BMO Financial Group Reports First Quarter Results



    BMO Continues to Invest in its Retail Businesses, is Managing Prudently
    in the Current Environment and is Taking Action to Reduce Volatility in
    its Capital Markets Businesses

    
    Year-over-Year Operating Performance Highlights:

    -   Net income of $255 million, down $93 million or 27%. Excluding
        significant items(2),(3), net income of $617 million, down
        $56 million or 8.4%

    -   EPS(1) of $0.47 and cash EPS(2) of $0.49, down $0.20 and $0.19 or 30%
        and 28%, respectively. Excluding significant items(2),(3), EPS of
        $1.19 and cash EPS of $1.21, down $0.11 and $0.10 or 8.5% and 7.6%,
        respectively

    -   As previously announced, results in the quarter were impacted by
        significant items(3) that lowered net income by $362 million or
        $0.72 per share. Results of a year ago were also affected by
        significant items that decreased net income by $325 million or
        $0.63 per share

    -   Strong tier 1 capital ratio, at 9.48% on a Basel II basis

    (1) All Earnings per Share (EPS) measures in this document refer to
        diluted EPS unless specified otherwise.
    (2) The adjustments that change results under generally accepted
        accounting principles (GAAP) to cash results are outlined in the Non-
        GAAP Measures section in the Financial Performance Review, where all
        non-GAAP measures and their closest GAAP counterparts are outlined.
        Results stated on a basis that excludes commodities losses, charges
        related to certain trading activities and valuation adjustments,
        changes in the general allowance for credit losses and/or
        restructuring charges are non-GAAP measures. Please see the Non-GAAP
        Measures section.
    (3) Significant items are discussed in the Significant Items section on
        page 7.
    

    QUEBEC CITY, March 4 /CNW/ - BMO Financial Group reported solid first
quarter results in personal and commercial banking and wealth management while
overall performance reflected the difficult capital markets environment.
    For the first quarter ended January 31, 2008, BMO Financial Group
reported net income of $255 million or $0.47 per share. As previously
announced, results included losses of $362 million after tax in respect of
charges for certain trading activities and valuations adjustments and an
increase in the general allowance for credit losses. These are detailed in the
Significant Items section on page 7. Excluding significant items, net income
was $617 million or $1.19 per share.
    P&C Canada, our Canadian personal and commercial banking unit, reported
higher earnings both year-over-year and quarter-over-quarter. "We are building
momentum and I am encouraged with our progress in sharpening our focus on
customers and making it easier for them to do business with us. Based on
market share gains in personal and business loans relative to a year ago and
the fourth quarter, we are on the right track and our initiatives will
continue to pay off," said Bill Downe, President and Chief Executive Officer,
BMO Financial Group.
    Results in our U.S. personal and commercial banking group were up from a
year ago. Results decreased relative to an especially strong fourth quarter,
as expected. "Our U.S. retail and commercial banking group had a solid quarter
in an extremely competitive market. There was moderate volume growth but loan
spreads were squeezed in the competitive lending environment," added Mr Downe.
    "Our wealth management business continues to deliver impressive results,
growing net income year-over-year. The business has been successful at
managing discretionary expense levels to the revenue environment, which should
place it in good stead in this softer revenue growth environment.
    "In the first quarter of 2008, we faced challenges due to the capital
markets environment. Global financial markets have been significantly affected
by a re-pricing of credit risk and BMO, like others, has been impacted by this
change. Market participants were not being adequately compensated for risk,
and the market is now adjusting for this. As these adjustments take place,
volatility has increased and credit spreads have widened. Our results in BMO
Capital Markets this quarter reflect this, but we are committed to producing
high stable ROE in that business and we are taking the steps needed to reduce
risk and volatility of results," Mr. Downe added.
    "We are reducing the size of our off-balance sheet businesses and seeking
a better balance between risk and return. To reduce volatility and improve
profitability, we are ensuring that our trading activities are primarily
supporting clients with whom we have broad and valuable relationships. We will
also reduce capital allocated to other trading areas and to certain of our
lending portfolios where returns are not sufficiently attractive. And, our
risk management group will assume increased direct corporate oversight into
risk-return decisions made by the businesses."
    Corporate Services earnings reflected higher provisions for credit losses
and lower revenues, offset in part by reduced expenses.
    Mr. Downe indicated that, "Credit quality is typical for this stage of
the credit cycle, when we start seeing emerging deterioration in the
performance of customer accounts. We have seen an increase in delinquencies
which, while still below the industry average, is an early indicator of coming
credit losses. We are, however, confident that over time we will maintain the
credit quality advantage we have historically achieved.
    "Conditions are particularly difficult in some of our capital markets
businesses. We have responded to these challenges in a number of ways in all
of our businesses. We continue to focus on expense management, slowing the
pace of spending on initiatives where appropriate, ensuring the benefits of
discretionary spending produce maximum return and redirecting resources
accordingly. Due to our consistent commercial lending practices, we expect
opportunities to capture more business in more difficult market conditions.
And we have responded to aggressive pricing in the retail market where
customer retention/capture is at stake."
    Subsequent to the quarter end, we announced a proposal to provide
senior-ranked support for the funding of our U.K.-based structured investment
vehicles (SIVs). BMO liquidity facilities would backstop the repayment of
senior note obligations to facilitate access to further senior funding,
provide the SIVs with supplemental funding and permit them to continue the
strategy of an orderly sale of assets to better realize on their value. This
is discussed in more detail in the Market Environment section on page 6.
    Results in the current quarter and in the first and fourth quarters of
2007 included significant items that lowered net income, as summarized below
and detailed in the Significant Items section.

    
    Net Income Summary

    (Canadian $ in millions)                 Q1-2008     Q4-2007     Q1-2007
    -------------------------------------------------------------------------
    Net income as reported                       255         452         348
    -------------------------------------------------------------------------
    Significant Items(1) (after tax)
      Commodities losses(2)                        -          16         237
      Charges related to deterioration in
       capital markets(3)                        324         211           -
      Increase in the general allowance           38          33           -
      Restructuring charges                        -          15          88
    -------------------------------------------------------------------------
    Total significant items                      362         275         325
    -------------------------------------------------------------------------
    Net income excluding significant items(4)    617         727         673
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Significant items are discussed in detail in the Significant Items
        section on page 7.
    (2) Commodities losses in Q1 2008 were $12 million ($8 million after tax)
        and were not considered a significant item in the first quarter of
        2008.
    (3) Reduced performance-based compensation associated with the charges
        has not been included in the determination of significant items.
    (4) These are non-GAAP amounts or non-GAAP measures. Please see
        footnote 2 to the preceding Operating Performance Highlights and the
        Non-GAAP Measures section that follows, which outline the use of non-
        GAAP measures in this document.
    

    Operating Segment Overview

    P&C Canada

    Net income was $302 million, up $5 million or 1.7% from a year ago and
$15 million or 4.6% from the fourth quarter. Revenue increased $45 million or
3.8% from a year ago, led by accelerated balance growth across most products,
improved mix and increased insurance revenue. Margins decreased from a year
ago but improved relative to the fourth quarter.
    Expenses increased more than revenues year-over-year, primarily due to
increased employee-related expenses and initiative spending. Going forward, we
intend to maintain our investments in key strategic initiatives and, mindful
of interest rate pressures, continue to manage our tactical spending.
    In personal banking, we continued to see growth in most products,
particularly higher-spread loans and cards, as well as higher insurance
revenue. Mortgages increased from the fourth quarter as growth in
branch-originated mortgages more than offset the impact of our exit from
third-party and broker mortgage channels. Personal deposits were up from a
year ago and the fourth quarter and market share for personal deposits rose
from the fourth quarter. We are seeing encouraging signs that our deposit
initiatives are gaining traction. We're confident that the initiatives put in
place in 2007 and 2008 will continue to drive further improvements.
    In commercial banking, where we have earned a reputation for being a
consistent lender throughout the business cycle, we increased our market share
year-over-year and quarter-over-quarter and there was continued good growth in
both commercial loans and deposits, priority areas for BMO.
    Cards and payment services revenues increased year-over-year on improved
volumes and transactions.

    P&C U.S.

    Net income was US$26 million, up US$1 million or 5.2% from a year ago.
Revenue increased US$19 million or 9.9%, largely due to the inclusion of First
National Bank & Trust's operating results. Net income decreased relative to
very strong results in the fourth quarter.
    P&C U.S. has operated in a difficult environment since 2006, with intense
competition, soft housing markets and lower economic growth. Management has
focused on effectively managing expenses, while still investing in growing the
business, in the difficult operating environment. We are actively managing
expenses associated with integrating acquired businesses, and are redirecting
our talent and resources for maximum return. The market has faced disruption
related to local acquisitions by Bank of America and National City and we
continue to successfully and aggressively target customers and talent in this
environment.
    A number of financial institutions have experienced difficulties with
exposure to subprime mortgages. P&C U.S. does not originate subprime mortgage
programs and has very little retail exposure with subprime characteristics.
    We completed the acquisitions of Wisconsin-based Ozaukee Bank and
Merchants and Manufacturers Bancorporation, Inc. on February 29, 2008. These
acquisitions add 41 full-service branches to our banking network.

    Private Client Group

    Net income was $98 million, up $7 million or 7.6% from a year ago.
Revenue increased $13 million and 2.7% or by $25 million and 5.0% excluding
the impact of the weaker U.S. dollar. The improvement was attributable to
increased deposits in our brokerage businesses, higher trust and investment
revenues in North American Private Banking and a change to a fixed fee charge
in BMO Mutual Funds. Assets under management and administration have been
affected by weaker equity and fixed income markets.
    Private Client Group completed the acquisition of Pyrford International
plc on December 14, 2007. Pyrford expands the group's international asset
management capabilities outside of North America.
    The group continues to innovate and be recognized for its products and
services. For the second consecutive year, BMO Mutual Funds was awarded the
Dalbar, Inc. Mutual Fund Service Award for best overall customer service in
both the English and French language categories. Guardian Group of Funds won
the 2007 Canadian Investment Award for Science and Technology Equity Fund. The
Canadian Investment Awards, Canada's premier awards program, recognizes
excellence in the Financial Services industry. On November 28, 2007,
Full-Service Investing added Inhance Investment Management's Canadian Socially
Responsible Investing (SRI) Portfolio to the BMO Nesbitt Burns Architect
Program. Offering retail investors an SRI portfolio as a separately managed
account is a first in Canada.

    BMO Capital Markets

    The group incurred a net loss of $34 million, compared with a net loss of
$20 million a year ago. Excluding significant items in the current quarter and
the first quarter of 2007, net income rose $73 million to $290 million, in
large part due to the benefit of lower performance-based compensation.
Significant items are discussed in the Significant Items section on page 7.
    Market conditions were difficult, but on a basis that excludes
significant items in both periods, revenue increased $38 million or 5.2% from
a year ago with strong growth in our interest-rate-sensitive businesses and
increases in commissions and foreign exchange trading. Commodities losses
continued to decrease. They were $12 million in the current quarter and are
not expected to be significant in 2008.
    BMO Capital Markets participated in a number of significant deals in the
quarter, including acting as joint book-runner in Franco-Nevada's
$1.25 billion IPO, the largest mining IPO in North American history. We also
participated in the largest private placement in South American history,
acting as joint book-runner in Brazil's OGX Petroleo E Gas issue of
US$1.28 billion of preferred shares. In addition, we were co-manager of
Agrium's follow-on common share offering, with gross proceeds of $1.375
billion. New issuance activity was down slightly from the fourth quarter of
2007. BMO Capital Markets was involved in 84 new issues in the quarter,
including 21 corporate debt deals, 23 government debt deals, two issues of
preferred shares and 38 common equity transactions, raising $32.5 billion.

    Performance Targets

    Given the significance of charges recorded in the first quarter, our
current expectations in respect of fiscal 2008 provisions for credit losses,
the prolonged difficulties in the capital markets environment and the
expectation that the economy will not perform as well as anticipated when we
established our targets, we do not expect to achieve our annual earnings
targets. We anticipate that specific provisions for credit losses of
$170 million in the current quarter are indicative of the quarterly run-rate
for the balance of the year.

    
    -------------------------------------------------------------------------
    Annual Targets for 2008              Performance to January 31, 2008(*)

    - 10% to 15% EPS growth from a base  - EPS of $0.55, down 58% from $1.30
      of $5.24(1)                          a year ago

    - ROE of 18% to 20%                  - ROE of 7.8% annualized

    - Specific provision for credit      - Specific provision for credit
      losses of $475 million or less       losses of $170 million

    - Tier 1 Capital Ratio of at least   - Tier 1 Capital Ratio of 9.48% on
      8.0% on a Basel II basis             a Basel II basis

    - Cash operating leverage of at      - Cash operating leverage of - 20.7%
      least 2.0%

                                       (*) Excluding changes in the general
                                           allowance

    -------------------------------------------------------------------------

    1) The base excluded the impact of restructuring, changes in the general
       allowance and commodities losses

    Excluding the impact of significant items for purposes of assessing
    performance relative to our targets, EPS growth would be -8.5%, ROE would
    be 16.8% and cash operating leverage would be -1.8%
    -------------------------------------------------------------------------
    

    The above table contains forward-looking statements. Please see the
Caution Regarding Forward-Looking Statements.

    Management's Discussion and Analysis

    MD&A commentary is as of March 4, 2008. Unless otherwise indicated, all
amounts are in Canadian dollars and have been derived from financial
statements prepared in accordance with Canadian generally accepted accounting
principles (GAAP). The MD&A should be read in conjunction with the unaudited
consolidated financial statements for the period ended January 31, 2008,
included in this document, and the annual MD&A for the year ended October 31,
2007, included in BMO's 2007 Annual Report. The material that precedes this
section comprises part of this MD&A.

    -------------------------------------------------------------------------
    Bank of Montreal uses a unified branding approach that links all of the
    organization's member companies. Bank of Montreal, together with its
    subsidiaries, is known as BMO Financial Group. As such, in this document,
    the names BMO and BMO Financial Group mean Bank of Montreal, together
    with its subsidiaries.
    -------------------------------------------------------------------------

    
    Summary Data

    (Unaudited) (Canadian $                     Increase            Increase
     in millions, except                       (Decrease)          (Decrease)
     as noted)               Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income        1,214        18        2%        18        2%
    Non interest revenue         812       (58)      (7%)     (192)     (19%)
    -------------------------------------------------------------------------
    Revenue                    2,026       (40)      (2%)     (174)      (8%)
    Specific provision for
     credit losses               170       118     +100%        69       68%
    Increase in the general
     allowance                    60        60      100%        10       20%
    -------------------------------------------------------------------------
    Total provision for
     credit losses               230       178     +100%        79       52%
    Non-interest expense       1,614        76        5%       (17)      (1%)
    Restructuring charge           -      (135)    (100%)      (24)    (100%)
    -------------------------------------------------------------------------
    Total non-interest
     expense                   1,614       (59)      (4%)      (41)      (3%)
    Income taxes                 (91)      (65)   (+100%)      (14)     (20%)
    Non-controlling interest
     in subsidiaries              18        (1)      (4%)       (1)      (4%)
    -------------------------------------------------------------------------

    Net income                   255       (93)     (27%)     (197)     (44%)

    Amortization of
     intangible assets
     (after tax)                   8        (1)     (11%)       (1)     (11%)
    Cash net income(1)           263       (94)     (26%)     (198)     (43%)
    Earnings per share -
     basic ($)                  0.48     (0.20)     (29%)    (0.41)     (46%)
    Earnings per share -
     diluted ($)                0.47     (0.20)     (30%)    (0.40)     (46%)
    Cash earnings per share -
     diluted ($)(1)             0.49     (0.19)     (28%)    (0.40)     (45%)
    Return on equity (ROE)      6.7%               (2.5%)              (5.5%)
    Cash ROE(1)                 6.9%               (2.6%)              (5.6%)
    Productivity ratio         79.7%               (1.3%)               4.5%
    Cash productivity ratio(1) 79.2%               (1.2%)               4.5%
    Operating leverage          1.5%                  nm                  nm
    Cash operating leverage(1)  1.5%                  nm                  nm
    Net interest margin on
     earning assets            1.45%              (0.19%)             (0.02%)
    Effective tax rate        (50.3%)             (42.5%)             (31.0%)

    Capital Ratios(2)
      Tier 1 Capital Ratio     9.48%                  nm                  nm
      Total Capital Ratio     11.26%                  nm                  nm
    Net income:
    Personal and Commercial
     Banking                     328         2        1%         8        2%
      P&C Canada                 302         5        2%        15        5%
      P&C U.S.                    26        (3)     (10%)       (7)     (18%)
    Private Client Group          98         7        8%        (5)      (5%)
    BMO Capital Markets          (34)      (14)     (74%)      (80)   (+100%)
    Corporate Services,
     including Technology
     and Operations (T&O)       (137)      (88)   (+100%)     (120)   (+100%)
    -------------------------------------------------------------------------

    BMO Financial Group
     Net Income                  255       (93)     (27%)     (197)     (44%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) These are non-GAAP amounts or non-GAAP measures. Please see the Non-
        GAAP Measures section that follows, which outlines the use of non-
        GAAP measures in this document.
    (2) Variances have not been provided as the basis of computation is no
        longer comparable. In the current quarter, capital ratios are
        computed under Basel II versus on a Basel I basis in prior periods.
        On a Basel I basis, in Q4 2007 the Tier 1 capital ratio was 9.51% and
        the total capital ratio was 11.74% and in Q1 2007, the ratios on a
        Basel 1 basis were 9.76% and 11.20%, respectively. See the Capital
        Management section.
    nm - not meaningful.
    

    -------------------------------------------------------------------------

    Management's Responsibility for Financial Information

    BMO's CEO and Acting CFO have signed certifications relating to the
appropriateness of the financial disclosures in our interim MD&A and unaudited
interim consolidated financial statements for the period ended January 31,
2008 and relating to the design of our disclosure controls and procedures and
internal control over financial reporting.
    BMO's internal control over financial reporting includes policies and
procedures that: pertain to the maintenance of records that in reasonable
detail accurately and fairly reflect the transactions and dispositions of the
assets of BMO; provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the financial statements in accordance with
Canadian generally accepted accounting principles and the requirements of the
Securities and Exchange Commission in the United States, as applicable, and
that receipts and expenditures of BMO are being made only in accordance with
authorizations of management and directors of BMO; and provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of BMO's assets that could have a material
effect on the financial statements.
    Because of its inherent limitations, internal control over financial
reporting can provide only reasonable assurance and may not prevent or detect
misstatements. Further, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
    There were no changes in our internal control over financial reporting
during the quarter ended January 31, 2008 that materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
    As in prior quarters, BMO's audit committee reviewed this document,
including the attached unaudited interim consolidated financial statements,
and BMO's Board of Directors approved the document prior to its release.
    A comprehensive discussion of our businesses, strategies and objectives
can be found in Management's Discussion and Analysis in BMO's 2007 Annual
Report, which can be accessed on our web site at
www.bmo.com/investorrelations. Readers are also encouraged to visit the site
to view other quarterly financial information.

    -------------------------------------------------------------------------

    Caution Regarding Forward-Looking Statements

    Bank of Montreal's public communications often include written or oral
forward-looking statements. Statements of this type are included in this
document, and may be included in other filings with Canadian securities
regulators or the U.S. Securities and Exchange Commission, or in other
communications. All such statements are made pursuant to the 'safe harbor'
provisions of, and are intended to be forward-looking statements under, the
United States Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward-looking statements may
involve, but are not limited to, comments with respect to our objectives and
priorities for 2008 and beyond, our strategies or future actions, our targets,
expectations for our financial condition or share price, and the results of or
outlook for our operations or for the Canadian and U.S. economies.
    By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. There is
significant risk that predictions, forecasts, conclusions or projections will
not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this document not to place
undue reliance on our forward-looking statements as a number of factors could
cause actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed
in the forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
influenced by many factors, including but not limited to: general economic and
market conditions in the countries in which we operate; interest rate and
currency value fluctuations; changes in monetary policy; the degree of
competition in the geographic and business areas in which we operate; changes
in laws; judicial or regulatory proceedings; the accuracy and completeness of
the information we obtain with respect to our customers and counterparties;
our ability to execute our strategic plans and to complete and integrate
acquisitions; critical accounting estimates; operational and infrastructure
risks; general political conditions; global capital market activities; the
possible effects on our business of war or terrorist activities; disease or
illness that impacts on local, national or international economies;
disruptions to public infrastructure, such as transportation, communications,
power or water supply; and technological changes.
    We caution that the foregoing list is not exhaustive of all possible
factors. Other factors could adversely affect our results. For more
information, please see the discussion on pages 28 and 29 of BMO's 2007 Annual
Report, which outlines in detail certain key factors that may affect BMO's
future results. When relying on forward-looking statements to make decisions
with respect to Bank of Montreal, investors and others should carefully
consider these factors, as well as other uncertainties and potential events,
and the inherent uncertainty of forward-looking statements. Bank of Montreal
does not undertake to update any forward-looking statement, whether written or
oral, that may be made, from time to time, by the organization or on its
behalf. The forward-looking information contained in this document is
presented for the purpose of assisting our shareholders in understanding our
financial position as at and for the periods ended on the dates presented and
our strategic priorities and objectives, and may not be appropriate for other
purposes.
    Assumptions about the level of asset sales, expected asset sale prices
and risk of default of the underlying assets of the structured investment
vehicles were material factors we considered when establishing our
expectations of the future performance of our interests in the structured
investment vehicles discussed in this document. Key assumptions included that
assets would continue to be sold with a view to reducing the size of the
structured investment vehicles, under various asset price scenarios.
    Assumptions about the level of defaults and losses on defaults were
material factors we considered when establishing our expectation of the future
performance of the transactions that Apex and Sitka Trusts have entered into. 
Key assumptions included that the level of defaults and losses on defaults
would be consistent with historical experience.
    Assumptions about the risk level of our commodities portfolio and
liquidity levels in the energy derivative markets and how that will affect the
performance of our commodities business were material factors we considered in
making the forward-looking statements regarding our commodities business set
out in this document. Key assumptions included that the current risk level of
the portfolio and liquidity levels in the energy derivative markets would
remain stable.
    Assumptions about the performance of the Canadian and U.S. economies in
2008 and how it will affect our businesses were material factors we considered
when setting our strategic priorities and objectives, and when determining our
financial targets, including provisions for credit losses. Key assumptions
were that the Canadian economy will expand at a moderate pace in 2008 while
the U.S. economy expands modestly, and that inflation will remain low in North
America. We also assumed that interest rates in 2008 will decline slightly in
Canada and the United States, and that the Canadian dollar will trade at
parity to the U.S. dollar at the end of 2008. In determining our expectations
for economic growth, both broadly and in the financial services sector, we
primarily consider historical economic data provided by the Canadian and U.S.
governments and their agencies. We now anticipate weaker economic growth in
Canada and that the United States will slip into a mild recession in the first
half of 2008. We also expect lower interest rates and a somewhat weaker
Canadian dollar than when we established our 2008 financial targets. Tax laws
in the countries in which we operate, primarily Canada and the United States,
are material factors we consider when determining our sustainable effective
tax rate.
    -------------------------------------------------------------------------

    Regulatory Filings

    Our continuous disclosure materials, including our interim filings,
annual MD&A and audited consolidated financial statements, our Annual
Information Form and the Notice of Annual Meeting of Shareholders and Proxy
Circular are available on our web site at www.bmo.com/investorrelations, on
the Canadian Securities Administrators' web site at www.sedar.com and on the
EDGAR section of the SEC's web site at www.sec.gov.

