BMO Financial Group reports fourth quarter net income



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    Results demonstrate the value of BMO's diversified business mix and
    continued operating momentum in a difficult capital markets environment.
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    Performance Highlights:

    Fourth Quarter 2007 Compared with Fourth Quarter 2006:

    
    -   Net income of $452 million, down $244 million or 35%
    -   EPS(1) of $0.87 and cash EPS(2) of $0.89, both down $0.48 or 36% and
        35%, respectively
    -   Results in the quarter were reduced by significant items(3) that
        lowered net income by $275 million or $0.55 per share. Results of a
        year ago were affected by a reduction in the general allowance which
        increased net income by $23 million or $0.04 per share.
    -   Excluding these significant items(4):
        -   Net income of $727 million, up $54 million or 8.0%
        -   EPS of $1.42 and cash EPS of $1.44, up $0.11 or 8.4% and 8.3%,
            respectively
    -   Strong tier 1 capital ratio, at 9.51%

    Fiscal 2007 Compared with Fiscal 2006:

    -   Net income of $2,131 million, down $532 million or 20%
    -   EPS of $4.11 and cash EPS of $4.18, both down 20% or $1.04  and
        $1.05, respectively
    -   Return on equity of 14.4% reflecting core operating strength and
        diversification of businesses despite significant items in the year
    -   Results in the year were reduced by significant items(4) that lowered
        net income by $787 million or $1.55 per share. Results of a year ago
        were affected by a reduction in the general allowance which increased
        net income by $23 million or $0.04 per share.
    -   Excluding these significant items:
        -   Net income of $2,918 million, up $278 million or 10.5%
        -   EPS of $5.66, up $0.55 or 10.8% and cash EPS of $5.73, up $0.54
            or 10.4%
        -   Return on equity of 19.8%


    (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 and GAAP revenue and
        income taxes to a taxable equivalent basis (teb) 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. Revenues and income taxes in the financial statements are
        stated in accordance with GAAP. Otherwise, all revenues and income
        taxes and measures that include revenues or income taxes in this
        document are stated on a taxable equivalent basis.
    (3) The significant items are shown in our Net Income Summary table on
        the following page.
    (4) Results stated on a basis that excludes commodities losses, charges
        related to deterioration in the capital markets environment, changes
        in the general allowance for credit losses and/or restructuring
        charges are non-GAAP measures. Please see the Non-GAAP Measures
        section.


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                    Momentum Continues in Most Businesses
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    TORONTO, Nov. 27 /CNW/ - BMO Financial Group saw most of its businesses
achieve strong results in the fourth quarter ended October 31, 2007 in a
difficult capital markets environment.
    "By focusing on our customers and delivering on our priorities, we were
able to build solid momentum in most of our businesses. The quarter's results
led to record net income in fiscal 2007 for Personal & Commercial Banking
Canada (P&C Canada) and Private Client Group," said Bill Downe, President and
Chief Executive Officer of BMO Financial Group. "Our businesses performed well
in the quarter in the face of a difficult environment, which should pay off
when market conditions improve."
    For the fourth quarter ended October 31, 2007, BMO Financial Group
reported net income of $452 million or $0.87 per share. Results included
losses of $275 million after tax in respect of charges related to
deterioration in capital markets, losses in our commodities business, an
increase in the general allowance and a restructuring charge. Excluding these
significant items, net income was $727 million or $1.42 per share.
    Net income for fiscal 2007 was $2,131 million, a decrease of $532 million
from a year ago. Full year results were affected by $787 million of after-tax
losses in respect of the charges related to deterioration in capital markets,
losses in our commodities business, an increase in the general allowance and
restructuring charges. Excluding these significant items, net income was
$2,918 million, an increase of $278 million or 10.5% after adjusting for the
reduction in the general allowance in the prior year.
    "We earned $2.1 billion and achieved a return on equity of 14.4% in
fiscal 2007. Our return on equity, despite the challenges in the year,
reflects the strength of our core businesses and the benefits of our
diversified business mix," added Mr. Downe.
    "P&C Canada's financial results in the quarter rose from a year ago
despite market-driven spread compression. For fiscal 2007, P&C Canada earned
record net income of $1.25 billion and grew earnings by more than 9%. We are
pleased with our progress in 2007 and the Group is more focused on doing the
right things, especially in its attention to making it easier for our
customers to do business with us. These initiatives are working. We achieved
volume growth and increased market share in our priority markets such as
personal loans, credit cards and commercial loans and deposits. There is good
momentum and we will continue to invest in future growth.
    "Personal and Commercial Banking U.S. (P&C U.S.) had a great quarter. On
a U.S. dollar basis, earnings increased 51% from a year ago and 31% from the
third quarter. It marked the fourth successive quarter of posting better
earnings on a basis that excludes acquisition integration costs. On that
basis, its cash productivity ratio fell below 70% in the quarter, a tribute to
the team who have worked so hard to manage expenses in a tough operating
environment.
    "Private Client Group also achieved outstanding results. Its net income
was up 27% and revenue rose 10% from a year ago in spite of softening market
conditions in the quarter. For the year, Private Client Group earned record
net income of $408 million, up 15% from 2006, and continues to innovate and
invest in growing for the future.
    "Losses in our commodities business in the fourth quarter were lower and
we continued to implement our strategy to reduce both the size and risk of the
portfolio. The write-downs and valuation adjustments in our capital markets
business in the fourth quarter were typical of a widespread pattern of losses
incurred by many financial institutions. We will continue to take steps to
lower the volatility in our trading businesses as the losses in 2007 were
outside our risk tolerance, notwithstanding the difficult market environment.
Our goal is to earn an annual return on equity in excess of 20% in BMO Capital
Markets."
    Results in the fourth quarter included an increase in the general
allowance for credit losses of $50 million and a net restructuring charge of
$24 million in Corporate Services. The increase in the general allowance was
attributable to portfolio growth and risk migration. The net restructuring
charge relates to our continued efforts to improve performance, including
enhancing customer service by investing in front-line sales and service people
and simplifying processes across the organization. As such, we recorded a new
charge of $40 million while adding back into earnings $16 million of the
original first quarter restructuring charge, mostly due to higher than
anticipated staff redeployment within the organization.

    
    Net Income Summary
                                                                      Fiscal
    (Canadian $ in millions)           Q4-2007   Q3-2007   Q4-2006      2007
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    Net income as reported                 452       660       696     2,131
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    Significant Items (after tax)
      Commodities losses                    16        97         -       440
      Charges related to deterioration
       in capital markets                  211         -         -       211
      Changes in the general allowance      33         -       (23)       33
      Restructuring charges                 15         -         -       103
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    Total significant items                275        97       (23)      787
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    Net income excluding
     significant items(1)                  727       757       673     2,918
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    (1) These are non-GAAP amounts. Please see footnote 2 to the preceding
        Operating Highlights and the Non-GAAP Measures section that follows,
        which outline the use of non-GAAP measures in this document.
    

    "Looking ahead, our targets for 2008 reflect strong earnings momentum and
solid growth across all our businesses, while anticipating a weaker credit
environment," added Mr. Downe. "The targets reflect confidence in our
underlying businesses and their teams, the increased focus we are placing on
the customer and our commitment to generate strong returns for our
shareholders." The targets are based on our expectations for the economic
environment in 2008 as discussed in the Economic Outlook & Market Environment
section that follows.

    Fourth Quarter Operating Segment Overview

    P&C Canada

    Net income was $284 million, up $12 million or 4.2% from a year ago.
Results included three items that largely offset: a gain on sale of our
investment in MasterCard International Inc. common shares, a recovery of prior
years' income taxes and an adjustment to increase the liability for future
customer redemptions related to our credit card loyalty rewards program.
    There was strong volume growth in all businesses. Revenue in the quarter
was affected by lower net interest margins relative to a year ago, driven by
higher funding costs and increased competitive pressures on both personal and
commercial loan spreads. Over 2007, we have focused on placing the customer at
the centre of our activities. We earned record net income of $1.25 billion in
fiscal 2007, up 9%. Our businesses have good momentum as personal loans grew
and market share increased, and we continued to grow commercial loans and
deposits, priority areas for the Group. Growing personal deposits continues to
prove challenging.
    In personal banking, there was growth in most products, particularly
higher-spread loans and cards as we continue to focus on improving the
customer experience and strengthening relationships. Our AIR MILES debit card
initiative is proving popular with new and existing customers, as the number
of personal deposit customers increased significantly in the fourth quarter.
    In commercial banking, we increased our market share year-over-year and
there was continued good growth in deposits and particularly loans, which
increased 11% from a year ago with growth in all regions.
    In the quarter, we recorded an increase in our liability for future
customer redemptions related to our credit card loyalty rewards program. In
order to minimize volatility in earnings, we are exploring options to transfer
the liability and change the cost structure going forward to eliminate our
exposure to changing redemption patterns. We expect no significant change in
run-rate costs as a result of the charge or the change in cost structure.

    P&C U.S.

    Net income was US$32 million, up US$11 million or 51% from a year ago and
up US$8 million or 31% from the third quarter. First National Bank & Trust's
operating results, reduced acquisition integration costs and effective expense
management contributed to improved performance.
    P&C U.S. has operated in a difficult environment over 2007, with intense
competition, soft housing markets and lower economic growth. We have continued
to achieve volume growth over the year but net income growth has been hampered
by reduced net interest margins, which were down appreciably from a year ago.
Margins have stabilized over most of 2007 and consequently the benefits of
volume growth are starting to show up in revenue. Management has focused on
actively managing expenses in the difficult operating environment and in the
fourth quarter, excluding acquisition integration costs, improved the cash
productivity ratio to 69.7%. Excluding acquisition integration costs, P&C U.S.
net income increased quarter-over-quarter in each period in fiscal 2007.
    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.
Please see the following Economic Outlook & Market Environment section.
    We previously announced agreements to acquire Ozaukee Bank and Merchants
and Manufacturers Bancorporation, Inc., both located in Wisconsin. We expect
to close these transactions in the first quarter of fiscal 2008, subject to
receipt of approval from U.S. regulators and Ozaukee Bank shareholders. The
shareholders of Manufacturers Bancorporation, Inc. approved the transaction on
November 13, 2007. These acquisitions will add 40 full- service branches and
13 limited-service locations to our banking network.

