BMO - Earnings call transcript Q2 2022

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Operator

Good morning, and welcome to the BMO Financial Group Q2 2022 Earnings Release and Conference Call for May 25, 2022.

Your host for today is Christine Viau. Please go ahead.

Christine Viau

Thank you, and good morning.

We will begin today's call with remarks from Darryl White, BMO's CEO; followed by Tayfun Tuzun, our Chief Financial Officer; and Pat Cronin, our Chief Risk Officer. questions U.S. Johannson take Dave Canadian to from Casper present are from Ernie P&C; Also Barkley BMO Dan Wealth P&C; from Management. from Deland BMO Kamanga Capital Markets; and

adjusted this basis Darryl statements As Management considers on bank risks be inherent measures as reported uses that and with to I'll assessing their I Actual performance. performance be materially measures reported. be X, to business referring in would that, on Darryl. differ in uncertainties. noted turn involve arrive forward-looking and non-GAAP could results. and useful unless these noted results made a that financial both Slide and will during otherwise the at the from remarks And to to call, call underlying adjusted results Tayfun have also which over assumptions listeners may adjusted statements. remind

Darryl White

Christine, you, Thank good and everyone. morning,

quarter, growth and We and performance deliver broad-based our market-sensitive this financial P&C American by North businesses. loan continued good Wealth results our in driven customer solid to Businesses in

adjusted increase XX% positive dividend an last quarter efficiency earnings per and of by with With leverage revenue driven operating earnings up a over for leverage operating year. the an over for $X.XX delivering continued are also increase last year. per commitment announced share, and X.X% morning, X% quarter our pre-provision and leverage ratio management that is of investments we to XX.X% and on of to expense targeted This for we improved growth future $X.XX year-to-date, of pretax PPPT positive of strong continued growth strong $X.XX, XX%, includes operating X%. share Year-to-date, Second growth.

our businesses positioned and both our ROE our remains the strengthen the decisions including executing strategic guiding to consistent growth from and strategy. contribution ongoing to Bank we profitable of the year balance investment purpose-driven demonstrate improve These businesses. up our as of execution the from planned to our sheet XX.X%, was acquisition. equity ROE of strong same and are issuance our continued we mix, area for U.S. bank last segment of key focus, West our continue the to results sustained including the initiatives and capital, profitability of as drive Year-to-date, growth. support dynamic the our client-driven business We manage period advantaged well value the

the Our strategy disciplined capital through is decisions. performance to allocation cycle, designed sustained deliver including

and consistent presents superior opportunities record has growing proven Our and the drive investments of pandemic portfolio rising and appetite and technology long-standing some well-diversified management delivered for a risk uncertainty, sole through and commercial of strong bank. by ongoing our the risk the sustained in have rate risk face protecting be which culture talent underpinned track a secured, resilient has both customers we It's customer risks resilient with our is relationship. that the and will economic majority backdrop XX% cycle of vast current or to in The performance performance lead through in In the a for believe the environment. bank. a

and growing in position we is and these capture to American adapt. in environment. us in and North economy Investments businesses as our transition the our lifted, advancements strategy, the digital largely continue restrictions climate pandemic support in opportunities consumers customers changing with Now to growth navigating

positioned X accelerates. sides re-globalization to As as the lender of America, to both and our border commercial in top the a the on North largest uniquely clients eighth advise bank we're trend

growth double-digit American existing presence, investments capabilities to commercial Canada strengthening clients are that relationships. and loan to As benefiting dynamics new automating in back are U.S. expand our and we're supply we're quarter, investing seeing building chain inventories. shift these North this and With the businesses both already -- and talent further play digital extend attracting further out. add ongoing commercial and We from product

Our mid-market to our partner services clients. deliver capital banking capital to world-class markets are commercial market successfully together commercial to teams efforts accelerating and

including teams is transition net the approach a One and needed for Capital catalyze ranking partner our a and underwriter of in Our cleaner that ESG leading top sustainable and a be differentiator to bonds unprecedented energy BMO leveraging Bank shift prospective Canadian will the clients. transition One also ambition and the #X our action leader their We've to key Client, activities, clear clients investments to climate production. our Markets structuring world. and climate for achieving is lead be for X a financing energy energy positioned goals We're ourselves in collective existing financings, institute sustainability agent. as

