The following sections review the financial results of each of our operating segments and operating groups for the first quarter of 2013.
Periodically, certain business lines and units within the business lines are transferred between client groups to more closely align BMO's organizational structure with its strategic priorities. Results for prior periods are restated to conform to the current presentation.
Corporate Services results reflect certain items in respect of the acquired loan portfolio, including the recognition of a portion of the credit mark that is reflected in net interest income over the term of the purchased loans and provisions for credit losses on the acquired portfolio. Integration and restructuring costs are also included in Corporate Services.
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. As part of this change, the interest income resulting from the accretion of the net present value of impaired loans is also included in operating group net interest income. 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.
During the quarter we refined our methodology for the allocation of certain revenues in Corporate Services by geographic region. As a consequence, we have reallocated certain revenue of prior periods from Canada to the United States in Corporate Services.
BMO analyzes revenue at the consolidated level based on GAAP revenues reflected in the consolidated financial statements rather than on a taxable equivalent basis (teb), which is consistent with our Canadian peer group. Like many banks, we continue to analyze revenue on a teb basis at the operating group level. This basis includes an adjustment that increases GAAP revenues and the GAAP provision for income taxes by an amount that would raise revenues on certain tax-exempt items to a level equivalent to amounts that would incur tax at the statutory rate. The offset to the group teb adjustments is reflected in Corporate Services revenues and income tax provisions. The teb adjustments for the first quarter of 2013 totalled $64 million, down from $92 million in the fourth quarter of 2012, and up from $52 million in the first quarter of 2012.
----------------------------------------------------------------------------Personal and Commercial Banking (P&C) Table 22----------------------------------------------------------------------------(Canadian $ in % Increase % Increase millions, except as (Decrease) (Decrease) noted) Q1-2013 Q1-2012 vs Q1-2012 Q4-2012 vs Q4-2012----------------------------------------------------------------------------Net interest income (teb) 1,702 1,754 (3) 1,684 1Non-interest revenue 613 596 3 616 (1)----------------------------------------------------------------------------Total revenue (teb) 2,315 2,350 (2) 2,300 1Provision for credit losses 160 218 (26) 221 (28)Non-interest expense 1,262 1,301 (3) 1,272 (1)----------------------------------------------------------------------------Income before income taxes 893 831 7 807 11Income taxes (teb) 253 231 9 225 12----------------------------------------------------------------------------Reported net income 640 600 7 582 10--------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted net income 656 619 6 600 9----------------------------------------------------------------------------Return on equity (%) 18.7 15.8 2.9 17.9 0.8Adjusted return on equity (%) 19.1 18.5 0.6 18.4 0.7Operating leverage (%) 1.5 (7.8) nm (1.9) nmAdjusted operating leverage (%) 1.2 (6.1) nm (2.0) nmEfficiency ratio (%) (teb) 54.5 55.4 (0.9) 55.3 (0.8)Adjusted efficiency ratio (%) (teb) 53.6 54.2 (0.6) 54.2 (0.6)Net interest margin on earning assets (%) (teb) 3.05 3.34 (0.29) 3.10 (0.05)Average earning assets ($ billions) 221 209 6 216 2--------------------------------------------------------------------------------------------------------------------------------------------------------Adjusted results in this table are non-GAAP amounts or non-GAAP measures.Please see the Non-GAAP Measures section.nm - not meaningful