    Economic Outlook

    We anticipate that the Canadian economy will grow more slowly in 2008
than in 2007. While falling interest rates and high commodities prices should
continue to support domestic demand, the weak U.S. economy and strong Canadian
dollar will continue to weigh on exports. Housing market activity and
residential mortgage growth are expected to moderate as past increases in
prices have reduced affordability. Business investment is expected to slow,
though ongoing strength in the resource sector should provide support to
business loan growth. Growth in consumer spending and personal credit are
expected to moderate in 2008 from elevated rates of recent years, as gains in
employment slow. However, domestic demand should be supported by low and
falling interest rates. Canadian interest rates are projected to decline
further as the Bank of Canada addresses a weakening economy. The Canadian
dollar is expected to trade below par with the U.S. dollar as commodity prices
are likely to moderate in the face of softer global demand. As in recent
years, the resource-based western provinces should outperform Central and
Atlantic Canada, as manufacturers will continue to face challenging
conditions.
    The U.S. economy is projected to slip into a mild recession in the first
half of 2008. The correction in housing markets shows no sign of ending,
implying further weakness in mortgage demand. Consumer confidence has been
depressed by tighter credit standards, lower home values and high fuel bills.
Accordingly, personal consumption is expected to slow sharply this year,
curbing growth in personal credit. Companies will likely scale back
investments, resulting in slower growth in business credit. Capital markets
activity is expected to remain volatile until the uncertainty in structured
credit markets abates. Substantial interest rate reductions from the Federal
Reserve are expected to continue in the first half of the year. Lower interest
rates and sizeable tax rebates should spur an economic recovery in the second
half of the year.
    This Economic Outlook section contains forward-looking statements. Please
see the Caution Regarding Forward-Looking Statements.

    Market Environment

    BMO's investment in ABCP of six BMO-sponsored Canadian securitization
conduits have declined to $1,797 million as at January 31, 2008, compared with
$5,931 million at October 31, 2007. We have commitments to provide backstop
liquidity facilities to these conduits totalling up to $23.0 billion. The
assets of these conduits consist primarily of Canadian residential mortgages
and auto loans and leases and none have exposure to U.S. subprime residential
mortgages. No losses have been recorded on the ABCP in these conduits.
    We hold ABCP of third-party Canadian conduits as at January 31, 2008 with
a carrying value of $302 million, compared with $308 million at October 31,
2007. We have no backstop liquidity commitments to these conduits. 
Realization on our investment in the non-bank-sponsored conduits will be
affected by the outcome of the agreement reached among certain
non-bank-sponsored Canadian ABCP conduits and investors known as the Montreal
Accord. BMO is fully supportive of the resolution of the Montreal Accord.
    We also sponsor Apex Trust (including Sitka Trust) (referred to as Apex),
which provides credit protection on highly-rated leveraged super senior
tranches of a diversified pool of U.S. and European corporate credits via
credit default swaps. Stakeholders in Apex, including BMO, are engaged in
discussions with respect to a potential restructuring of Apex. If successful,
a restructuring would preserve the underlying economic value that continues to
exist. BMO believes that the actual credit losses that will be realized over
time in the transactions that Apex has entered into should be very modest. The
mark-to-market charges that have been taken in Apex reflect the widening of
credit spreads and not actual realized credit losses. BMO may decide to
increase its investment in Apex as part of a restructuring transaction if it
determines that it is in its interests to do so. BMO also noted that, with the
restructuring discussions ongoing, no stakeholders had taken steps to enforce
rights they may have as a result of the default of Apex.
    While these credit default swaps in Apex had significant mark-to-market
losses at January 31, 2008, the underlying corporate credits have experienced
virtually no defaults. In the first quarter, we recorded charges of
$130 million on our exposure to Apex. Charges taken in BMO's fourth quarter of
2007 and first quarter of 2008 in connection with Apex total $210 million,
leaving BMO with a net position of $495 million as at January 31, 2008 in
respect of investments and guarantees to third parties. The charges that BMO
has taken as at January 31, 2008 reflected its expectations of the potential
for a successful restructuring.
    Since the quarter end, BMO has been in active negotiations to restructure
Apex. On February 27th, Apex was unable to roll its notes and, as a result,
did not meet its payment obligations. In addition, Apex failed to satisfy
collateral calls. If no restructuring agreement is reached, BMO expects to
record a charge of approximately $500 million related to its remaining Apex
exposure in the quarter ending April 30, 2008. There is also additional risk
should Apex not successfully be restructured. One noteholder of Apex is
disputing BMO's demand for the return of a $400 million funds transfer. In
addition, a swap counterparty is disputing its obligations of up to
$600 million to BMO under an agreement and with respect to a total return swap
transaction that the counterparty had previously confirmed. While BMO is
confident in its position and will vigorously pursue its rights in these
matters, it is not possible to determine the amount or probability of losses,
if any, or whether any potential charges will be taken in the quarter ending
April 30, 2008. It is anticipated that if a restructuring is successful, these
matters would be dealt with as part of the restructuring.
    We hold capital notes of BMO-managed London-based SIVs, Links Finance
Corporation and Parkland Finance Corporation with a carrying value of
Cdn$33 million at January 31, 2008. The capital notes are unsecured limited
recourse investments that are subordinated to all other credit obligations of
the SIVs. The net asset value of the SIVs capital notes as at February 28,
2008 was approximately US$755 million for Links and approximately (euro)127
million for Parkland. The assets of Links and Parkland, net of cash, have been
reduced from US$23.4 billion and (euro)3.4 billion, respectively, as of July
31, 2007 to US$13.2 billion (net of cash of US$2.4 billion) and (euro)1.4
billion (net of cash of (euro)0.3 billion) as of January 31, 2008. As of March
3, 2008, the assets of Links and Parkland, net of cash, were approximately
US$10 billion and (euro)1 billion, respectively. This reduction principally
reflects progress to date in the strategy to reduce the size of the SIVs. At
January 31, 2008, we held Cdn$1.4 billion of senior notes, which rank higher
than the capital notes of the vehicles.
    On February 19, 2008, we announced a proposal to provide senior-ranked
support for the funding of Links and Parkland. A definitive agreement is now
in place to provide support to the SIVs through BMO liquidity facilities. The
facilities will backstop the repayment of senior note obligations to
facilitate the SIVs access to further senior funding, provide the SIVs with
supplemental funding, and permit the SIVs to continue the strategy of selling
assets in an orderly manner to better realize on their value. The liquidity
facilities, which include previous financial support provided by BMO, are
capped at a maximum of approximately US$11 billion related to Links and
(euro)1.2 billion for Parkland. Given the terms and conditions of the
liquidity facilities and the maturity profile of the senior notes, the amount
to be drawn is expected to be approximately one half of the maximum amount of
the facilities.
    In making this decision we considered a number of facts. The strength of
BMO's financial position as well as the quality of the SIVs' assets allows BMO
to extend this support without any material adverse impact on its financial
position. The asset quality of the SIVs is high with over 90 per cent of
assets rated AA or better by Moody's and over 80 per cent rated AA or better
by Standard & Poor's (S&P's); certain of the assets ratings are on watch. On
February 25th, in anticipation of signing these agreements, S&P's ratings on
the senior notes of the SIVs were changed to AA-. On March 3rd, upon signing
these agreements, Moody's confirmed the ratings of the senior notes at AAA,
and simultaneously removed from review those notes that were under review for
downgrade. The SIVs hold minimal U.S. subprime mortgages. The advances under
the liquidity facilities will rank ahead of the subordinate capital notes.
Capital note holders will continue to bear the economic risk from actual
losses up to the full amount of their investment and BMO is not providing any
protection from the economic risk to capital note holders, now or in the
future. The impact on Tier 1 Capital is not material and the amount of these
liquidity facilities represents approximately 3 per cent of BMO's total assets
at January 31, 2008. Asset sales and maturities and the maturity profile of
the senior notes reduce the size of the expected funding to a level
significantly below the full amount of the liquidity facilities.
    BMO has committed to provide liquidity support facilities of $10.2
billion to our U.S. sponsored ABCP conduit, Fairway Finance Company, LLC, and
$624 million of the facilities have been drawn down at January 31, 2008. In
the first quarter, a specific provision of $39 million was taken against
amounts advanced under the liquidity facility. There is no ABCP on BMO's
balance sheet related to this conduit.
    Given the uncertainty in the capital markets environment, our investments
in ABCP, SIVs, structured finance vehicles, Fairway and other mark-to-market
investments could experience further valuation gains and losses due to changes
in market value.
    This Market Environment section contains forward-looking statements.
Please see the Caution Regarding Forward-Looking Statements.

    Significant Items

    Q1 2008

    In the first quarter of 2008, as previously-announced, BMO recorded
$548 million ($362 million after tax and $0.72 per share) of charges for
certain trading activities and valuation adjustments and an increase in the
general provision for credit losses. They included $488 million ($324 million
after tax) in BMO Capital Markets in respect of: losses on exiting positions
related to monoline insurer ACA Financial Guarantee Corporation
($158 million); trading and structured-credit related positions, preferred
shares, third party Canadian conduits and other mark-to-market losses
($177 million); investments in Apex, a structured finance vehicle that BMO
sponsored but to which BMO has not provided backstop liquidity ($130 million);
and capital notes in the Links and Parkland SIVs ($23 million). BMO has no
further exposure to ACA. Reduced performance based compensation associated
with the charges has not been included in the determination of the impact of
significant items.
    The $177 million charge above was primarily due to the impact of widening
credit spreads on a number of our trading portfolios. The charge is comprised
of a number of items, the largest of which is $78 million for counterparty
credit risk on our derivative assets, with approximately half related to
monoline insurers (other than ACA) and similar credit derivative companies.
BMO holds $184 million of derivative assets on its balance sheet as of January
31, 2008 related to monoline insurers (other than ACA) and similar credit
derivative companies. Contracts with these companies mostly relate to
collateralized debt obligations and credit default swaps within our trading
portfolio and provide protection against losses arising from defaults. These
instruments have minimal subprime exposure. The protection provided is on our
total notional portfolio value of $3.9 billion as at January 31, 2008. BMO
also holds $962 million of municipal bonds insured by monolines, as at January
31, 2008.
    The $488 million charge included reductions in trading non-interest
revenue ($420 million), investment securities gains ($23 million) and other
income ($45 million).
    Corporate Services results included a $60 million ($38 million after tax)
increase in the general allowance for credit losses to reflect portfolio
growth and risk migration.
    The impact of significant items is further set out in the tables that
follow.

    Q1 2007

    In the first quarter of 2007, BMO recorded $644 million ($325 million
after tax and $0.63 per share) of charges. We recorded commodities trading
losses in trading non-interest income of $509 million which, net of an
$87 million reduction in performance-based compensation and reduced income
taxes, lowered net income in BMO Capital Markets in the first quarter of 2007
by $237 million. We also recorded a restructuring charge of $135 million
($88 million after tax) in Corporate Services.

    Q4 2007

    In the fourth quarter of 2007, BMO recorded charges of $416 million
($275 million after tax and $0.55 per share). They included $342 million
($227 million after tax) of charges recorded in BMO Capital Markets comprised
of $318 million of charges for certain trading activities and valuation
adjustments and $24 million of commodities losses. We also recorded
$74 million ($48 million after tax) of charges in Corporate Services
consisting of a $50 million increase in the general allowance for credit
losses and a $24 million net restructuring charge.
    The $318 million of charges for certain trading activities and valuation
adjustments included: $169 million in respect of trading and structured-credit
related positions and preferred shares; $134 million related to Canadian ABCP;
and $15 million related to capital notes in the Links and Parkland SIVs. The
Canadian ABCP charges reflected $80 million for our investment in commercial
paper issued by Apex and $54 million for our investment in commercial paper
issued by non-bank sponsored conduits. Both write-downs used an estimated
mark-to-market adjustment of 15%. Reduced performance based compensation
associated with the charges has not been included in the determination of
significant items.
    The $342 million of charges in BMO Capital Markets consisted of
reductions of $317 million in trading non-interest revenue, $10 million of
trading net interest income and $15 million of securities gains, other than
trading.

    Non-GAAP Measures

    BMO uses both GAAP and certain non-GAAP measures to assess performance.
Securities regulators require that companies caution readers that earnings and
other measures adjusted to a basis other than GAAP do not have standardized
meanings under GAAP and are unlikely to be comparable to similar measures used
by other companies. The following table reconciles the non-GAAP measures,
which management regularly monitors, to their GAAP counterparts.
    Management discloses amounts on a basis that adjusts for certain
significant items. Amounts and measures stated on a basis that excludes the
significant items are considered useful as they would be expected to be more
reflective of ongoing operating results. These significant items included:
charges related to certain trading activities and valuation adjustments in the
first quarter of 2008 and fourth quarter of 2007; losses in our commodities
business in 2007 (including associated performance-based compensation);
restructuring charges recorded in the first and fourth quarters of 2007; and
changes in the general allowance for credit losses. Since such charges tend to
be irregular, adjusting for them is helpful in assessing quarterly trends in
results.
    Cash earnings, cash productivity and cash operating leverage measures may
enhance comparisons between periods when there has been an acquisition,
particularly because the purchase decision may not consider the amortization
of intangible assets to be a relevant expense. Cash EPS measures are also
disclosed because analysts often focus on this measure, and cash EPS is used
by Thomson First Call to track third-party earnings estimates that are
frequently reported in the media. Cash measures add the after-tax amortization
of intangible assets to GAAP earnings to derive cash net income (and
associated cash EPS) and deduct the amortization of intangible assets from
non-interest expense to derive cash productivity and cash operating leverage
measures.
    BMO analyzes consolidated revenues on a GAAP basis. However, like many
banks, BMO analyzes revenue of its operating groups, and ratios of the groups
computed using revenue, on a taxable equivalent basis (teb). 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
securities to a level equivalent to amounts that would incur tax at the
statutory rate. The effective income tax rate is also analyzed on a taxable
equivalent basis for consistency of approach. The offset to the group teb
adjustments is reflected in Corporate Services. Analysis on a taxable
equivalent basis neutralizes the impact on ratios of investing in tax exempt
or tax-advantaged securities rather than fully-taxable securities with higher
yields. It reduces distortions in ratios between periods and between
institutions related to the choice of tax-advantaged and taxable investments.
In this MD&A, all revenues and tax amounts and related ratios of our operating
groups are stated on a taxable equivalent basis, unless indicated otherwise.
    Net economic profit represents cash net income available to common
shareholders, less a charge for capital, and is considered an effective
measure of economic value added.

    
    GAAP and Related Non-GAAP Measures used in the MD&A

    (Canadian $ in millions,
     except as noted)                        Q1-2008     Q4-2007     Q1-2007
    -------------------------------------------------------------------------

    Non-interest expense (a)                   1,614       1,631       1,538
    Restructuring charge (b)                       -          24         135
    -------------------------------------------------------------------------
    Total non-interest expense (c)             1,614       1,655       1,673
    Amortization of intangible assets            (10)        (11)        (11)
    -------------------------------------------------------------------------
    Cash-based non-interest expense (d)
     (note 1)                                  1,604       1,644       1,662
    -------------------------------------------------------------------------
    Net income (e)                               255         452         348
    Amortization of intangible assets,
     net of income taxes                           8           9           9
    -------------------------------------------------------------------------
    Cash net income (f) (note 1)                 263         461         357
    Preferred share dividends                    (15)        (12)         (9)
    Charge for capital (note 1)                 (375)       (378)       (385)
    -------------------------------------------------------------------------
    Net economic profit (note 1)                (127)         71         (37)
    -------------------------------------------------------------------------

    Restructuring charge (b)                       -          24         135
    Related income taxes (g)                       -           9          47
    -------------------------------------------------------------------------
    Net impact of restructuring (h)                -          15          88
    -------------------------------------------------------------------------

    Commodities losses (i) (note 2)                -          24         509
    Performance - based compensation (j)           -           -         (87)
    Related income taxes (k)                       -           8         185
    -------------------------------------------------------------------------
    Net impact of Commodities losses (l)           -          16         237
    -------------------------------------------------------------------------

    Charges related to deterioration in
     capital markets environment (m)             488         318           -
    Related income taxes (o)                     164         107           -
    -------------------------------------------------------------------------
    Net impact of charges related to
     capital markets environment (p)             324         211           -
    -------------------------------------------------------------------------

    Increase in general allowance                 60          50           -
    Related income taxes (q)                      22          17           -
    -------------------------------------------------------------------------
    Net impact of increase in
     general allowance (r)                        38          33           -
    -------------------------------------------------------------------------
    Net impact of significant items
     (h+l+p+r)(1)                                362         275         325
    -------------------------------------------------------------------------
    Note 1: These are non-GAAP amounts or non-GAAP measures.
    Note 2: Commodities losses in Q1 2008 were $12 million ($8 million after
            tax) and were not considered a significant item in the first
            quarter of 2008


    GAAP and Related Non-GAAP Measures used in the MD&A

    (Canadian $ in millions,
     except as noted)                        Q1-2008     Q4-2007     Q1-2007
    -------------------------------------------------------------------------
    Revenue (s)                                2,026       2,200       2,066
    Non-interest expense (c)                   1,614       1,655       1,673
    Cash-based Non-interest expense (d)        1,604       1,644       1,662
    Income tax (t)                               (91)        (77)        (26)
    Productivity ratio (%) ((c/s) x 100)        79.7        75.2        81.0
    Cash productivity ratio (%)
     ((d/s) x 100) (note 1)                     79.2        74.7        80.4
    Revenue Growth (%) (u)                      (2.0)      (10.6)      (16.7)
    Non-interest expense Growth (%) (v)         (3.5)        2.6         5.9
    Cash-based Non-interest expense
     Growth (%) (w) (note 1)                    (3.5)        2.6         5.9
    Operating leverage (%) (u-v)                 1.5       (13.2)      (22.6)
    Cash operating leverage (%) (u-w) (note 1)   1.5       (13.2)      (22.6)
    EPS (uses net income) ($)                   0.47        0.87        0.67
    Cash EPS (note 1)
     (uses cash net income) ($)                 0.49        0.89        0.68
    Effective tax rate (%) (t/(e+t))           (50.3)      (19.3)       (7.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Measures on a basis that excludes the
     impact of significant items (note 1)
    Revenue (s+i+m)(2)                         2,514       2,542       2,575
    Non-interest expense (c-b-j)(3)            1,614       1,631       1,625
    Cash-based expense (d-b-j)(4)              1,604       1,620       1,614
    Income tax (t+g+k+o+q)(5)                     95          64         206
    Net income (e+1)(6)                          617         727         673
    Cash net income (f+1)                        625         736         682
    Productivity ratio (%) ((3/2) x 100)        64.2        64.2        63.1
    Cash productivity ratio (%) ((4/2) x 100)   63.8        63.7        62.7
    Revenue Growth (%) (*)                      (2.4)        3.3         3.8
    Non-interest expense Growth (%) (y)         (0.6)        1.1         2.8
    Cash-based expense Growth (%) (z)           (0.6)        1.1         2.9
    Operating leverage (%) (x-y)                (1.8)        2.2         1.0
    Cash Operating leverage (%) (x-z)           (1.8)        2.2         0.9
    EPS (uses net income excluding
     significant items)                         1.19        1.42        1.30
    Cash EPS (uses cash net income
     excluding significant items)               1.21        1.44        1.31
    ROE (%) (uses net income excluding
     significant items)                         16.8        19.9        18.0
    Effective tax rate (%) (5/(6+5))            13.0         8.0        22.9
    -------------------------------------------------------------------------
    Note 1: These are non-GAAP amounts or non-GAAP measures.
    