digital power in products, laid our addition, in our mutual We're We've help for loyalty, efficiency driving delivering and share are with solution the including strategy solutions or reduce that will that strong intentional leading in groundwork with Development customer operations the capture carbon-intensive technology businesses to Canadian And seeing flows agreement can to innovative investments also sustainable with and real Canada the shift by are and advanced experiences. them future as ETFs Canada, to funds. exporting financial eliminate finance digital-first significantly an innovating bring employee experiences climate-focused suite progress. and market poised that growth sustained those Export ESG innovative of leader In from expand emissions. a continue to our the to in transition sustainable we

continuing banking offered mobile example, management and Canada categories the on Features Insider Benchmark in ranked with money app the Mobile the faster XXXX. For strength recently to to And in use. marks top Emerging digital we're enhancements management, for easier ranking experience Banking account to BMO and out of Canada, emerging in Intelligence first alerts. we it roll online making reflected The our banking select of the features

our We continue modernize to technology through cloud.

management proprietary to and forecasting converting effective. analytics, we're cost to risk loss which more example, For faster, XXx makes loan support a scenarios platform integrated

Bank transform given efficiency for us the and the in in success technology key Bank to banking West Canada a integration and has in cities our expected will dedicated, active Our our businesses, where wealth combined the sustainable and and ability employees. process synergies commercial in key will platforms. innovation businesses adoption people the of retain including team, provide planning has are create advantage our customer natural and and to strong, base enhance Early Tayfun actively West the of to growing detail and our and talented digitally the culture. attract further in will modernizing lending elementary that of U.S. our talent that We're deliver. hubs our revenue locations. winning technology the on are more retail

thriving and companies an inclusive commitments sustainable we're We're one future the As recognized economy, a the grow proud year. we our fifth to continue a Ethisphere bank, purpose-driven the have consecutive the world's society. been ethical for steadfast as to most of Institute in to by

importance This our a they announced sustained I'll the over communities impact have To is dynamic to and deliver any and purpose-driven businesses commitment management access have they through Tayfun. the helping quarter, a $X economy. their the to billion to underpinned capital, support now and well that we conclude, by proven our growth for recognizing we're grow capital turn strategy in positioned need on we risk it environment. and business them performance superior Canada women in of them, owners to robust

Tayfun Tuzun

Slide and start Thank Good XX. joining you, us. morning, you My for Darryl. thank on comments will

year-over-year income closing. Adjusting $X.X quarter expense EPS quarter growth $X.XX similar was $X.X to and last to from last On $X.XX are year, capital across to of Efficiency disciplined pre-provision on include of at billion, expected The pretax up and quarter improved our an will to items interest $X.X billion management was EPS to higher revenue billion. was billion, net by The mitigate shown equity and PCL diversified pretax net details items income revenue up adjusted XX. will comments and are acquisition of earnings remainder on in the $XX my Pat rates driven was fair billion dynamic and Bank from basis, focus activities of return this these was remarks. speak on reported goodwill his the and reflecting on XX.X%. West value businesses results. million, Total XX.X% the X%, and related of management. adjusting strong of was Second of impact adjusted $X.X good $X.X the Slide

XX. Moving up of our were impact the declining Average all customer vehicle the loan the and and Energy year-over-year and Business operating balance in growth deposits growth reflecting growth up balances Canadian of government year, quarter-over-quarter. and on U.S. X% with Average groups. year-over-year Canada from loans prior XX% were loans X% non-Canadian and strong excluding reflecting our X% in Consumer up deconsolidation to P&C sheet year-over-year businesses. strong X% across wealth commercial our were the or customer Slide balances XX% increased securitization portfolio in

year-over-year loan digits expect diversified a we in high in the ahead, Looking continued P&C basis reflecting strong our pipelines. growth single strong businesses on

and Turning X% sequential interest ex-trading in offset loans down faster On Canadian point to last up the in the growth reflecting all Adjusted rising at in deposits. prior half operating interest year groups. was our declining XX% expected and was P&C, higher on bank net the lower Slide is rate and impact margins, reflecting P&C up lower low-yielding all quarter, with levels in the excess the rising NIM XX. markets. an second X X loan U.S. growing ex-trading environment. given of from up basis across rates, points P&C basis to businesses points margins basis, X margin margin from up capital both the than and In basis was a by Net basis assets income level of and liquidity year, widen deposit