    Private Client Group

    Net income was $107 million, up $23 million or 27% from a year ago, and
reached a record $408 million for the year. This marked another very
successful quarter for our wealth management business. Revenues for the
quarter were up strongly from a year ago with all lines of business
contributing to the growth. The group continues to focus on expanding and
improving the productivity of the sales force and improving the solutions and
services provided to clients. During the quarter, we launched MyLink, the
first online brokerage service in Canada that sends personalized messages to
individual investors. Guardian Group of Funds Ltd. completed the launch of the
GGOF 2007 Mining Flow-Through Limited Partnership, a fund that offers
investors the opportunity to invest in a diversified portfolio of mining
industry equities. On November 2, 2007, we announced an agreement to purchase
Pyrford International plc, a United Kingdom-based institutional asset manager,
adding to the group's international asset management capabilities and
improving our product capabilities for our North American customers. The
transaction is expected to close in the first quarter of fiscal 2008, subject
to regulatory approval.

    BMO Capital Markets

    Net income was $48 million, down $140 million or 74% from a year ago,
reflecting the after-tax impact of $211 million of charges related to
deterioration in capital markets and $16 million of losses in our commodities
business. Excluding these significant items, net income was $275 million, up
$87 million or 47% from a year ago.
    It was a challenging quarter for the group and for many other investment
banks as concerns over asset quality affected liquidity, credit spreads and
valuations. Activity levels were down from the first three quarters of the
year in most product areas.
    Commodities losses were down significantly from the prior three quarters.
We lowered the size and risk of the portfolio in the quarter in the course of
our trading activities.
    Net income for the year was $425 million, down $435 million from the
prior year. Excluding the fourth quarter charges of $211 million and the
$440 million of after-tax losses in the commodities business, net income was
$1,076 million, up $216 million or 25%, with very favourable performance in a
number of our businesses. Mergers and acquisitions and equity underwriting saw
extremely strong performance in fiscal 2007 and there was very strong growth
in lending fees and commissions. We maintained our momentum and focus as BMO
Capital Markets continued to demonstrate its Canadian leadership in our core
high-return fee businesses. Our market share decreased from the previous
quarter, however the aggregate amount raised from our deals increased. During
the quarter we participated in 100 new issues including 26 corporate debt
deals, 3 issues of preferred shares, 48 common equity transactions and 23
government debt issues, raising a total of $39 billion. We also advised on a
number of significant M&A transactions in the quarter.
    During the quarter, we were recognized, for the 27th consecutive year, as
the top equity research group in Canada in the Brendan Wood International
Survey. BMO Capital Markets launched a new suite of global treasury management
services, making it easier for companies in Canada and the U.S. to conduct
business around the world from their home base. We also established a foreign
exchange sales and trading desk in London, England, a move that will further
bolster BMO's strong position in the Canadian-dollar foreign exchange market.

    Performance Targets

    Given the significance of the losses incurred in our commodities business
this year and the fourth quarter charges related to deterioration in capital
markets, we were unable to achieve most of our annual financial targets. Our
targets for 2008 have been set in the context of our performance in 2007 and
our expectations for the economy in the year ahead.

    
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    Annual Targets for 2007(1)              Performance to
                                             October 31, 2007(2)

    -   5% to 10% EPS growth from a base    -   EPS of $4.38, down 14.3% from
        of $5.11 (excluding changes in          $5.11 a year ago
        the general allowance)
    -   ROE of 18% to 20%                   -   ROE of 15.3%
    -   Specific provision for credit       -   Specific provision for credit
        losses of $400 million or less          losses of $303 million

        We estimated at the end of the
        second quarter that specific
        provisions would be $300 million
        or less in fiscal 2007.

    -   Improve our cash productivity       -   Cash productivity ratio
        ratio by 100 to 150 basis points        deteriorated 473 basis points

                                            -   Tier 1 Capital Ratio(3)
                                                of 9.51%

    (1) Excluding restructuring charges     (2) Performance data for 2007
                                                above excludes the impact of
                                                changes in the general
                                                allowance and restructuring
                                                charges. After also excluding
                                                the impact of commodities
                                                losses: EPS was $5.24, up
                                                2.5% from $5.11; ROE was
                                                18.4%, and the cash
                                                productivity ratio
                                                deteriorated 37 basis points.

                                            (3) Our policy was to maintain a
                                                Tier 1 Capital Ratio of at
                                                least 8.0%. It was not a
                                                financial target in 2007.


    2008 Financial Targets(2)

    -   10% to 15% EPS growth from a base
        of $5.24 (excluding changes in
        the general allowance)
    -   ROE of 18% to 20%
    -   Specific provision for credit losses
        of $475 million or less


    -   Grow revenue by two percentage
        points more than expense growth

    -   Tier 1 Capital Ratio of at least 8.0%
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    The data in the above table are non-GAAP amounts or non-GAAP measures.
    Please see footnote 2 to the preceding Operating Highlights and the
    Non-GAAP Measures section that follows, which outline the use of non-GAAP
    measures in this document.

    The preceding section and above table contain forward-looking statements.
    Please see the Caution Regarding Forward-Looking Statements.
    


    Economic Outlook & Market Environment

    The Canadian economy grew at a moderate pace in 2007, with very strong
domestic demand partially offset by softening exports. The tightening in
credit conditions during the summer has yet to have a major adverse impact on
growth. Consumer spending was sustained by solid gains in employment and
income, supporting growth in personal loans. Housing market activity continued
at high levels, boosting residential mortgages. Companies invested briskly to
expand capacity, spurring growth in business credit. The strong Canadian
dollar held inflation low despite rising oil prices and the lowest
unemployment rate in 33 years.
    High commodity prices supported earnings growth in the resource sector,
fostering strong underwriting and merger and acquisition activities in the
first half of the year. The Bank of Canada raised overnight lending rates 25
basis points in July before moving to the sidelines as credit and liquidity
concerns unfolded in the markets in late summer. The U.S. economy grew at a
modest rate in 2007, slowing from the previous year as a result of a weakening
housing market and rising energy costs. An increase in default rates and a
decrease in sales have boosted the supply of unsold homes, causing house
prices to decline. While residential mortgage growth continued to slow, growth
in personal and business loans remained healthy. In September, the Federal
Reserve reduced interest rates for the first time in more than four years to
address the risks to the economy arising from tighter credit conditions and
weaker housing markets.
    In 2008, the Canadian economy is expected to continue growing moderately,
restrained by a soft U.S. economy and a strong Canadian dollar. A slowing in
housing activity due to a decline in affordability will likely dampen demand
for residential mortgages. In contrast, business investment should remain
healthy in light of sound corporate balance sheets, promoting growth in
business credit. Interest rates are expected to ease modestly in 2008. While
the Canadian dollar should remain strong relative to a generally weak U.S.
dollar, it is expected to weaken somewhat in 2008 in response to a moderation
in commodity prices. The U.S. economy is expected to continue growing modestly
in 2008, with weakness in the housing market partly offset by the supportive
effects of easier monetary policy and stronger net exports arising from brisk
global economic growth and the weaker U.S. dollar. Growth should pick up in
the second half of the year as the slump in the housing market recedes. Demand
for personal and business credit will likely continue to expand at a moderate
pace, although growth in residential mortgages is expected to slow further.
The Federal Reserve is expected to reduce rates further in early 2008.
    In the fourth quarter, BMO recorded $318 million ($211 million after tax)
of charges for certain trading activities and valuation adjustments related to
deterioration in capital markets. The charges included $169 million in respect
of trading and structured-credit related positions and preferred shares;
$134 million related to Canadian asset-backed commercial paper (ABCP); and
$15 million related to capital notes in the Links Finance Corporation (Links)
and Parkland Finance Corporation (Parkland) structured investment vehicles
(SIVs).
    The Canadian ABCP charges reflect $80 million for our investment in
commercial paper issued by one of our BMO-sponsored conduits, 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%. BMO has
not provided backstop liquidity commitments to any of the preceding conduits.
    The above noted BMO-sponsored conduit's underlying positions are super-
senior AAA-rated with exposures to high quality, diversified corporate debt
through collateralized debt obligations (CDOs). The conduit has no direct
exposure to U.S. subprime-related loans. We are in discussions with a number
of counterparties on restructuring alternatives regarding this conduit.
    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.
    The $15 million charge for our investment in the capital notes in the
Links and Parkland SIVs reduced the book value of BMO's capital notes to
$53 million. The conduit has approximately $2.2 billion of capital notes
outstanding. During the quarter, BMO agreed to participate in the senior notes
issued by these SIVs up to a maximum of approximately $1.3 billion, in
addition to our existing commitment for backstop liquidity facilities of
$221 million, for a total commitment of approximately $1.6 billion,
representing 8% of the SIVs total senior debt outstanding as of October 31,
2007. At October 31, 2007, BMO had purchased approximately $350 million of the
SIVs senior notes. Subsequent to year end, BMO purchased another $900 million
of senior notes.
    The assets of the SIVs consist of investment grade structured finance and
financial institution assets. They are high grade assets, as rated by external
agencies, with over 60% rated AAA, over 85% rated AA or above, and 99% rated A
or above. Less than 0.01% of the assets have direct exposure to U.S. subprime
loans.
    Given the amount of our investments in ABCP and the SIVs, and given the
uncertainty in the capital markets environment, these investments could
experience subsequent valuation gains and losses due to changes in market
value.
    This Economic Outlook & Market Environment section contains forward-
looking statements. Please see the Caution Regarding Forward-Looking
Statements.


    
                    Management's Discussion and Analysis

    MD&A commentary is as of November 27, 2007. 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 October 31, 2007,
included in this document, and the annual MD&A for the year ended October 31,
2006, included in BMO's 2006 Annual Report. The material that precedes this
section comprises part of this MD&A.