    Foreign Exchange

    The Canadian dollar equivalents of BMO's U.S. dollar-denominated net
income, revenues, expenses, provisions for credit losses and income taxes were
lowered relative to the first quarter of 2007 by the weakening of the U.S.
dollar in the past year. The average Canadian/U.S. dollar exchange rate,
expressed in terms of the Canadian dollar cost of a U.S. dollar, fell by 14%
from a year ago. The average exchange rate in the current quarter was
relatively unchanged from the fourth quarter of 2007 and had no impact on
income or expense. The following table indicates the relevant average
Canadian/U.S. dollar exchange rates and the impact of changes in the rates.

    
    Effects of U.S. Dollar Exchange Rate
     Fluctuations on BMO's Results

                                                               Q1-2008
                                                             vs.         vs.
    (Canadian $ in millions, except as noted)            Q1-2007     Q4-2007
    -------------------------------------------------------------------------

    Canadian/U.S. dollar exchange rate (average)
    Current period                                        0.9984      0.9984
    Prior period                                          1.1617      0.9986
    Decreased revenue                                        (44)          -
    Decreased expense                                         64           -
    Decreased provision for credit losses                     24           -
    Decreased income taxes                                     1           -
    -------------------------------------------------------------------------
    Increased net income                                      45           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    At the start of each quarter, BMO enters into hedging transactions that
are expected to partially offset the pre-tax effects of exchange rate
fluctuations in the quarter on our expected U.S. dollar net income for that
quarter. As such, these activities partially mitigate the impact of exchange
rate fluctuations within a single quarter; however, the hedging transactions
are not designed to offset the impact of year-over-year or quarter-over-
quarter fluctuations in exchange rates. Over the course of the current
quarter, the U.S. dollar strengthened, as the exchange rate increased from
Cdn$0.9447 per U.S. dollar at October 31, 2007 to an average of Cdn$0.9984. As
a result, hedging transactions resulted in an after-tax loss of $7 million in
the quarter. The gain or loss from hedging transactions in future periods will
be determined by both future currency fluctuations and the amount of
underlying future hedging transactions, since the transactions are entered
into each quarter in relation to expected U.S. dollar denominated net income
for the next three months.
    The effect of currency fluctuations on our investments in foreign
operations is discussed in the Income Taxes section.

    Other Value Measures

    Net economic profit was negative $127 million (see the Non-GAAP Measures
section), compared with negative $37 million in the first quarter of 2007 and
$71 million in the fourth quarter.
    The total shareholder return (TSR) on an investment in BMO common shares
was -8.9% in the first quarter and -15.6% for the twelve months ended
January 31, 2008. BMO's average annual TSR for the five-year period ended
January 31, 2008 was 10.1%.

    Net Income

    Q1 2008 vs Q1 2007

    Net income was $255 million for the first quarter of 2008, down
$93 million or 27% from a year ago. Earnings per share were $0.47, compared
with $0.67. Results in both periods included significant items that are
discussed in the Significant Items section on page 7. Excluding these
significant items in both periods, net income was $617 million, a decrease of
$56 million or 8.4% from a year ago, and EPS was $1.19, down 8.5%.
    P&C Canada net income increased $5 million. There was good volume growth
across most product areas. Net interest margin was down slightly as funding
cost increased, while expenses increased due largely to increased employee-
related expenses and initiative spending.
    P&C U.S. net income increased US$1 million. There was good volume growth
in the quarter with loan growth and increases in fee income and other non-
interest revenue. Results were lowered by reduced net interest margin due to
competitive pressures on pricing and customer preferences shifting from
higher-spread to lower-spread loan and deposit products.
    Private Client Group net income increased $7 million or 7.6%. The
increase was achieved despite softer market conditions. BMO Capital Markets
net loss increased by $14 million. Excluding significant items in both
periods, BMO Capital Markets net income rose by $73 million or 33%, in large
part due to the benefit of reduced performance-based compensation, with
favourable performance in a number of product areas.
    Corporate Services net loss was $137 million. Excluding significant items
in both periods, net income fell $138 million primarily due to higher specific
provisions for credit losses and lower revenues, offset in part by reduced
expenses.

    Q1 2008 vs Q4 2007

    Reported net income decreased $197 million or 44% from the fourth
quarter. Excluding significant items, net income decreased $110 million or
15%.
    In P&C Canada, net income increased $15 million. Results in the fourth
quarter included $6 million of net income arising from three items: a
$107 million ($83 million after tax) gain on sale of MasterCard International
Inc. shares and a $43 million recovery of prior years income taxes; less a
$185 million ($120 million after tax) adjustment to increase the liability for
future customer redemptions related to our credit card loyalty rewards
program. There was good volume growth and net interest margins increased
slightly.
    P&C U.S. net income fell US$7 million from a very strong fourth quarter,
as anticipated.
    Private Client Group net income decreased $5 million or 5.1%. Revenue
growth of 1.7% in a difficult market environment was more than offset by
increased expenses, due in part to expensing in the first quarter the annual
stock-based compensation costs for employees eligible to retire.
    BMO Capital Markets net income decreased $80 million. Excluding
significant items in both periods, net income rose $17 million or 6.0%. On
this basis, there were lower revenues and lower performance-based
compensation. Trading revenues, commissions and equity underwriting were
higher but market conditions were quite challenging.
    Corporate Services net loss was $120 million worse than in the fourth
quarter. Excluding significant items in both periods, net income fell
$130 million due to higher specific provisions for credit losses and lower
revenues, mitigated in part by lower expenses.

    Revenue

    BMO analyzes consolidated revenues on a GAAP basis. However, like many
banks, BMO analyzes revenue of its operating groups and associated ratios
computed using revenue on a taxable equivalent basis (teb). 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
securities 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.
    Total revenue decreased $40 million or 2.0% from a year ago. Excluding
significant items in both periods, revenue decreased $61 million or 2.4% year-
over-year.
    Revenue decreased $174 million from the fourth quarter of 2007. Excluding
significant items in both periods, revenue decreased $28 million or 1.1%.
    The weaker U.S. dollar decreased revenue growth by $44 million or
2.2 percentage points year-over-year. Changes in net interest income and non-
interest revenue are reviewed in the sections that follow.

    Net Interest Income

    Net interest income increased $18 million or 1.5% from a year ago, driven
by volume growth in the P&C Canada and BMO Capital Markets. Average earning
assets increased $44 billion, due primarily to growth in trading assets and
higher corporate banking assets in BMO Capital Markets as its average earning
assets increased $37 billion.
    Relative to the fourth quarter, net interest income rose $18 million.
Average earning assets increased $11 billion, again due primarily to higher
trading assets in BMO Capital Markets, where net interest income rose
strongly.

    BMO's overall net interest margin on earning assets for the first quarter
of 2008 was 1.45%, or 19 basis points lower than in the first quarter of the
prior year and 2 basis points lower than in the fourth quarter. The two main
drivers of a change in total bank margin are the individual group margins and
the changes in the magnitude of each operating group's assets. The year-
over-year decrease of 19 basis points was mainly due to growth in lower-spread
assets in BMO Capital Markets and reduced net interest income in Corporate
Services. Both P&C U.S. and Private Client Group had significant margin
declines but they are relatively smaller groups and their effect on the total
bank margin change was minimal.
    Net interest margins declined 3 basis points in P&C Canada relative to a
year ago. Its funding costs increased and ongoing competitive pressures were
largely offset by positive mix factors as growth was proportionately greater
in high-spread products. Relative to the fourth quarter, P&C Canada net
interest margin improved largely due to an improvement in the differential
between the prime and BA rates and positive product mix, partially offset by
lower mortgage refinancing fees. Margins declined in P&C U.S. About 22 basis
points of the decline year-over-year and relative to the fourth quarter
related to the transfer of a small client-driven investment portfolio from
Corporate Services. The remaining decline was due to the continuing effects of
competitive pressures, shifts in customer preferences and higher levels of
non-accrual loans. BMO Capital Markets margin rose from a year ago and from
the previous quarter mainly due to higher spreads in interest-rate-sensitive
businesses, partially offset by lower spreads in the U.S. lending portfolio.
Corporate Services net interest income fell due to a large number of small
items negatively impacting revenues in the current quarter and interest
revenue on income tax refunds and reassessments in the fourth quarter of 2007.
The decline lowered BMO's overall margin.

    
    Net Interest Margin (teb)(*)

                                                    Increase        Increase
                                                   (Decrease)      (Decrease)
                                                         vs.             vs.
    (in basis points)                    Q1-2008     Q1-2007         Q4-2007
    -------------------------------------------------------------------------
    P&C Canada                               264          (3)              4
    P&C U.S.                                 297         (43)            (37)
    -------------------------------------------------------------------------
    Personal and Commercial Client Group     270          (8)             (1)
    Private Client Group                     867        (108)            (45)
    BMO Capital Markets                       65           3              13
    Corporate Services, including
     Technology and Operations (T&O)          nm          nm              nm
    -------------------------------------------------------------------------
    Total BMO                                145         (19)             (2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Canadian Retail(xx)                297          (5)              1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*)    Net interest margin is disclosed and computed with reference to
           average earning assets, rather than total assets. This basis
           provides a more relevant measure of margins and changes in
           margins. Operating group margins are stated on a teb basis while
           total BMO margin is stated on a GAAP basis.
    (xx)   Total Canadian retail margin represents the net interest margin of
           the combined Canadian business of P&C Canada and Private Client
           Group.
    nm - not meaningful
    

    Non-Interest Revenue

    Non-interest revenue decreased $58 million or 6.7% from a year ago.
Excluding significant items, non-interest revenue decreased $79 million or
5.7%, in large part due to $73 million of lower revenues in Corporate Services
primarily related to lower earnings from certain subsidiaries related to a
number of items and lower hedging gains, including gains on foreign exchange,
as the prior year results included a large mark-to-market gain. There was
growth in P&C Canada due to increased insurance revenues and in Private Client
Group primarily due to higher trust and investment revenue in North American
Private Banking. Excluding significant items, BMO Capital Markets non-interest
revenue decreased due to reductions in investment securities gains, lending
fees and equity underwriting fees, partially offset by increased commission
revenue and trading revenue.
    Relative to the fourth quarter, non-interest revenue decreased
$192 million, or by $36 million and 2.7% excluding the significant items in
both periods. The decrease was due to reduced revenues in Corporate Services
of $53 million primarily related to lower earnings from certain subsidiaries
related to a number of items and a decline in foreign exchange hedging
revenue. P&C Canada revenues increased as its non-interest revenue in the
fourth quarter was lowered by a $78 million net reduction in respect of a
$185 million adjustment to increase our liability for future customer
redemptions related to our customer loyalty rewards program and a $107 million
investment securities gain on the sale of our MasterCard shares. Excluding
those items, P&C Canada non-interest revenue was stable as higher insurance
and securitization revenues were offset by lower revenue from cards and
investment products. Private Client Group non-interest revenue increased due
to higher fee-based revenue in full-service investing and increased trust &
investment revenue in North American Private Banking. BMO Capital Markets
non-interest revenue fell on both a reported basis and on a basis that
excludes significant items. There were lower investment securities gains,
trading revenues and lending fees. Fees from mergers and acquisitions and debt
underwriting were also lower, partially offset by increased commission revenue
and equity underwriting fees.

    Non-Interest Expense

    Non-interest expense decreased $59 million from a year ago to
$1,614 million. Excluding significant items, non-interest expense decreased
$11 million.
    The $11 million decrease was attributable to the $64 million benefit of
the weaker U.S. dollar. There were higher performance-based costs and
increases in salary, computer costs, professional fees and travel and business
development. Benefits costs are lower as we actively manage our employee
benefit offerings to maintain competitiveness while keeping our costs in
check.
    There were higher expenses in each of the operating groups. Employee
costs were higher, in part due to increased staffing levels in P&C Canada and
Private Client Group associated with expansion of front-line sales and service
staff in 2007.
    Cash operating leverage was 1.5% in the current quarter. Excluding
significant items, it was -1.8% as expense growth outpaced revenue growth on
this basis.
    Non-interest expense decreased $41 million or 2.5% from the fourth
quarter. The fourth quarter results included a $24 million net restructuring
charge. The current quarter reflected increases in salaries, benefits and
performance-based compensation, including expensing in the current quarter
$49 million of annual stock-based compensation costs for employees eligible to
retire. There were reductions in computer costs, professional fees and travel
and business development.

    Risk Management

    The credit environment has softened from the highly favourable conditions
of early 2007. The provision for credit losses this quarter totalled
$230 million, consisting of $170 million of specific provisions and a $60
million increase in the general allowance. The increase in the general
allowance was attributable to portfolio growth and risk migration. Specific
provisions include a $39 million charge in respect of a single enterprise. In
the first quarter of 2007, there were $52 million of specific provisions,
compared with $101 million of specific provisions and a $50 million increase
in the general allowance in the fourth quarter of 2007.
    Specific provisions in the current quarter represented 31 basis points of
average net loans and acceptances, including securities borrowed or purchased
under resale agreements, compared with 10 basis points a year ago, 19 basis
points in the fourth quarter of 2007 and a 15 basis point average over the
past five fiscal years.
    New impaired loan formations totalled $708 million in the quarter, up
from $238 million in the fourth quarter and $113 million a year ago. Of the
$470 million increase from the fourth quarter, $459 million was attributable
to a single enterprise. Formations are in line with expectations at this stage
of the economic cycle. There were $3 million of impaired loan sales in the
quarter, compared with sales of $11 million in the fourth quarter. There were
no sales of impaired loans a year ago.
    Gross impaired loans and acceptances were up appreciably from the fourth
quarter and a year ago due to the formations discussed above.
    The total allowance for credit losses of $1,227 million at the end of the
quarter was comprised of a specific allowance of $250 million and a general
allowance of $977 million. The general allowance is maintained to absorb
impairment in the existing credit portfolio that cannot yet be associated with
specific credit assets. It is assessed on a quarterly basis and increased
$79 million from the end of the previous fiscal year due to the $60 million
provision and the $19 million impact of the change in the Canadian/U.S. dollar
exchange rate.
    BMO's loan book continues to be comprised largely of more stable consumer
and commercial portfolios, which, excluding securities borrowed or purchased
under resale agreements, represented 78.2% of the loan portfolio at the end of
the quarter, down from 82.2% a year ago and 78.6% at the end of the fourth
quarter.
    We expect the credit environment to continue to be challenging in 2008,
as U.S. commercial real estate, industrials and manufacturing, retailing and
tourism-related sectors remain weak. These sectors continue to be impacted by
high input costs, a strong Canadian dollar and/or the slowdown in the U.S.
economy. Evidence of credit deterioration tends to lag a slowing in the
economy.
    Reflective of our position in a deteriorating credit cycle, gross
impaired loans are expected to increase in fiscal 2008 from historically low
levels.
    We do not expect to achieve our annual target of specific provisions of
$475 million or less in fiscal 2008. We anticipate that specific provisions
for credit losses of $170 million in the current quarter are indicative of the
quarterly run-rate for the balance of the year.
    BMO's market risk and liquidity and funding management practices and key
measures are outlined on pages 68 to 71 of BMO's 2007 Annual Report. Trading
and Underwriting Market Value Exposure (MVE) was little changed quarter-over-
quarter, while Earnings Volatility has increased quarter-over-quarter
primarily due to higher exposure in the mark-to-market credit portfolios,
driven by higher observed credit spreads and credit spread volatilities.
    To align with the regulatory definition of risk classifications,
effective the beginning of fiscal 2008, general credit spread risk and
interest rate risk have been combined and are now reported in the 'Interest
Rate Risk (Mark-to-Market)' line in the Total Trading and Underwriting MVE
Summary. This change does not impact the Total MVE result but only the way in
which the results are reported. MVE data for October 31, 2007 has been
restated to reflect this change. There have been no significant changes to our
market risk management practices over the quarter.
    There have been no significant changes to the levels of structural market
risk and liquidity and funding risk over the quarter. We remain satisfied that
our liquidity and funding management framework provides us with a sound
position despite recent market developments. There was no significant change
in our structural market risk management practices during the quarter.
    This Risk Management section and the following Income Taxes section
contain forward-looking statements. Please see the Caution Regarding Forward-
Looking Statements.

    
    Provisions for Credit Losses (PCL)

    (Canadian $ in millions, except as noted)    Q1-2008   Q4-2007   Q1-2007
    -------------------------------------------------------------------------

    New specific provisions                          205       152        86
    Reversals of previously established
     allowances                                      (13)      (27)      (12)
    Recoveries of loans previously written-off       (22)      (24)      (22)
    -------------------------------------------------------------------------

    Specific provision for credit losses             170       101        52
    Increase in the general allowance                 60        50         -
    -------------------------------------------------------------------------

    Provision for credit losses                      230       151        52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Specific PCL as a % of average net loans
     and acceptances (annualized).                  0.31%     0.19%     0.10%
    PCL as a % of average net loans and
     acceptances (annualized).                      0.42%     0.29%     0.10%



    Changes in Gross Impaired Loans and
     Acceptances (GIL)

    (Canadian $ in millions, except as noted)
    -------------------------------------------------------------------------

    GIL, Beginning of Period                         720       618       666
    Additions to impaired loans & acceptances        708       238       113
    Reductions in impaired loans & acceptances(1)     21       (19)       43
    Write-offs                                      (102)     (117)      (74)
    -------------------------------------------------------------------------

    GIL, End of Period                             1,347       720       748
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GIL as a % of gross loans & acceptances         0.63%     0.36%     0.36%
    GIL as a % of equity and allowances for
     credit losses                                  7.46%     4.07%     4.19%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes impaired amounts returned to performing status, loan sales,
        repayments, the impact of foreign exchange fluctuations and offsets
        for consumer write-offs which have not been recognized as formations
        (Q1-08 $87MM; Q4-07 $73MM; and Q1-07 $68MM).



    Aggregate Market Value Exposure and Earnings Volatility
    for Trading and Underwriting and Structural Positions ($ millions)(*)

                                                                    12-month
                                            Market value            earnings
    (After-tax Canadian equivalent)        exposure (MVE)         volatility
    -------------------------------------------------------------------------
                                       Jan. 31   Oct. 31   Jan. 31   Oct. 31
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------
    Trading and Underwriting             (17.7)    (18.2)    (17.3)    (12.6)
    Structural                          (226.2)   (231.6)    (24.4)    (24.2)
    -------------------------------------------------------------------------
    BMO Financial Group                 (243.9)   (249.8)    (41.7)    (36.8)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Measured at a 99% confidence interval. Losses are in brackets.



    Total Trading and Underwriting MVE Summary ($ millions)(*)

                                                                       As at
                                                                     October
                            For the quarter ended January 31, 2008  31, 2007
    (Pre-tax Canadian                                                Quarter-
     equivalent)         Quarter-end   Average      High       Low       end
    --------------------------------------------------------------- ---------
    Commodities Risk            (3.9)     (4.3)     (6.3)     (2.5)     (2.7)
    Equity Risk                (10.6)    (12.2)    (17.7)     (7.9)     (9.5)
    Foreign Exchange Risk       (0.3)     (1.6)     (4.3)     (0.3)     (0.9)
    Interest Rate Risk
     (Mark-to-Market)          (13.4)    (13.4)    (21.4)     (8.7)    (10.0)
    Diversification              8.4      10.3      nm(1)     nm(1)      9.2
    -------------------------------------------                     ---------
    Comprehensive Risk         (19.8)    (21.2)    (27.8)    (14.5)    (14.0)
    Interest Rate Risk
     (accrual)                  (1.3)     (5.1)     (9.3)     (1.3)     (9.1)
    Issuer Risk                 (6.1)     (5.8)     (7.7)     (4.2)     (4.9)
    -------------------------------------------                     ---------
    Total MVE                  (27.2)    (32.1)    (37.2)    (25.8)    (28.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    (*) One-day measure using a 99% confidence interval. Losses are in
        brackets and benefits are presented as positive numbers.
    (1) Computation of a diversification effect for the high and low is not
        meaningful.



    Structural Balance Sheet Earnings and Value Sensitivity to Changes in
    Interest Rates ($ millions)(*)

                                                                    Earnings
                                                Economic         sensitivity
                                                   value       over the next
    (After-tax Canadian equivalent)          sensitivity           12 months
    -------------------------------------------------------------------------
                                       Jan. 31   Oct. 31   Jan. 31   Oct. 31
                                          2008      2007      2008      2007
    -------------------------------------------------------------------------
    100 basis point increase            (184.9)   (201.1)    (17.3)      6.6
    100 basis point decrease             133.9     138.6      28.7     (15.4)

    200 basis point increase            (427.5)   (438.1)    (43.9)      0.4
    200 basis point decrease             254.7     234.0      62.1     (17.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Losses are in brackets and benefits are presented as positive
        numbers.
    


