BMO Capital Markets
Net income was $280 million, up $30 million or 12% from the prior year, driven by good performance across our diversified businesses in general, with increases in trading revenue and equity underwriting.
We were recognized during the quarter with a number of awards, reflecting our ongoing commitment to our clients. BMO Capital Markets was selected as a 2013 Greenwich Quality and Share Leader in Canadian equities by Greenwich Associates, reflecting client recognition for providing the industry's best coverage in equity research/advisory vote and trading share and high service quality for equity sales and trading. In the Global Custodian Magazine 2013 Prime Brokerage Survey, BMO Capital Markets ranked Best in Class for our Prime Brokerage business in 9 of 12 categories, and was the recipient of Trade Finance Magazine's Best Trade Bank in Canada award for the fourth consecutive year.
BMO Capital Markets participated in 136 new issues in the quarter including 55 corporate debt deals, 45 government debt deals, 28 common equity transactions and eight issues of preferred shares, raising $56 billion.
Corporate Services net loss for the quarter was $11 million, compared with net income of $13 million a year ago. On an adjusted basis, the net loss was $35 million, compared with net income of $32 million a year ago. The decrease in reported results was smaller than the decrease in adjusted results primarily due to lower integration costs in the reported results in the current year. Adjusting items are detailed in the Adjusted Net Income section and in the Non-GAAP Measures section. Adjusted revenues were lower primarily due to a higher group taxable equivalent basis (teb) offset. Adjusted non-interest expenses were higher primarily due to higher technology costs. Adjusted recoveries of credit losses increased, primarily due to higher recoveries on the Marshall & Ilsley (M&I) purchased credit impaired loan portfolio.
Adjusted Net Income
Adjusted net income was $1,136 million for the third quarter of 2013, up $123 million or 12% from a year ago. Adjusted earnings per share were $1.68, up 13% from $1.49 a year ago.
Management has designated certain amounts as adjusting items and has adjusted GAAP results so that we can discuss and present financial results without the effects of adjusting items to facilitate understanding of business performance and related trends. Management assesses performance on a GAAP basis and on an adjusted basis and considers both to be useful in the assessment of underlying business performance. Presenting results on both bases provides readers with a better understanding of how management assesses results. Adjusted results and measures are non-GAAP and, together with items excluded in determining adjusted results, are disclosed in more detail in the Non-GAAP Measures section, along with comments on the uses and limitations of such measures. Items excluded from third quarter 2013 results in the determination of adjusted results totalled $1 million of net income and had no impact on EPS, and were comprised of:
-- the $68 million after-tax net benefit for credit-related items in respect of the M&I purchased performing loan portfolio, consisting of $154 million for the recognition in net interest income of a portion of the credit mark on the portfolio (including $55 million for the release of the credit mark related to early repayment of loans), net of a $44 million specific provision for credit losses and related income taxes of $42 million. These credit-related items in respect of the acquired M&I performing loan portfolio can significantly impact both net interest income and the provision for credit losses in different periods over the life of the M&I purchased performing loan portfolio;-- costs of $49 million ($30 million after tax) for the integration of M&I including amounts related to system conversions, restructuring and other employee-related charges, consulting fees and marketing costs related to rebranding activities;-- an increase in the collective allowance for credit losses of $20 million ($15 million after tax) on loans other than the M&I purchased loan portfolio;-- the $1 million before and after-tax benefit from run-off structured credit activities; and-- the amortization of acquisition-related intangible assets of $32 million ($23 million after tax).