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Summary of Bank of Montreal Conference Call Company Overview - **Company**: Bank of Montreal (NYSE: BMO) - **Date**: January 06, 2026 Key Points ROE Target and Performance - Bank of Montreal aims to achieve a **15% Return on Equity (ROE)** by the end of **2027**, with a commitment to sustainable performance beyond that [6][8][59] - The bank increased its ROE by **150 basis points** year-over-year, the fastest among peers, and achieved **26% EPS growth** in the previous year [4][5] - The bank's operating leverage was **4.3%** with an **18% growth** in Pre-Provision Profitability (PPPT) in 2025 [5] U.S. Banking Segment - The objective is to exit 2027 with a **12% ROE** in the U.S. banking segment, which has been restructured to optimize synergies between personal, commercial, and wealth management services [9][10] - The restructuring began in July 2025, and the bank expects to see full benefits from this optimization by the second quarter of 2026 [11] - Loan growth in the U.S. is anticipated to be in the **mid-single digits** starting in the second quarter of 2026, contingent on macroeconomic conditions [16] Credit and Impairments - The bank expects a **flattish** credit experience in 2026, with improvements anticipated in the U.S. but some deterioration in Canadian retail [13][14] - The bank aims to normalize impaired Provision for Credit Losses (PCL) to the mid-30s, but does not expect significant credit normalization to impact ROE significantly [14][34] Deposit Growth and Strategy - Deposit growth has been strong, particularly following the instability in early 2023, and is expected to align with loan growth moving forward [18] - The bank is focusing on improving the mix of deposits, targeting low-cost retail deposits and operational deposits in the commercial sector [19][21] Canadian Market Outlook - Loan growth in Canada is projected to be low single digits, influenced by economic uncertainty and client confidence [22][24] - The bank is optimistic about the Canadian economy's resilience and expects to see increased loan demand as clients regain confidence [24] Efficiency and Cost Control - The bank's efficiency ratio gap to peers has narrowed from **400 basis points** to **160 basis points** over the past five years [27] - A restructuring expense of approximately **CAD 200 million** is expected, with an annual run rate benefit of **CAD 250 million** [28] Capital Deployment and M&A Strategy - The bank generated **90 basis points** of capital last year and maintains a **13.3% Common Equity Tier 1 (CET1)** ratio, indicating strong capital generation capacity [35] - While the bank is open to M&A opportunities, it prioritizes organic growth and optimizing existing operations over pursuing acquisitions [39][40] Capital Markets Outlook - The capital markets business is performing well, with expectations to exceed previous targets of **$625 million** in PPPT per quarter [48] - The U.S. capital markets are seen as a significant growth area, with high market shares in investment banking and a focus on integrating services across business lines [51][52] Macro Economic Outlook - The bank anticipates **2.3%-2.4% GDP growth** in the U.S. and **1.7%** in Canada, with a positive outlook for operational improvements continuing into 2026 [58] - The bank remains optimistic about its ability to achieve its ROE target and sustain it beyond 2027 [59] Additional Insights - The bank's strong position in the mining sector and its global reach in capital markets are expected to provide significant benefits as the market improves [55] - The bank is cautious about the timing of capital flows despite positive policy shifts, indicating a measured approach to growth [56]

Market Performance - Canadian equities are closing out their second-best year this century, with the S&P/TSX index on track for a 29% advance, trailing only 2009's 31% gain [1][3] - The index has achieved a record 63 new all-time highs over the year, driven by a steady increase in the final seven months [3] Sector Contributions - The rally has been significantly supported by the materials sector, which doubled due to increases in gold, silver, copper, and palladium prices, while the financials group jumped 40% [4] - Tech companies like Shopify Inc. and Celestica Inc. contributed a combined 11% increase to the index during the year [4] Economic Factors - The Canadian economy has benefited from lower interest rates, with three Federal Reserve rate cuts positively impacting precious metals, which do not pay interest [5] - Canada's Big Six banks reported stronger-than-expected profits, with annual adjusted earnings exceeding Bloomberg consensus expectations by an average of 2 percentage points [7] Valuation Concerns - There are concerns regarding elevated bank valuations as the Canadian economy may face strains from higher tariffs, with the banking subindex's price-to-earnings ratio reaching nearly 15, up from a low of 9.7 in 2022 [9] - The performance of the banking sector may be more sensitive to economic conditions compared to sectors like gold and energy, which are less affected by the Canadian economy [9] Oil Market Outlook - Despite the Canadian index's record performance, the outlook for crude oil prices remains muted, with demand struggling to keep up with supply [10] - The market could be vulnerable to fluctuations in precious metals, as evidenced by silver's recent decline, although it is still on track for a record gain [11] Investment Opportunities - Strategists suggest that if oil prices improve, the S&P/TSX Composite could be an attractive option for foreign investors looking to leverage energy plays [12] - There is a growing recognition of the TSX as a viable investment opportunity for foreign investors seeking alternatives outside the US market [12]