    Income Taxes

    As explained in the Revenue section, in fiscal 2008, management assesses
BMO's consolidated results and associated provisions for income taxes on a
GAAP basis. We continue to assess the performance of the operating groups and
associated income taxes on a taxable equivalent basis and to report
accordingly.
    There was an income tax recovery of $91 million, compared with recoveries
of $26 million in the first quarter of 2007 and $77 million in the fourth
quarter of 2007. The effective rate for the quarter was a recovery rate of
50.3%, compared with recovery rates of 7.8% in the first quarter a year ago
and 19.3% in the fourth quarter. The capital markets losses reflected as
significant items were attributable to higher tax-rate jurisdictions.
    Excluding the impact of significant items, the effective rate for the
quarter was 13.0%, compared with 22.9% a year ago and 8.0% in the fourth
quarter. The decrease in the effective rate from the first quarter of 2007 was
mainly attributable to a relatively higher proportion of income from
lower-tax-rate jurisdictions in the current quarter. The increase from the
fourth quarter was primarily due to the favourable resolution of certain tax
matters resulting in the recovery of prior period income taxes in the fourth
quarter of 2007. While rates will vary from quarter to quarter due to one time
adjustments and significant items, our current estimate is that the
sustainable effective tax rate will be in the range of 19% to 23%, down
slightly from our prior estimate due primarily to a reduction in statutory
rates in Canada in the quarter.
    BMO hedges the foreign exchange risk arising from its investments in U.S.
operations by funding the investments in U.S. dollars. Under this program, the
gain or loss from hedging and the unrealized gain or loss from translation of
the investments in U.S. operations are charged or credited to shareholders'
equity. For income tax purposes, the gain or loss on the hedging activities
attracts an income tax charge or credit in the current period, which is
charged or credited to shareholders' equity, while the associated unrealized
gain or loss on the investments in U.S. operations does not attract income
taxes until the investments are liquidated. The income tax charge/benefit
arising from a hedging gain/loss is a function of the fluctuation in U.S.
rates from period to period. Hedging of the investments in U.S. operations has
given rise to an income tax recovery in shareholders' equity of $185 million
for the quarter. Refer to the Consolidated Statement of Changes in
Shareholders' Equity included in the attached unaudited consolidated financial
statements for further details.

    
    Summary Quarterly Results Trends

    (Canadian $ in millions,                Q1-       Q4-       Q3-       Q2-
     except as noted)                     2008      2007      2007      2007
    -------------------------------------------------------------------------
    Total revenue                        2,026     2,200     2,555     2,528
    Provision for credit losses
     - specific                            170       101        91        59
    Provision for credit losses
     - general                              60        50         -         -
    Non-interest expense                 1,614     1,631     1,659     1,614
    Restructuring charge                     -        24         -         -
    -------------------------------------------------------------------------
    Total non-interest expense           1,614     1,655     1,659     1,614
    Net income                             255       452       660       671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          0.48      0.89      1.30      1.31
    Diluted earnings per share ($)        0.47      0.87      1.28      1.29
    Net interest margin on earning
     assets (%)                           1.45      1.47      1.61      1.65
    Effective income tax rate (%)        (50.3)    (19.3)     15.7      19.4
    Canadian/U.S. dollar exchange
     rate (average)                       1.00      1.00      1.07      1.14

    Net income:
      P&C Canada                           302       287       356       327
      P&C U.S.                              26        33        25        29
    -------------------------------------------------------------------------
    Personal and Commercial Banking        328       320       381       356
    Private Client Group                    98       103       102        99
    BMO Capital Markets                    (34)       46       194       197
    Corporate Services, including T&O     (137)      (17)      (17)       19
    -------------------------------------------------------------------------
    BMO Financial Group                    255       452       660       671
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in millions,                Q1-       Q4-       Q3-       Q2-
     except as noted)                     2007      2006      2006      2006
    -------------------------------------------------------------------------
    Total revenue                        2,066     2,461     2,570     2,473
    Provision for credit losses
     - specific                             52        51        42        66
    Provision for credit losses
     - general                               -       (35)        -         -
    Non-interest expense                 1,538     1,613     1,600     1,560
    Restructuring charge                   135         -         -         -
    -------------------------------------------------------------------------
    Total non-interest expense           1,673     1,613     1,600     1,560
    Net income                             348       696       710       651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Basic earnings per share ($)          0.68      1.37      1.41      1.28
    Diluted earnings per share ($)        0.67      1.35      1.38      1.25
    Net interest margin on earning
     assets (%)                           1.64      1.78      1.84      1.78
    Effective income tax rate (%)         (7.8)     14.1      21.4      20.1
    Canadian/U.S. dollar exchange
     rate (average)                       1.16      1.12      1.12      1.14

    Net income:
      P&C Canada                           297       277       350       267
      P&C U.S.                              29        24        32        27
    -------------------------------------------------------------------------
    Personal and Commercial Banking        326       301       382       294
    Private Client Group                    91        80        80        94
    BMO Capital Markets                    (20)      185       201       245
    Corporate Services, including T&O      (49)      130        47        18
    -------------------------------------------------------------------------
    BMO Financial Group                    348       696       710       651
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    BMO's quarterly earning trends were reviewed in detail on pages 75 and 76
of the 2007 Annual Report. Readers are encouraged to refer to that review for
a more complete discussion of trends and factors affecting past quarterly
results including the modest impact of seasonal variations in results. The
above table outlines summary results for the second quarter of fiscal 2006
through the first quarter of fiscal 2008.
    Significant items have affected revenues in BMO Capital Markets. There
were commodities losses of $509 million, $171 million and $149 million in the
first through third quarters of 2007 with smaller losses of $24 million and
$12 million in the two most recent quarters, respectively, as the size and
risk of the portfolio was reduced. The fourth quarter of 2007 and first
quarter of 2008 reflected charges for certain trading activities and valuation
adjustments of $318 million and $488 million, respectively. Associated
performance-based compensation was lowered appreciably in the first and second
quarters of 2007. BMO Capital Markets other businesses that were not affected
by significant items performed very strongly over the course of 2007 but
market conditions have been softer in 2008.
    Personal and Commercial Banking has continued to benefit from strong
volume growth over 2007 and into 2008, with stable margins in Canada and
moderate expense growth. Customer and front-line staffing levels were
increased over the first half of 2007. P&C U.S. margin had been pressured in
2006 and early 2007 but stabilized in the latter part of 2007. In the first
quarter of 2008, P&C U.S. margins declined due to the competitive environment.
    Private Client group results have demonstrated fairly consistent growth
as capital markets were quite strong over the course of 2006 and 2007, with
revenue growth slowing in late 2007 and in 2008.
    Corporate Services results reflect restructuring charges as outlined in
the accompanying table and are impacted by increased provisions for credit
losses because of BMO's allocation of provisions on an expected loss basis. In
the first quarter of 2008, its results were also affected by reduced revenues.
    Provisions for credit losses have started to trend higher as economic
conditions have softened from the particularly favourable credit environment
of recent years. The decline in BMO's net interest margin over the last two
years has been largely due to strong asset growth in BMO Capital Markets,
which has lower net interest margin than other groups. The favourable
effective tax rates are in part due to losses being incurred in high tax-rate
jurisdictions and higher income earned in low-rate jurisdictions. The U.S.
dollar has weakened over the course of the past two years but was more stable
in the first quarter of 2008, trading at close to parity with the Canadian
dollar. A weaker U.S. dollar lowers the translated values of BMO's U.S.
dollar-denominated revenues and expenses.

    Balance Sheet

    Total assets of $376.8 billion increased $10.3 billion from October 31,
2007 as a stronger U.S. dollar increased the translated value of U.S.
denominated assets by $22.2 billion. Excluding the effect of the stronger U.S.
dollar, total assets decreased by $11.9 billion. The $10.3 billion increase on
a Canadian dollar basis primarily reflects growth in cash resources
($3.2 billion), net loans and acceptances ($10.7 billion) and other assets
($5.1 billion), partially offset by a decrease in securities ($8.8 billion).
    The $3.2 billion increase in cash resources was largely attributable to
higher deposit balances.
    The $10.7 billion increase in net loans and acceptances was largely due
to a $5.8 billion increase in securities borrowed or purchased under resale
agreements due to greater customer demand. Net loans to businesses and
governments and related acceptances increased $2.8 billion due to growth in
the corporate loans portfolio, while consumer instalment and other personal
loans increased $1.3 billion and residential mortgages increased by
$0.8 billion.
    Other assets increased by $5.1 billion primarily due to a $4.3 billion
increase in derivative financial assets related to the interest rate, equity
and credit derivatives businesses, partially offset by a decrease in foreign
exchange and commodity contracts.
    The $8.8 billion decrease in securities was primarily attributable to
lower trading securities held in BMO Capital Markets in respect derivatives
trading in support of our businesses and lower equity valuations due to market
conditions.
    Liabilities and shareholders' equity increased $10.3 billion from
October 31, 2007 but decreased $11.9 billion excluding the effects of the
stronger U.S. dollar. The increase on a Canadian dollar basis primarily
reflects growth in deposits ($10.9 billion) and securities sold but not yet
purchased ($3.4 billion), partially offset by a decrease in securities lent or
sold under repurchase agreements ($2.9 billion), lower derivative financial
liabilities ($0.8 billion) and lower acceptances ($0.8 billion).
    Deposits by banks, which account for 14% or $35.0 billion of total
deposits, increased $0.9 billion and were used to fund the increase in cash
resources. Deposits by businesses and governments, which account for 52% or
$125.3 billion of total deposits, increased $3.6 billion and were used to fund
growth in cash and loans. Deposits from individuals, which account for the
remaining 34% or $82.6 billion of total deposits, increased $6.4 billion and
were used to fund growth in loans.
    The net increase in securities lent or sold under repurchase agreements
and securities sold but not yet purchased were used in trading activities.
    Contractual obligations by year of maturity were outlined in Table 24 on
page 89 of BMO's 2007 Annual Report. There have been no material changes to
contractual obligations that are outside the ordinary course of our business.

    Capital Management

    Effective November 1, 2007, a new regulatory capital management framework
was implemented in Canada. The new framework, Basel II, replaced Basel I, the
framework utilized for the past 20 years.
    Basel II is an important step in the alignment of regulatory and economic
capital requirements. It represents an improvement over Basel I in that it
establishes regulatory capital requirements that are more sensitive to a
bank's risk profile. The Office of the Superintendent of Financial
Institutions (OSFI), our regulator, approved BMO's application to apply the
Advanced Internal Ratings Based (AIRB) approach for credit risk on our
portfolio and the Standardized Approach for measuring Operational Risk. We
were granted a waiver to apply the Standardized Approach for determining the
credit risk-weighted assets of our subsidiary Harris Bankcorp, Inc.
    The AIRB approach is the most advanced of the approaches to measuring
credit risk capital under Basel II. It utilizes more sophisticated techniques
to measure risk-weighted assets at the borrower level based on sound risk
management principles, including consideration of estimates of the probability
of default, the likely loss given a default, exposure at time of default, term
to maturity and the type of Basel Asset Class exposure. These risk parameters
are determined using historical portfolio data supplemented by benchmarking,
and are updated periodically. The validation procedures related to these
parameters are currently in place and continue to be enhanced in order to
appropriately quantify and differentiate risks to ensure that they reflect
changes in economic and credit conditions. These validation processes are
subjected to regulatory review and approval. Basel I had utilized an approach
where risk-weighted assets were determined primarily based on balance sheet
volumes as opposed to credit quality.
    Under the Standardized Approach, Operational Risk capital requirements
are determined by the size and type of our lines of business. Gross income as
defined under Basel II serves as a proxy for the size of the business and an
indicator of operational risk. Gross income is segmented into eight regulatory
business lines by business type, and multiplied by a corresponding factor
prescribed by the Basel II framework to determine Operational Risk capital.
    The methodology for determining risk-weighted assets for Market Risk did
not change materially between Basel I and Basel II.
    Basel II introduces new deductions from capital not contemplated under
Basel I, the most notable of which is the requirement to net expected credit
losses calculated for AIRB portfolios with the corresponding sum of the
specific and general allowance, with the differential being either a deduction
from capital or an increase in capital.
    Basel II is discussed further on pages 66 to 67 of BMO's 2007 Annual
Report.
    At January 31, 2008, BMO's Tier 1 Capital Ratio was 9.48%, with risk-
weighted assets of $179.5 billion and Tier 1 Capital of $17.0 billion. The
ratio remains strong and is well above our minimum target of 8.0%. BMO's Total
Capital Ratio was 11.26%.
    As a result of the implementation of Basel II in the first quarter,
measures of risk-weighted assets, capital and capital ratios are not
comparable to those measures at October 31, 2007. On a Basel I basis, at
January 31, 2008 the Tier 1 Capital Ratio was 9.05% and the Total Capital
Ratio was 11.09%. At the end of 2007, the Tier 1 Capital Ratio was 9.51% and
the Total Capital Ratio was 11.74% as determined under Basel I.
    During the quarter, 844,000 shares were issued due to the exercise of
stock options, share exchanges, and the dividend reinvestment plan. We did not
repurchase any Bank of Montreal common shares under our common share
repurchase program during the quarter. Our share repurchase program is
primarily used, over time, to offset the impact of dilution caused by issuing
shares through the exercise of stock options, share exchanges, and the
dividend reinvestment plan. BMO repurchased 2.2 million more shares than were
issued in fiscal 2007.
    On March 4, 2008, BMO's Board of Directors declared a quarterly dividend
payable to common shareholders of $0.70 per share, up $0.02 from a year ago
and unchanged from the fourth quarter.

    
    Outstanding Shares and Securities Convertible into Common Shares

                                                         Number of shares or
    As of February 27, 2008                           Canadian dollar amount
    -------------------------------------------------------------------------
    Common shares                                                499,423,000
    Class B Preferred Shares
      Series 5                                                $  200,000,000
      Series 13                                               $  350,000,000
      Series 14                                               $  250,000,000
    Convertible into common shares:
    Class B Preferred Shares
      Series 6                                                $  250,000,000
      Series 10                                               $  396,000,000
    Stock options
      - vested                                                    15,866,000
      - non-vested                                                 5,735,000
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Details on share capital are outlined in Notes 21 and 22 to the audited
    financial statements on pages 121 and 122 and the table on page 58 in the
    Annual MD&A included in the 2007 Annual Report.
    

    Eligible Dividends Designation

    For the purposes of the Income Tax Act (Canada) and any similar
provincial and territorial legislation, BMO designates all dividends paid on
both its common and preferred shares in the 2006 calendar year, and all
dividends (including deemed dividends) paid thereafter, as "eligible
dividends" unless BMO indicates otherwise.

    Credit Rating

    BMO's senior debt credit ratings remain unchanged with a stable outlook.
Each of the rating agencies affirmed the ratings following BMO's February 19th
announcement of expected charges in the quarter. All four ratings are
indicative of high-grade, high-quality issues. They remain: Dominion Bond
Rating Service (AA); Fitch (AA-); Moody's (Aa1); and Standard & Poor's (A+).

    Transactions with Related Parties

    In the ordinary course of business, we provide banking services to our
directors and executives and their affiliated entities, joint ventures and
equity-accounted investees on the same terms that we offer our customers. A
select suite of customer loan and mortgage products is offered to our
employees at rates normally accorded to our preferred customers. We also offer
employees a fee-based subsidy on annual credit card fees.
    Stock options and deferred share units granted to directors were
discussed in Note 27 of the audited consolidated financial statements on page
132 of the 2007 Annual Report.
    Preferred rate loan agreements for executives, relating to transfers we
initiate, are discussed in Note 27 of the audited consolidated financial
statements on page 132 of the 2007 Annual Report.

    Off-Balance-Sheet Arrangements

    BMO enters into a number of off-balance sheet arrangements in the normal
course of operations. The most significant off-balance sheet arrangements that
we enter into are credit instruments and VIEs, which are described on pages 59
and 60 of the 2007 Annual Report and in Note 5 to the attached unaudited
consolidated financial statements. See the Market Environment section for
changes to our off-balance-sheet arrangements during the three months ended
January 31, 2008.

    Accounting Policies and Critical Accounting Estimates

    The notes to BMO's October 31, 2007 audited consolidated financial
statements outline our significant accounting policies. There were no changes
to our accounting policies in the first quarter of 2008.
    Pages 61 to 63 of the 2007 Annual Report contain a discussion of certain
accounting estimates that are considered particularly important as they
require management to make significant judgments, some of which relate to
matters that are inherently uncertain. Readers are encouraged to refer to the
Annual Report to review that discussion.

    Accounting Changes

    Financial Instruments Disclosure and Presentation

    On November 1, 2007, we adopted new CICA Handbook requirements regarding
the disclosure and presentation of financial instruments. The new requirements
are intended to enhance financial statement users' ability to evaluate the
significance of financial instruments to an enterprise and the exposures
inherent within these instruments, and to understand the entity's ongoing
management of such exposures. For new disclosures, refer to Notes 4 and 14 in
the attached unaudited interim consolidated financial statements.

    Capital Disclosures

    On November 1, 2007, we adopted the CICA's new handbook section
establishing requirements to disclose both qualitative and quantitative
information on capital management. This disclosure requirement is intended to
enhance a reader's evaluation of an entity's objectives, policies and
procedures related to ongoing capital management. For new disclosures, refer
to Note 13 in the attached unaudited interim consolidated financial
statements.

    
    Review of Operating Groups' Performance

    Operating Groups' Summary Income Statements and Statistics for Q1-2008

                                                 Q1-2008
                              -----------------------------------------------
                                                         Corporate
    (Canadian $ in millions,                             including     Total
     except as noted)            P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income
     (teb)(1)                    960       155       303      (204)    1,214
    Non-interest revenue         466       364       (37)       19       812
    -------------------------------------------------------------------------
    Total revenue (teb)(1)     1,426       519       266      (185)    2,026
    Provision for (recovery
     of) credit losses            92         1        29       108       230
    Non-interest expense         861       368       383         2     1,614
    Restructuring charge           -         -         -         -         -
    -------------------------------------------------------------------------
    Total non-interest expense   861       368       383         2     1,614
    Income before income taxes
     and non-controlling
     interest in subsidiaries    473       150      (146)     (295)      182
    Income taxes (teb)(1)        145        52      (112)     (176)      (91)
    Non-controlling interest
     in subsidiaries               -         -         -        18        18
    -------------------------------------------------------------------------
    Net income Q1-2008           328        98       (34)     (137)      255
    -------------------------------------------------------------------------
    Net income Q4-2007           320       103        46       (17)      452
    -------------------------------------------------------------------------
    Net income Q1-2007           326        91       (20)      (49)      348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          159        70      (183)     (173)     (127)
    Return on equity           20.2%     37.2%     (3.4%)       nm      6.7%
    Cash return on equity      20.6%     37.6%     (3.4%)       nm      6.9%
    Operating leverage         (3.1%)     1.4%     12.4%        nm      1.5%
    Cash operating leverage    (3.2%)     1.3%     12.4%        nm      1.5%
    Productivity ratio (teb)   60.3%     71.0%    144.2%        nm     79.7%
    Cash productivity
     ratio (teb)               59.7%     70.8%    144.1%        nm     79.2%
    Net interest margin on
     earning assets (teb)      2.70%     8.67%     0.65%        nm     1.45%
    Average common equity      6,244     1,031     5,251     1,700    14,226
    Average earning assets
     ($ billions)              141.7       7.1     186.3      (2.3)    332.8
    Full-time equivalent
     staff                    20,482     4,394     2,418     8,960    36,254
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful

    (1) Operating group revenues and income taxes are stated on a taxable
        equivalent basis (teb). The group teb adjustments are offset in
        Corporate, and Total BMO revenue and income taxes are stated on a
        GAAP basis. See the Non-GAAP Measures section.
    

    The following sections review the financial results of each of our
operating segments and operating groups for the first quarter of 2008.
    Periodically, certain business lines and units within the business lines
are transferred between client groups to more closely align BMO's
organizational structure and its strategic priorities. All comparative figures
are reclassified to reflect these transfers.
    Note 17 to the attached unaudited interim consolidated financial
statements outlines how income statement items requiring allocation are
distributed among the operating groups, including the allocation of the
provision for credit losses. Corporate Services is generally charged (or
credited) with differences between the periodic provisions for credit losses
charged to the client groups under our expected loss provisioning methodology
and the periodic provisions required under GAAP.


    
    Personal and Commercial Banking

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    960        14        2%        18        2%
    Non-interest revenue         466        18        4%        76       20%
    -------------------------------------------------------------------------
    Total revenue (teb)        1,426        32        2%        94        7%
    Provision for credit
     losses                       92         3        3%         3        4%
    Non-interest expense         861        45        5%        10        1%
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries    473       (16)      (3%)       81       20%
    Income taxes (teb)           145       (18)     (11%)       73      100%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   328         2        1%         8        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            7        (1)     (11%)       (1)      (6%)
    -------------------------------------------------------------------------
    Cash net income              335         1         -         7        2%
    -------------------------------------------------------------------------

    Return on equity           20.2%               (0.1%)               2.1%
    Cash return on equity      20.6%               (0.2%)               2.0%
    Operating leverage         (3.1%)                 nm                  nm
    Cash operating leverage    (3.2%)                 nm                  nm
    Productivity ratio (teb)   60.3%                1.7%               (3.5%)
    Cash productivity
     ratio (teb)               59.7%                1.8%               (3.4%)
    Net interest margin on
     earning assets (teb)      2.70%              (0.08%)             (0.01%)
    Average earning assets   141,680     6,848        5%     3,915        3%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful


    Personal and Commercial Banking (P&C) represents the sum of our two retail
and business banking operating segments, Personal and Commercial Banking
Canada (P&C Canada) and Personal and Commercial Banking U.S. (P&C U.S.). These
operating segments are reviewed separately in the sections that follow.

