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"New World Rising"
Notes For Remarks By Tony Comper, President & CEO, BMO Financial Group At Bank Of Montreal Annual Meeting Of Shareholders
 

Calgary, Alberta, March 2, 2006
 

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Thank you, David and good morning everyone.

 

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.

 

Watching the richly intertwined past of this province and my organization unfold all around us this morning reminded me that we last held our annual meeting here in 1996 when we celebrated the 110th anniversary of our first Calgary branch – and now we’re back again to celebrate the 120th.

 

While I have been here many times in between, I have especially fond memories of our annual meeting in Calgary a decade ago, and it’s a great pleasure to address shareholders here once again. It’s also a bit of a relief to look around and see that I’m not the only survivor of that meeting!

 

I’d like to discuss today the welcome challenges of reaching for top performance in a post-globalization world – a particularly apt topic given how energizing it is just to be here in the City of Calgary and the Province of Alberta these days.

 

It’s not just the fact that you’ve got your very own Prime Minister now – a victory, if I may say so, that is very much in the spirit of Alberta and the West. Given how “promised” this land has become at the start of the 21st Century, it is not surprising that the political axis is shifting this way as well.

 

Another reason has got to be the proliferation of Olympic medals for Canada from this part of the country. (My congratulations and thanks to each and every one of these superlative athletes.)

 

For me, though, that “Alberta energy” started to build earlier this year when I picked up and leafed through and then went back and pored over our Economics Department’s long-range outlook for this province.

 

Like just about every other sentient Canadian, it did not hit me like a bolt out of the blue that Alberta was outperforming the field by a considerable margin. But listen to some of the section headings:

 

§         Alberta is the only debt-free province”

 

§         Alberta’s economy to grow significantly faster than the national economy”

 

§         “Living standards improve faster in Alberta than in the rest of the nation”

 

§         Alberta should continue to offer the best job prospects in the nation…and the largest increase in incomes”

 

And, to cap it all off:

 

§         “Surpluses for as far as the eye can see…”

 

What’s not to like, in other words, what’s not to get excited about? And, for the leader of a company that aspires to be the top-performing bank in North America, what’s not to take inspiration from?

 

This is not the first time I have voiced BMO’s mission to become the top performer on an ever-more-crowded and ever-more talented North American playing field. And I’m looking forward to making my case shortly.

 

First though, let me paint a broader picture. Which is this: The only competitive advantages we Canadians can expect in the near-future world are the ones we create and invent and pursue and renew for ourselves.

 

And while I would not presume to speak for Albertans on just about any other matter, I’m pretty sure most people in this room and indeed in this province share my conviction that this is the way it should be – that in fact we would not want it any other way.

 

Rather than feel threatened by, say, the emergence of China as the world’s next great economic superpower – which is how 45% of Canadians responded in a poll taken last year – we can do what my bank and this province and indeed enlightened corporate Canada have been doing for years: focus (and capitalize) on the opportunities to build relationships.

 

I would go farther and say that we also qualify as early comprehenders of the fact that as the world gets flatter – to borrow a bit of imagery from The World Is Flat, Thomas Friedman’s best seller on the post-globalization age – history and geography are going to count for less and less until they count for nothing at all.

 

As up-close and early participants, we also understand that being matched is not the same as being surpassed. No matter how flat the Earth gets, it is my considered opinion that this country and its people and its corporations and its institutions will be able to hold their own with the best the rest of the world has to offer – no matter who rises or how high.

 

The irresistible metaphor is the National Hockey League. And I say this notwithstanding Team Canada’s heartbreaking performance at the recent Olympics – because, of course, the NHL is now home to virtually all of the world’s best hockey players.

 

As a few others here may recall along with me, the NHL once had six teams, and with the very rare exception, every player on every team came from Canada. Then, over time, other northern countries began producing significant numbers of players who could compete with our best.

 

Has Canada been diminished as a hockey nation by this leveling of the global playing surface? Have Canadian players been eclipsed by their counterparts from the 20 other hockey-playing countries?

 

No to both questions, obviously.

 

Despite the rise of other major hockey-playing nations and the arrival of the rest of the world’s best players in what used to be “our” NHL – or, I would argue, because of these things – Canada’s teams and Canadian players have not just survived but thrived.

 

While out-populated by something like 20 to one by the rest of the hockey-playing world, Canadians still account for 60% of the players in today’s 30-team National Hockey League.

 

The world caught up, in other words, but it did not surpass.

 

Now I am hardly qualified to comment on whether or not “hockey is like life.” It strikes me however that if some of us – i.e., hockey players and hockey organizations – can hold their own in a global arena, why not the rest of us?