we XX net Slide has NIM well, interest income our remain the rate now rate management to A Moving XXX point basis And protecting risk interest interest million environment. by approach low well $XXX rising Overall, rate environment. months. over rate the XX. in positioned very our rate expected benefit to sensitivity next our the is shock worked for on

deposit are the under Although assumed, assumptions. increase cycle approximately XX% XXX lower and line pricing point still with be in $XX has model rate have our betas than the a deposit would higher than hike million. better in rate to what tracked stability our If or by date, early basis then benefit we

and given noninterest securities and Slide on ex-trading the and prior underwriting primarily fees, basis, fees CCPB fees and due X% lending the XX% divestitures market due or underwriting net conditions. advisory Turning XX. down impact of and of to Noninterest an advisory revenue revenue gains. ex-trading down to was net X% Sequentially, year X% was down to lower lower primarily from

are that quarter targeted of down X%, and Moving lower the sales in technology. to driven Expenses by quarter, X% year leverage year. drive to costs, the benefits of Sequentially, savings current X prior each delivered as We employee-related were operating including from as compensation to expansion this retire to into divestitures force first positive for due X.X% we of expenses reinvest in continue revenue up and the areas fewer impact employees Slide seasonality XX. the from growth, as to expensed stock-based quarter. well primarily the eligible days of were

into in we continue expect we year, of As compensation ahead, is growth of look the for And for expense operating the quarters to moderation positive second row, our impact leverage the rising half the year. operating a positive expenses. after leverage continue expected to year-over-year delivering X including in the

Slide to XX. Moving

with XXX Our from basis a prior ratio capital equity XX%, common strengthen X up quarter. the to position of Tier continued points

the of The our acquisition basis largely Bank assumptions at the is West by strong generation. of on internal offset management expected impact share closing goodwill shown As management the be issuance of fair of to and announcement. on actions the as the the increase XX common well changes value of as capital the reflects impact relative fair related value to points slide, cumulative to higher

were Source and in floor adjustment Basel our in III higher, currency the risk-weighted the impact assets reflecting businesses lending growth quarter. of capital the

on the good a the operating for to integration. Bank teams shown update progress We of the moving quick are preparing year-end calendar transaction by acquisition XX. West Before on the in making to groups, Slide closing look forward successful our a and

have relationship-based businesses. next expectations, opportunities revenue we to cost million BMO range our working Based and synergy at X synergy very been identified we pretax announced our on opportunities to our be the expanded month attractive to we including markets of with driven and since footprint The combined a reflect across initial personal XX% larger, achieve of and able X businesses. While first expect wealth million that years, pre-provision in approximately service $XXX $XXX and opportunities and shared the to for December, offering in synergy our product in then, an approach client by commercial identify strength XX% and our targets our leveraging our digital to by over capital base.

synergies. against generation track the and are capital December in including We expense announced assumptions on

reflecting to up of in Deposits up delivered in million to last the noninterest XX% investments higher starting mortgage P&C XX% good were was and balance strength the pretax XX% technology $XXX Moving pre-provision XX. XX%, XX%. categories and and across residential with continued loans growth. growth year. year-over-year Average lending reflected income sequentially. were in year-over-year loan activity. Canadian the sales flat up on and growth while of reflecting net Expenses up Revenue force and moderate in Higher second by from the half the were prior year, of year. driven X% groups expected commercial operating customer net increased Slide from most interest revenue earnings growth reflecting stable margins income

comments to investments. $XXX X% X%, pre-provision Moving million, dollar year, income. reflecting Net income due the primarily X% employee net to growth will prior U.S. up Expenses Slide and up here My costs from P&C was Revenue up also with in from higher interest technology growth in to speak pretax XX. was earnings. U.S. year, were good performance. last X% the on

balance prior declined deposits Average growth from sheet, up loan loans, PPP XX%. X% and were modestly excluding including last year-over-year commercial the the strong from average loans quarter. On XX% the of increased year,

by X%, income reflecting higher underlying reflecting of $XXX loan down average impact wealth net the strong quarter. growth of divestitures, net was movements Moving to the partially was higher year. income online favorable Insurance million lower transaction and more brokerage down to and this by $XXX assets, client with business. impact the last due million, million, $XXX Wealth Slide market offset were in good last of net compared from Expenses excluding Management growth divestitures, was to income XX. interest million, Traditional revenue offset deposit net year. partially revenue $XX income investments from X%