    Personal and Commercial Banking Canada (P&C Canada)

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    793        33        4%        23        3%
    Non-interest revenue         418        12        3%        74       22%
    -------------------------------------------------------------------------
    Total revenue (teb)        1,211        45        4%        97        9%
    Provision for credit
     losses                       83         3        4%         2        4%
    Non-interest expense         695        53        8%         5        1%
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries    433       (11)      (2%)       90       26%
    Income taxes (teb)           131       (16)     (11%)       75     +100%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   302         5        2%        15        5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            -        (2)     (47%)       (3)     (36%)
    -------------------------------------------------------------------------
    Cash net income              302         3        1%        12        4%
    -------------------------------------------------------------------------

    Personal, Insurance &
     Other revenue               609        19        3%        12        2%
    Commercial revenue           349        12        4%        14        4%
    Cards revenue                253        14        6%        71       40%
    Operating leverage         (4.3%)                 nm                  nm
    Cash operating leverage    (4.5%)                 nm                  nm
    Productivity ratio (teb)   57.4%                2.3%               (4.5%)
    Cash productivity
     ratio (teb)               57.3%                2.4%               (4.4%)
    Net interest margin on
     earning assets (teb)      2.64%              (0.03%)              0.04%
    Average earning assets   119,254     6,100        5%     1,929        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    


    Q1 2008 vs Q1 2007

    Net income increased $5 million or 1.7%.
    Revenue rose $45 million or 3.8% driven by volume growth across most
products. Net interest margin fell by 3 basis points with increased cost of
funds and ongoing competitive pressures, partially offset by product mix
improvement as growth was proportionately greater in high-spread products.
While short-term interest rate spreads returned to historic average levels
near the end of the quarter, we continue to face margin pressure due to higher
longer-term funding costs in the current market.
    In the personal banking segment, revenue rose $19 million with growth in
most products and higher insurance revenue from favourable claims experience.
Personal loan growth from the first quarter of 2007 was a strong 16.6% with
increased market share of 80 basis points from the prior year and 21 basis
points from the fourth quarter. In the current quarter, we saw improved
mortgage growth and spread, as branch-originated mortgage growth outpaced the
impact of our exit from third-party and broker mortgage channels. Mortgage
market share has declined 143 basis points from a year ago and 26 basis points
from the fourth quarter as third-party and broker mortgages continue to run
off.
    Personal deposits grew relative to the fourth quarter and market share
increased 15 basis points. Personal deposits also increased 0.4% from the
first quarter of 2007, although market share declined 32 basis points. We
continue to focus on better serving the customer and are leveraging our Air
Miles on debit initiative to drive growth in accounts and balances.
    Within the commercial banking segment, revenue increased $12 million as
loans grew a strong 11.1% from the first quarter of 2007. We continue to view
this as an area of competitive strength. BMO ranks second in Canadian business
banking market share at 19.37%. Our objective is to be the market leader and
this quarter we increased market share by 80 basis points from the prior year
and 20 basis points from the fourth quarter. In the $1 to $5 million segment,
there was loan growth of 9.9% and market share growth of 100 basis points
relative to the first quarter of 2007 and 29 basis points relative to the
fourth quarter.
    Cards and payments service revenues improved $14 million as volumes and
transactions grew.
    Non-interest expense increased $53 million or 8.1% due largely to
increased employee-related expenses and initiative spending. Going forward, we
intend to maintain our investments in key strategic initiatives and, mindful
of interest rate pressures, continue to manage our tactical spending. Cash
operating leverage was (4.5%) as expense growth exceeded revenue growth.
    There was growth in average loans and acceptances which, including
securitized loans, increased $7.5 billion or 6.2% from the first quarter of
2007 and $1.9 billion or 1.5% from the fourth quarter. Personal and commercial
deposits grew $2.4 billion or 5.2% from a year ago and increased $1.0 billion
or 2.1% from the fourth quarter.

    Q1 2008 vs Q4 2007

    Net income increased $15 million or 4.6%. The prior quarter included
three notable items which increased net income by $6 million: A $107 million
($83 million after-tax) gain on the sale of MasterCard International Inc.
shares as we chose to realize on the value inherent in our investment, and a
$43 million recovery of prior years income taxes; less a $185 million
($120 million after-tax) adjustment to increase the liability for future
customer redemptions related to our credit card loyalty rewards program. In
order to minimize future volatility in earnings, we continue to explore
options to transfer the liability and change the cost structure going forward
to eliminate our exposure to changing redemption patterns.
    Revenue increased $97 million or 8.7%, and by $19 million or 1.6%
excluding the $78 million impact of the notable items above. The increase was
primarily due to volume growth, higher net interest margins and higher revenue
from insurance and securitization, partially offset by lower revenue from
cards and term investment products. Net interest margin increased 4 basis
points due to lower funding costs, positive mix, higher commercial loan fees
and higher cards spread as revolving card balances increased. These increases
were partially offset by lower mortgage refinancing fees and competitive
pressures on commercial deposits.
    Non-interest expense increased $5 million or 0.8% due largely to higher
allocated costs and higher employee-related expenses including annual stock-
based compensation costs for employees eligible to retire, partially offset by
lower initiative spending.

    
    Personal and Commercial Banking U.S. (P&C U.S.)

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    167       (19)     (10%)       (5)      (3%)
    Non-interest revenue          48         6       14%         2        4%
    -------------------------------------------------------------------------
    Total revenue (teb)          215       (13)      (6%)       (3)      (1%)
    Provision for credit
     losses                        9         -         -         1        5%
    Non-interest expense         166        (8)      (5%)        5        3%
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries     40        (5)     (10%)       (9)     (18%)
    Income taxes (teb)            14        (2)     (10%)       (2)     (18%)
    Non-controlling interest
     in subsidiaries               -         -         -         -        -
    -------------------------------------------------------------------------
    Net income                    26        (3)     (10%)       (7)     (18%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            7         1        1%         2        2%
    -------------------------------------------------------------------------
    Cash net income               33        (2)      (8%)       (5)     (15%)
    -------------------------------------------------------------------------

    Operating leverage         (0.7%)                 nm                  nm
    Cash operating leverage    (0.4%)                 nm                  nm
    Productivity ratio (teb)   77.0%                0.6%                3.6%
    Cash productivity
     ratio (teb)               73.4%                0.3%                3.4%
    Net interest margin on
     earning assets (teb)      2.97%              (0.43%)             (0.37%)
    Average earning assets    22,426       748        3%     1,986       10%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Net interest income (teb)    167         7        5%        (6)      (3%)
    Non-interest revenue          48        12       33%         1        3%
    -------------------------------------------------------------------------
    Total revenue (teb)          215        19       10%        (5)      (2%)
    Non-interest expense         166        16       11%         6        3%
    Net Income                    26         1        5%        (7)     (18%)
    Average assets            24,246     4,012       20%     2,052        9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    


    Q1 2008 vs Q1 2007

    Net income declined $3 million or 9.5%. On a U.S. dollar basis, net
income rose $1 million or 5.2%.
    Revenue rose US$19 million or 9.9%. The acquisition of First National
Bank & Trust (FNBT) represented US$12 million of the growth. Personal and
commercial loans grew US$1.9 billion or 10.5%, and 7.1% excluding FNBT.
Deposits grew US$1.2 billion or 7.6%, and 1.8% excluding FNBT, in a highly
competitive environment. The impact of volume growth and increases in fee and
other non-interest revenue was partially offset by a decline in net interest
margin. About 22 basis points of the decline in net interest margin was due to
the transfer of a small client-driven investment portfolio from Corporate
Services. The remaining 21 basis point decline was due to competitive
pressures on pricing and customer preferences shifting from higher-spread to
lower-spread loan and deposit products and to higher levels of non-accrual
loans.
    Non-interest expense increased US$16 million or 11%. Excluding FNBT,
expenses increased US$8 million. The increase was attributable to initiative
spending, new branches and costs associated with volume increases. Acquisition
integration costs were comparable in both periods. Cash operating leverage was
(0.4%).

    Q1 2008 vs Q4 2007

    Net income fell by $7 million or 18%, on both a Canadian and U.S. dollar
basis, from a very strong fourth quarter, as anticipated.
    Revenue decreased US$5 million or 1.5%. Loan growth continued, increasing
US$0.2 billion or 1.2%, while deposit growth was nominal. Net interest margin
was lowered by 22 basis points by the aforementioned portfolio transfer. The
remaining 15 basis point decline in net interest margin resulted from the same
factors previously discussed and its impact more than offset the benefits of
increased volumes.
    Non-interest expense rose US$6 million or 3.4% due to initiative spending
and costs associated with higher volume. Our Retail Net Promoter Score, a
measure of the strength of customer loyalty, remained consistent with the
prior quarter.

    
    Private Client Group (PCG)

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    155         4        3%         1         -
    Non-interest revenue         364         9        3%        10        3%
    -------------------------------------------------------------------------
    Total revenue (teb)          519        13        3%        11        2%
    Provision for credit
     losses                        1         -         -         -         -
    Non-interest expense         368         4        1%        12        3%
    -------------------------------------------------------------------------
    Income before income taxes   150         9        6%        (1)      (2%)
    Income taxes (teb)            52         2        4%         4        3%
    -------------------------------------------------------------------------
    Net income                    98         7        8%        (5)      (5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            1         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income               99         7        7%        (5)      (5%)
    -------------------------------------------------------------------------

    Return on equity           37.2%                5.7%                2.5%
    Cash return on equity      37.6%                5.7%                2.6%
    Operating leverage          1.4%                  nm                  nm
    Cash operating leverage     1.3%                  nm                  nm
    Productivity ratio (teb)   71.0%               (1.0%)               1.1%
    Cash productivity
     ratio (teb)               70.8%               (0.9%)               1.2%
    Net interest margin on
     earning assets (teb)      8.67%              (1.08%)             (0.45%)
    Average earning assets     7,126       998       16%       356        5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)           62         3        6%         -         -
    Non-interest expense          59        (1)      (2%)       (7)     (11%)
    Net income                     2         3     +100%         5     +100%
    Cash net income                3         3     +100%         5     +100%
    Average assets             2,260       213       10%        50        2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    


    Q1 2008 vs Q1 2007

    Net income increased $7 million or 7.6%.
    Revenue increased $13 million and 2.7% or $25 million and 5.0% excluding
the impact of the weaker U.S. dollar, despite softer market conditions. Net
interest income increased, primarily due to higher deposit balances in the
brokerage businesses. This was partially offset by lower spread in term
investment products, which was impacted by the competitive environment. Non-
interest revenue increased, primarily due to higher trust and investment
revenue in North American Private Banking. This was partially offset by lower
commission revenue in the brokerage businesses.
    Non-interest expense increased $4 million and 1.3% or $14 million and
3.9% excluding the benefit of the weaker U.S. dollar, primarily due to
continued investment in our client-facing sales force and supporting
infrastructure. This was partially offset by lower revenue-based costs,
primarily related to lower commission revenue in the brokerage businesses.
    Effective December 1, 2007, BMO Mutual Funds began absorbing the
operating expenses of its funds in return for a fixed administration fee. This
had the impact of increasing both non-interest revenue and expenses in the
quarter.
    Cash operating leverage was 1.3%.
    The Group's $283 billion of assets under management and administration
and term deposits were affected by softer market conditions. Assets increased
$11 billion or 4.0% year-over-year, excluding the impact of foreign exchange
and the transfer of our U.S. Institutional Trust and Custody business to P&C
U.S. in the third quarter of 2007.

    Q1 2008 vs Q4 2007

    Net income decreased $5 million or 5.1%.
    Revenue increased $11 million or 1.7%, in a difficult market environment,
primarily due to higher revenue in Full-Service Investing and higher trust &
investment revenue in North American Private Banking. This was partially
offset by lower spread in term investment products.
    Non-interest expense increased $12 million or 3.4%, primarily as a result
of expensing in the current quarter the annual stock-based compensation costs
for employees eligible to retire, and higher revenue-based costs. The Group
continues to focus on managing expenses in line with the current market
environment.
    The new fixed administration fee increased both non-interest revenue and
expenses in the quarter.

    
    BMO Capital Markets

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    303        71       30%        70       30%
    Non-interest revenue         (37)      (12)     (49%)     (225)   (+100%)
    -------------------------------------------------------------------------
    Total revenue (teb)          266        59       28%      (155)     (37%)
    Provision for credit
     losses                       29         9       46%        10       55%
    Non-interest expense         383        53       16%       (16)      (4%)
    -------------------------------------------------------------------------
    Income (loss) before
     income taxes               (146)       (3)      (2%)     (149)   (+100%)
    Income taxes (teb)          (112)       11        9%       (69)   (+100%)
    -------------------------------------------------------------------------
    Net income (loss)            (34)      (14)     (74%)      (80)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            -         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income              (34)      (14)     (74%)      (80)   (+100%)
    -------------------------------------------------------------------------

    Trading Products revenue     (36)      141       80%       (34)   (+100%)
    Investment and Corporate
     Banking and Other revenue   302       (82)     (21%)     (121)     (29%)
    Return on equity           (3.4%)              (1.1%)              (6.3%)
    Cash return on equity      (3.4%)              (1.1%)              (6.3%)
    Operating leverage         12.4%                  nm                  nm
    Cash operating leverage    12.4%                  nm                  nm
    Productivity ratio (teb)  144.2%              (15.4%)              49.2%
    Cash productivity
     ratio (teb)              144.1%              (15.4%)              49.2%
    Net interest margin on
     earning assets (teb)      0.65%               0.03%               0.13%
    Average earning assets   186,319    37,066       25%     8,219        5%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      294       464     +100%       (63)     (18%)
    Non-interest expense         208        72       54%        18        9%
    Net Income (loss)             56       219     +100%       (58)     (51%)
    Average assets            93,478    27,071       41%    12,051       15%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    


    Q1 2008 vs Q1 2007

    BMO Capital Markets incurred a net loss of $34 million for the quarter,
compared with a net loss of $20 million last year. Excluding significant
items, which are detailed on page 7, net income increased $73 million or 33%
to $290 million, in large part due to reduced performance-based compensation.
    Revenue rose $59 million to $266 million. Excluding significant items,
revenue increased $38 million or 5.2% to $754 million. There was favourable
performance in many areas including interest-rate-sensitive businesses,
commission revenues and our cash management business. There were consistent
levels of merger and acquisition and debt underwriting revenues and higher
foreign exchange trading revenue. In contrast, there were lower lending fees
and equity underwriting revenue.
    Trading Products revenue increased $141 million or 80%, and increased
$79 million or 24% excluding the Trading Products related significant items in
both periods.
    Investment and Corporate Banking and Other revenue decreased by
$82 million or 21%, and by $41 million or 11% excluding significant items in
the current quarter.
    Net interest income improved from a year ago due to strong performance in
our interest-rate-sensitive businesses and higher corporate banking assets.
Net interest margin improved 3 basis points from the prior year.
    Non-interest expense increased $53 million or 16%, due to higher
allocated costs and lower performance-based compensation recorded in the prior
year, which included an $87 million reduction relating to significant items in
that period. Excluding the significant expense item in the prior year, non-
interest expense decreased $34 million or 8.3%. The Group's cash operating
leverage was 12.4%, or 13.5% excluding significant items.
    The relatively high income tax recovery on the loss incurred in the
quarter is due to losses being incurred in high tax-rate jurisdictions and
income earned in low tax-rate jurisdictions.

    Q1 2008 vs Q4 2007

    Net income decreased $80 million. Excluding significant items, net income
rose $17 million or 6.0%.
    Revenue fell $155 million or 37%. Excluding significant items, revenue
decreased $9 million or 1.2% to $754 million. Market conditions continue to be
challenging, resulting in lower merger and acquisition fees, debt underwriting
activity and lending fees. There were higher revenues from our interest-rate-
sensitive businesses, higher trading revenues excluding the significant items,
higher equity underwriting fees and higher commission revenues.
    Non-interest expense decreased $16 million or 4.1% due to lower computer
costs and professional fees.
    Excluding significant items, the cash operating leverage in the first
quarter of 2008 and the fourth quarter of 2007 would have been 13.5% and
19.0%, respectively.

    
    Corporate Services, Including Technology and Operations

                                                Increase            Increase
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q1-2008         vs. Q1-2007         vs. Q4-2007
    -------------------------------------------------------------------------
    Net interest income (teb)   (204)      (71)     (54%)      (71)     (51%)
    Non-interest revenue          19       (73)     (79%)      (53)     (74%)
    -------------------------------------------------------------------------
    Total revenue (teb)         (185)     (144)   (+100%)     (124)   (+100%)
    Provision for (recovery
     of) credit losses           108       166     +100%        66     +100%
    Non-interest expense           2       (26)     (93%)      (23)     (92%)
    Restructuring charge           -      (135)    (100%)      (24)    (100%)
    -------------------------------------------------------------------------
    Total non-interest expense     2      (161)     (99%)      (47)     (96%)
    Income (loss) before income
     taxes and non-controlling
     interest in subsidiaries   (295)     (149)   (+100%)     (143)     (90%)
    Income taxes (recovery)
     (teb)                      (176)      (60)     (53%)      (22)     (14%)
    Non-controlling interest
     in subsidiaries              18        (1)      (4%)       (1)      (4%)
    -------------------------------------------------------------------------
    Net income (loss)           (137)      (88)   (+100%)     (120)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      (68)      (46)   (+100%)      (31)     (99%)
    Provision for credit
     losses                      119       139     +100%        75     +100%
    Non-interest expense         (19)      (15)   (+100%)      (11)   (+100%)
    Restructuring charge           -       (18)   (+100%)       (8)   (+100%)
    -------------------------------------------------------------------------
    Total non-interest expense   (19)      (33)   (+100%)      (19)   (+100%)
    Income taxes (recovery)
     (teb)                       (72)      (62)   (+100%)      (38)   (+100%)
    Net income (loss)           (101)      (90)   (+100%)      (50)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    


    Corporate Services

    Corporate Services includes the corporate units that provide expertise
and governance support to BMO Financial Group in areas such as strategic
planning, law, finance, internal audit, risk management, corporate
communications, corporate marketing, human resources and learning. Operating
results include revenues and expenses associated with certain securitization
activities, the hedging of foreign-source earnings, and activities related to
the management of certain balance sheet positions and BMO's overall asset-
liability structure.
    Corporate Services is generally charged (or credited) with differences
between the periodic provisions for credit losses charged to the client groups
under our expected loss provisioning methodology and the required periodic
provisions charged by the consolidated organization under GAAP.

    Technology and Operations

    Technology and Operations (T&O) manages, maintains and provides
governance over information technology, operations services, real estate and
sourcing for BMO Financial Group. T&O focuses on enterprise-wide priorities
that improve service quality and efficiency to deliver an excellent customer
experience.

    Financial Performance Review

    Technology and Operations operating results are included with Corporate
Services for reporting purposes. Costs of T&O's services are transferred to
the client groups (P&C, PCG and BMO Capital Markets) and only relatively minor
amounts are retained within T&O. As such, results in this section largely
reflect the other corporate units outlined above.
    There was a net loss of $137 million in the quarter compared with a
$49 million loss in the prior year. Results in both periods were affected by
significant items, which are outlined on page 7. Excluding significant items,
there was a net loss of $99 million in the current quarter, compared with net
income of $39 million in the first quarter a year ago. The decrease was
primarily attributable to higher specific provisions for credit losses and
lower revenues, offset in part by reduced expenses. Revenue decreased
primarily due to lower earnings from certain subsidiaries related to a number
of items and lower hedging gains, including gains on foreign exchange, as the
prior year results included a large mark-to-market gain. There were also a
large number of small items negatively impacting revenues in the current
quarter. The expense decrease was primarily due to higher recoveries of
previously-unallocated expenses.
    There was a $17 million net loss in the fourth quarter of 2007. Excluding
significant items in both periods, net income declined $130 million from the
fourth quarter of 2007 due to higher specific provisions for credit losses and
lower revenues, mitigated in part by lower expenses. Revenue decreased
primarily due to lower earnings from certain subsidiaries related to a number
of items, lower foreign exchange hedging gains, lower interest revenue on
income tax refunds and reassessments, and a large number of small items
negatively impacting revenues in the current quarter. Expenses decreased
primarily due to higher recoveries of previously-unallocated expenses.


    INVESTOR AND MEDIA PRESENTATION

    Investor Presentation Materials

    Interested parties are invited to visit our web site at
www.bmo.com/investorrelations to review this quarterly news release,
presentation materials and a supplementary financial information package
online. Copies of these documents are also available at BMO Financial Group's
offices at 100 King Street West, 18th Floor, 1 First Canadian Place, Toronto,
Ontario, M5X 1A1.

    Quarterly Conference Call and Webcast Presentations

    Interested parties are also invited to listen to our quarterly conference
call on Tuesday, March 4, 2008 at 2:00 p.m. (EST). At that time, senior BMO
executives will comment on results for the quarter and respond to questions
from the investor community. The call may be accessed by telephone at 416-695-
9753 (from within Toronto) or 1-888-789-0089 (toll-free outside Toronto). A
replay of the conference call can be accessed until Monday, May 26, 2008 by
calling 416-695-5800 (from within Toronto) or 1-800-408-3053 (toll-free
outside Toronto) and entering passcode 648299.
    A live webcast of the call can be accessed on our web site at
www.bmo.com/investorrelations. A replay can be accessed on the site until
Monday, May 26, 2008.