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    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.
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    Summary Data


                                               Increase/           Increase/
    (Canadian $ in millions,                   (Decrease)          (Decrease)
     except as noted)        Q4-2007         vs. Q4-2006         vs. Q3-2007
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    Revenue per financial
     statements                2,200      (261)     (11%)     (355)     (14%)
    Taxable equivalent
     basis (teb) adjustment       44        11       33%       (10)     (19%)
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    Revenue (teb)(1)           2,244      (250)     (10%)     (365)     (14%)
    Specific provision for
     credit losses               101        50     +100%        10       11%
    Increase in the general
     allowance                    50        85     +100%        50     +100%
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    Total provision for
     credit losses               151       135     +100%        60       66%
    Non-interest expense       1,631        18        1%       (28)      (2%)
    Restructuring charge          24        24     +100%        24     +100%
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    Total non-interest
     expense                   1,655        42        3%        (4)        -
    Income taxes per
     financial statements        (77)     (194)   (+100%)     (204)   (+100%)
    Taxable equivalent
     basis adjustment             44        11       33%       (10)     (19%)
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    Income taxes (teb)(1)        (33)     (183)   (+100%)     (214)   (+100%)
    Non-controlling
     interest in
     subsidiaries
    Net income                   452      (244)     (35%)     (208)     (32%)

    Amortization of intangible
     assets (after tax)            9         -         -        (1)     (10%)
    Cash net income(1)           461      (244)     (35%)     (209)     (31%)
    Earnings per share -
     basic ($)                  0.89     (0.48)     (35%)    (0.41)     (32%)
    Earnings per share -
     diluted ($)                0.87     (0.48)     (36%)    (0.41)     (32%)
    Cash earnings per share -
     diluted ($)(1)             0.89     (0.48)     (35%)    (0.41)     (32%)
    Return on equity (ROE)     12.2%               (7.2%)              (5.8%)
    Cash ROE(1)                12.5%               (7.1%)              (5.7%)
    Productivity ratio         75.2%                9.7%               10.3%
    Productivity (teb)
     ratio(1)                  73.7%                9.1%               10.2%
    Cash productivity (teb)
     ratio(1)                  73.3%                9.1%               10.1%
    Net interest margin on
     earning assets            1.47%              (0.31%)             (0.14%)
    Net interest margin on
     earning assets (teb)(1)   1.53%              (0.30%)             (0.15%)
    Effective tax rate        (19.3%)             (33.4%)             (35.0%)
    Effective tax rate
     (teb)(1)                  (7.4%)             (24.8%)             (28.4%)

    Capital Ratios
      Tier 1 Capital Ratio      9.51              (0.71%)              0.22%
      Total Capital Ratio      11.74              (0.02%)              0.56%
    Net income:
    Personal and Commercial
     Banking                     316        20        7%       (60)     (16%)
      P&C Canada                 284        12        4%       (66)     (19%)
      P&C U.S.                    32         8       35%         6       22%
    Private Client Group         107        23       27%         2        1%
    BMO Capital Markets           48      (140)     (74%)     (148)     (75%)
    Corporate Services,
     including Technology and
     Operations (T&O)            (19)     (147)   (+100%)       (2)     (11%)
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    BMO Financial Group Net
     Income                      452      (244)     (35%)     (208)     (32%)
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                                               Increase/
    Canadian $ in millions    Fiscal-          (Decrease)
     except as noted)           2007     vs. Fiscal-2006
    -----------------------------------------------------
    Revenue per financial
     statements                9,349      (636)      (6%)
    Taxable equivalent
     basis (teb) adjustment      180        53       42%
    -----------------------------------------------------
    Revenue (teb)(1)           9,529      (583)      (6%)
    Specific provision for
     credit losses               303        92       44%
    Increase in the general
     allowance                    50        85     +100%
    -----------------------------------------------------
    Total provision for
     credit losses               353       177     +100%
    Non-interest expense       6,442        89        1%
    Restructuring charge         159       159     +100%
    -----------------------------------------------------
    Total non-interest
     expense                   6,601       248        4%
    Income taxes per
     financial statements        189      (528)   (+100%)
    Taxable equivalent
     basis adjustment            180        53       42%
    -----------------------------------------------------
    Income taxes (teb)(1)        369      (475)     (56%)
    Non-controlling
     interest in
     subsidiaries
    Net income                 2,131      (532)     (20%)

    Amortization of intangible
     assets (after tax)           38         2        6%
    Cash net income(1)         2,169      (530)     (20%)
    Earnings per share -
     basic ($)                  4.18     (1.07)     (20%)
    Earnings per share -
     diluted ($)                4.11     (1.04)     (20%)
    Cash earnings per share -
     diluted ($)(1)             4.18     (1.05)     (20%)
    Return on equity (ROE)     14.4%               (4.8%)
    Cash ROE(1)                14.7%               (4.8%)
    Productivity ratio         70.6%                7.0%
    Productivity (teb)
     ratio(1)                  69.3%                6.5%
    Cash productivity (teb)
     ratio(1)                  68.8%                6.4%
    Net interest margin on
     earning assets            1.59%              (0.22%)
    Net interest margin on
     earning assets (teb)(1)   1.65%              (0.21%)
    Effective tax rate          7.9%              (12.9%)
    Effective tax rate
     (teb)(1)                  14.3%               (9.2%)

    Capital Ratios
      Tier 1 Capital Ratio     9.51%              (0.71%)
      Total Capital Ratio     11.74%              (0.02%)
    Net income:
    Personal and Commercial
     Banking                   1,364       107        9%
      P&C Canada               1,250       108        9%
      P&C U.S.                   114        (1)      (1%)
    Private Client Group         408        53       15%
    BMO Capital Markets          425      (435)     (51%)
    Corporate Services,
     including Technology and
     Operations (T&O)            (66)     (257)   (+100%)
    -----------------------------------------------------
    BMO Financial Group Net
     Income                    2,131      (532)     (20%)
    -----------------------------------------------------
    -----------------------------------------------------
    (1) These are non-GAAP amounts or non-GAAP measures. Please see footnote
        2 to the preceding Operating Highlights and the Non-GAAP Measures
        section that follows, which outline the use of non-GAAP measures in
        this document.
    


    Management's Responsibility for Financial Information

    BMO's Annual Report will contain a statement signed by the President &
Chief Executive Officer (CEO) and the Executive Vice-President Finance and
Treasurer and Acting Chief Financial Officer (Acting CFO) outlining
management's responsibility for financial information contained in the report.
In addition, BMO's CEO and Acting CFO are expecting to sign certifications
relating to the appropriateness of the financial disclosures in our annual
filings and the design and effectiveness 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.
    In connection with BMO Financial Group's review of its losses in its
commodities business, BMO determined at the end of the second quarter that a
more appropriate market-based methodology should be used for valuing the
commodities portfolio and that the independent price verification processes
previously performed by BMO failed to identify price discrepancies. These
factors, together with increased concerns with the reliability of quotes from
BMO's principal broker used in the first quarter valuation resulted in the
restatement of BMO's previously reported financial statements for the quarter
ended January 31, 2007.

    In light of the foregoing, BMO made the following changes in the second,
third and fourth quarters:

    
    -   placed two of our commodities professionals on leave. Those
        individuals are no longer employed by BMO;
    -   changed reporting lines within BMO Capital Markets for the
        commodities business, appointed a new head of energy trading and
        hired additional key personnel;
    -   suspended our business relationship with the principal broker used in
        the first quarter valuation;
    -   changed our independent price verification process to incorporate a
        more appropriate market-based valuation methodology for determining
        ongoing mark-to-market valuation of the commodities portfolio; and
    -   increased management oversight, implemented new risk limits and
        reduced existing risk limits.
    

    Except for the above changes, there were no changes in our internal
control over financial reporting in fiscal 2007 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting. BMO Financial Group's management, including the CEO and
Acting CFO, has evaluated the effectiveness of our internal control over
financial reporting using the framework and criteria established in Internal
Control - Integrated Framework, issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this evaluation, management
is expecting to conclude that internal control over financial reporting was
effective as of October 31, 2007.
    BMO will file the applicable Canadian and U.S. CEO and Acting CFO
certifications with the Canadian Securities Administrators and the SEC in the
United States in December 2007 when we file our Annual Report and other annual
disclosure documents.
    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 2006 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 2007 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 2006 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.
    Assumptions about the performance of the Canadian and U.S. economies in
2008 and how that will affect our businesses are material factors we consider
when setting our strategic priorities and objectives, and in determining our
financial targets, including provision for credit losses. Key assumptions
include 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 have assumed that interest rates in 2008 will decline
slightly in Canada and the United States, and that the Canadian dollar will
trade at approximately 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. Assumptions
about the terms of any agreement we enter to transfer our liability for future
customer redemptions, or to change the cost structure, relating to our
customer credit card loyalty rewards program are material factors we
considered in assessing expected changes in the run-rate costs of the program.
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.

