chicago banks into a community banking network of nearly 200 branches in the greater Chicago area. We took a deliberate and methodical approach to expansion, building a scalable community banking model designed to support additional acquisitions.

Slide 16 - Chicagoland Banking Distribution Network

Key assets include the highly regarded Harris brand, more than 1 million personal, business and corporate and institutional clients, and our distribution network in the high-opportunity greater Chicago area. Harris is one of the top three banks that together have about 30% retail deposit market share in a still largely fragmented market characterized by hundreds of small banks serving a population of more than 9 million.

We have also developed a superior business model that is uniquely suited to a large Canadian bank looking to succeed in the vastly larger and highly competitive U.S. environment. It retains the best of the Harris community banking heritage while positioning us for higher growth and profits in the future.

We are using BMO’s Canadian experience in operating a large and diverse banking network to blend the best of two banking models — network banking and community banking — to create a powerful, growth-generating bank, which combines a community-focused front office with a high-efficiency back office.

Strong volumes plus high customer satisfaction and market share results show that Harris is competing very successfully against the established and new competitors in this affluent market. Our score on the toughest measure, “Would you refer business to us?” is three times higher than the network players — by which I mean Bank One, LaSalle, Fifth Third, Charter One, Citibank and Bank of America. We have a very competitive full-service offer and we’ve proven we can compete in any product category.

Slide 17 - One Harris

Looking to the future, we are making great progress in our One Harris program to involve more of our colleagues in developing deep relationships with our target segments. Early results show that we are gaining good momentum in earning a larger share of wallet and driving revenue growth through better collaboration across lines of business.

At times, the similarities between Canada and the United States can reduce visibility of the significant differences between the business cultures and customer expectations. It all looks deceptively familiar. Companies that don’t take the subtle differences into account when making business decisions will eventually run into trouble. At BMO, we have put a great deal of effort into shifting our perspective. A significant number of our leaders in key positions split their time between Canada and the U.S. and others with long-term career experience in one country have moved to the other. Overall, we are very much at home in the Midwest and very optimistic about future growth.

Slide 18 - 2004 Acquisitions — Synergy Capture

A very considerable benefit of our on-the-ground experience is our track record for integrating acquisitions to reduce expenses. This slide shows our strong progress to date in capturing expense savings from our 2004 acquisitions. With the Mercantile acquisition, for example, our business case anticipated a 19% reduction in pre-acquisition operating expenses within three years. Already, we have achieved 60% of the business case and we now anticipate being 41% better than plan by Year 3. This gives you a feel for the extent to which our superior U.S. business model will enable us to grow revenues while lowering costs as we absorb future acquisitions.

I would also point out that if you exclude the expenses associated with de novo branch expansion and our recent acquisitions from Chicagoland financial results so far this year, you will see that our U.S. personal and commercial businesses are performing very well despite all the competitive and economic pressures.

Slide 19 - Progress on U.S. Expansion

Let me highlight some of the recent progress we made toward our goal to become the leading personal and commercial bank in the U.S. Midwest:

We announced an agreement to acquire Edville Bankcorp and its subsidiary Villa Park Trust and Savings Bank.

We opened a new branch in Mount Prospect, Illinois, bringing the Harris community banking network to 171 locations in Chicagoland and 190 including Northwest Indiana. We anticipate that by year-end we will continue to be on target to reach 200 locations in Chicagoland and 20 in Northwest Indiana by 2007.

We made huge progress in completing the Harris charter consolidation with no disruption to customer service. It was an outstanding success. Customers can now transact business with greater ease at any Harris Chicagoland location. We anticipate that benefits will start to accrue in 2006 as system modifications and business processes become fully integrated. With this significant initiative completed, we are better positioned to successfully integrate future acquisitions.

And in August, we announced an agreement to sell Harrisdirect for approximately $910 million or about $1,700 per active account. The deal is expected to close by BMO’s year end. Some time ago we told the investor community that we were closely monitoring this business in light of the changing competitive landscape. We are confident today that we chose exactly the right time and right transaction to deliver a win for both customers and shareholders.

Slide 20 - Acquisition Strategy

We are well positioned to continue the expansion of our Harris personal and commercial operations in the states contiguous to Illinois — west of the Mississippi and east of the Rockies.

We have a dedicated team of professionals who specialize in identifying and evaluating potential acquisitions. The invaluable experience we have gained with our acquisitions to date makes it possible to integrate acquisitions much more rapidly than a few years ago — as, of course, does our integrated back office.

Slide 21 - De Novo Branch Expansion

We are also continuing Harris’s de novo branch expansion. In the past three years we have opened 22 de novo branches in the Chicago area and now have the second-largest branch distribution network in this area. We’ll be adding three more branches this quarter, and we have already secured eight prime sites for expansion in 2006 and 2007. So far, new branch performance is in line with expectations, and we will maintain our focus on performance.

Slide 22 - Becoming the Leading P&C Bank in the U.S. Midwest

What will it take to become the leading personal and commercial bank in the U.S. Midwest? Here are the metrics we find most meaningful: We want to grow faster from a core business perspective than everyone else; lead the market in customer service scores; continue to improve productivity and profitability; and acquire suitable properties as they become available.

This is not some grandiose vision but a very achievable, track-able goal given our current size in the Midwest, our integrated platform, our on-the-ground expertise, and the resources at our disposal. We’re not talking high drama here but integrated, disciplined, focused, shareholder-friendly growth that we believe will produce, over the long term, high returns at relatively low risk to our shareholders.

In closing, let me just say that we’re not content to see ourselves as one of the big five Canadian banks with just another niche focus on the U.S. market. We want to be acknowledged as #1 in the markets we have chosen. And we want to be considered the most successful Canadian bank in the U.S. We have some distance to go, but the path ahead is clear.

Slide 23 - Contact Information

On that note I’ll conclude my prepared remarks and thank you for your attention.

Slide 24 - Clear Path Ahead: Question & Answer

I’d be happy to answer any questions.

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