HispanicBusiness

Relative to the fourth quarter, non-interest revenue decreased $166 million or 8%, and adjusted non-interest revenue decreased $107 million or 5%. Insurance revenues were lower, and there were also decreases in securities gains and adjusted trading revenues. Other revenue was down from the higher level in the fourth quarter. The above reductions were partly offset by a large increase in underwriting and advisory fees, primarily mergers and acquisitions and debt underwriting fees, as well as improved mutual fund revenues and lending fees.

Non-interest revenue is detailed in the unaudited interim consolidated financial statements.

Adjusted results in this section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Non-Interest Expense

Non-interest expense increased $36 million or 1% from the first quarter a year ago to $2,590 million. Adjusted non-interest expense increased $86 million or 4% to $2,464 million mainly due to higher employee costs and increased performance-based compensation, given improved revenue. The weaker U.S. dollar decreased adjusted expense growth by $15 million or 1%.

Relative to the fourth quarter, non-interest expense decreased $111 million or 4%. Adjusted non-interest expense increased $28 million or 1%. Adjusted expense includes $73 million of performance-based compensation in respect of employees that are eligible to retire, which is expensed each year in the first quarter, and increased employee benefits costs, which are typically higher in the first quarter of the year. The above were mostly offset by continued cost management initiatives. The stronger U.S. dollar increased adjusted expense growth by $5 million. The quarter-over-quarter operating leverage on a reported basis was 1.8% and the adjusted operating leverage was negative 2.7%. On a basis that adjusts for the current quarter stock-based compensation mentioned above, the quarter-over-quarter adjusted operating leverage was 0.3%.

Non-interest expense is detailed in the unaudited interim consolidated financial statements.

Adjusted results in this section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.

Risk Management

Our risk management practices and key measures have not changed significantly from those outlined on pages 75 to 92 of BMO's 2012 annual MD&A.

Provisions for Credit Losses

In the first quarter of 2013, the provision for credit losses was $178 million and the adjusted provision for credit losses was $96 million. Adjusting items included an $82 million specific provision on the M&I purchased performing loan portfolio. There was no change in the collective allowance for either the M&I purchased performing or other loan portfolios. The adjusted provision for credit losses of $96 million represents an annualized 16 basis points of average net loans and acceptances, compared with $113 million or an annualized 20 basis points in the fourth quarter of 2012 and $91 million or an annualized 17 basis points in the first quarter of 2012. Included in the adjusted specific provision for credit losses is a recovery of $59 million related to the M&I purchased credit impaired loans this quarter, compared with recoveries of $132 million in the fourth quarter of 2012 and $142 million a year ago.

On a geographic basis, specific provisions in Canada and all other countries (excluding the United States) were $128 million in the current quarter, $143 million in the fourth quarter of 2012 and $153 million a year ago. Specific provisions in the United States were $50 million in the current quarter, $73 million in the fourth quarter of 2012 and a $31 million recovery a year ago. On an adjusted basis, there were recoveries in the United States for the comparable periods of $32 million, $30 million and $62 million, respectively.