 

Really, is there any reason to believe that other Canadians in other walks of life won’t be able to hold their own with the best in the world? Or that the same does not hold true for our corporations and our post-secondary educational institutions?

 

When I look around this room, and this city and province, I have my answer to what I admit were blatantly rhetorical questions. You won’t allow yourselves to be bested; you just don’t have it in you.

 

And neither do the people at BMO.

 

We believe our organization can rank among the planet’s top-performing financial institutions.

 

Now to be perfectly accurate, for the time being we have confined BMO’s top-performance quest to the North American continent, where we are already the oldest and best-integrated of the cross-border banks.

 

But given the reinvention of the global marketplace and the growing strength of global banks throughout North America, in our industry (as in so many others), aiming to be the best in North America is pretty much the same as aiming for the top of the world.

 

That we will surely be sharing that space matters not at all: the banking business is full of exceptional people with thousands more arriving by the day. What matters is that in banking, as in hockey, we will not be surpassed. There’s no reason we should be.

 

When it comes to talent, dedication, sophistication and expertise, the people at BMO Financial Group are unsurpassed by the people at any other financial institution anywhere – in (let me qualify this) each and every area where we choose to compete. Whenever the bar is raised, BMO people will continue to clear it in style.

 

Under the leadership of our Chief Operating Officer Bill Downe, we are pursuing a series of initiatives to create a working environment where top performance becomes the daily norm – developed in part by studying the best practices of current top performers in a number of industries – and a growth strategy that we believe is perfectly suited to our top-performer ambitions.

 

I should quickly add that when it comes to achieving these ambitions, we have a flying start. This is by virtue of the fact that we are currently competing at the extremely high levels demanded by the Canadian banking system – recognized and acknowledged as already among the best on the planet.

 

Let me quickly list a couple of areas where BMO stands out.

 

For one, there is our well-established and very significant leadership in credit risk management, which Karen Maidment will be discussing a few moments from now.

 

Karen will also show you one of our favourite slides, and I daresay one of special interest to this audience of shareholders. It shows that BMO ranks second in the world among large-cap financial services companies for delivering risk-adjusted returns to shareholders. This exceptionally strong showing speaks to BMO’s enduring strength in delivering consistent and reliable long-term returns at relatively low risk.

 

Another strength we can build on is our leadership in commercial banking in North America. Even in an increasingly competitive Canadian market where others are re-focusing on their personal and commercial businesses, our intense customer focus has enabled us to gain and maintain over time a market leadership position in commercial banking.

 

We are also a leading commercial player in our chosen markets in the United States, both through Harris’s increasing business banking operations in the greater Chicago area and Harris Nesbitt’s well-entrenched mid-market client base throughout the Midwest.

 

With the major emphasis we are placing on meeting more of our customers’ needs, our commercial clients provide an excellent pipeline to expand our personal banking and wealth management businesses.

 

We also see a new growth opportunity in providing seamless solutions for customers with financial interests in both Canada and the United States. Given BMO’s unparalleled and fully integrated U.S. operations, which we have built up over decades, none of our competitors is as well positioned as we are to fill this need.

 

In fact, as we continue to invest in growing our core Canadian businesses, we are also accelerating our expansion in the U.S. Midwest through both organic growth and disciplined acquisition of personal and commercial banks that meet our strict criteria. We are aiming to make Harris a “super-regional” player in the United States

 

…and no less than the leading personal and commercial bank in the Midwest. We have targeted up to 400 branches over the next five years, or about twice as many as we have up and running today.

 

We see ourselves as a very focused player in the U.S. We are aiming to be #1 in the markets where we choose to compete – to be and to be seen to be the most successful Canadian bank in the United States.

 

Given that I earlier invoked the emergence of China as an economic superpower, I should also like to mention BMO’s considerable ties with that country. While our strategic focus for the mid term is resolutely on North America, we are keeping a keen eye on the long-term potential of our ongoing investments in China.

 

BMO’s ties with China stretch all the way back to 1818, the year after our bank was founded, when we undertook a foreign exchange transaction in support of trade.

 

Our modern presence there began in earnest after wheat sales were negotiated in 1961 and BMO started forging deep relationships with major Chinese banks. Those relationships have deepened even further since 1996, when Bank of Montreal became the first Canadian bank – and only the eighth in the world – to open a branch in Beijing.

 

We have since established branches in Guangzhou and Hong Kong, plus a representative office in Shanghai, creating an active network offering a wide range of commercial and trade products and services. We are also licensed to take deposits and make loans in local currency.