Key Points - Michelle Connolly has joined Q Wealth Partners as head of advanced wealth planning, leaving Raymond James Ltd. after one year in a similar role [3] - Steve Reimer has joined Raymond James Ltd. as a senior portfolio manager and investment advisor, previously with Richardson Wealth for over 20 years [3] - Mike Pedersen has been appointed to the board of EQB Inc. and will take over as chair in April 2026, bringing over three decades of leadership experience in financial services [3] - Caroline Dufaux has been named chief financial officer of BMO U.S., succeeding Rahul Nalgirkar, who will become CFO of BMO Financial Group in January [3] - Kaitlyn Lawson has been promoted to head of practice management at CI Global Asset Management, previously serving as director of advisor development [3] - J.P. Lavoie has been named senior vice-president at Wellington-Altus, having joined the firm in 2018 [3] - Nicolas Ospina has joined VersaBank as global chief financial officer, a new role, after over a decade with Raymond James [3] - John Asma has been promoted to executive vice-president responsible for Canadian digital banking operations and strategy at VersaBank [3]

Core Insights - Diversification remains a successful investment strategy, with international stocks significantly outperforming U.S. equities in 2025, as evidenced by the S&P 500's 15% increase compared to Spain's 40% and South Korea's 65% gains [1] Group 1: International Stock Performance - South Korea's KOSPI Composite Index has risen over 65% YTD, driven by favorable domestic policies and a tech sector buoyed by AI advancements [3] - Spain's IBEX 35 index has increased more than 40% YTD, supported by a booming banking sector and a GDP growth of 3%, nearly tripling the overall EU GDP growth [5][7] - The Canadian stock market has seen gains exceeding 30% in 2025, with the iShares MSCI Canada Index Fund up nearly 35%, benefiting from reduced tariffs and strong performance in megacap banks [12][15] Group 2: ETFs for International Exposure - The Franklin FTSE South Korea ETF (NYSE:FLKR) offers exposure to South Korean equities with a low expense ratio of 0.09%, heavily weighted towards Samsung Electronics and SK Hynix [4] - The iShares MSCI Spain ETF (NYSE:EWP) has a 0.50% expense ratio and $1.6 billion in AUM, with over 40% of its holdings in the finance sector, including major banks like Santander and BBVA [7] - The Franklin FTSE Latin America ETF (NYSE:FLLA) provides broad exposure to Latin American markets with a 0.19% expense ratio, focusing on Brazilian and Mexican stocks [10] - The Vanguard FTSE Europe ETF (NYSE:VGK) has gained nearly 35% YTD, with a low expense ratio of 0.06% and a diverse portfolio of over 1,200 stocks [11] - The iShares MSCI Canada Index Fund (NYSE:EWC) has a 0.50% expense ratio and focuses on major banks, with top 10 holdings accounting for over 43% of its assets [15]

Core Points - Brompton Split Banc Corp. has completed a treasury offering of preferred shares, raising approximately $38.2 million [1] - The preferred shares were priced at $10.40 each, yielding 6.0% [2] - The fund invests in common shares of the six largest Canadian banks and may hold up to 10% in global financial companies for diversification [3] Fund Performance - The compound annual returns for the preferred shares as of November 30, 2025, are 6.4% for 1 year, 6.4% for 3 years, 5.9% for 5 years, 5.4% for 10 years, and 5.2% since inception [5]

