HispanicBusiness

Note: All ratios and percentage changes in this document are based on unrounded numbers.

Operating Segment Overview

Commencing in the first quarter of 2013, we changed the way in which we evaluate our operating segments to reflect the provisions for credit losses on an actual credit loss basis. The change in allocation methodology enhances the assessment of performance against our peer group. Previously, we had charged the groups with credit losses based on an expected loss provisioning methodology whereby Corporate Services was charged (or credited) with differences between the periodic provisions for credit losses charged to the operating group segments under our expected loss provisioning methodology and the periodic provisions required under GAAP. Prior period results have been restated accordingly. Provisions for the purchased performing and purchased credit impaired loan portfolios continue to be evaluated and reported in Corporate Services.

P&C Canada

Net income was $458 million, up $17 million or 4% from a year ago. Results reflect the combination of good volume growth across most products and the impact of lower net interest margin, together with lower provisions for credit losses. There was year-over-year loan growth of 9% and deposit growth of 4%. Expenses were up modestly, with growth of 1% reflecting good expense management as we continue to invest in our business.

We are focused on making money make sense for our customers, offering simplified products and exceptional customer service. Customers have more options than ever as to how to bank with BMO. We expanded our network by opening or upgrading nine locations this quarter and have continued to invest in our online and mobile banking services. These investments in online and mobile capabilities are making a difference as increasing numbers of customers are using technologies such as eStatements, email and text alerts, online appointment booking and Mobile Paypass. We continue to have top-tier performance in customer loyalty, as measured by the net promoter score.

Personal banking continues to see momentum and improved sales force productivity. We are leveraging the success of our home financing campaigns and offering products that fit the needs of our customers. The average number of products held by our customers continues to grow, as we develop stronger relationships with our current customers and attract new ones. In the quarter, we enhanced our Smart Saver Account by paying interest on every dollar of savings with no minimum required, providing our customers with a competitive offer and an easy to understand product. We also introduced a compelling Tax Free Savings Account offer which is generating strong early results.

In commercial banking, our sales force is focused on offering solutions, advice and integrated products and services suited to the needs of our diverse commercial customer base. Our award-winning Online Banking for Business platform helps customers manage their businesses more effectively. Customers continue to recognize us with top-tier customer loyalty, as measured by commercial net promoter score. With our ongoing success in these areas, we continue to rank #2 in Canadian business banking loan market share for small and medium-size loans.

P&C U.S. (all amounts in US$)

Net income of $183 million increased $26 million or 17% from $157 million in the first quarter a year ago. Adjusted net income was $197 million, up $23 million or 13% from a year ago due to the benefit of reduced expenses and lower provisions for credit losses. Revenue was 3% lower as higher gains on the sale of newly originated mortgages and increased commercial lending fees were more than offset by the effect of lower net interest margin, a decline in securities gains and lower deposit fees.