    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:
losses in our commodities business in 2007 and related performance-based
compensation; charges related to deterioration in capital markets in the
fourth quarter of 2007; restructuring charges recorded in the first and fourth
quarters; 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 and cash productivity 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 measures.
    BMO, like many banks, analyzes revenue, and 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 effective income tax rate is also analyzed on a taxable equivalent basis
for consistency of approach. 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 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,                               Fiscal-   Fiscal-
     except as noted)        Q4-2007   Q3-2007   Q4-2006      2007      2006
    -------------------------------------------------------------------------
    Net interest income per
     financial statements(a)   1,196     1,247     1,215     4,843     4,744
    Non-interest revenue       1,004     1,308     1,246     4,506     5,241
    -------------------------------------------------------------------------
    Revenue per financial
     statements(b)             2,200     2,555     2,461     9,349     9,985
    Taxable equivalent basis
     (teb) adjustment(c)          44        54        33       180       127
    -------------------------------------------------------------------------
    Net interest income (teb)
     (a+c) (d) (1)             1,240     1,301     1,248     5,023     4,871
    Non-interest revenue       1,004     1,308     1,246     4,506     5,241
    -------------------------------------------------------------------------
    Revenue (teb) (e) (1)      2,244     2,609     2,494     9,529    10,112
    -------------------------------------------------------------------------

    Provision for income
     taxes per financial
     statements(f)               (77)      127       117       189       717
    Taxable equivalent basis
     adjustment                   44        54        33       180       127
    -------------------------------------------------------------------------
    Provision for income
     taxes (teb) (g) (1)         (33)      181       150       369       844
    -------------------------------------------------------------------------
    Non-interest expense(h)    1,631     1,659     1,613     6,442     6,353
    Restructuring charge(i)       24         -         -       159         -
    -------------------------------------------------------------------------
    Total non-interest
     expense(j)                1,655     1,659     1,613     6,601     6,353
    Amortization of
     intangible assets           (11)      (11)      (11)      (46)      (44)
    -------------------------------------------------------------------------
    Cash-based expense(k) (1)  1,644     1,648     1,602     6,555     6,309
    -------------------------------------------------------------------------
    Net income(l)                452       660       696     2,131     2,663
    Amortization of
     intangible assets,
     net of income taxes           9        10         9        38        36
    -------------------------------------------------------------------------
    Cash net income(m) (1)       461       670       705     2,169     2,699
    Preferred share dividends    (12)       (9)       (8)      (43)      (30)
    Charge for capital(1)       (378)     (381)     (372)   (1,523)   (1,439)
    -------------------------------------------------------------------------
    Net economic profit(1)        71       280       325       603     1,230
    -------------------------------------------------------------------------
    Restructuring charge(i)       24         -         -       159         -
    Income taxes thereon           9         -         -        56         -
    -------------------------------------------------------------------------
    Net impact of
     restructuring(n)             15         -         -       103         -
    -------------------------------------------------------------------------

    Commodities
     losses(o)                    24       149         -       853         -
    Performance - based
     compensation(p)               -         -         -      (120)        -
    Related income taxes           8        52         -       293         -
    -------------------------------------------------------------------------
    Net impact of Commodities
     losses(q)                    16        97         -       440         -
    -------------------------------------------------------------------------

    Charges related to
     deterioration in capital
     markets environment(t)      318         -         -       318         -
    Income taxes thereon         107         -         -       107         -
    -------------------------------------------------------------------------
    Net impact of charges
     related to capital
     markets environment(r)      211         -         -       211         -
    -------------------------------------------------------------------------
    Increase (decrease) in
     general allowance            50         -       (35)       50       (35)
    Income taxes thereon          17         -        12        17        12
    -------------------------------------------------------------------------
    Net impact of change in
     general allowance(s)         33         -       (23)       33       (23)
    -------------------------------------------------------------------------
    Net impact of
     significant items
     (n+q+r+s)(2)                275        97       (23)      787       (23)
    -------------------------------------------------------------------------

    Productivity ratio (%)
     ((j/b) x 100)              75.2      64.9      65.5      70.6      63.6
    Productivity (teb) ratio
     (1) (%) ((j/e) x 100)      73.7      63.6      64.6      69.3      62.8
    Cash productivity (teb)
     ratio (1) (%) ((k/e)
     x 100)                     73.3      63.2      64.2      68.8      62.4
    Net interest margin
     annualized (%)
     ((a/average earning
      assets) x 100)            1.47      1.61      1.78      1.59      1.81
    Net interest margin (teb)
     annualized (1) (%)
     ((d/average earning
     assets) x 100)             1.53      1.68      1.83      1.65      1.86
    EPS (uses net income) ($)   0.87      1.28      1.35      4.11      5.15
    Cash EPS(1) (uses cash
     net income) ($)            0.89      1.30      1.37      4.18      5.23
    Effective tax rate (%)
     (f/income before income
     taxes)                    (19.3)     15.7      14.1       7.9      20.7
    Effective tax rate (teb)
     (%) (1) (g/income
     before income taxes
     plus teb adjustment)       (7.4)     21.0      17.4      14.3      23.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Measures on a basis that
     excludes the impact of
     significant items(1)
    Revenue (teb) (e+o+t)(3)   2,586     2,758     2,494    10,700    10,112
    Expenses (j-i-p)(4)        1,631     1,659     1,613     6,562     6,353
    Cash-based expense
     (k-i-p)(5)                1,620     1,648     1,602     6,516     6,309
    Net income (l+2)             727       757       673     2,918     2,640
    Cash net income (m+2)        736       767       682     2,956     2,976
    Productivity ratio (teb)
     (%) (4/3) x 100            63.1      60.2      64.6      61.3      62.8
    Cash productivity ratio
     (teb) (%)
     (5/3) x 100                62.7      59.7      64.2      60.9      62.4
    EPS (uses net income
     excluding significant
     items)                     1.42      1.47      1.31      5.66      5.11
    Cash EPS (uses cash
     net income excluding
     significant items)         1.44      1.49      1.33      5.73      5.19
    ROE (%) (uses net
     income excluding
     significant items)         19.9      20.6      18.8      19.8      19.2
    Effective tax rate
     (teb) (%) (g + tax
     on significant
     items)/(income before
     income tax + teb
     adjustment + impact
     of significant items
     excluding tax)             12.6      23.1      16.7      22.0      23.5
    ------------------------------------------------------------------------
    1) These are non-GAAP amounts or non-GAAP measures.
    


    Foreign Exchange

    The average Canadian/U.S. dollar exchange rate strengthened by 7% in the
fourth quarter after having strengthened by close to that level in the third
quarter. By October 31, 2007 the Canadian dollar had strengthened further,
trading at $0.945 per U.S. dollar. The following table indicates the relevant
average Canadian/U.S. dollar exchange rates and the impact of changes in the
rates. 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 U.S. dollar net income for that quarter. As
such, these activities partially mitigate the impact of exchange rate
fluctuations within a single quarter; hedging transactions are not, however,
designed to offset the impact of year-over-year fluctuations in exchange
rates.
    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.


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

                                                                     Fiscal-
                                                      Q4-2007           2007

                                                                         vs.
                                                     vs.       vs.   Fiscal-
    (Canadian $ in millions, except as noted)    Q4-2006   Q3-2007      2006
    -------------------------------------------------------------------------
    Canadian/U.S. dollar
     exchange rate (average)
      Current period                              0.9986    0.9986    1.0926
      Prior period                                1.1153    1.0673    1.1322
    Decreased revenue                                (67)      (39)      (87)
    Decreased expense                                 45        27        57
    Decreased provision for credit losses              7         4         9
    Decreased income taxes                             6         3         5
    -------------------------------------------------------------------------
    Decreased net income before hedging gains         (9)       (5)      (16)
    Hedging gains                                     13        13        21
    Income taxes thereon                              (4)       (4)       (7)
    -------------------------------------------------------------------------
    Increased (decreased) net income                   -         4        (2)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    Net Income
    Q4 2007 vs Q4 2006

    Reported net income of $452 million for the fourth quarter of 2007
decreased $244 million from a year ago. Earnings per share were $0.87,
compared with $1.35. Results included after tax losses of $275 million in
respect of charges related to deterioration in capital markets, losses in our
commodities business, an increase in the general allowance and a restructuring
charge. Excluding these significant items, net income was $727 million, an
increase of $54 million from a year ago after adjusting for a reduction in the
general allowance in the prior year.
    P&C Canada net income increased $12 million. There was good volume growth
in a number of product areas. Revenues were affected by lower net interest
margin, while expenses increased. Results in P&C Canada also 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.
    P&C U.S. net income increased US$11 million or 51% due to the First
National Bank & Trust acquisition, reduced acquisition integration costs and
effective cost control. Results in the quarter were encouraging, reflecting
stability in net interest margin. Excluding acquisition integration costs, net
income improved for the fourth successive quarter, with a cash productivity of
less than 70% in the fourth quarter, on that basis. The benefits of volume
growth were largely offset by lower net interest margin.
    Private Client Group net income increased $23 million or 27%. Broad-based
revenue growth was only partially offset by higher revenue-based costs and
costs of investing to drive future revenue growth.
    BMO Capital Markets net income fell by $140 million. BMO Capital Markets
results were affected by a $318 million ($211 million after tax) charge for
certain trading activities and valuation adjustments related to deterioration
in capital markets and a $24 million ($16 million after tax) loss in our
commodities business. The losses are discussed in more detail on page 4 in the
Economic Outlook and Market Environment section. Excluding these significant
items, there was favourable performance in a number of areas including
lending, foreign exchange trading and commission revenues.
    Corporate Services net income declined $147 million. Results in Corporate
Services include a $24 million ($15 million after tax) net restructuring
charge, and a $50 million ($33 million after tax) increase in the general
allowance for credit losses. Results in the fourth quarter of 2006 included a
$35 million ($23 million after tax) reduction in the general allowance for
credit losses and tax benefits from the resolution of tax matters and a large
number of small initiatives. Results in the current quarter also included
$18 million of prior years' income tax recoveries.
    The $24 million net restructuring charge comprises a $40 million charge
and a recovery of $16 million in respect of the $135 million restructuring
charge recorded in the first quarter. Costs of achieving the planned
reductions in non-customer-facing positions were lower than anticipated mostly
due to higher redeployment of staff.

    Q4 2007 vs Q3 2007

    Reported net income decreased $208 million or 32% from the third quarter,
due largely to the deterioration in capital markets. Results in our underlying
businesses were generally weaker than in the third quarter, reflecting
deteriorating capital markets conditions and the softer banking environment.
Net interest margins were lowered in P&C Canada by rising funding costs for
variable rate loans, where there is limited opportunity to pass on the higher
costs to customers. Weak capital market conditions affected activities in BMO
Capital Markets although there were higher investment securities gains in the
group. Private Client Group results were essentially flat relative to the
third quarter because of lower commission revenue.