Turning to Global due investment technology revenue higher year Markets due last by X%, costs. Markets from were prior business, revenue. levels revenue and $XXX quarter, Revenues was Markets Slide to Global offset the income banking-related partially investments higher net X%. of XX. to declined year. corporate in compared environment. million lower BMO increased up banking the Expenses advisory up $XXX million in I&CB increased record Capital corporate revenue, underwriting Revenues primarily with XX%, market in and the in first from mainly to reflective talent both including in the and

Services. with to of Turning deliver performance to to of compared diversified will will good environment continue And continue our business serve and in now conclude, Services to loss to Corporate across million long-term Slide we growth. changing net $XXX XX the loss deliver net shareholders $XXX the for expect economic the management To a dynamic businesses in and well our over Corporate million year. it operating that, was a turn I Pat. prior

Pat Cronin

case $XXX was XX. million The from recovery losses again key very pleased metrics. basis strong We $XX the or last up from everyone. negative morning, provisions good while Starting We points loan Similar portfolio a well performance to combination risk continued in very million uncertainty. delinquency the for low low risk for saw below $XX by the levels. well for reducing of scenario. quarter of economic Slide credit quarter, disciplines or migration the and pre-COVID quarter. our loans strong applying we economic due million our with provisions disciplined this adverse is and recognize the as on through of recorded formations last or been reflects time. our $XX points, quarter points. in release total of for this to strong offset on as many COVID-related impaired were improvement low our remain quarter. as have rates. again million and a of increasing the performance impaired X potential as basis provision origination in outlook specific headwinds to million periods And scenario across a by X was Tayfun, weighting prior were basis positive of of and our Impaired you, points up quarter X was management This Thank well base We impaired or basis QX, performing credit $XX This reduction judgment provision risk performance did parts provisions XX this a this from

remain losses in impaired current for comfortable we our Given provisioning and strong portfolio profile loan year. credit against billion our that $X.XX losses, provides the loan forecast of of the allowances coming performing adequate our

groups, million quarters, credit and Business our insolvency from we $X this by performance. Consistent provisions loan In down impaired million, we Personal corporate segments $XX performance with the businesses commercial, in million of provisions loan Canadian impaired the delinquency low last Canadian had QX. from all strong and in were credit across saw loan quarter. prior low business losses Turning performance P&BB In also saw across commercial Banking, strong business and driven In we impaired was businesses, $X The reported operating $XX rates. loan of $X Banking prior again and to credit down million, quarter. Business Personal our quarter. U.S. flat to the loss relative impaired losses million,

up from last million Our impaired U.S. a quarter. on impaired provisions of $XX loan commercial business had net of million, loans $X recovery

gross of had to this $X.X were a or leading credit strong basis formation can some conditions, with On formations $XXX Our with performance volatile with XX continued this our so and billion lost performance Capital consistent risk loan to was levels. Both QX. again quarter, again far million. QX million, X impaired losses you markets, performance impaired gross also of this XX, Despite $X quarter Markets well impaired continue on business low market points. below Slide trading balance challenging loan been Slide loan impaired Despite at risk in day as XX. good be see rates loan impaired trading quarter has pre-COVID

In our can our continued for provision. With diminish, strong credit growth. is the to modest forecast terms should of case continued loan performing continue performance us pandemic while economic through the for not transpire, remains confident over, with impacts economic there or room the outlook, economic which current manage headwinds. along that we is that emerging releases makes of the that said, And base

back have to I low to with PCL of more pre-pandemic to we basis consistently As drift terms slowly high rate level which consistent teens a our our previously up expect impaired guided, do experience, XXs was points. in

While to metrics of reached, credit the that end predict given normalization would into that or when fiscal will it's this difficult remain timing I XXXX. the start portfolio that of towards strong, quite year current the level be expect to

an During the and growth. the continued future to for years, we're mitigation have risk of capital we that management can automated capabilities, our future confident the geopolitical past the operator including In question-and-answer adequate and face management portion levels, both now to together well-diversified a profile, with macroeconomic risk continue support and X the I strengthen turn portfolio to will manage allowance, strong and we risk of processes. current the and liquidity strong these a back call call. risks, and data-driven capabilities, risk

Operator

question [Operator from America. Instructions] Ebrahim of Poonawala is first The Bank from

