Q2 F2023 - Bank of the West Contribution & Financial Results
Non-GAAP and Other Financial Measures8
727
49
(7,559)
(1) Reported net income included the impact of divestitures of our EMEA and U.S. Asset
Management business. Q2-2022 included a gain of $6 million ($8 million pre-tax) relating to the
transfer of certain U.S. asset management clients recorded in revenue, and expenses of $15
million ($18 million pre-tax), both related to the sale of our EMEA Asset Management business.
Q1-2022 included a $29 million (pre-tax and after-tax) loss relating to foreign currency
translation reclassified from accumulated other comprehensive income to non-interest revenue,
a $3 million pre-tax net recovery of non-interest expense, including taxes of $22 million on
closing of the sale of our EMEA Asset Management business. These amounts were recorded in
Corporate Services.
(2) Reported net income included revenue (losses) related to the acquisition of Bank of the West
resulting from the management of the impact of interest rate changes between the
announcement and closing on its fair value and goodwill. Q1-2023 included a loss of $1,461
million ($2,011 million pre-tax), comprising $1,628 million of pre-tax mark-to-market losses on
certain interest rate swaps recorded in trading revenue and $383 million of pre-tax losses on a
(21) portfolio of primarily U.S. treasuries and other balance sheet instruments recorded in net
4,117 interest income, and Q2-2022 included revenue of $2,612 million ($3,555 million pre-tax),
comprising $3,433 million of pre-tax mark-to-market gains and $122 million of pre-tax net
interest income. YTD-2022 included revenue of $3,025 million ($4,117 million pre-tax),
comprising $3,950 million of pre-tax mark-to-market gains and $167 million of pre-tax interest
income. These amounts were recorded in Corporate Services. For further information on this
acquisition, refer to the Significant Events section in the Second Quarter 2023 MD&A.
(3) Reported net income included the impact of a lawsuit associated with a predecessor bank,
M&I Marshall and Ilsley Bank. Q2-2023 included interest expense of $6 million ($7 million pre-
(15) tax) and Q1-2023 included $6 million ($8 million pre-tax), comprising interest expense of $6
million pre-tax and legal fees of $2 million pre-tax. These amounts were recorded in Corporate
Services. For further information, refer to the Provisions and Contingent Liabilities section in
Note 24 of the audited annual consolidated financial statements of BMO's 2022 Annual Report.
(4) Reported net income included acquisition and integration costs recorded in non-interest
expense. Costs related to the acquisition of Bank of the West were recorded in Corporate
Services: Q2-2023 included $545 million ($722 million pre-tax), Q1-2023 included $178 million
($235 million pre-tax), and Q2-2022 included $26 million ($35 million pre-tax). YTD-2023
included $723 million ($957 million pre-tax) and YTD-2022 included $33 million ($43 million pre-
tax). Costs related to Radicle and Clearpool were recorded in BMO Capital Markets: Q2-2023
included $2 million ($2 million pre-tax), Q1-2023 included $3 million ($4 million pre-tax), and
Q2-2022 included $2 million ($2 million pre-tax). YTD-2023 included $5 million ($6 million pre-
tax) and YTD-2022 included $5 million ($6 million pre-tax) for YTD-2022. Costs related to the
announced acquisition of AIR MILESⓇ were recorded in P&C Canada: Q2-2023 included $2 million
($3 million pre-tax).
(34)
(5) Reported net income included amortization of acquisition-related intangible assets recorded
in non-interest expense in the related operating group and was $85 million ($115 million pre-
(84) tax) in Q2-2023 and $6 million ($8 million) in both Q1-2023 and Q2-2022. YTD-2023 included
$91 million ($123 million pre-tax) and YTD-2022 included $12 million ($16 million pre-tax). The
current quarter included $77 million ($104 million pre-tax) related to Bank of the West.
(6) Q2-2023 reported net income included an initial provision for credit losses of $517 million
($705 million pre-tax) on the purchased Bank of the West performing loan portfolio, recorded in
Corporate Services.
49
(7) Q1-2023 reported net income included a one-time tax expense of $371 million related to
certain tax measures enacted by the Canadian government, comprising a Canada Recovery
Dividend (CRD) of $312 million and $59 million related to the pro-rated fiscal 2022 impact of the
1.5% tax rate increase, net of a deferred tax asset remeasurement, recorded in Corporate
Services.