    Fiscal 2007 vs Fiscal 2006

    In fiscal 2007, net income totalled $2,131 million, a decrease of
$532 million from $2,663 million a year ago. Full year results were affected
by $787 million of after-tax losses in respect of the charges related to
deterioration in capital markets, losses in our commodities business, an
increase in the general allowance and restructuring charges. Excluding these
significant items, net income was $2,918 million, an increase of $278 million
or 10.5%, after adjusting for the reduction in the general allowance in the
prior year.
    Our commodities business incurred $853 million of losses ($440 million
net of income taxes after also adjusting $120 million for reduced performance-
based compensation). We recorded a $318 million ($211 million after tax)
charge in the fourth quarter related to deterioration in capital market,
$50 million ($33 million after tax) in the fourth quarter for an increase in
the general allowance and also recorded $159 million ($103 million after-tax)
in restructuring charges. In 2006, we recorded a $35 million ($23 million
after tax) reduction in the general allowance.
    P&C Canada achieved strong improvement, earning record net income with
solid volume growth in a number of product areas, while net interest margin
was unchanged as better volumes in more profitable products were offset by
increased funding costs. Private Client Group net income also increased
strongly as it too earned record net income. All its lines of business
contributed higher revenues, with particularly strong contributions from full-
service investing and mutual funds. P&C U.S. net income improved slightly on a
U.S. dollar basis with results improving each quarter excluding acquisition
integration costs. There was good volume growth and active management of
expenses. Revenue was affected by reduced net interest margin. BMO Capital
Markets was down sharply because of the commodities losses and the charges in
the fourth quarter related to deterioration in the capital markets
environment. Excluding those significant items, results were up strongly. A
number of its businesses performed extremely well with strong growth in
mergers and acquisitions fees, equity underwriting, commissions and other
businesses. Corporate Services net income was down significantly due to higher
provisions for credit losses, restructuring charges, reduced securitization
revenues and lower income tax benefits. Higher provisions for credit losses
were in part due to an increase in the general allowance in 2007 compared with
a reduction in 2006.

    Revenue

    As explained in the preceding Non-GAAP Measures section, BMO, like many
banks, analyzes revenue on a taxable equivalent basis (teb) and all revenues
and ratios computed using revenue in this MD&A are stated on that basis.
Changes in net interest income and non-interest revenue are reviewed in the
sections that follow.


    
    Net Interest Margin (teb) (*)
                                                                    Increase
                                      Increase  Increase           (Decrease)
                                     (Decrease)(Decrease)                vs.
                                           vs.       vs.   Fiscal-   Fiscal-
    (In basis points)        Q4-2007   Q4-2006   Q3-2007      2007      2006
    -------------------------------------------------------------------------
    P&C Canada                   260        (6)      (13)      266         -
    P&C U.S.                     334       (23)       (3)      337       (30)
    -------------------------------------------------------------------------
    Personal and Commercial
     Client Group                271        (9)      (12)      277        (5)
    Private Client Group         912       (68)      (45)      966       (33)
    BMO Capital Markets           52        (5)       (9)       60        (2)
    Corporate Services,
     including Technology and
     Operations (T&O)             nm        nm        nm        nm        nm
    -------------------------------------------------------------------------
    BMO Financial Group          153       (30)      (15)      165       (21)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Total Canadian Retail(xx)    296        (5)      (12)      302         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.
    (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
    


    Net Interest Income
    Q4 2007 vs Q4 2006

    Net interest income decreased $8 million or 0.7% from a year ago to
$1,240 million. There was strong growth in BMO Capital Markets with reduced
income in Corporate Services, related to lower interest refunds on tax
recoveries and lower securitization revenues. Average earning assets increased
$51 billion or 19% to $322 billion, primarily due to growth in lower-spread
trading products assets and corporate loans in BMO Capital Markets as its
average earning assets increased $46 billion. P&C Canada average earning
assets increased $5 billion due to loan growth across all products except
mortgages, which declined as expected.
    BMO's overall net interest margin on average earning assets for the
fourth quarter of 2007 was 1.53%, or 30 basis points lower than in the fourth
quarter of the prior year. The two main drivers of the 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 30 basis points
was mainly due to growth in lower-spread assets in BMO Capital Markets. 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.
    P&C Canada net interest margin declined due to increased funding costs
and competitive pressures on personal and commercial loans, partially offset
by increased mortgage spreads and positive mix as deposit growth improved. Net
interest margin in P&C U.S. has been affected by the continued shifting of
customers' preferences from higher-spread to lower-spread loan and deposit
products and by competitive pressures. BMO Capital Markets net interest margin
declined due to growth in low-spread assets including increased levels of high
quality, highly liquid assets.

    Q4 2007 vs Q3 2007

    Relative to the third quarter, net interest income decreased $61 million
or 4.8%, due to lower net interest margin. Average earning assets increased
$14 billion primarily due to growth in fixed income assets in BMO Capital
Markets. The addition of high quality and highly liquid assets was in response
to the difficult capital markets environment. The net interest margin
decreased by 15 basis points. Lower net interest margin in P&C Canada was
primarily attributable to increased funding costs, with limited opportunity to
pass on cost increases on variable rate loans as well as lower mortgage
refinancing fees and competitive pressures in personal and commercial loans.
The reduction in BMO Capital Markets net interest margin was due to lower
spreads on corporate loans and the corporate portfolio, and growth in lower-
spread fixed income assets.

    Fiscal 2007 vs Fiscal 2006

    Net interest income increased $152 million or 3.1%, driven by volume
growth in the operating groups partly offset by lower earnings in Corporate
Services. Corporate Services net interest income declined as a result of lower
credit card earnings from the card loans securitization in the fourth quarter
of 2006 and lower interest earned on tax refunds and reserves.
    Average earning assets increased $43 billion or 16%, rising $38 billion
in BMO Capital Markets and $5 billion in P&C Canada. In P&C Canada there was
strong asset growth in all business lines except mortgages. There were
increases in trading assets and corporate loans in BMO Capital Markets.
    BMO's overall net interest margin fell 21 basis points to 1.65%. The
overall decline was mainly due to the mix impact of growth in BMO Capital
Markets and reduced earnings in Corporate Services. Net interest margin was
stable in P&C Canada as improved mortgage spreads were offset by increased
funding costs. Net interest margin was lower in P&C U.S., which has been
affected by the continued shifting of customers' preferences from higher-
spread to lower-spread loan and deposit products and by competitive pressures.
Net interest margin also decreased in Private Client Group, primarily due to
lower loan spread.

    Non-Interest Revenue

    Non-interest revenue decreased $242 million from a year ago to
$1,004 million. In the quarter, we recorded $318 million of charges related to
the deterioration in the capital markets environment, of which $310 million
was recorded in non-interest revenue. This was comprised of a $295 million
reduction in non-interest trading revenues and a $15 million reduction in
investment securities gains. Trading non-interest revenue decreased
$255 million from a year ago. Card services fees decreased $210 million due to
the $185 million adjustment to increase the liability for future customer
redemptions related to our credit card loyalty rewards program and the
$1.5 billion cards securitization in the fourth quarter of 2007. Investment
securities gains increased $102 million due to the $107 million gain on sale
of MasterCard shares. There were also increases in securities commissions,
lending fees, mutual fund fees and foreign exchange revenues.
    Relative to the third quarter, non-interest revenue decreased
$304 million. Trading revenues decreased $205 million and card services fees
were $184 million lower, reflecting the factors discussed previously.
Commodities losses recorded in non-interest revenue were $22 million,
significantly better than the $147 million of losses in the third quarter.
Securities commissions, mergers and acquisitions fees and equity underwriting
fees were also appreciably lower. Investment securities gains increased
$142 million, reflecting the gain on sale of MasterCard shares and the
realization of a merchant banking investment. Foreign exchange revenues
increased amid heightened volatility in currency markets.
    Year to date, non-interest revenue decreased $735 million or 14%. The
$853 million of commodities losses was comprised of $841 million charged to
trading non-interest revenue and $12 million charged to trading net interest
income. Trading revenues included in non-interest revenue decreased
$1,205 million, largely due to the $841 million of commodities losses and the
$295 million of charges in the fourth quarter. Card services fees fell $289
million due to the adjustment to increase the liability for future customer
redemptions in our credit card loyalty rewards program and a credit card loan
securitization in the fourth quarter of 2006, resulting in card fee revenue
being subsequently recognized as securitization revenue. The remaining
components of non-interest revenue increased $759 million. There were
significant increases in securitization revenue, mutual fund fees, lending
fees and securities commissions as well as equity underwriting and mergers and
acquisitions fees, which were at particularly robust levels. Insurance
revenues also increased.

    Non-Interest Expense

    Non-interest expense increased $42 million or 2.6% from a year ago to
$1,655 million. The increase was due to the $24 million net restructuring
charge and increases in professional fees, computer costs and promotion,
partially offset by reduced performance-based costs. There was an increase in
front-line sales and service staff in P&C Canada and Private Client Group but
increased salary and benefits costs in those groups were offset by lower costs
in Corporate Services. BMO's productivity ratio was 73.7% in the quarter,
compared with 64.6% a year ago and 63.6% in the third quarter. The cash
productivity ratio was 73.3%, compared with 64.2% a year ago. The ratios were
affected by the write-downs and adjustments in the quarter.
    The net restructuring charge relates to a new expense of $40 million
while adding back into earnings $16 million from the original first quarter
$135 million restructuring charge, mostly due to higher than anticipated staff
redeployment within the organization.
    Relative to the third quarter, non-interest expense decreased $4 million
or 0.3%. There was a $98 million reduction in performance-based compensation,
in keeping with weaker results. This was largely offset by the net
restructuring charge and increases in professional fees, computer costs and
business promotion.
    In fiscal 2007, non-interest expense increased $248 million or 3.9%. The
increase was largely attributable to the $159 million of restructuring charges
and increased salary costs in respect of added front-line sales and service
staff in P&C Canada and Private Client Group as well as increased staffing
costs in our other businesses. There were significant increases in computer
costs and depreciation as well as business promotion and communications.
    Performance-based compensation was down, as a significant reduction in
BMO Capital Markets was only partially offset by higher revenue-based costs in
Private Client Group. BMO's productivity ratio was 69.3% for the year,
compared with 62.8% a year ago.
    Excluding significant items, the cash productivity ratio was 62.7% in the
current quarter, compared with 59.7% in the third quarter and 64.2% a year
ago. On a similarly-adjusted basis, the cash productivity ratio was 60.9% for
the year and 62.4% in the comparable period of 2006.