    Media Relations Contacts

    Ralph Marranca, Toronto, ralph.marranca@bmo.com, 416-867-3996
    Ronald Monet, Montreal, ronald.monet@bmo.com, 514-877-1873

    Investor Relations Contacts

    Viki Lazaris, Senior Vice-President, viki.lazaris@bmo.com,
    416-867-6656
    Steven Bonin, Director, steven.bonin@bmo.com, 416-867-5452
    Krista White, Senior Manager, krista.white@bmo.com, 416-867-7019

    Chief Financial Officer

    Tom Flynn, Executive Vice-President, Finance & Treasurer and Acting
    Chief Financial Officer
    tom.flynn@bmo.com, 416-867-4649

    Corporate Secretary

    Blair Morrison, Vice-President & Corporate Secretary
    corp.secretary@bmo.com, 416-867-6785

    
    -------------------------------------------------------------------------

    Shareholder Dividend Reinvestment    For other shareholder information,
    and Share Purchase Plan              please contact

    Average market price                 Bank of Montreal
    November 2007 $ 58.32                Shareholder Services
    December 2007 $ 55.99                Corporate Secretary's Department
    January 2008 $ 56.56                 One First Canadian Place, 19th Floor
                                         Toronto, Ontario M5X 1A1
    For dividend information, change     Telephone: (416) 867-6785
    in shareholder address or to         Fax: (416) 867-6793
    advise of duplicate mailings,        E-mail: corp.secretary@bmo.com
    please contact
                                         For further information on this
    Computershare Trust Company          report, please contact
    of Canada
    100 University Avenue, 9th Floor     Bank of Montreal
    Toronto, Ontario M5J 2Y1             Investor Relations Department
    Telephone: 1-800-340-5021 (Canada    P.O. Box 1, One First Canadian
    and the United States)               Place, 18th Floor
    Telephone: (514) 982-7800            Toronto, Ontario M5X 1A1
    (international)
    Fax: 1-888-453-0330 (Canada          To review financial results online,
    and the United States)               please visit our web site at
    Fax: (416) 263-9394                  www.bmo.com
    (international)
    E-mail: service@computershare.com

    -------------------------------------------------------------------------

    (R) Registered trade-mark of Bank of Montreal


    Financial Highlights

    (Unaudited)
    (Canadian $ in
     millions, except
     as noted)                     For the three months ended
    -------------------------------------------------------------------------
                                                                 Change from
                   January   October      July     April   January   January
                  31, 2008  31, 2007  31, 2007  30, 2007  31, 2007  31, 2007
    -------------------------------------------------------------------------
    Income
     Statement
     Highlights
    Total
     revenue     $   2,026 $   2,200 $   2,555 $   2,528 $   2,066     (2.0)%
    Provision for
     credit losses     230       151        91        59        52      +100
    Non-interest
     expense         1,614     1,655     1,659     1,614     1,673      (3.5)
    Net income         255       452       660       671       348     (26.8)
    -------------------------------------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share   $    0.47 $    0.87 $    1.28 $    1.29 $    0.67 $   (0.20)
    Diluted cash
     earnings per
     share(a)         0.49      0.89      1.30      1.31      0.68     (0.19)
    Dividends
     declared per
     share            0.70      0.70      0.68      0.68      0.65      0.05
    Book value
     per share       28.64     28.29     28.81     28.95     28.90     (0.26)
    Closing share
     price           56.75     63.00     66.59     69.46     70.01    (13.26)
    Total market
     value of
     common shares
     ($ billions)     28.3      31.4      33.2      34.7      35.1      (6.8)
    -------------------------------------------------------------------------
                                               As at
    -------------------------------------------------------------------------
                                                                 Change from
                   January   October      July     April   January   January
                  31, 2008  31, 2007  31, 2007  30, 2007  31, 2007  31, 2007
    -------------------------------------------------------------------------
    Balance Sheet
     Highlights
    Assets       $ 376,825 $ 366,524 $ 359,154 $ 356,527 $ 355,491       6.0%
    Net loans and
     acceptances   211,931   201,188   205,612   203,210   205,472       3.1
    Deposits       242,911   232,050   229,027   221,615   217,114      11.9
    Common
     shareholders'
     equity         14,304    14,102    14,374    14,475    14,472      (1.2)
    -------------------------------------------------------------------------
                               For the three months ended
    -------------------------------------------------------------------------
                   January   October      July     April   January
                  31, 2008  31, 2007  31, 2007  30, 2007  31, 2007
    -------------------------------------------------------------------------
    Primary
     Financial
     Measures(%)(b)
    Average annual
     five year total
     shareholder
     return           10.1      14.2      17.2      16.6      17.8
    Diluted
     earnings per
     share growth    (29.9)    (35.6)     (7.2)      3.2     (42.7)
    Diluted cash
     earnings per
     share growth(a) (27.9)    (35.0)     (7.1)      3.1     (42.9)
    Return on
     equity            6.7      12.2      18.0      18.3       9.2
    Cash return on
     equity(a)         6.9      12.5      18.2      18.5       9.5
    Net economic
     profit (NEP)
     growth(a)       (+100)    (78.1)    (19.8)     (4.2)    (+100)
    Operating
     leverage          1.5     (13.2)     (4.2)     (1.2)    (22.6)
    Cash operating
     leverage(a)       1.5     (13.2)     (4.2)     (1.1)    (22.6)
    Revenue growth    (2.0)    (10.6)     (0.6)      2.3     (16.7)
    Non-interest
     expense-to-
     revenue ratio    79.7      75.2      64.9      63.8      81.0
    Cash non-interest
     expense-to-
     revenue ratio(a) 79.2      74.7      64.5      63.3      80.4
    Provision for
     credit losses-
     to-average
     loans and
     acceptances
     (annualized)     0.42      0.29      0.18      0.12      0.10
    Gross impaired
     loans and
     acceptances-
     to-equity and
     allowance for
     credit losses    7.46      4.07      3.49      3.86      4.19
    Cash and
     securities-to-
     total assets
     ratio            30.7      33.1      31.0      28.6      28.4
    Tier 1 capital
     ratio - Basel II 9.48       n/a       n/a       n/a       n/a
    Tier 1 capital
     ratio - Basel I  9.05      9.51      9.29      9.67      9.76
    Credit rating
      Standard &
       Poor's            A+        A+        A+       AA-       AA-
      Moody's           Aa1       Aa1       Aa1       Aa1       Aa3
      Fitch             AA-       AA-       AA-       AA-       AA-
      DBRS               AA        AA        AA        AA        AA
    -------------------------------------------------------------------------
    Other Financial
     Ratios (%
     except as
     noted)(b)
    Twelve month
     total
     shareholder
     return          (15.6)     (5.8)      8.0      11.3       6.0
    Dividend yield    4.93      4.44      4.08      3.92      3.71
    Price-to-earnings
     ratio (times)    14.5      15.3      14.5      14.8      15.1
    Market-to-book
     value (times)    1.98      2.23      2.31      2.40      2.42
    Net economic
     profit
     ($ millions)(a)  (127)       71       280       289       (37)
    Return on
     average assets   0.26      0.48      0.72      0.77      0.40
    Net interest
     margin on
     average earning
     assets           1.45      1.47      1.61      1.65      1.64
    Non-interest
     revenue-to-
     total revenue    40.1      45.7      51.2      52.4      42.1
    Non-interest
     expense growth   (3.5)      2.6       3.6       3.5       5.9
    Cash non-interest
     expense growth(a)(3.5)      2.6       3.6       3.4       5.9
    Total capital
     ratio - Basel
     II              11.26       n/a       n/a       n/a       n/a
    Total capital
     ratio - Basel
     I               11.09     11.74     11.18     11.03     11.20
    Equity-to-assets
     ratio             4.1       4.2       4.3       4.3       4.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    All ratios in this report are based on unrounded numbers.
    (a) Refer to the "Non-GAAP Measures" section of Management's Discussion
        and Analysis for an explanation of cash results and net economic
        profit. Securities regulators require that companies caution readers
        that earnings and other measures adjusted to a basis other than
        generally accepted accounting principles (GAAP) do not have
        standardized meanings under GAAP and are unlikely to be comparable
        to similar measures used by other companies.
    (b) For the period ended, or as at, as appropriate.
    n/a - not applicable



    Consolidated Financial Statements

    Consolidated Statement of Income

    (Unaudited)
    (Canadian $ in
     millions, except
     as noted)                         For the three months ended
    -------------------------------------------------------------------------
                         January    October       July      April    January
                        31, 2008   31, 2007   31, 2007   30, 2007   31, 2007
    -------------------------------------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans              $   2,984  $   2,971  $   2,935  $   2,839  $   2,812
    Securities               948        910        786        731        726
    Deposits with banks      315        387        291        230        220
    -------------------------------------------------------------------------
                           4,247      4,268      4,012      3,800      3,758
    -------------------------------------------------------------------------
    Interest Expense
    Deposits               2,297      2,328      1,968      1,833      1,776
    Subordinated debt         49         51         46         40         43
    Preferred shares
     and capital trust
     securities               23         24         24         26         25
    Other liabilities        664        669        727        697        718
    -------------------------------------------------------------------------
                           3,033      3,072      2,765      2,596      2,562
    -------------------------------------------------------------------------
    Net Interest Income    1,214      1,196      1,247      1,204      1,196
    Provision for credit
     losses (Note 2)         230        151         91         59         52
    -------------------------------------------------------------------------
    Net Interest Income
     After Provision for
     Credit Losses           984      1,045      1,156      1,145      1,144
    -------------------------------------------------------------------------
    Non-Interest Revenue
    Securities
     commissions and fees    271        265        299        303        278
    Deposit and payment
     service charges         182        183        180        182        183
    Trading revenues
     (losses)               (301)      (165)        40        (10)      (352)
    Lending fees              92        105        102        100         99
    Card fees                 67       (105)        79         70         63
    Investment management
     and custodial fees       81         83         81         81         77
    Mutual fund revenues     154        148        151        140        137
    Securitization revenues   80         61         65         83         87
    Underwriting and
     advisory fees            92        103        160        159        106
    Securities gains
     (losses), other than
     trading                  (2)       148          6         48         44
    Foreign exchange, other
     than trading             29         48         30         33         21
    Insurance income          62         52         55         77         46
    Other                      5         78         60         58         81
    -------------------------------------------------------------------------
                             812      1,004      1,308      1,324        870
    -------------------------------------------------------------------------
    Net Interest Income and
     Non-Interest Revenue  1,796      2,049      2,464      2,469      2,014
    -------------------------------------------------------------------------
    Non-Interest Expense
    Employee compensation
     (Note 8)                945        901      1,024        969        931
    Premises and equipment   326        350        325        320        308
    Amortization of
     intangible assets        10         11         11         13         11
    Travel and business
     development              72         92         72         64         59
    Communications            42         36         38         42         33
    Business and capital
     taxes                    12          6          -         17         24
    Professional fees         79        108         62         67         64
    Other                    128        127        127        122        108
    -------------------------------------------------------------------------
                           1,614      1,631      1,659      1,614      1,538
    -------------------------------------------------------------------------
    Restructuring Charge
     (Note 9)                  -         24          -          -        135
    -------------------------------------------------------------------------
    Income Before Provision
     for (Recovery of)
     Income Taxes and
     Non-Controlling
     Interest in
     Subsidiaries            182        394        805        855        341
    Income taxes             (91)       (77)       127        165        (26)
    -------------------------------------------------------------------------
                             273        471        678        690        367
    Non-controlling interest
     in subsidiaries          18         19         18         19         19
    -------------------------------------------------------------------------
    Net Income          $    255  $     452  $     660  $     671  $     348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Preferred share
     dividends          $     15  $      12  $       9  $      13  $       9
    Net income available
     to common
     shareholders       $    240  $     440  $     651  $     658  $     339
    Average common
     shares (in
     thousands)          499,067    498,379    499,793    500,510    501,136
    Average diluted
     common shares
     (in thousands)      505,572    506,173    507,913    509,943    510,320
    -------------------------------------------------------------------------
    Earnings Per Share
     (Canadian $)
    Basic              $    0.48  $    0.89  $    1.30  $    1.31  $    0.68
    Diluted                 0.47       0.87       1.28       1.29       0.67
    Dividends Declared
     Per Common Share       0.70       0.70       0.68       0.68       0.65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.



    Consolidated Financial Statements

    Consolidated Balance Sheet

    (Unaudited)(Canadian $ in millions)          As at
    -------------------------------------------------------------------------
                         January    October       July      April    January
                        31, 2008   31, 2007   31, 2007   30, 2007   31, 2007
    -------------------------------------------------------------------------
    Assets
    Cash Resources     $  26,122  $  22,890  $  25,041  $  19,502  $  22,873
    -------------------------------------------------------------------------
    Securities
    Trading               63,377     70,773     67,716     63,600     58,401
    Available-for-sale    24,341     26,010     17,046     17,529     18,235
    Other                  1,747      1,494      1,456      1,460      1,465
    Loan substitutes           -          -         11         11         11
    -------------------------------------------------------------------------
                          89,465     98,277     86,229     82,600     78,112
    -------------------------------------------------------------------------
    Loans
    Residential
     mortgages            53,224     52,429     62,297     62,908     63,109
    Consumer instalment
     and other personal   34,517     33,189     33,009     31,913     31,474
    Credit cards           4,685      4,493      4,347      3,899      3,764
    Businesses and
     governments          66,205     62,650     63,795     60,956     58,108
    Securities borrowed
     or purchased under
     resale agreements    42,937     37,093     34,216     35,063     41,843
    -------------------------------------------------------------------------
                         201,568    189,854    197,664    194,739    198,298
    Customers' liability
     under acceptances    11,590     12,389      8,993      9,530      8,252
    Allowance for credit
     losses (Note 2)      (1,227)    (1,055)    (1,045)    (1,059)    (1,078)
    -------------------------------------------------------------------------
                         211,931    201,188    205,612    203,210    205,472
    -------------------------------------------------------------------------
    Other Assets
    Derivative
     instruments          36,857     32,585     30,030     38,711     37,361
    Premises and
     equipment             1,977      1,980      2,015      2,047      2,057
    Goodwill               1,189      1,140      1,232      1,252      1,306
    Intangible assets        152        124        149        174        207
    Other                  9,132      8,340      8,846      9,031      8,103
    -------------------------------------------------------------------------
                          49,307     44,169     42,272     51,215     49,034
    -------------------------------------------------------------------------
    Total Assets       $ 376,825  $ 366,524  $ 359,154  $ 356,527  $ 355,491
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and
     Shareholders' Equity
    Deposits
    Banks              $  34,991  $  34,100  $  30,561  $  28,256  $  33,811
    Businesses and
     governments         125,312    121,748    120,757    114,504    104,994
    Individuals           82,608     76,202     77,709     78,855     78,309
    -------------------------------------------------------------------------
                         242,911    232,050    229,027    221,615    217,114
    -------------------------------------------------------------------------
    Other Liabilities
    Derivative
     instruments          32,776     33,584     30,543     40,192     38,842
    Acceptances           11,590     12,389      8,993      9,530      8,252
    Securities sold but
     not yet purchased    28,393     25,039     28,551     24,692     19,472
    Securities lent or
     sold under repurchase
     agreements           28,331     31,263     30,992     31,027     40,965
    Other                 12,478     12,055     10,682     10,055     11,083
    -------------------------------------------------------------------------
                         113,568    114,330    109,761    115,496    118,614
    -------------------------------------------------------------------------
    Subordinated Debt
     (Note 10)             3,446      3,446      3,446      2,395      2,745
    -------------------------------------------------------------------------
    Preferred Share
     Liability (Note 11)     250        250        450        450        450
    -------------------------------------------------------------------------
    Capital Trust
     Securities            1,150      1,150      1,150      1,150      1,150
    -------------------------------------------------------------------------
    Shareholders' Equity
    Share capital
     (Note 11)             5,648      5,607      5,318      5,272      5,225
    Contributed surplus       65         58         56         55         55
    Retained earnings     11,056     11,166     11,158     11,017     10,836
    Accumulated other
     comprehensive loss   (1,269)    (1,533)    (1,212)      (923)      (698)
    -------------------------------------------------------------------------
                          15,500     15,298     15,320     15,421     15,418
    -------------------------------------------------------------------------
    Total Liabilities
     and Shareholders'
     Equity            $ 376,825  $ 366,524  $ 359,154  $ 356,527  $ 355,491
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.



    Consolidated Financial Statements

    Consolidated Statement of Comprehensive Income

    (Unaudited) (Canadian $ in millions)          For the three months ended
    -------------------------------------------------------------------------
                                          January 31, 2008  January 31, 2007
    -------------------------------------------------------------------------
    Net income
    Other Comprehensive Income                   $     255         $     348
      Net change in unrealized gains
       (losses) on available-for-sale securities        (2)                2
      Net change in unrealized gains (losses)
       on cash flow hedges                              64               (45)
      Net gain on translation of net foreign
       operations                                      202               182
    -------------------------------------------------------------------------
    Total Comprehensive Income                   $     519         $     487
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statement of Changes in Shareholders' Equity

    (Unaudited) (Canadian $ in millions)          For the three months ended
    -------------------------------------------------------------------------
                                          January 31, 2008  January 31, 2007
    -------------------------------------------------------------------------
    Preferred Shares
    Balance at beginning of period               $   1,196         $     596
    Issued during the period (Note 11)                   -               350
    -------------------------------------------------------------------------
    Balance at End of Period                         1,196               946
    -------------------------------------------------------------------------
    Common Shares
    Balance at beginning of period                   4,411             4,231
    Issued under the Shareholder Dividend
     Reinvestment and Share Purchase Plan               28                28
    Issued under the Stock Option Plan                  13                29
    Issued on the exchange of shares of a
     subsidiary corporation                              -                 1
    Repurchased for cancellation (Note 11)               -               (10)
    -------------------------------------------------------------------------
    Balance at End of Period                         4,452             4,279
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period                      58                49
    Stock option expense                                 7                 6
    -------------------------------------------------------------------------
    Balance at End of Period                            65                55
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period                  11,166            10,974
    Cumulative impact of adopting new accounting
     requirements for financial instruments
     (net of income taxes of $39)                        -               (71)
    Net income                                         255               348
    Dividends - Preferred shares                       (15)               (9)
              - Common shares                         (350)             (325)
    Common shares repurchased for cancellation
     (Note 11)                                           -               (72)
    Share issue expense                                  -                (9)
    -------------------------------------------------------------------------
    Balance at End of Period                        11,056            10,836
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Income on
     Available-for-Sale Securities
    Balance at beginning of period                      35                 -
    Impact of remeasuring available-for-sale
     securities to market value on November 1, 2006
     (net of income taxes of $1)                         -                 3
    Unrealized gains (losses) on available-for-sale
     securities arising during the period (net
     of income taxes of $12 and $4)                    (25)                7
    Reclassification to earnings of realized
     losses (gains) in the period (net of
     income taxes of $10 and $3)                        23                (5)
    -------------------------------------------------------------------------
    Balance at End of Period                            33                 5
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Loss on
     Cash Flow Hedges
    Balance at beginning of period                    (166)                -
    Impact of adopting new cash flow hedge
     accounting rules on November 1, 2006 (net of
     income taxes of $28)                                -               (51)
    Gains (losses) on cash flow hedges arising
     during the period (net of income taxes of $15
     and $25)                                           27               (48)
    Reclassification to earnings of losses on cash
     flow hedges (net of income taxes of $17 and $2)    37                 3
    -------------------------------------------------------------------------
    Balance at End of Period                          (102)              (96)
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive Loss on
     Translation of Net Foreign Operations
    Balance at beginning of period                  (1,402)             (789)
    Unrealized gain on translation of net
     foreign operations                                592               493
    Impact of hedging unrealized gain on
     translation of net foreign operations (net
     of income taxes of $185 and $164)                (390)             (311)
    -------------------------------------------------------------------------
    Balance at End of Period                        (1,200)             (607)
    -------------------------------------------------------------------------
    Total Accumulated Other Comprehensive Loss      (1,269)             (698)
    -------------------------------------------------------------------------
    Total Shareholders' Equity                   $  15,500         $  15,418
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements.