Core Viewpoint - Canadian Banc Corp. plans to execute a share split of its Class A shares due to strong performance, with shareholders receiving additional shares [1] Share Split Details - Class A shareholders will receive 10 additional shares for every 100 shares held, effective for those on record by December 16, 2025 [1] - The share split is subject to approval by the Toronto Stock Exchange [1] - The Class A shares will begin trading on an ex-split basis on December 16, 2025, with no fractional shares issued [3] Cash Distributions - Class A shareholders will continue to receive monthly cash distributions targeted at an annualized rate of 15%, based on the volume weighted average market price for the last three trading days of the preceding month [2] - Since inception, cash distributions have totaled $24.60 per share [2] Investment Portfolio - The Company invests in a portfolio of six publicly traded Canadian banks, including Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, Bank of Nova Scotia, and Toronto-Dominion Bank [4] - The weight of shares in the portfolio is expected to range between 5-20% but may vary [4] - The Company also engages in a selective covered call writing program to generate additional returns [4]

Core Insights - Canadian banks have reported strong quarterly earnings, generally exceeding estimates and resulting in significant stock price increases [1][2] - Despite challenges in the Canadian economy, banks are successfully generating higher revenues and profits, partly due to their substantial operations in the U.S. market [1] - The Canadian banking sector has shown impressive long-term performance, often outperforming the U.S. stock market [8] Earnings Performance - TD Bank reported a revenue decline to $15.49 billion, down 0.1% year over year, but adjusted earnings per share increased by 26.7% to $2.18 [8] - Royal Bank of Canada achieved revenue growth of $17.21 billion, up 14.2% year over year, with adjusted earnings per share rising by 25% to $3.85 [9] - Scotiabank's revenue grew to $9.8 billion, up 14.8% year over year, with adjusted earnings per share increasing by 22.9% to $2.56 [11][12] - Bank of Montreal reported revenue growth of $9.34 billion, up 4.2% year over year, and adjusted earnings per share surged by 72.6% to C$3.28 [14] - CIBC's revenue increased to $7.58 billion, up 14.5% year over year, with adjusted earnings per share rising by 16% to C$2.21 [16] - National Bank's revenue grew to $3.7 billion, up 25.9% year over year, with adjusted earnings per share increasing by 9% to C$2.82 [18] Market Performance - The Canadian banking sector ETF, ZEB-T, saw a weekly increase of 3.01% [7] - Individual bank stock performances for the week included CIBC up 4.78%, Royal Bank up 4.52%, TD Bank up 3.95%, Scotiabank up 2.66%, Bank of Montreal up 1.39%, and National Bank up 1.07% [10]

Core Viewpoint - Toronto-Dominion Bank (TD) demonstrates strong financial performance, particularly in its US operations, leading to an upward revision of its price target by Jefferies following robust earnings results [2][5]. Financial Performance - TD reported adjusted diluted earnings per share of C$2.18, exceeding the consensus estimate of C$2.01 [3][5]. - The bank's adjusted revenue was approximately C$16 billion, surpassing analyst forecasts of around C$15.49 billion [3]. - Net income for the quarter was C$3.28 billion, with diluted earnings per share of C$1.82, a decrease from the previous year's C$3.64 billion and C$1.97 per share [4][5]. - Adjusted net income increased to C$3.91 billion from C$3.21 billion [4][5]. - The Canadian Personal and Commercial Banking segment recorded a net income of C$1.87 billion, reflecting a 2% year-over-year increase [4]. Market Position - TD stands out in the banking industry with extensive operations across Canada and the United States, competing with major banks like Royal Bank of Canada and Bank of Montreal [1][5]. - The bank offers a wide array of financial services, including retail banking, wealth management, and capital markets [1][5].

Core Viewpoint - Brompton Split Banc Corp. successfully announced an offering of preferred shares with expected gross proceeds of approximately $38.2 million, set to close around December 10, 2025, subject to certain conditions [1]. Group 1: Offering Details - The preferred shares were offered at a price of $10.40 per share, yielding 6.0% [2]. - The offering was led by a syndicate of agents including RBC Capital Markets, CIBC Capital Markets, and others, with an over-allotment option for an additional 15% of the shares issued [2]. Group 2: Investment Strategy - The Fund invests in a portfolio of common shares of the six largest Canadian banks, including Royal Bank of Canada and The Toronto-Dominion Bank, with the potential to hold up to 10% in global financial companies for diversification [3]. Group 3: Performance Metrics - As of November 30, 2025, the compound annual returns for the preferred shares were 6.4% for 1 year and 5.4% for 10 years, with an inception date of November 16, 2005 [6].