(7,479) (8) For more information, refer to slide 40, and the Non-GAAP and Other Financial
Measures and Summary Quarterly Earnings Trend sections of the Second Quarter 2023
MD&A
(Canadian $ in millions, except as noted)
Q2 23
Q1 23
Q2 22
YTD 23
YTD 22
Reported Results
Net interest income
4,814
4,021
3,902
8,835
Non-interest revenue
3,626
2,449
5,416
6,075
Revenue
8,440
6,470
9,318
14,910
7,921
9,120
17,041
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)
(591)
(1,193)
808
(1,784)
Revenue, net of CCPB
7,849
Provision for credit losses
(1,023)
5,277
(217)
10,126
13,126
17,768
(50)
(1,240)
Non-interest expense
(5,573)
(4,421)
(3,713)
(9,994)
Income before income taxes
1,253
639
6,363
Provision for income taxes
(194)
(392)
(1,607)
1,892
(586)
Net income
1,059
247
4,756
1,306
Diluted EPS ($)
1.30
0.30
7.13
1.62
10,258
(2,569)
7,689
11.57
Adjusting Items Impacting Revenue (Pre-tax)
Impact of divestitures (1)
8
Management of fair value changes on the purchase of Bank of the West (2)
Legal provision (3)
(7)
(2,011)
(6)
3,555
(2,011)
(13)
Impact of adjusting items on revenue (pre-tax)
(7)
(2,017)
3,563
(2,024)
4,096
Adjusting Items Impacting Provision for Credit Losses (Pre-tax)
Initial provision for credit losses on purchased performing loans (pre-tax) (6)
(705)
(705)
Adjusting Items Impacting Non-Interest Expense (Pre-tax)
Acquisition and integration costs (4)
(727)
(239)
(37)
(966)
(49)
Amortization of acquisition-related intangible assets (5)
(115)
(8)
(8)
(123)
(16)
Impact of divestitures (1)
Legal provision (3)
Impact of adjusting items on non-interest expense (pre-tax)
Impact of adjusting items on reported net income (pre-tax)
Adjusting Items Impacting Revenue (After-tax)
Impact of divestitures (1)
Management of fair value changes on the purchase of Bank of the West (2)
Legal provision (3)
(18)
(2)
(2)
(842)
(249)
(63)
(1,554)
(2,266)
3,500
(1,091)
(3,820)
(80)
4,016
। ।
6
(1,461)
2,612
(6)
(5)
Impact of adjusting items on revenue (after-tax)
(6)
(1,466)
2,618
(1,461)
(11)
(1,472)
(23)
3,025
3,002
Adjusting Items Impacting Provision for Credit Losses (After-tax)
Initial provision for credit losses on purchased performing loans (after-tax) (6)
(517)
(517)
Adjusting Items Impacting Non-Interest Expense (After-tax)
Acquisition and integration costs (4)
(549)
(181)
(28)
(730)
(38)
Amortization of acquisition-related intangible assets (5)
(85)
(6)
(6)
(91)
(12)
Impact of divestitures (1)
(15)
-
Legal provision (3)
(1)
(1)
Impact of adjusting items on non-interest expense (after-tax)
(634)
(188)
(49)
(822)
Impact of Canadian tax measures (7)
(371)
(371)
Impact of adjusting items on reported net income (after-tax)
(1,157)
(2,025)
2,569
Impact on diluted EPS ($)
(1.63)
(2.92)
3.90
(3,182)
(4.53)
2,918
4.45
Adjusted Results
Net interest income
4,821
4,410
3,780
9,231
7,754
Non-interest revenue
3,626
4,077
1,975
7,703
5,191
Revenue
8,447
8,487
5,755
16,934
12,945
Insurance claims, commissions and changes in policy benefit liabilities (CCPB)
(591)
(1,193)
808
(1,784)
727
Revenue, net of CCPB
7,856
7,294
6,563
15,150
13,672
Provision for credit losses
(318)
(217)
(50)
(535)
Non-interest expense
(4,731)
(4,172)
(3,650)
(8,903)
Income before income taxes
2,807
2,905
2,863
5,712
Provision for income taxes
Net income
Diluted EPS ($)
BMOM
(591)
(633)
(676)
(1,224)
2,216
2,272
2,187
4,488
2.93.
3.22
3.23
6.15
6,242
(1,471)
4,771
7.12
Financial Results May 24, 2023
•
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