    Consolidated Financial Statements

    Consolidated Statement of Cash Flows

    (Unaudited) (Canadian $ in millions)       For the three months ended
    -------------------------------------------------------------------------
                                          January 31, 2008  January 31, 2007
    -------------------------------------------------------------------------
    Cash Flows from Operating Activities
    Net income                                   $     255         $     348
    Adjustments to determine net cash
     flows provided by (used in)
     operating activities
      Write-down of securities, other than
       trading                                          39                 -
      Net gain on securities, other than
       trading                                         (37)              (44)
      Net (increase) decrease in trading
       securities                                    9,198            (5,295)
      Provision for credit losses                      230                52
      Gain on sale of securitized loans (Note 3)       (59)              (60)
      Change in derivative instruments
       - (Increase) in derivative asset             (3,442)           (5,874)
       - Increase (decrease) in derivative
           liability                                (1,881)            6,174
      Amortization of premises and equipment            96                92
      Amortization of intangible assets                 10                11
      Net increase (decrease) in future
       income taxes                                     15               (61)
      Net decrease in current income taxes            (461)             (501)
      Change in accrued interest
       - Decrease in interest receivable               243               206
       - Decrease in interest payable                  (55)              (62)
      Changes in other items and accruals, net      (1,833)            2,068
    -------------------------------------------------------------------------
    Net Cash Provided by (Used in) Operating
     Activities                                      2,318            (2,946)
    -------------------------------------------------------------------------
    Cash Flows from Financing Activities
    Net increase in deposits                         4,208             7,080
    Net increase in securities sold but not
     yet purchased                                   3,087             3,922
    Net increase (decrease) in securities lent
     or sold under repurchase agreements            (3,902)            8,135
    Net increase in liabilities of subsidiaries      1,665                 3
    Proceeds from issuance of preferred shares           -               350
    Proceeds from issuance of common shares             41                57
    Share issue expense                                  -                (9)
    Common shares repurchased for cancellation
     (Note 11)                                           -               (82)
    Dividends paid                                    (365)             (334)
    -------------------------------------------------------------------------
    Net Cash Provided by Financing Activities        4,734            19,122
    -------------------------------------------------------------------------
    Cash Flows from Investing Activities
    Net (increase) in interest bearing deposits
     with banks                                     (2,746)           (2,153)
    Purchases of securities, other than trading     (7,094)          (11,461)
    Maturities of securities, other than trading     5,466             7,285
    Proceeds from sales of securities, other than
     trading                                         3,972             1,098
    Net (increase) in loans, customers' liability
     under acceptances and loan substitute
     securities                                     (2,823)           (1,652)
    Proceeds from securitization of loans (Note 3)     545               942
    Net (increase) in securities borrowed or
     purchased under resale agreements              (4,909)           (9,752)
    Premises and equipment - net purchases             (60)              (29)
    Acquisitions (Note 7)                              (40)             (384)
    -------------------------------------------------------------------------
    Net Cash Used in Investing Activities           (7,689)          (16,106)
    -------------------------------------------------------------------------
    Effect of Exchange Rate Changes on Cash and
     Cash Equivalents                                   84                97
    -------------------------------------------------------------------------
    Net Increase (Decrease) in Cash and Cash
     Equivalents                                      (553)              167
    Cash and Cash Equivalents at Beginning
     of Period                                       3,650             2,458
    -------------------------------------------------------------------------
    Cash and Cash Equivalents at End of Period   $   3,097         $   2,625
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The accompanying notes to consolidated financial statements are an
    integral part of these statements. Certain comparative figures have been
    reclassified to conform with the current period's presentation.



    Notes to Consolidated Financial Statements

    For the three months ended January 31, 2008 (Unaudited)
    -------------------------------------------------------------------------

    Note 1: Basis of Presentation

    These consolidated financial statements should be read in conjunction
    with the notes to our consolidated financial statements for the year
    ended October 31, 2007 as set out on pages 96 to 137 of our 2007 Annual
    Report. These consolidated financial statements have been prepared in
    accordance with Canadian generally accepted accounting principles
    ("GAAP") using the same accounting policies and methods of computation as
    were used for our consolidated financial statements for the year ended
    October 31, 2007.

    Note 2: Allowance for Credit Losses

    The allowance for credit losses recorded in our Consolidated Balance
    Sheet is maintained at a level which we consider adequate to absorb
    credit-related losses on our loans, customers' liability under
    acceptances and other credit instruments. The portion related to other
    credit instruments is recorded in other liabilities in our
    Consolidated Balance Sheet. As at January 31, 2008 and January 31, 2007
    there was no allowance for credit losses related to other credit
    instruments included in other liabilities.

    A continuity of our allowance for credit losses is as follows:

    (Canadian $ in millions)          For the three months ended
    -------------------------------------------------------------------------
                                            Credit card,
                                         consumer instalment   Business and
                           Residential   and other personal     government
                            mortgages           loans              loans
    -------------------------------------------------------------------------
                        January  January  January  January  January  January
                             31,      31,      31,      31,      31,      31,
                           2008     2007     2008     2007     2008     2007
    -------------------------------------------------------------------------
    Specific Allowance
     at beginning of
     period             $    14  $     5  $     1  $     1  $   142  $   147
    Provision for
     credit losses            1        -       68       49      101        3
    Recoveries                -        -       19       18        3        4
    Write-offs                -       (1)     (87)     (67)     (15)      (6)
    Foreign exchange
     and other                -        -        -        -        3        3
    -------------------------------------------------------------------------
    Specific Allowance at
     end of period           15        4        1        1      234      151

    General Allowance at
     beginning of period     11       23      327      340      517      506
    Provision for credit
     losses                  (3)      (4)      30       15       36      (14)
    Foreign exchange
     and other                -        -        -        -       19       17
    -------------------------------------------------------------------------
    General Allowance at
     end of period            8       19      357      355      572      509
    -------------------------------------------------------------------------
    Total Allowance     $    23  $    23  $   358  $   356  $   806  $   660
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                            For the three months ended
    -------------------------------------------------------
                           Customers'
                        liability under
                          acceptances           Total
    -------------------------------------------------------
                        January  January  January  January
                             31,      31,      31,      31,
                           2008     2007     2008     2007
    -------------------------------------------------------
    Specific Allowance
     at beginning of
     period             $     -  $     -  $   157  $   153
    Provision for
     credit losses            -        -      170       52
    Recoveries                -        -       22       22
    Write-offs                -        -     (102)     (74)
    Foreign exchange
     and other                -        -        3        3
    -------------------------------------------------------
    Specific Allowance at
     end of period            -        -      250      156

    General Allowance at
     beginning of period     43       36      898      905
    Provision for credit
     losses                  (3)       3       60        -
    Foreign exchange
     and other                -       -        19       17
    -------------------------------------------------------
    General Allowance at
     end of period           40       39      977      922
    -------------------------------------------------------
    Total Allowance     $    40  $    39  $ 1,227  $ 1,078
    -------------------------------------------------------
    -------------------------------------------------------

    Note 3: Securitization

    During the quarter ended January 31, 2008, we securitized residential
    mortgages totalling $563 million for total cash proceeds of $545 million.
    There are no expected credit losses as the mortgages are guaranteed by
    third parties. We retained responsibility for servicing these mortgages.
    We recorded a gain of $5 million in non-interest revenue, securitization
    revenues, $24 million of deferred purchase price in available-for-sale
    securities and $4 million of servicing liability in other liabilities
    related to the securitization of those loans. The key weighted-average
    assumptions used to value the deferred purchase price for these
    securitizations were an average term of 4.4 years, a prepayment rate of
    10.0%, an interest rate of 5.21% and a discount rate of 4.77%.

    In addition, gains on sales of loans sold to all revolving securitization
    vehicles were $54 million for the quarter ended January 31, 2008.

    Note 4: Financial Instruments

    Fair Value Option
    Management can elect to account for any financial instruments that would
    not otherwise be accounted for at fair value as trading instruments with
    changes in fair value recorded in income provided they meet certain
    criteria.

    The Bank has designated bonds purchased to support our Municipal Tender
    Option Bond Program as trading under the fair value option. These bonds
    would otherwise be accounted for as available-for-sale securities with
    unrealized gains and losses recorded in Other Comprehensive Income. In
    managing this program, we enter into derivatives to hedge against changes
    in the fair value of those bonds that arise due to changes in interest
    rates. Electing the fair value option for the bonds better aligns the
    accounting result with how the portfolio is managed. The fair value of
    the bonds as at January 31, 2008 was $29 million. The impact of recording
    the bonds as trading was a decrease in non-interest revenue, trading
    losses of less than $1 million for the quarter ended January 31, 2008.
    The decrease was offset by a loss on the derivatives.

    Fair Value Measurement
    We use a fair value hierarchy to categorize the inputs we use in
    valuation techniques to measure fair value. The extent of our use of
    quoted market prices (Level 1), internal models using observable market
    information as inputs (Level 2) and internal models without observable
    market information (Level 3) in the valuation of securities, derivative
    assets and derivative liabilities as at January 31, 2008 were as follows:

                                                              Derivative
                                                              Instruments
                                                           ------------------
                         Available-for-sale     Trading
                                 securities  securities    Asset   Liability
    -------------------------------------------------------------------------
    Valued using quoted
     market prices                       56%         98%       5%          6%
    Valued using
     internal models (with
     observable inputs)                  43           -       93          93
    Valued using internal
     models (without
     observable inputs)                   1           2        2           1
    -------------------------------------------------------------------------
    Total                               100%        100%     100%        100%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Sensitivity analysis for the most significant items valued using internal
    models without observable inputs was as follows:

    Trading securities
    ------------------
    Within trading securities as at January 31, 2008 was $302 million of
    third party Asset Backed Commercial Paper ("ABCP") with a face value of
    $362 million. This ABCP is considered Level 3 as its value has been
    determined by management based on expected discounted cash flows and
    expectations of the probability of restructuring the vehicles in
    accordance with the Montreal Accord versus the liquidation value. The
    assessment of probability has the most significant impact on the
    valuation of the ABCP. We assumed an 85% probability of the underlying
    vehicle being restructured and a 15% probability of it being liquidated
    to determine the value as at January 31, 2008. The impact of assuming the
    probability of liquidation increased or decreased by 5% would result in a
    change in fair value of $6 million and $(7) million, respectively. The
    impact on net income for the quarter ended January 31, 2008 related to
    changes in fair value of this investment was a charge of $6 million
    before tax.

    Our remaining exposure to Apex/Sitka totals $495 million as at
    January 31, 2008, of which $302 million is ABCP (with a face value of
    $430 million) included in trading securities, and $193 million is
    guarantees. These amounts are considered Level 3 as their value has been
    determined by management based on expected discounted cash flows and
    expectations of the probability of restructuring the vehicles versus the
    liquidation value. The assessment of probability has the most significant
    impact on the valuation. We assumed a 70% probability of the underlying
    vehicle being restructured and a 30% probability of it being liquidated.
    The impact on our remaining exposure of assuming the probability of
    liquidation increased or decreased by 5% would result in a change in fair
    value totalling $37 million and $(36) million, respectively. The impact
    on net income for the quarter ended January 31, 2008 related to changes
    in fair value of our exposure to Apex/Sitka was a charge of $130 million
    before tax.

    Note 5: Variable Interest Entities

    Customer Securitization Vehicles
    Customer securitization vehicles assist our customers with the
    securitization of their assets to provide them with alternative sources
    of funding. Total assets in unconsolidated customer securitization
    vehicles amounted to $23,629 million as at January 31, 2008
    ($25,465 million as at October 31, 2007) of which $15,705 million relates
    to Canadian assets ($17,536 million as at October 31, 2007), and the
    balance are U.S assets. Our exposure to losses relates to our investment
    in commercial paper issued by the vehicles, derivative contracts we have
    entered into with the vehicles and the liquidity support we provide
    through standby letters of credit and commitments to extend credit. As at
    January 31, 2008, we have a net exposure of $1,730 million from
    commercial paper held ($5,564 million as at October 31, 2007) classified
    as trading securities, and backstop liquidity facilities of
    $28,148 million ($31,475 million as at October 31, 2007), of which
    $17,882 million ($20,756 million as at October 31, 2007) relates to
    Canadian facilities and the balance are U.S. facilities. As at
    January 31, 2008, $624 million had been drawn against these facilities
    ($nil as at October 31, 2007). The fair value of derivatives outstanding
    with these Variable Interest Entities ("VIEs") and recorded in our
    Consolidated Balance Sheet was a derivative asset of $29 million as at
    January 31, 2008 (derivative liability of $20 million as at
    October 31, 2007).

    Included in our Consolidated Balance Sheet as at January 31, 2008 were
    other assets totalling $292 million and $15 million as a deposit
    liability ($311 million and $65 million, respectively, as at
    October 31, 2007) as a result of consolidating two VIEs.

    Bank Securitization Vehicles
    We use bank securitization vehicles to securitize our Canadian mortgage
    loans and Canadian credit card loans either for capital management
    purposes or to obtain alternate sources of funding. Total assets held by
    these vehicles amounted to $6,526 million as at January 31, 2008
    ($6,552 million as at October 31, 2007). We are not required to
    consolidate our bank securitization vehicles. We held $67 million of the
    commercial paper issued by these vehicles as at January 31, 2008
    ($367 million as at October 31, 2007). We also provide liquidity support
    to certain of our bank securitization vehicles for the face value of the
    commercial paper outstanding. The total contract amount of the liquidity
    support was $5,100 million as at January 31, 2008 and October 31, 2007.
    No amounts were drawn as at January 31, 2008 and October 31, 2007. The
    fair value of derivatives outstanding with these vehicles and recorded in
    our Consolidated Balance Sheet was a derivative asset of $33 million as
    at January 31, 2008 (derivative liability of $52 million as at
    October 31, 2007).

    Credit Investment Management Vehicles
    Credit investment management vehicles provide investment opportunities in
    customized, diversified debt portfolios in a variety of asset and rating
    classes. We hold an interest in high grade Structured Investment Vehicles
    ("SIVs") and act as asset manager. Total assets in these vehicles
    amounted to $18,228 million, including cash of $2,766 million, as at
    January 31, 2008 (total assets of $22,754 million as at
    October 31, 2007). Our exposure to loss relates to our investments in
    these vehicles, derivative contracts we have entered into with the
    vehicles and the liquidity support we provide through standby letters of
    credit and commitments to extend credit or purchase senior debt issued by
    the SIVs. Our investment in the capital notes of the SIVs is recorded in
    available-for-sale securities in our Consolidated Balance Sheet and was
    $33 million as at January 31, 2008 ($53 million as at October 31, 2007),
    net of write-downs of $23 million for the quarter ended January 31, 2008
    ($13 million for the quarter ended October 31, 2007). We have provided
    funding commitments equivalent to $1.4 billion ($1.3 billion as at
    October 31, 2007) to purchase senior notes issued by the SIVs which have
    been fully drawn at January 31, 2008. The total contract amount of
    letters of credit for backstop liquidity facilities was $237 million as
    at January 31, 2008 ($221 million as at October 31, 2007); no amounts
    were drawn as at January 31, 2008 and October 31, 2007. The fair value of
    our derivative contracts outstanding with these SIVs and recorded in our
    Consolidated Balance Sheet was a derivative asset of $8 million as at
    January 31, 2008 (derivative liability of $11 million as at
    October 31, 2007). We are not required to consolidate these VIEs.
    Subsequent to January 31, 2008, we announced a proposal to provide senior
    funding of a maximum of $13 billion through a liquidity facility in order
    to backstop the repayment of senior notes. The senior notes of
    $1.4 billion held at January 31, 2008 will be repaid through this new
    facility.

    Structured Finance Vehicles
    We facilitate development of investment products by third parties
    including mutual funds, unit investment trusts and other investment funds
    that are sold to retail investors. We enter into derivatives with these
    funds to provide the investors their desired exposure and hedge our
    exposure from these derivatives by investing in other funds. We
    consolidate those VIEs where our interests expose us to a majority of the
    expected losses or residual returns, or both. Total assets and our
    exposure to losses in these consolidated VIEs were $409 million as at
    January 31, 2008 ($440 million as at October 31, 2007). Assets held by
    these VIEs in which we have a significant variable interest but we do not
    consolidate totalled $333 million as at January 31, 2008 ($353 million as
    at October 31, 2007). Our exposure to loss from VIEs related to this
    activity is limited to the amount of our investment which totalled $90
    million as at January 31, 2008 ($99 million as at October 31, 2007).

    We also sponsor Apex/Sitka, a VIE that provides investors credit
    protection on investments in debt portfolios through the issuance of
    commercial paper. We are not required to consolidate this VIE. Assets
    held by Apex/Sitka were $2,012 million as at January 31, 2008 and
    October 31, 2007. Our exposure to loss is limited to the amount of our
    investment of $302 million as at January 31, 2008 ($454 million as at
    October 31, 2007) and guarantees we provided to third parties related to
    collateral calls and outstanding ABCP totalling $193 million as at
    January 31, 2008 ($nil as at October 31, 2007).

    Capital Trusts
    BMO Covered Bond Trust (the "CB Trust") was created in 2007 to guarantee
    payments due to the bondholders in respect of (euro) 1 billion
    BMO Covered Bonds issued by the Bank in the first quarter of 2008. The
    guarantee is secured by the assets of the CB Trust. The CB Trust is a
    variable interest entity which we are required to consolidate as we are
    exposed to the majority of the expected losses and residual returns.
    Total assets in the vehicle as at January 31, 2008 were $3.5 billion of
    residential mortgages.

    Note 6: Guarantees

    In the normal course of business, we enter into a variety of guarantees,
    the most significant of which are as follows:

    Standby Letters of Credit and Guarantees
    Standby letters of credit and guarantees represent our obligation to make
    payments to third parties on behalf of another party if they are unable
    to make the required payments or meet other contractual requirements.

    The maximum amount payable under standby letters of credit and guarantees
    was $14,269 million as at January 31, 2008 ($12,395 million as at
    October 31, 2007). Collateral requirements for standby letters of credit
    and guarantees are consistent with our collateral requirements for loans.

    No amount was included in our Consolidated Balance Sheet as at
    January 31, 2008 and October 31, 2007 related to these standby letters of
    credit and guarantees.

    Backstop Liquidity Facilities
    Backstop liquidity facilities are provided to asset-backed commercial
    paper programs administered by either us or third parties as an
    alternative source of financing in the event that such programs are
    unable to access asset-backed commercial paper markets or, in limited
    circumstances, when predetermined performance measures of the financial
    assets owned by these programs are not met. The terms of the backstop
    liquidity facilities do not require us to advance money to these programs
    in the event of bankruptcy of the borrower. The facilities' terms are
    generally no longer than one year, but can be several years. The maximum
    amount payable under these backstop liquidity facilities totalled
    $35,083 million as at January 31, 2008 ($38,466 million as at October 31,
    2007). The amount drawn on the backstop liquidity facilities was
    $625 million as at January 31, 2008 ($16 million as at October 31, 2007).

    Credit Enhancement Facilities
    Where warranted, we provide partial credit enhancement facilities to
    transactions within asset-backed commercial paper programs administered
    by either us or third parties. Credit enhancement facilities were
    included in $5,124 million of backstop liquidity facilities as at
    January 31, 2008 ($5,449 million as at October 31, 2007). Credit
    enhancement was also provided in the form of program letters of credit;
    $nil was included in standby letters of credit and guarantees as at
    January 31, 2008 and October 31, 2007. The facilities' terms are
    generally no longer than one year, but can be several years. Of the
    $625 million of backstop liquidity facilities drawn as at
    January 31, 2008, $66 million relates to credit enhancement.

    Note 7: Acquisitions

    Pyrford International plc
    On December 14, 2007, we completed the acquisition of Pyrford
    International plc ("Pyrford"), a London, U.K.-based asset manager,
    for total cash consideration of $40 million, plus contingent
    consideration up to $10 million based on our retention of the assets
    under management one year from the closing date. The results of Pyrford's
    operations have been included in our consolidated financial statements
    since that date. The acquisition of Pyrford will provide us with the
    opportunity to expand our investment management capabilities outside of
    North America. As part of this acquisition, we acquired a customer
    relationship intangible asset, which will be amortized on a straight line
    basis over a period not to exceed 15 years. Goodwill related to this
    acquisition is not deductible for tax purposes. Pyrford is part of our
    Private Client Group reporting segment.

    First National Bank & Trust
    On January 4, 2007, we completed the acquisition of First National
    Bank & Trust ("First National") for total cash consideration of
    $345 million. The results of First National's operations have been
    included in our consolidated financial statements since that date. The
    acquisition of First National provides us with the opportunity to expand
    our banking services in the Indianapolis, Indiana market. As part of this
    acquisition, we acquired a core deposit intangible asset, which will be
    amortized on an accelerated basis over a period not to exceed 10 years.
    Goodwill related to this acquisition is deductible for tax purposes.
    First National is part of our Personal and Commercial Banking U.S.
    reporting segment.

    bcpbank Canada
    On December 4, 2006, we completed the acquisition of bcpbank Canada, a
    full-service chartered bank, for total cash consideration of $41 million.
    The results of bcpbank Canada's operations have been included in our
    consolidated financial statements since that date. The acquisition of
    bcpbank Canada expands our branch network and provides our customers with
    greater access to banking services across the greater Toronto area. As
    part of this acquisition, we acquired a core deposit intangible asset,
    which will be amortized on an accelerated basis over 10 years. Goodwill
    related to this acquisition is not deductible for tax purposes. bcpbank
    Canada is part of our Personal and Commercial Banking Canada
    reporting segment.

    Future Acquisitions
    On July 10, 2007, we announced that we had reached definitive agreements
    to purchase Ozaukee Bank and Merchants and Manufacturers Bancorporation,
    Inc. These acquisitions are expected to close during the quarter ended
    April 30, 2008.

    The estimated fair values of the assets acquired and the liabilities
    assumed at the date of acquisition are as follows:


                                             January 31,         October 31,
    (Canadian $ in millions)                        2008                2007
    -------------------------------------------------------------------------
                                                             First   bcpbank
                                                 Pyrford  National    Canada
    -------------------------------------------------------------------------
    Cash resources                                $    1   $   110   $    47
    Securities                                         -       317        23
    Loans                                              -     1,009       293
    Premises and equipment                             1        30         9
    Goodwill                                           6       175        13
    Core deposit/Customer relationship
     intangible asset                                 30        37         5
    Other assets                                       4        52         2
    -------------------------------------------------------------------------
    Total assets                                      42     1,730       392
    -------------------------------------------------------------------------
    Deposits                                           -     1,375       339
    Other liabilities                                  2        10        12
    -------------------------------------------------------------------------
    Total liabilities                                  2     1,385       351
    -------------------------------------------------------------------------
    Purchase price                                $   40   $   345   $    41
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    The allocation of the purchase price for Pyrford is subject to refinement
    as we complete the valuation of the assets acquired and liabilities
    assumed.