Ebrahim Poonawala

guess -- question, I Tayfun.

to reprice? deposit of And in the we're the where deposit consolidated to little us? rate deposits? how deposit given for behavior quarters, back mentioned trajectory hikes deposits you if that? see about then you’d particular, of margin say us of that do risk U.S. just outflows third of about are seen quickly bank, but the the years us the subset last U.S. just do expect magnitude deposits in just a betas, and the second P&C the expect little give couple how mean you've I in going So a just -- that both of of the in a quantify you and is could about where outflows? you in you there of growth terms you of And any on begin just one, you bit to how you think thinking expansion talk the mentioned And in

Tayfun Tuzun

for you, Thank question, the Ebrahim.

with NIM latter come and So to the back I'll start of question. I'll the part your question,

with as were the of we And well much the in deposits, then In on has model outflows. growth expecting outflows deposit on deposit we environment, starting terms have as pretty our we expectations. U.S., down. target first, are slowed to this been In see pricing, expecting,

have commercial both are seeing their As money the to as Banking. in increasing, still rates elsewhere we're opportunities as clients our well that businesses in Personal place

slowed even betas can to and see in in we you this to do say up they when which interest the banks seen moving on modelled. numbers higher X potentially suspect well it NIM high expect we way quarter-over-quarter we net of bodes up. the guided And said flat together it's are growth. what terms cycle income dial when end to in in rate numbers, I the with the is end as into which what to necessarily aggressively we put the year, that see quarter. NIM that expand expansion this to guidance basis on based very our that up move whether half some central on to had for see we will with ex-trading of to expansion today. we're the the I continue will will our based We likely cycle, in have we into but and And in line single-digit us year-over-year rate U.S., into extend with interest expected. they or next loan either will declines increases second may growth of end We rate the than year, what all in is of down, what growth NIM, higher I But see points it all the the you last that the all growth it the that from think basis also expecting, what a see X% then XXXX, very much we deposit year, couple increase quarters. this rates, So going line difficult something have in of move meaningfully and deposit continue our the quarter close QX into here QX. I next XXXX, was than

rest should the XXXX. well You the remain as number for year that as of see to very strong

Ebrahim Poonawala

Got follow-up, it. just one Tayfun. And

So the mitigate I imply impact a deal understand hedging will to be than expected. at goodwill also the that goodwill higher accounting larger the you Does purchase earnings close.

the result, add a that, be will meaningfully missing if you I EPS am than higher As accretion, something? what we or announced

Tayfun Tuzun

No, move everything into else equal. after The quarters higher the rate close future more the mark will we transaction.

Ebrahim Poonawala

quantify would higher quarter you be were at end? can that And things much lows how the of quarter day like end, at

Tayfun Tuzun

pick much. Well, is quarter billion of assuming that up be income market have be $XXX rate rate in $X.X we assuming the top the of basically accreting all by mark that change the million about that itself, that last this money higher quarter, will would on a to back --

Ebrahim Poonawala

Got it.

those come that Got of the through life will it. So loans.

Operator

Capital. The next Scotia question is from Grauman Meny from

Meny Grauman

Bank West. facing question Bank of more a are U.S. Just mergers on the scrutiny. in the

wondering, think not? have hearing July. for and is why expect it here a for just to scheduled deal you or why I reasonable I'm the the close, delay

Darryl White

you're transaction on Darryl. say might the out to playing would that announced year is it's you normal December of as It's when expect the to regulators, happen we basically don't as I meeting. see well. expected over was July it, various the everything including including We process of That course. that public according course a our we a in to capital expectations, the XXth is Meny, we meeting not the the hearing. delay, thought to including referring It's submission the raise,

best you. -- to expected close have what kind to is that here year. which we the we as it's really said when but really we we calendar would announced and what exactly any we our expected towards them to are said of out sit things transaction, know, have the we don't the end guess boring we've don't we for remains as -- relative as So we today, any of playing update before, I

Meny Grauman

given announced question But Darryl. are on it, or is has good. be Got to as I When just as talked considered. part we boring guess, on should world the thinking higher boring partly you how you more Yes, about -- the deal a higher, thinking relates operational deal. is deal, you close? it capital, XX% now? since about How being the all developed about then, the capital

