Insurance Risk
There were no significant changes in the risk management practices or risk levels of our insurance business during the quarter. BMO's insurance risk management practices are outlined on page 89 of BMO's 2012 Annual Report.
Caution
This Risk Management section contains forward-looking statements. Please see the Caution Regarding Forward-Looking Statements.
Adjusted results in this section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.
Income Taxes
The provision for income taxes of $265 million decreased $48 million from the first quarter of 2012 and increased $64 million from the fourth quarter of 2012. The effective tax rate for the quarter was 20.2%, compared with 22.0% a year ago and 15.7% in the fourth quarter.
The adjusted provision for income taxes of $260 million decreased $42 million from a year ago and increased $14 million from the fourth quarter. The adjusted effective tax rate was 19.9% in the current quarter, compared with 23.7% in the first quarter of 2012 and 17.9% in the fourth quarter of 2012.
The lower adjusted effective tax rate in the current quarter relative to the first quarter of 2012 was primarily due to higher recoveries of prior periods' income taxes and higher tax exempt earnings. The higher adjusted effective tax rate in the current quarter relative to the fourth quarter of 2012 was primarily due to lower recoveries of prior periods' income taxes. The adjusted tax rate is computed using adjusted net income rather than net income in the determination of income subject to tax.
Adjusted results in this section are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.
----------------------------------------------------------------------------Summary Quarterly Earnings Trends (1) Table 13----------------------------------------------------------------------------(Canadian $ in millions, except as Q1- Q4- Q3- Q2- Q1- Q4- Q3- Q2- noted) 2013 2012 2012 2012 2012 2011 2011 2011----------------------------------------------------------------------------Total revenue 4,081 4,176 3,878 3,959 4,117 3,822 3,320 3,333Provision for credit losses - specific (see below) 178 216 229 195 122 299 245 265Provision for credit losses - collective - (24) 8 - 19 63 (15) 32Non-interest expense 2,590 2,701 2,484 2,499 2,554 2,432 2,221 2,030Reported net income (see below) 1,048 1,082 970 1,028 1,109 768 708 813Adjusted net income (see below) 1,041 1,125 1,013 982 972 832 856 770----------------------------------------------------------------------------Basic earnings per share ($) 1.53 1.59 1.42 1.52 1.65 1.12 1.10 1.34Diluted earnings per share ($) 1.53 1.59 1.42 1.51 1.63 1.11 1.09 1.32Adjusted diluted earnings per share ($) 1.52 1.65 1.49 1.44 1.42 1.20 1.34 1.25Net interest margin on earning assets (%) 1.85 1.83 1.88 1.89 2.05 2.01 1.76 1.82Adjusted net interest margin on earning assets (%) 1.67 1.67 1.70 1.76 1.85 1.78 1.78 1.83Effective income tax rate (%) 20.2 15.7 16.2 18.7 22.0 25.3 18.5 19.2Adjusted effective income tax rate (%) 19.9 17.9 16.9 19.5 23.7 20.7 19.7 21.7Canadian/U.S. dollar exchange rate (average) 1.00 0.99 1.02 0.99 1.01 1.01 0.96 0.96Provision for credit losses - specific (2) P&C Canada 128 146 147 167 155 178 154 166 P&C U.S. 32 75 76 60 63 71 60 85----------------------------------------------------------------------------Personal and Commercial Banking 160 221 223 227 218 249 214 251Private Client Group 2 11 5 1 5 2 (1) 5BMO Capital Markets (15) (4) - 19 (9) 12 10 4Corporate Services, including T&O 31 (12) 1 (52) (92) 36 22 5----------------------------------------------------------------------------BMO Financial Group provision for credit losses - specific 178 216 229 195 122 299 245 265----------------------------------------------------------------------------Reported net income: P&C Canada 458 442 459 433 441 419 436 400 P&C U.S. 182 140 139 142 159 162 90 21----------------------------------------------------------------------------Personal and Commercial Banking 640 582 598 575 600 581 526 421Private Client Group 163 164 109 147 104 138 109 90BMO Capital Markets 310 314 250 233 224 156 288 250Corporate Services, including T&O (65) 22 13 73 181 (107) (215) 52----------------------------------------------------------------------------BMO Financial Group net income 1,048 1,082 970 1,028 1,109 768 708 813--------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted net income: P&C Canada 461 444 462 436 443 422 437 401 P&C U.S. 195 156 155 157 176 179 99 26----------------------------------------------------------------------------Personal and Commercial Banking 656 600 617 593 619 601 536 427Private Client Group 169 169 114 153 109 143 111 92BMO Capital Markets 310 315 250 233 224 156 289 250Corporate Services, including T&O (94) 41 32 3 20 (68) (80) 1----------------------------------------------------------------------------BMO Financial Group adjusted net income 1,041 1,125 1,013 982 972 832 856 770--------------------------------------------------------------------------------------------------------------------------------------------------------(1) Adjusted results in this table are non-GAAP amounts or non-GAAP measures. Please see the Non-GAAP Measures section.(2) Prior period balances have been restated to reflect a change in accounting allocation methodology for provisions for credit losses. See the Review of Operating Groups' Performance for more details.