 

Furthermore, we have a 28% interest in one of China’s largest mutual fund companies – an investment with immense long-term potential. And among all the foreign banks in China, BMO has become the market maker in the yuan.

 

While I want to emphasize that our expectations for revenue contributions from China are very modest in the near term, BMO now ranks among the largest foreign banking presences in China.

 

And this, along with some excellent personal relationships my colleagues and I have established over the years, positions BMO exceptionally well for the future, starting in 2007, when China opens its financial services industry to global competition.

 

No crisis. Opportunity. 1.3 billion consumers’ worth.

 

For many years now, I have kept in touch on a very personal level with China’s exciting potential through my membership on the Advisory Council of the Mayor of Beijing.

 

And I am certainly not the only person who knows how important personal relationships are to the people of China. In the course of preparation for today, I came across remarks Premier Ralph Klein made in Beijing a couple of years ago, on his seventh trade mission to China.

 

Because of my own abiding interest in post-secondary education, I noted the Premier’s statement that “education is a key area of cooperation between Alberta and China.”

 

What struck me, as I explored further, was not just the depth and the breadth but the substance of the many relationships Alberta’s own colleges and universities have already forged with their counterparts in China.

 

What better symbol of a self-confident people exercising their self-confidence, serving notice that they can’t wait to be part of the new world that’s rising? 

 

While BMO may be (rightly) accused of a down-the-road profit motive for sharing our experience and expertise with bankers and other officials in China, the only purpose of Alberta’s 40-plus educational agreements signed to date is the sharing and advancement of knowledge – to the benefit of all concerned; and, at some stage, I’m sure, all of humankind.

 

When I made a point of how much personal relationships count in doing business in China, I should also have made the point that this particular demand is now pretty much universal. And properly so, and overlong in coming.

 

Indeed, when I talk about achieving top performance and being a world-class competitor, what I mean is providing every client of every business we run with (here’s that word again) unsurpassed products and services. So they’ll never even feel the need to look anywhere else.

 

There are other hurdles along the road to top performance, of course, from constantly improving productivity – as much or more on revenue-growing as on the cost-cutting side – to maintaining our role and profile as one of the country’s leading corporate citizens. In fact, BMO was named Canada’s best corporate citizen last year by Corporate Knights magazine.

 

But, as I have said so often, in the end everything – from survival to marketplace leadership to maximizing shareholder returns – comes down to one thing: getting it right with customers.

 

Our renewed drive to provide exceptional service to customers helped spark the internal transformation that has brought us to where we are today, with thousands and thousands of my colleagues as excited about the idea of word-class credentials and top performance as I am, and just as committed to bringing it about.

 

I cannot begin to tell you how gratifying it is to be around others who think we can, and therefore think we should. The future of BMO is going to be in very good hands, especially with the recent appointment of the multitalented Bill Downe as Chief Operating Officer.

 

As I guess I’ve made clear, my sense of optimism as the old world flattens and the new world rises is not isolated to the company that I’ve helped to build. Nor does it just extend to the success of Canada and Canadians.

 

What I also see in this coming-to-pass is the true promise and noblest intention of globalization fulfilled – the briskly paced climb of hundreds of millions of people from dead-end worlds of poverty and despair into worlds of possibility and dignity and hope. In our very lifetime and before our very eyes.

 

It is a privilege to play a small part in the global drama. Thank you very much.

____________________

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 presentation, 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 the United States Private Securities Litigation Reform Act of 1995 and of any applicable Canadian securities legislation. Forward-looking statements may include, but are not limited to, comments with respect to our objectives and priorities for 2006 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 and U.S. 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 presentation 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 conditions in the countries in which we operate; currency value fluctuations; changes in monetary policy; the degree of competition in the geographic and business areas in which we operate; changes in laws; 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; operational and infrastructure risks; general political conditions; global capital market activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes.

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 in our 2005 Annual Report concerning the effect certain key factors could have on actual 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 statement, whether written or oral, that may be made from time to time by the organization or on its behalf.

Assumptions about the performance of the Canadian and U.S. economies in 2006 and how that will affect our businesses are material factors we consider when setting our strategic priorities and objectives, and in determining our financial targets, including provision for credit losses. Key assumptions include our assumption that the Canadian and U.S. economies will expand at a healthy pace in 2006 and that inflation will remain low. We also have assumed that interest rates will increase gradually in both countries in 2006 and that the Canadian dollar will hold onto its recent gains in value. 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. Tax laws in the countries in which we operate, primarily Canada and the United States, are material factors we consider when determining our sustainable effective tax rate.

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