    Risk Management

    Credit conditions have deteriorated somewhat from the highly favourable
conditions of 2006. The provision for credit losses totalled $151 million in
the fourth quarter of 2007, comprised of $101 million of specific provisions
and a $50 million increase in the general allowance for credit losses. The
provision for credit losses totalled $16 million in the fourth quarter of
2006, comprised of $51 million of specific provisions net of a $35 million
reduction in the general allowance. Specific provisions totalled $91 million
in the third quarter of 2007 and there was no change in the general allowance
that quarter.
    In fiscal 2007, the provision for credit losses totalled $353 million,
comprised of $303 million of specific provisions and a $50 million increase in
the general allowance. In fiscal 2006, the provision for credit losses
totalled $176 million, comprised of $211 million of specific provisions net of
a $35 million reduction in the general allowance.
    Specific provisions in the fourth quarter were at their highest level in
some time, representing an annualized 19 basis points of average net loans and
acceptances, including securities borrowed or purchased under resale
agreements. However, almost half of the provision related to a single credit
that was designated as impaired in the quarter, most of which has been written
off. In fiscal 2007, specific provisions represented 15 basis points of
average net loans and acceptances, up from 11 basis points in the prior year,
and continue to be appreciably lower than the 23 basis point average of the
past five fiscal years. The components of the specific provision are outlined
in the Provisions for Credit Losses table.
    The increase in the general allowance in the quarter was attributable to
portfolio growth and risk migration. Last year's $35 million reduction in the
general allowance was primarily attributable to a $1.5 billion credit card
receivables securitization. The general allowance is maintained to absorb
impairment in the existing credit portfolio that cannot yet be associated with
specific credit assets and remains adequate.
    New impaired loan formations totalled $238 million in the quarter, up
$152 million from a year ago and $132 million from the third quarter.
Formations are in line with expectations at this stage of the economic cycle.
Gross impaired loans and acceptances were up from a year ago and the third
quarter. Factors contributing to the changes are outlined in the accompanying
table.
    BMO has no material exposure to U.S. subprime mortgages and we are
comfortable with the level of our exposure. Please see the preceding Economic
Outlook & Market Environment section.
    BMO's market risk and liquidity and funding management practices and key
measures are outlined on pages 69 to 72 of the 2006 Annual Report. Trading and
Underwriting Market Value Exposure and Earnings Volatility exposure has
decreased year-over-year, mainly due to reduced exposure in the commodity
portfolios coupled with reduced interest rate exposure in the mark-to-market
and accrual accounted, money market portfolios. During the second and third
quarters, we changed our independent price verification process to incorporate
a more appropriate market-based valuation methodology for determining ongoing
mark-to-market valuation of the commodities portfolio and implemented new risk
limits and reduced previously existing limits for the portfolio. Otherwise,
there have been no significant changes to our market risk management practices
during the quarter, or since last year.
    There have been no significant changes to 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, or
since last year.
    Specific provisions in fiscal 2007, at $303 million, were slightly above
our estimate of $300 million at the end of the second quarter, but below our
2007 target of $400 million that was established at the beginning of the year.
We expect the credit environment to be somewhat weaker in fiscal 2008, given
current concerns in capital markets, high energy prices, more sluggish
economic growth and the impact of the high Canadian dollar on exporters.
Overall for fiscal 2008, we expect new specific provisions to be higher and
reversals and recoveries to be lower than in fiscal 2007. We anticipate
specific provisions in fiscal 2008 to be $475 million or less, up from
$303 million in 2007 and the fiscal 2007 target of $400 million or less
established at the beginning of the year.
    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                                      Fiscal-   Fiscal-
     as noted)               Q4-2007   Q3-2007   Q4-2006      2007      2006
    -------------------------------------------------------------------------
    New specific provisions      152       129        96       460       410
    Reversals of previously
     established allowances      (27)      (14)      (21)      (66)      (87)
    Recoveries of loans
     previously written-off      (24)      (24)      (24)      (91)     (112)
    -------------------------------------------------------------------------
    Specific provision for
     credit losses               101        91        51       303       211
    Increase in (reduction
     in) the general
     allowance                    50         -       (35)       50       (35)
    -------------------------------------------------------------------------
    Provision for credit
     losses                      151        91        16       353       176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Specific PCL as a % of
     average net loans and
     acceptances (annualized)  0.19%     0.18%     0.11%      0.15%    0.11%
    PCL as a % of average
     net loans and
     acceptances (annualized)  0.29%     0.18%     0.03%      0.17%    0.09%

    Changes in Gross Impaired
    Loans and Acceptances (GIL)

    (Canadian $ in
     millions, except
     as noted)
    -------------------------------------------------------------------------
    GIL, Beginning of Period     618       688       663       666       804
    Additions to impaired
     loans & acceptances         238       106        86       588       420
    Reductions in impaired
     loans & acceptances(1)      (19)      (60)        3      (143)     (220)
    Write-offs                  (117)     (116)      (86)     (391)     (338)
    -------------------------------------------------------------------------
    GIL, End of Period           720       618       666       720       666
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    GIL as a % of gross loans
     & acceptances             0.36%     0.30%     0.35%     0.36%     0.35%
    GIL as a % of equity and
     allowances for credit
     losses                    4.07%     3.49%     3.81%     4.07%     3.81%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
        (Q4-07 $73MM; Q3-07 $76MM; Q4-06 $69MM; Fiscal-2007 $216MM; and
        Fiscal-2006 $267MM).


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

    (After-tax
     Canadian                        Market value                   12-month
     equivalent)                    exposure (MVE)       earnings volatility
    -------------------------------------------------------------------------
                        Oct. 31  Jul. 31  Oct. 31  Oct. 31  Jul. 31  Oct. 31
                           2007     2007     2006     2007     2007     2006
    -------------------------------------------------------------------------
    Trading and
     Underwriting         (18.2)   (22.5)   (23.4)   (12.6)   (17.1)   (17.5)
    Structural           (249.9)  (258.6)  (267.0)   (24.2)   (28.7)   (24.1)
    -------------------------------------------------------------------------
    BMO Financial Group  (268.1)  (281.1)  (290.4)   (36.8)   (45.8)   (41.6)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Measured at a 99% confidence interval. Losses are in brackets.


    Total Trading and Underwriting MVE Summary ($ millions)(*)
                                                                       As at
                                                              As at  October
                                     For the quarter ended  July 31,      31,
    (Pre-tax                              October 31, 2007     2007     2006
    Canadian           Quarter-                             Quarter- Quarter-
     equivalent)            end  Average     High      Low      end      end
    ------------------------------------------------------- -----------------
    Commodities Risk       (2.7)    (4.7)    (6.2)    (2.7)    (3.3)    (8.4)
    Equity Risk            (9.5)   (11.2)   (15.9)    (6.9)   (12.6)    (9.8)
    Foreign exchange Risk  (0.9)    (0.7)    (2.0)    (0.3)    (1.0)    (3.3)
    Interest rate Risk
     (Mark-to-Market)      (4.7)    (5.2)   (10.2)    (3.7)    (3.9)    (7.1)
    Correlation             3.8      5.2      9.3      2.8      4.3     10.4
    -------------------------------------                   -----------------
    Comprehensive Risk    (14.0)   (16.6)   (20.1)   (13.1)   (16.5)   (18.2)
    Interest rate Risk
     (accrual)             (9.1)   (10.4)   (11.9)    (8.8)    (9.2)   (12.0)
    Issuer Risk            (4.9)    (5.9)    (8.4)    (4.2)    (8.9)    (5.8)
    -------------------------------------                   -----------------
    Total MVE             (28.0)   (32.9)   (36.3)   (28.0)   (34.6)   (36.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) One-day measure using a 99% confidence interval. Losses are in
        brackets and benefits are presented as positive numbers.


    Structural Balance Sheet Earnings and Value Sensitivity to Changes in
    Interest Rates ($ millions)(*)
                                                                    Earnings
                                         Economic                sensitivity
    (After-tax Canadian                     value              over the next
     equivalent)                      sensitivity                  12 months
    -------------------------------------------------------------------------
                        Oct. 31  Jul. 31  Oct. 31  Oct. 31  Jul. 31  Oct. 31
                           2007     2007     2006     2007     2007     2006
    -------------------------------------------------------------------------
    100 basis point
     increase            (241.1)  (252.8)  (237.4)     6.6     12.3     10.9
    100 basis point
     decrease             180.1    197.5    181.6    (15.4)   (26.7)   (10.5)

    200 basis point
     increase            (516.6)  (535.0)  (508.0)     0.4      7.9     12.1
    200 basis point
     decrease             318.6    333.7    318.3    (17.0)   (52.3)    (4.1)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (*) Losses are in brackets and benefits are presented as positive numbers
    


    Income Taxes

    As explained in the Non-GAAP Measures section, BMO adjusts revenue to a
taxable equivalent basis for analysis in this MD&A, with an offsetting
adjustment to the provision for income taxes. As such, the provisions for
income taxes and associated rates are stated on a taxable equivalent basis in
the MD&A.
    The provision for income taxes declined $183 million from the fourth
quarter a year ago and $214 million from the third quarter, to a recovery of
$33 million. The effective tax rate for the quarter was a recovery rate of
7.4%, compared with an income tax rate of 17.4% in the fourth quarter a year
ago and 21.0% in the third quarter. The effective rate for the year to date
was 14.3%, compared with 23.6% a year ago. The decreases in the quarterly and
year-to-date tax rates were largely attributable to favourable resolution of
income tax audits resulting in the recovery of prior period income taxes and a
relatively higher proportion of income from lower-tax-rate jurisdictions. We
expect a current sustainable tax rate of 21% to 24% in fiscal 2008 on a non-
teb basis. In fiscal 2008, management expects to continue to assess the
performance of the operating groups on a teb basis and report accordingly; for
BMO's consolidated results, we expect to assess performance on a non-teb
basis.
    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 charge in shareholders' equity of $397 million for
the quarter and $575 million for the year to date. Refer to the Consolidated
Statement of Changes in Shareholders' Equity included in the unaudited
consolidated financial statements for further details.