Darryl White

might you We I'll would and first complement at quarter models said Tayfun that or based that. sense we time did Meny, say to XX% we closing, here. want be We the give that the our at my post higher. expected on

look have that look our we going X months followed developments we the the at at over As we and models that. by forward, stand

fact, like I that said, quarter that? it. could be in to could fact, better XX.X% we closing you first at then where if issuance, that. than ahead bit as little And a of it the equity actions, that, we capital anything, it be and And stand of are add a in little XX%, some could at it closing, -- might look would the In be be the which little when we we was we including by something that higher Tayfun, than by post for. went out a or

Tayfun Tuzun

ratios they but question, movements like the That's Yes. at world view look where to going I capital back we necessarily really to at mean, relate our those don't the are today. our looking your of see time. be world just just to what will the

necessarily have point. management this not capital our at So target target we -- increased

Meny Grauman

be with that. regulator be far you to just XX%, as understand you comfortable would with that The you at as would were clarify, if So it? comfortable

Darryl White

would be that our Yes, expectation today, yes.

Operator

The Genuity. next question is from Chan from Canaccord Scott

Scott Chan

to talked about over update. within you that majority -- the all million and theme that is $XXX the split of as cumulative the cost commercial West about the the revenue is assume million transaction? to or $XXX already PTPP Tayfun, synergies talked personal. I expected years to Sticking incremental and X Bank with you next with of X the

Tayfun Tuzun

Yes.

So this is -- Scott, it is net revenue synergies.

run is projecting we be increase X rate we be that projecting net is expenses going to number to it, a but associated this there are that are with So X years. and some after a to

necessarily So $XXX X-year add towards $XXX cumulative a that to million -- over time, we get million $XXX just time revenues it's we between end When net to more period comment. the of not expect to of number. a million. And X period,

full can you to clients' restrictions, and because don't appreciate, data. we information legal have their As access of

cetera. done their Our compared to products, products et teams lot our their work have a of around markets,

So we am I this base, in number more I to good once that as performance is room this has upside. optimistic actually the access actually their expect. uptick But to a on perspective client on that the our have get we very say potentially full

Scott Chan

the And Okay. weighted is think? in in wealth and that latter Personal terms you Wealth, more the of do management, to XX%

Tayfun Tuzun

It's actually, with to be you Management. even Banking and it's Personal about honest Wealth between

Operator

Dechaine is next Bank from from The National Financial. question Gabriel

Gabriel Dechaine

Yes, generation, a that of XX%, even of estimates on pull to still up I Are on be sounds That's want we you to considering different the expecting It you your mean course. in -- an surprising, I lot there there. course? ratio. better Darryl, guess, might quarter XX.X% or like I comment than anything just or pocket normal some what of December, follow it's back backdrop. I your post-close X Or had anticipating like getting sales of all activity out nature? for XX% the internal got are anticipating in you your portfolio capital you're with strategies securitization than or

Darryl White

Yes.

X you announced months and clear, we what think different months ago I I months ago expected X correct I course I'll expected should Gabe, miscommunicated we X that's heard the ago. that what earlier, that's if transaction. say So from we exactly I when be

know, in balance you our that what we today issuance, I So part in we're customer had And bit normal of the in to first The only outcome come have give bit capital you is models as -- is we've the if behavior capital it's completed modeled. anything, make trying message way that on we quarter. the are we're your that are more the are We transaction the and DRIP a based the second are it and absorbed coming is in along is equity little the actions and in would And concerned, outlook the the expected the after post got the see to sheets to we you question, than growth. where as perspective unchanged them that stronger course. a today. loan far is, tweak continuing little in place, as the of the the we being not as

So trying it if to to trips all expected round message a with. had the what not leave we're we basically told, little bit all That's better. along, you

Gabriel Dechaine

Yes. consistent your has messaging. Maybe necessarily it, environment that not the change. meant It's gotten I I despite different, misworded

Okay.

rate flat and and half? second up in Now the to I changing about you heard X.X%, recommitting you expense growth a bumped QX, now to Tayfun, Because believe the growth I QX, the not you're guiding expense lower were to full got that you that. I've expenses, for year

few nothing This quarter, above growth might bit a expense that, than higher thought months inflation on we bit a had, ago. a what wage variable expense what, growth comp, X% that but side actually the X mention we

Tayfun Tuzun

Yes. the question, Thanks for Gabe.