    Note 8: Employee Compensation

    Stock Options
    During the quarter ended January 31, 2008, we granted a total of
    1,337,228 stock options. The weighted-average fair value of these options
    was $8.32 per option and was determined using a trinomial option pricing
    model, based on the following weighted-average assumptions:

    For stock options granted during the three months ended January 31, 2008
    -------------------------------------------------------------------------
    Expected dividend yield                                             4.0%
    Expected share price volatility                                    19.4%
    Risk-free rate of return                                            4.1%
    Expected period until exercise                                 7.4 years
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Pension and Other Employee Future Benefit Expenses
    We recorded pension and other employee future benefit expenses in our
    Consolidated Statement of Income as follows:

                                                              Other employee
                                         Pension benefit      future benefit
    (Canadian $ in millions)                 plans                plans
    -------------------------------------------------------------------------
                                          For the three       For the three
                                           months ended        months ended
    -------------------------------------------------------------------------
                                       January   January   January   January
                                      31, 2008  31, 2007  31, 2008  31, 2007
    -------------------------------------------------------------------------
    Benefits earned by employees      $     34  $     40  $      5  $      5
    Interest cost on accrued
     benefit liability                      58        55        13        12
    Actuarial loss recognized
     in expense                              4        16         3         4
    Amortization of plan amendment
     costs                                   2         2        (1)       (1)
    Expected return on plan assets         (72)      (69)       (1)       (1)
    -------------------------------------------------------------------------
    Benefits expense                        26        44        19        19
    Canada and Quebec pension plan
     expense                                14        13         -         -
    Defined contribution expense             3         4         -         -
    -------------------------------------------------------------------------
    Total pension and other employee
     future benefit expenses          $     43  $     61  $     19  $     19
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 9: Restructuring Charge

    The continuity of our restructuring charge is as follows:

                                    Severance- Premises-
                                       related   related
    (Canadian $ in millions)           charges   charges     Other     Total
    -------------------------------------------------------------------------
    Year Ended October 31, 2007
    ---------------------------
    Opening balance                   $    117  $     11  $      7  $    135
    Paid in the year                       (46)      (10)       (7)      (63)
    Reversal in the year                   (15)       (1)        -       (16)
    Additional charge in the year           40         -         -        40
    -------------------------------------------------------------------------
    Balance as at October 31, 2007          96         -         -        96
    Paid in the quarter                    (12)        -         -       (12)
    -------------------------------------------------------------------------
    Balance as at January 31, 2008    $     84  $      -  $      -  $     84
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10: Subordinated Debt

    On February 4, 2008, we redeemed all of our 5.75% Series A Medium-Term
    Notes, Second Tranche, due 2013, totalling $150 million. The notes
    were redeemed at a redemption price of 100 per cent of the principal
    amount plus unpaid accrued interest to the redemption date.

    Note 11: Share Capital

    During the quarter ended January 31, 2008, we did not repurchase any
    common shares. During the quarter ended January 31, 2007, we repurchased
    1,194,900 common shares at an average cost of $69.08 per share, totalling
    $82 million.

    There have been 27,800 common shares repurchased under the existing
    normal course issuer bid that expires on September 5, 2008 and pursuant
    to which we are permitted to purchase up to 25,000,000 common shares.

    During the quarter ended January 31, 2007, we issued 14,000,000
    4.5% Non-Cumulative Perpetual Class B Preferred Shares, Series 13, at a
    price of $25.00 per share, representing an aggregate issue price of
    $350 million.

    Share Capital Outstanding(a)

     (Canadian $ in millions,
      except as noted)                            January 31, 2008
    -------------------------------------------------------------------------
                              Number of shares  Amount   Convertible into...
    -------------------------------------------------------------------------
    Preferred Shares -
     Classified as Liabilities
      Class B - Series 6            10,000,000 $   250   common shares (b)
    -------------------------------------------------------------------------
                                                   250
    -------------------------------------------------------------------------
    Preferred Shares -
     Classified as Equity
      Class B - Series 5             8,000,000     200   -
      Class B - Series 10 (c)       12,000,000     396   common shares (b)
      Class B - Series 13           14,000,000     350   -
      Class B - Series 14           10,000,000     250   -
    -------------------------------------------------------------------------
                                                 1,196
    Common Shares                  499,406,700   4,452   -
    -------------------------------------------------------------------------
    Share Capital                              $ 5,648
    -------------------------------------------------------------------------
    Stock options issued under                           21,617,502
     stock option plan                             n/a    common shares
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) For additional information refer to Notes 21 and 22 to our
        consolidated financial statements for the year ended October 31, 2007
        on pages 121 to 124 of our 2007 Annual Report.
    (b) The number of shares issuable on conversion is not determinable until
        the date of conversion.
    (c) Face value is US$300 million.
    n/a - not applicable

    Note 12: Contingent Liabilities

    Following our disclosures of mark-to-market losses in our commodities
    trading businesses on April 27, 2007 and May 17, 2007 aggregating
    $680 million (pre-tax) as of April 30, 2007, the Bank has received
    inquiries, requests for documents and subpoenas pertaining to those
    trading losses from securities, commodities, banking and law enforcement
    authorities. The Bank is cooperating with all of these authorities.

    Note 13: Capital Management

    Our capital management framework is designed to maintain the level of
    capital that: meets target ratios as set out by our regulator, the
    Superintendent of Financial Institutions Canada; supports our internal
    assessment of required capital; results in targeted credit ratings; funds
    our operating groups' business strategies; and builds long-term
    shareholder value.

    Our policies and processes for managing capital as well as the nature of
    our capital are outlined in the Enterprise-Wide Capital Management
    section of Management's Discussion and Analysis on page 57 of our 2007
    Annual Report.

    Effective November 1, 2007, a new regulatory capital management framework
    was implemented in Canada. The new framework, Basel II, replaced Basel I,
    the framework utilized for the past 20 years. It establishes regulatory
    capital requirements that are more sensitive to a bank's risk profile.

    We have met our capital targets as at January 31, 2008. Our capital
    position as at January 31, 2008 is detailed in the Capital Management
    section on page 18 of Management's Discussion and Analysis of this First
    Quarter Report to Shareholders.

    Note 14: Risk Management

    We have an enterprise-wide approach to the identification, measurement,
    monitoring and management of risks faced across the organization. The key
    financial instrument risks are classified as credit and counterparty,
    market and liquidity and funding risk.

    Credit and Counterparty Risk
    We are exposed to credit risk from the possibility that counterparties
    may default on their financial obligations to us. This is the most
    significant measurable risk that we face. Our risk management practices
    are disclosed in Management's Discussion and Analysis on pages 67 to 68
    of our 2007 Annual Report. Key measures as at January 31, 2008 are
    outlined in the Risk Management section on pages 14 to 15 of Management's
    Discussion and Analysis of this First Quarter Report to Shareholders.

    Market, Liquidity and Funding Risk
    Market risk is the potential for a negative impact on the balance sheet
    and/or income statement resulting from adverse changes in the value of
    financial instruments as a result of changes in certain market variables.
    These variables include interest rates, foreign exchange rates, equity or
    commodity prices and their implied volatilities, as well as credit
    spreads, credit migration and default. We incur market risk in our
    trading and underwriting activities and structural banking activities.

    Liquidity and funding risk is the potential for loss if we are unable to
    meet financial commitments in a timely manner at reasonable prices as
    they fall due. It is our policy to ensure that sufficient liquid assets
    and funding capacity are available to meet financial commitments,
    including liabilities to depositors and suppliers, and lending,
    investment and pledging commitments, even in times of stress. Managing
    liquidity and funding risk is essential to maintaining both depositor
    confidence and stability in earnings.

    Our market risk and liquidity funding management practices and key
    measures are outlined on pages 68 to 71 of our 2007 Annual Report. Key
    measures as at January 31, 2008 are outlined in the Risk Management
    section on pages 14 to 15 of Management's Discussion and Analysis of this
    First Quarter Report to Shareholders.

    Financial liabilities are comprised of trading and non-trading
    liabilities. As liabilities in trading portfolios are typically held for
    short periods of time, they are not included in the table below.
    Contractual maturities of non-trading financial liabilities as at
    January 31, 2008 were as follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
                           Less                                  No
                           than     1 to     4 to     Over    fixed
                         1 year  3 years  5 years  5 years maturity    Total
    -------------------------------------------------------------------------
    Deposits           $122,966 $ 23,688 $  9,146 $  3,377 $ 83,734 $242,911
    Subordinated
     debt (1)               366      632      422    5,217        -    6,637
    Capital trust
     securities               -      750      400    1,050        -    2,200
    Preferred share
     liability              250        -        -        -        -      250
    Other financial
     liabilities (1)     36,270      226      203    2,465       42   39,206
    -------------------------------------------------------------------------
    Total              $159,852 $ 25,296 $ 10,171 $ 12,109 $ 83,776 $291,204
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Includes interest payments.


    (Canadian $ in millions)
    -------------------------------------------------------------------------
                                                      Less  Greater
                                                      than     than
                                                    1 year   1 year    Total
    -------------------------------------------------------------------------
    Committments to extend credit                 $ 47,326 $ 29,828 $ 77,154
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 15: United States Generally Accepted Accounting Principles

    Reporting under United States GAAP would have resulted in the following:

    (Canadian $ in millions,
     except earnings per share figures)           For the three months ended
    -------------------------------------------------------------------------
                                                            January  January
                                                           31, 2008 31, 2007
    -------------------------------------------------------------------------
    Net Income - Canadian GAAP                             $    255 $    348
    United States GAAP adjustments                                5      (12)
    -------------------------------------------------------------------------
    Net Income - United States GAAP                        $    260 $    336
    -------------------------------------------------------------------------
    Earnings Per Share
      Basic - Canadian GAAP                                $   0.48 $   0.68
      Basic - United States GAAP                               0.49     0.65
      Diluted - Canadian GAAP                                  0.47     0.67
      Diluted - United States GAAP                             0.48     0.64
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fair Value Option
    During the quarter ended January 31, 2008, we adopted the new United
    States accounting standard which allows the option to report selected
    financial assets and liabilities at fair value and establishes new
    disclosure requirements for assets and liabilities to which the fair
    value option is applied. The new standard eliminated a difference between
    Canadian and United States GAAP.

    Note 16: Subsequent Event

    Since the quarter end we have been in active negotiations to restructure
    our Apex/Sitka trust referred to in Note 5. On February 27, 2008,
    Apex/Sitka was unable to roll its notes and, as a result, did not meet
    its payment obligations. In addition, Apex/Sitka failed to satisfy
    collateral calls. If no restructuring agreement is reached, we expect to
    record a charge of approximately $500 million related to our remaining
    Apex/Sitka exposure in the quarter ending April 30, 2008. There is also
    additional risk should Apex/Sitka not be restructured. One noteholder of
    Apex/Sitka is disputing our demand for the return of a $400 million
    funds transfer payment. A swap counterparty is disputing its obligations
    of up to $600 million to us under an agreement and with respect to a
    total return swap transaction that the counterparty had previously
    confirmed. While we are confident in our position and we will vigorously
    pursue our rights in these matters, it is not possible to determine the
    amount or probability of losses, if any, or whether any potential
    charges will be taken in the quarter ending April 30, 2008. It is
    anticipated that if a restructuring is successful, these matters would
    be dealt with as part of the restructuring. In order to support a
    successful restructuring of Apex/Sitka, we may provide additional
    support.

    Note 17: Operating and Geographic Segmentation

    Operating Groups
    We conduct our business through operating groups, each of which has a
    distinct mandate. We determine operating groups based on our management
    structure and therefore our groups, and results attributed to them, may
    not be comparable with those of other financial services companies. We
    evaluate the performance of our groups using measures such as net income,
    revenue growth, return on equity, net economic profit and non-interest
    expense-to-revenue (productivity) ratio.

    Personal and Commercial Banking
    Personal and Commercial Banking ("P&C") is comprised of two operating
    segments: Personal and Commercial Banking Canada and Personal and
    Commercial Banking U.S.

    Personal and Commercial Banking Canada
    Personal and Commercial Banking Canada ("P&C Canada") offers a full range
    of consumer and business loan and deposit products, including deposit and
    management services, mortgages, consumer credit, business lending, cash
    management and other banking services.

    Personal and Commercial Banking U.S.
    Personal and Commercial Banking U.S. ("P&C U.S.") offers a full range of
    products and services to personal and business clients in select markets
    of the U.S. Midwest through branches and direct banking channels such as
    telephone banking, online banking and a network of automated banking
    machines.

    Private Client Group
    Private Client Group ("PCG") brings together all of our wealth management
    businesses. Operating under the BMO brand in Canada and Harris in the
    United States, PCG serves a full range of client segments, from
    mainstream to ultra-high net worth, as well as select institutional
    market segments. We offer our clients a broad range of wealth management
    products and services, including full-service and online brokerage in
    Canada, and private banking and investment products in Canada and the
    United States.

    BMO Capital Markets
    BMO Capital Markets ("BMO CM") combines all of our businesses serving
    corporate, institutional and government clients. In Canada and the
    United States, its clients span a broad range of industry sectors. BMO CM
    also serves clients in the United Kingdom, Europe, Asia and Australia. It
    offers clients complete financial solutions, including equity and debt
    underwriting, corporate lending and project financing, mergers and
    acquisitions, advisory services, merchant banking, securitization,
    treasury and market risk management, debt and equity research and
    institutional sales and trading.

    Corporate Services
    Corporate Services includes the corporate units that provide expertise
    and governance support in areas such as strategic planning, law, finance,
    internal audit, risk management, corporate communications, economics,
    corporate marketing, human resources and learning. Operating results
    include revenues and expenses associated with certain securitization
    activities, the hedging of foreign-source earnings and activities related
    to the management of certain balance sheet positions and our overall
    asset liability structure.

    Technology and Operations ("T&O") manages, maintains and provides
    governance over our information technology, real estate, operations
    services and sourcing. T&O focuses on enterprise-wide priorities that
    improve quality and efficiency to deliver an excellent customer
    experience.

    Operating results for T&O are included with Corporate Services for
    reporting purposes. However, costs of T&O services are transferred to
    three operating groups. As such, results for Corporate Services largely
    reflect the activities outlined above.

    Corporate Services also includes residual revenues and expenses
    representing the differences between actual amounts earned or incurred
    and the amounts allocated to operating groups.

    Basis of Presentation
    The results of these operating segments are based on our internal
    financial reporting systems. The accounting policies used in these
    segments are generally consistent with those followed in the preparation
    of our consolidated financial statements as disclosed in Note 1. Notable
    accounting measurement differences are the taxable equivalent basis
    adjustment and the provision for credit losses, as described below.

    Taxable Equivalent Basis
    We analyze net interest income on a taxable equivalent basis ("teb") at
    the operating group level. This basis includes an adjustment which
    increases GAAP revenues and the GAAP provision for income taxes by an
    amount that would raise revenues on certain tax-exempt securities to a
    level that would incur tax at the statutory rate.

    Analysis on a teb basis neutralizes the impact of investing in tax-exempt
    or tax-advantaged securities rather than fully taxable securities with
    higher yields. It reduces distortions in net interest income related to
    the choice of tax-advantaged and taxable investments.

    Provisions for Credit Losses
    Provisions for credit losses are generally allocated to each group based
    on expected losses for that group over an economic cycle. Differences
    between expected loss provisions and provisions required under GAAP are
    included in Corporate Services.

    Inter-Group Allocations
    Various estimates and allocation methodologies are used in the
    preparation of the operating groups' financial information. We allocate
    expenses directly related to earning revenue to the groups that earned
    the related revenue. Expenses not directly related to earning revenue,
    such as overhead expenses, are allocated to operating groups using
    allocation formulas applied on a consistent basis. Operating group net
    interest income reflects internal funding charges and credits on the
    groups' assets, liabilities and capital, at market rates, taking into
    account relevant terms and currency considerations. The offset of the net
    impact of these charges and credits is reflected in Corporate Services.

    Geographic Information
    We operate primarily in Canada and the United States but also have
    operations in the United Kingdom, Europe, the Caribbean and Asia, which
    are grouped in Other countries. We allocate our results by geographic
    region based on the location of the unit responsible for managing the
    related assets, liabilities, revenues and expenses, except for the
    consolidated provision for credit losses, which is allocated based upon
    the country of ultimate risk.

    Our results and average assets, allocated by operating segment and
    geographic region, are as follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
    For the three
     months ended                                        Corporate     Total
     January 31,       P&C      P&C                         Servi-     (GAAP
     2008 (2)       Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    793  $    167  $    155  $    303  $   (204) $  1,214
    Non-interest
     revenue           418        48       364       (37)       19       812
    -------------------------------------------------------------------------
    Total Revenue    1,211       215       519       266      (185)    2,026
    Provision for
     credit losses      83         9         1        29       108       230
    Non-interest
     expense           695       166       368       383         2     1,614
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      433        40       150      (146)     (295)      182
    Income taxes       131        14        52      (112)     (176)      (91)
    Non-controlling
     interest in
     subsidiaries        -         -         -         -        18        18
    -------------------------------------------------------------------------
    Net Income    $    302  $     26  $     98  $    (34) $   (137) $    255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $123,386  $ 24,206  $  7,855  $232,990  $  2,922  $391,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    104  $    668  $    322  $     93  $      2  $  1,189
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the three
     months ended                                        Corporate     Total
     January 31,       P&C      P&C                          Servi-    (GAAP
     2007 (2)       Canada      U.S.       PCG    BMO CM     ces(1)    basis)
    -------------------------------------------------------------------------
    Net interest
     income       $    760  $    186  $    151  $    232  $   (133) $  1,196
    Non-interest
     revenue           406        42       355       (25)       92       870
    -------------------------------------------------------------------------
    Total Revenue    1,166       228       506       207       (41)    2,066
    Provision for
     credit losses      80         9         1        20       (58)       52
    Non-interest
     expense           642       174       364       330       163     1,673
    -------------------------------------------------------------------------
    Income before
     taxes and
     non-controlling
     interest in
     subsidiaries      444        45       141      (143)     (146)      341
    Income taxes       147        16        50      (123)     (116)      (26)
    Non-controlling
     interest in
     subsidiaries        -         -         -         -         19        19
    -------------------------------------------------------------------------
    Net Income    $    297  $     29  $     91  $    (20) $    (49) $    348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average
     Assets       $117,128  $ 23,509  $  6,960  $192,772  $  3,066  $343,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill
     (As At)      $    101  $    778  $    327  $     98  $      2  $  1,306
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the three months                          United    countr-
     ended January 31, 2008             Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $    907  $    213  $     94  $  1,214
    Non-interest revenue                   591       289       (68)      812
    -------------------------------------------------------------------------
    Total Revenue                        1,498       502        26     2,026
    Provision for credit losses             74       148         8       230
    Non-interest expense                 1,150       414        50     1,614
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                       274       (60)      (32)      182
    Income taxes                             9       (48)      (52)      (91)
    Non-controlling interest
     in subsidiaries                        13         5         -        18
    -------------------------------------------------------------------------
    Net Income                        $    252  $    (17) $     20  $    255
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $236,226  $122,587  $ 32,546  $391,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    421  $    762  $      6  $  1,189
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Other
    For the three months                          United    countr-
     ended January 31, 2007             Canada    States       ies     Total
    -------------------------------------------------------------------------
    Net interest income               $    886  $    233  $     77  $  1,196
    Non-interest revenue                 1,002      (161)       29       870
    -------------------------------------------------------------------------
    Total Revenue                        1,888        72       106     2,066
    Provision for credit losses             51         1         -        52
    Non-interest expense                 1,216       418        39     1,673
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest in
     subsidiaries                          621      (347)       67       341
    Income taxes                           136      (178)       16       (26)
    Non-controlling interest in
     subsidiaries                           14         5         -        19
    -------------------------------------------------------------------------
    Net Income                        $    471  $   (174) $     51  $    348
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets                    $203,317  $107,919  $ 32,199  $343,435
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)                  $    419  $    887  $      -  $  1,306
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Corporate Services includes Technology and Operations.
    (2) Operating groups report on a taxable equivalent basis - see Basis of
        Presentation section.

    Prior periods have been restated to give effect to the current
    period's organization structure and presentation changes.

    





For further information:

For further information: Media Relations Contacts: Ralph Marranca,
Toronto, ralph.marranca@bmo.com, (416) 867-3996; Ronald Monet, Montreal,
ronald.monet@bmo.com, (514) 877-1873; Investor Relations Contacts: Viki
Lazaris, Senior Vice-President, viki.lazaris@bmo.com, (416) 867-6656; Steven
Bonin, Director, steven.bonin@bmo.com, (416) 867-5452; Krista White, Senior
Manager, krista.white@bmo.com, (416) 867-7019; Chief Financial Officer, Tom
Flynn, Executive Vice-President, Finance & Treasurer and Acting Chief
Financial Officer, tom.flynn@bmo.com, (416) 867-4649; Corporate Secretary,
Blair Morrison, Vice-President & Corporate Secretary, corp.secretary@bmo.com,
(416) 867-6785


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890