    Capital Management

    BMO's Tier 1 Capital Ratio was 9.51%, up from 9.29% at the end of the
third quarter but down from 10.22% at the end of 2006. The ratio remains
strong and is well above our minimum target of 8.0%.
    BMO's Total Capital Ratio was 11.74%, up from 11.18% at the end of the
third quarter but marginally down from 11.76% at the end of 2006.
    The quarter-over-quarter increase in the Tier 1 Capital Ratio was
primarily attributable to growth in Tier 1 capital and lower risk-weighted
assets. Tier 1 capital increased due to the $250 million issuance of Class B
Preferred Shares, Series 14 and the reclassification of preferred shares of a
subsidiary from Tier 2 to innovative Tier 1 capital as approved by OSFI,
partially offset by foreign exchange adjustments due to the strengthening of
the Canadian dollar. Risk-weighted assets were lower primarily due to lower
mortgage risk-weighted assets in P&C Canada as a result of the execution of
initiatives to manage regulatory capital requirements on a cost-effective
basis and lower P&C U.S. risk-weighted assets due to the stronger Canadian
dollar.
    The quarter-over-quarter increase in the Total Capital Ratio was
primarily the result of lower risk-weighted assets and growth in total
capital. Total capital grew as a result of the Series 14 preferred share
issuance, and the issuance of $800 million of BMO Trust Subordinated Notes -
Series A by BMO Subordinated Notes Trust, a non-consolidated closed-end trust
wholly owned by BMO, partially offset by foreign exchange adjustments.
    The decrease in the Tier 1 Capital Ratio relative to the end of 2006 was
largely attributable to risk-weighted asset growth, partially offset by growth
in Tier 1 capital. The Total Capital Ratio was relatively unchanged, as growth
in risk-weighted assets was largely offset by growth in Total capital.
    During the quarter, we repurchased 1,406,300 Bank of Montreal common
shares under our common share repurchase program at an average cost of $64.83
per share, for a total cost of $91 million. There have been 8,087,400 common
shares repurchased under the normal-course issuer bid that expired on
September 5, 2007 and pursuant to which BMO was permitted to repurchase for
cancellation up to 15 million common shares, representing approximately 3% of
BMO's public float. On August 31, 2007, we announced that the Toronto Stock
Exchange had accepted BMO's notice of intention to make a new normal course
issuer bid under which we may purchase up to 25 million common shares, being
approximately 5% of the public float, between September 6, 2007 and
September 5, 2008. We increased the program from a maximum 15 million to
25 million shares to provide greater flexibility in the management of BMO's
capital levels.
    On November 27, 2007, BMO's Board of Directors declared a quarterly
dividend payable to common shareholders of $0.70 per share, unchanged from the
fourth quarter's dividend.

    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.


    
    Review of Operating Groups' Performance

    Operating Groups' Summary Income Statements and Statistics for Q4-2007

                                                  Q4-2007
                              -----------------------------------------------
                                                         Corporate
    (Canadian $ in millions,                             including     Total
     except as noted)            P&C       PCG    BMO CM       T&O       BMO
    -------------------------------------------------------------------------
    Net interest income (teb)    942       155       233       (90)    1,240
    Non-interest revenue         390       355       188        71     1,004
    -------------------------------------------------------------------------
    Total revenue (teb)        1,332       510       421       (19)    2,244
    Provision for (recovery
     of) credit losses            89         1        19        42       151
    Non-interest expense         857       352       397        25     1,631
    Restructuring charge           -         -         -        24        24
    -------------------------------------------------------------------------
    Total non-interest
     expense                     857       352       397        49     1,655
    Income before income
     taxes and non-
     controlling interest
     in subsidiaries             386       157         5      (110)      438
    Income taxes (teb)            70        50       (43)     (110)      (33)
    Non-controlling interest
     in subsidiaries               -         -         -        19        19
    -------------------------------------------------------------------------
    Net income Q4-2007           316       107        48       (19)      452
    -------------------------------------------------------------------------
    Net income Q3-2007           376       105       196       (17)      660
    -------------------------------------------------------------------------
    Net income Q4-2006           296        84       188       128       696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          133        75       (96)      (41)       71
    Return on equity           17.8%     35.8%      3.0%        nm     12.2%
    Cash return on equity      18.3%     36.1%      3.0%        nm     12.5%
    Productivity ratio (teb)   64.3%     68.9%     94.3%        nm     73.7%
    Cash productivity ratio
     (teb)                     63.7%     68.6%     94.3%        nm     73.3%
    Net interest margin on
     earning assets (teb)      2.71%     9.12%     0.52%        nm     1.53%
    Average common equity      6,775     1,162     5,074        nm    14,273
    Average earning assets
     ($ billions)              137.8       6.8     178.1        (1)    321.7
    Full-time equivalent
     staff                    20,294     4,362     2,365     8,806    35,827
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                FISCAL-2007
                              -----------------------------------------------
                                                         Corporate
    (Canadian $ in millions,                             including
     except as noted)            P&C       PCG    BMO CM       T&O Total BMO
    -------------------------------------------------------------------------
    Net interest income (teb)  3,795       613       974      (359)    5,023
    Non-interest revenue       1,856     1,441       995       214     4,506
    -------------------------------------------------------------------------
    Total revenue (teb)        5,651     2,054     1,969      (145)    9,529
    Provision for (recovery
     of) credit losses           358         3        77       (85)      353
    Non-interest expense       3,366     1,427     1,565        84     6,442
    Restructuring charge           -         -         -       159       159
    -------------------------------------------------------------------------
    Total non-interest
     expense                   3,366     1,427     1,565       243     6,601
    Income before income
     taxes and non-
     controlling interest
     in subsidiaries           1,927       624       327      (303)    2,575
    Income taxes (teb)           563       216       (98)     (312)      369
    Non-controlling interest
     in subsidiaries               -         -         -        75        75
    -------------------------------------------------------------------------
    Net income Q4-2007         1,364       408       425       (66)    2,131
    -------------------------------------------------------------------------
    Net income Q3-2007
    -------------------------------------------------------------------------
    Net income Q4-2006         1,257       355       860       191     2,663
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Other statistics
    -------------------------------------------------------------------------
    Net economic profit          672       286      (133)     (222)      603
    Return on equity           20.5%     35.1%      7.8%        nm     14.4%
    Cash return on equity      21.0%     35.4%      7.8%        nm     14.7%
    Productivity ratio (teb)   59.6%     69.4%     79.4%        nm     69.3%
    Cash productivity ratio
     (teb)                     58.9%     69.2%     79.4%        nm     68.8%
    Net interest margin on
     earning assets (teb)      2.77%     9.66%     0.60%        nm     1.65%
    Average common equity      6,461     1,146     4,972        nm    14,506
    Average earning assets
     ($ billions)              136.8       6.4     162.3        (1)    304.5
    Full-time equivalent
     staff
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    nm - not meaningful
    

    The following sections review the financial results of our operating
segments and operating groups for the fourth quarter of 2007.
    Periodically, certain business lines and units within the business lines
are transferred between operating groups to more closely align BMO's
organizational structure and its strategic priorities. All comparative figures
are reclassified to reflect these transfers.
    Note 14 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

    (Canadian $ in                             Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    942         3         -       (39)      (4%)
    Non-interest revenue         390       (54)     (12%)     (109)     (22%)
    -------------------------------------------------------------------------
    Total revenue (teb)        1,332       (51)      (4%)     (148)     (10%)
    Provision for credit
     losses                       89         3        4%        (1)        -
    Non-interest expense         857         4        1%        10        1%
    -------------------------------------------------------------------------
    Income before income
     taxes and non-controlling
     interest in subsidiaries    386       (58)     (13%)     (157)     (29%)
    Income taxes (teb)            70       (78)     (53%)      (97)     (58%)
    Non-controlling interest in
     subsidiaries                  -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   316        20        7%       (60)     (16%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            7        (1)        -        (2)      (9%)
    -------------------------------------------------------------------------
    Cash net income              323        19        7%       (62)     (16%)
    -------------------------------------------------------------------------

    Return on equity           17.8%               (1.4%)              (4.3%)
    Cash return on equity      18.3%               (1.4%)              (4.3%)
    Productivity ratio (teb)   64.3%                2.6%                7.1%
    Cash productivity ratio
     (teb)                     63.7%                2.7%                7.1%
    Net interest margin on
     earning assets (teb)      2.71%              (0.09%)             (0.12%)
    Average earning assets   137,765     4,946        4%       180         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in                              Increase/
     millions, except         Fiscal-          (Decrease)
     as noted)                  2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)  3,795       114        3%
    Non-interest revenue       1,856        51        3%
    -----------------------------------------------------
    Total revenue (teb)        5,651       165        3%
    Provision for credit
     losses                      358        14        4%
    Non-interest expense       3,366        88        3%
    -----------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries  1,927        63        3%
    Income taxes (teb)           563       (44)      (7%)
    Non-controlling interest in
     subsidiaries                  -         -         -
    -----------------------------------------------------
    Net income                 1,364       107        9%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of intangible
     assets (after tax)           33         1        7%
    -----------------------------------------------------
    Cash net income            1,397       108        8%
    -----------------------------------------------------

    Return on equity           20.5%                   -
    Cash return on equity      21.0%                   -
    Productivity ratio (teb)   59.6%               (0.2%)
    Cash productivity ratio
     (teb)                     58.9%               (0.2%)
    Net interest margin on
     earning assets (teb)      2.77%               (0.05)
    Average earning assets   136,805     6,229        5%
    -----------------------------------------------------
    -----------------------------------------------------


    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)

    (Canadian $ in                             Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    770        15        2%       (30)      (4%)
    Non-interest revenue         344       (59)     (15%)     (110)     (24%)
    -------------------------------------------------------------------------
    Total revenue (teb)        1,114       (44)      (4%)     (140)     (11%)
    Provision for credit
     losses                       81         2        3%         -         -
    Non-interest expense         696        21        3%        26        4%
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in
     subsidiaries                337       (67)     (17%)     (166)     (33%)
    Income taxes (teb)            53       (79)     (60%)     (100)     (65%)
    Non-controlling interest in
     subsidiaries                  -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                   284        12        4%       (66)     (19%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            2        (1)      (8%)        1         -
    -------------------------------------------------------------------------
    Cash net income              286        11        4%       (65)     (19%)
    -------------------------------------------------------------------------