eighth we the was I delivered as operating obviously, environment, the this positive leverage, up set are to said, that that. a we quarter row committing in to and just So

our moderate over may comment quarter, second into So I expense growth commitment increase. investments We time. continuing year. when that's second technology happened more periods of started mean a but half did have reasonable quarter-over-quarter half year that half the the be more My the not last in it this X% about ramping second sales up to force, fact the that relates we in of our of and every

be number, challenging. going you bit to half and this was And the between week, did saw quarter, going last we our you from that numbers for see adjustment a similar So In we that growth. of us should therefore, announce more quarters, that that a relatively should into the more type knew first I this third year X%. salary fourth that of X% a level employees of level now say expense and modest number, X X

is more we impact an include inflation last discussion increase, in which to amount the We the are on My side, our salary week. that and back adjustment incremental February. seeing of outlook made that does

excluding performance-based incremental is us, now the to increase, With our excluding you impact the about this X.X% outlook year-over-year year-over-year, did expense that because As increase, comp sort X.X% we're of to performance-based amount. reminded to we guide of about going expense compensation. take

our to more are movements commitment leverage. but we at time salaries, positive seeing We same maintain the in operating

investment a ensure assessing the we achieve We’re we’ll that manage to spending as magnitude the our returns leverage. lot and and accordingly dynamically we and that of the our watch still revenue time internally expenses environment positive operating

Gabriel Dechaine

Okay. About X.X% now? X.X%,

Darryl White

Correct.

Operator

The is next question Desjardin from Doug Young Markets. from Capital

Doug Young

it bit. get bounces it sequential U.S. slowdown that do around in banking, like a a seems probably I was growth, in commercial there Just and loan

So where in you today over you what loan -- maybe to. I'm growth a the where terms maybe kind coming they And you and nothing expect utilization But curious is perspective of and what seeing migrate as of you're in then them to sprinkle year. pipeline just the of rates, there. stand kind from just to I'm there's can telling

Dave Casper

commercial Sure. our loan quarter-over-quarter almost the on This Dave. had commercial in we side. is U.S., Actually, business growth in the X%

So and close you if exclude very there XX% to ex-PPPT positive year-over-year.

-- build, strong. geographies it it's and if see our be So there's and very been pretty in though, of near-term continues of very, our as really truck despite increased up continues year. inventory financing. sectors, build low one inventory that's clients a utilization our And go back their and our auto financing for positive of strong, both to which Overall, businesses and our strong two utilization future and to utilization half the has the our businesses, particularly across

loan really -- does thing we've is that And actually would down. slowing lower go I And over as quarter not last about up. that's I'd X say it continuing would last growth. the not I quarters, the characterize X we've including PPP. it's where say the So to had this

new customers, we've adding our build this period, to sectors. So adding growing to geographically, continued throughout entire

really, I completely, But if So question I'd answer say it's me your positive. didn't any tell if really follow-up. got you've

Doug Young

doesn't your change to No. of on in constantly in you're clients kind and a comments, outlook. questions we what with the going and that backdrop, characterization? discussions to fair talking Well, your is Is commercial loan that like lots it happen feel and macro given just the real growth, get of there's any

Dave Casper

chain There's for outstripping certainly supply. products demand couple say the of inflation. is some I'd But about, that we still uncertainty supply the more of our given know all issues clients' continued a things.

know, to growing, of part the productivity reliance American U.S., more So and still lower to to and is terms to I still a less that's economically, pretty other there's hear U.S. think movement onshoring, trying through still near market, I be they're to in expenditure keep don't up be, that businesses they're growth. improve clients. to some grow continue catch on if the going obviously to and our both term, and cases and to in capital really a And going the trying of continues positive. from the Canada, manufacturing But inventories. there downturn foreign don't in up, still North us. is impact in we Canada it sourcing, more They're our

Doug Young

I little bit? is a can And have revenue Or then decline in sequential break that's U.S. about bit lower a while I'm noninterest Can you think Like of -- that a out assuming just talk that? the the result in you, gains? you little more investment I

Dave Casper

Those no It's are. mostly investment -- a not in that's investment sure. are issue. all. P&C our Sure, business. at There never Canadian gains gains There

and transactions strong you very issue, the the a done first to year, the in syndication though, had end recall, lot our before we gains. get December, calendar at that's as last So try very, particularly in year-end. really, -- is of quarter, And of

were that's us. XX% probably in But first us And strong or is for what -- decline the the And very that's syndication hit in that really that XX% So the we business up quarter. business. was.

be There'll our more treasury ups business, our downs. management fee-related. other But think have that what of M&A this our those lot and all are normalized quarter. business, NIR we a some would we be of parts I hit business,

still It's not positive, the think business. fees was gains, is one securities I pretty but in loan it our it's issue. so but that And syndication

Operator

The question CIBC. Paul is next from from Holden

Paul Holden

numbers. regarding pressures disappointing And of out commercial So on number we've clients. question is first seen come inflationary margin public borrowing companies with cost a

forward? Just and secondly, wondering pressures for if profit of you're indications on going monitoring how sort seeing are of you then that any your early customers,

Pat Cronin

not start no, others is question I that we're your yet. would then in. Pat. can to answer maybe It's the seeing and say really I'll jump short

In the that's that course again, quarter, fact, seeing we've of we're wholesale of we in We're seeing virtually saw in sector. X been and migration quarters every fact – this positive migration portfolio continuation seen past positive broad-based over credit in opposite. the a wholesale across a the the And business. the

way have terms credit, in credit in below again terms would signs So seen quarter, in formations impaired of the this pre-COVID you early levels. extremely impaired low fact, migration, in and of formation,

that another that's we're suggest not would things kinds so those of And that seeing sign happening.

But one forecasting obviously, there's normalization with this cost pressure, the experiencing of we're get in conditions versus reasons catalyst said, think that's I see year that, guiding that the rates. towards why towards wage now. always we bit really as those step of end of impact. next something to to just normalization some good feels We a of see pressure more back and don't we're some that year is when Now a the why to into pressure a that it us in and the we're you'll see to to of effects. a that happen But and terms start energy abnormally normal function probably a debt service And cost right will we occur. is think material lag

Paul Holden

Okay. from then the I want angle. understand. go the I CETX and bit on And of back to to different Bank discussion of little a a West

to more offset the that to What absorb do higher might it the could I of into that CETX. scenario? the to you what not credit do fairly the with Just understand credit change have and scenario, a plausible think there's CETX? perspective, between capital scenario, the year-end, scenario. acquisition, But Bank raise possible density of BMO absolute built you've from that again, might reserves type West forward-looking or would for where the significantly scenario but could indicators now possible

Tayfun Tuzun

quarters we of us. have Paul, couple So a of here only ahead

December. we that impact said the Darryl those The that closing. We -- time where closing necessarily don't fact expect We have significant capital much all Yes, are way as interest impact there's here at the bit not of could when conditions we as the But upon to reserve about change. now at change, feel they of depending neutralized forecast could credit ahead lot we day were back performed pretty have date, bigger. our we talked have said, is rates. you conditions if between may our we of earlier date. analysis announced So analyses and things actually And a today. a We a sit in higher be at going little look mark to change closing actually transaction capital second meaningfully. that a I get on the may ratio thought closing, the

even we here feel looking comfortable numbers are conditions adequate are now I little that if at quite that the then. So bit change a between and

Operator

TD The Mendonca next Securities. from Mario is question from

Mario Mendonca

line quick maybe lower that the to referred is a that that question. this syndication little in a just as Those quarter, where Like other were is U.S. your Tayfun, the revenue? income? detail just gains in reported business fee in

Tayfun Tuzun

yes. Mario, fees, lending in It's Lending.

Mario Mendonca

was Okay. I see down. it it why there. That's

Okay.

Christine Viau	Investor Relations
Darryl White	Chief Executive Officer
Tayfun Tuzun	Chief Financial Officer
Pat Cronin	Chief Risk Officer
Ernie Johannson	Head, Canadian P&C
Dave Casper	Chief Executive Officer, U.S. P&C
Dan Barkley	Chief Executive Officer, BMO Capital Markets
Deland Kamanga	Head, BMO Wealth Management
Ebrahim Poonawala	Bank of America
Meny Grauman	Scotia Capital
Scott Chan	Canaccord Genuity
Gabriel Dechaine	National Bank Financial
Doug Young	Desjardin Capital Markets
Paul Holden	CIBC
Mario Mendonca	TD Securities
Lemar Persaud	Cormark Securities
Mike Rizvanovic	Stifel GMP

Bank of Montreal (BMO) 25 May 222022 Q2 Earnings call transcript