    Personal, Insurance & Other
     revenue                     597         -         -       (42)      (7%)
    Commercial revenue           336        15        5%       (12)      (3%)
    Cards revenue                181       (59)     (25%)      (86)     (32%)
    Productivity ratio (teb)   62.5%                4.2%                9.0%
    Cash productivity ratio
     (teb)                     62.3%                4.2%                9.0%
    Net interest margin on
     earning assets (teb)      2.60%              (0.06%)             (0.13%)
    Average earning assets   117,325     4,915        4%     1,315        1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (Canadian $ in                              Increase/
     millions, except         Fiscal-          (Decrease)
     as noted)                  2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)  3,065       124        4%
    Non-interest revenue       1,678        39        2%
    -----------------------------------------------------
    Total revenue (teb)        4,743       163        4%
    Provision for credit
     losses                      323         9        3%
    Non-interest expense       2,670        73        3%
    -----------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in
     subsidiaries              1,750        81        5%
    Income taxes (teb)           500       (27)      (5%)
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------
    Net income                 1,250       108        9%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of intangible
     assets (after tax)            8         -         -
    -----------------------------------------------------
    Cash net income            1,258       108        9%
    -----------------------------------------------------

    Personal, Insurance &
     Other revenue             2,463        93        4%
    Commercial revenue         1,352        78        6%
    Cards revenue                928        (8)      (1%)
    Productivity ratio (teb)   56.3%               (0.4%)
    Cash productivity ratio
     (teb)                     56.1%               (0.5%)
    Net interest margin on
     earning assets (teb)      2.66%                   -
    Average earning assets   115,147     4,714        4%
    -----------------------------------------------------
    -----------------------------------------------------
    

    Q4 2007 vs Q4 2006

    Net income increased $12 million or 4.2% to $284 million. Results
included a $6 million increase to net income arising from three items: a
$107 million ($83 million after tax) gain on 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 are exploring options to
transfer the liability and change the cost structure going forward to
eliminate our exposure to changing redemption patterns. We expect no
significant change in run-rate costs as a result of the charge or change in
cost structure.
    Revenue fell $44 million or 3.8%. The MasterCard gain and the adjustment
to the loyalty rewards program liability lowered revenue by $78 million or
6.7%.
    In our personal banking business, revenue growth was flat as volume
growth in personal loans and branch-originated mortgages, increased
securitization revenue and growth in sales of term investments and mutual
funds were offset by increased cost of funds and competitive pressures on our
premium savings accounts. Personal loans increased 14.5% and we increased
market share 70 basis points from a year ago to 11.10%. Due to our decision to
focus on relationship-based branch-originated mortgages over our third-party
mortgage portfolio and broker balances, which are declining, mortgage market
share declined 136 basis points from a year ago to 12.17%. We anticipate
market share stabilizing and growing over time as we increase the size of our
specialized sales force. Personal deposits remained basically flat, resulting
in a 66 basis point loss of market share from the prior year to 11.52%. We are
targeting growth in personal deposits through simplified products, streamlined
account opening and an improved customer experience. Our AIR MILES debit card
initiative is proving popular with new and existing customers as the number of
personal deposit customers has significantly increased in the fourth quarter.
    In our commercial banking segment, revenues increased $15 million or 4.5%
as there was growth in both commercial loans and deposits, partially offset by
increased cost of funds and competitive pressures. Commercial loans grew 11.0%
from a year ago. BMO ranks second in Canadian business banking lending market
share and we increased our market share by 63 basis points from a year ago to
19.17%. Our objective is to be the market leader. In the $1 to $5 million loan
segment, there was loan growth of 8.1% while market share increased 81 basis
points.
    Cards and payment service revenues declined $59 million, but increased by
$19 million or 8.0% excluding the MasterCard share gain and loyalty reward
program liability adjustment, due to volume growth.
    Net interest margin was 6 basis points lower. In the current quarter,
margins were affected by an increased cost of funds and by competitive
pressures. Margins were also affected by competitive pressures on personal and
commercial loans, partially offset by improved mortgage spreads, as we exit
from third-party and broker products, and positive mix as deposit growth
improved.
    Non-interest expense was up $21 million or 3.2% due to higher employee-
related costs primarily related to the expansion of the front-line sales and
service staff, higher promotional costs including the AIR MILES debit card
initiative, and bcpbank Canada costs, partially offset by lower allocated
costs related to P&C Canada's share of capital tax and efficiency
improvements. The cash productivity ratio deteriorated 424 basis points to
62.3%. The adjustment to the loyalty rewards program liability net of the
MasterCard gain negatively affected cash productivity by 408 basis points.
    Average loans and acceptances, including securitized loans, increased
$6.8 billion or 5.7% from a year ago, while personal and commercial deposits
increased $2.8 billion or 6.2%.

    Q4 2007 vs Q3 2007

    Net income decreased $66 million or 19%.
    Revenue decreased $140 million or 11%. The MasterCard share gain and the
adjustment to the loyalty rewards program liability lowered revenue by
$78 million or 6.2% with revenue also impacted by lower net interest margin
and lower securitization revenue. Net interest margin fell by 13 basis points
to 2.60%, five basis points of which was attributable to increased funding
costs, with limited opportunity to pass on cost increases on variable rate
loans. Lower mortgage refinancing fees and competitive pressures on our
personal and commercial loans also contributed to the decline.
    Non-interest expense increased $26 million or 3.8%, primarily due to
higher promotional costs including the AIR MILES debit card initiative and
higher employee-related costs as the front-line workforce expanded.
    Average loans and acceptances, including securitized loans, increased
$2.1 billion or 1.7% from the third quarter, while personal and commercial
deposits increased $0.3 billion or 0.6%.
    Personal loan market share increased 32 basis points from the third
quarter, while mortgage market share declined 52 basis points. Personal
deposits market share decreased by 21 basis points. Business banking loan
market share decreased by 3 basis points, while in the $1 to $5 million loan
segment there was a market share decline of 10 basis points.

    Fiscal 2007 vs Fiscal 2006

    Net income increased $108 million or 9.4% to a record $1,250 million. We
achieved volume growth and increased market share in our priority markets such
as personal loans and credit cards as well as commercial loans and deposits.
There is good momentum and we will continue to invest in future growth.
    Results in 2007 and 2006 included notable items that increased earnings
in both years by comparable amounts. Results in 2007 were increased
$52 million by: the $6 million impact of the three items noted in the fourth
quarter, a $14 million recovery of prior years' income taxes in the third
quarter, a $26 million ($23 million after tax) insurance gain and a
$14 million ($9 million after tax) investment security gain in the second
quarter. Results in 2006 were increased $51 million by a $38 million
($25 million after tax) gain on the MasterCard IPO and a $26 million recovery
of prior years' income taxes.
    Revenue rose $163 million or 3.6%. The notable items above reduced
revenue growth by $76 million or 1.7%. There was volume-based growth in
personal and commercial loans, commercial deposits and cards. There were also
higher revenues from securitization, as well as increased sales of term
investment products and mutual funds. Net interest margin was unchanged at
2.66%, as improved mortgage spreads were offset by increased funding costs.
    Non-interest expense increased $73 million or 2.8% due to higher
 employee-related expense as the front-line sales and service staff expand,
bcpbank Canada costs and higher promotional costs including the AIR MILES
debit card initiative. These cost increases were partially offset by lower
allocated costs related to a share of capital taxes and efficiency
improvements. The cash productivity ratio improved 41 basis points to 56.1%,
but would have improved by 132 basis points excluding the notable items. This
follows a 65 basis point improvement in 2006, as revenue growth outpaced
expense growth in both periods.

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


    (Canadian $ in                              Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    172       (12)      (6%)       (9)      (5%)
    Non-interest revenue          46         5       12%         1        3%
    -------------------------------------------------------------------------
    Total revenue (teb)          218        (7)      (3%)       (8)      (3%)
    Provision for
     credit losses                 8         1       14%        (1)      (4%)
    Non-interest expense         161       (17)     (10%)      (16)      (9%)
    -------------------------------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries     49         9       24%         9       21%
    Income taxes (teb)            17         1        7%         3       20%
    Non-controlling interest
     in subsidiaries               -         -         -         -         -
    -------------------------------------------------------------------------
    Net income                    32         8       35%         6       22%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            5         -         -        (3)     (38%)
    -------------------------------------------------------------------------
    Cash net income               37         8       30%         3        9%
    -------------------------------------------------------------------------

    Productivity ratio (teb)   73.8%               (5.4%)              (4.5%)
    Cash productivity
     ratio (teb)               70.4%               (5.6%)              (4.4%)
    Net interest margin on
     earning assets (teb)      3.34%              (0.23%)             (0.03%)
    Average earning assets    20,440        31         -    (1,135)      (5%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    -------------------------------------------------------------------------
    Net interest income (teb)    173         9        5%         4        2%
    Non-interest revenue          47        11       26%         5       11%
    -------------------------------------------------------------------------
    Total revenue (teb)          220        20        9%         9        3%
    Non-interest expense         161         1        1%        (4)      (3%)
    Net Income                    32        11       51%         8       31%
    Average assets            22,194     2,360       12%       218        1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in                              Increase/
     millions, except         Fiscal           (Decrease)
     as noted)                 -2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)    730       (10)      (1%)
    Non-interest revenue         178        12        7%
    -----------------------------------------------------
    Total revenue (teb)          908         2         -
    Provision for
     credit losses                35         5       18%
    Non-interest expense         696        15        2%
    -----------------------------------------------------
    Income before income taxes
     and non-controlling
     interest in subsidiaries    177       (18)      (9%)
    Income taxes (teb)            63       (17)     (21%)
    Non-controlling interest
     in subsidiaries               -         -         -
    -----------------------------------------------------
    Net income                   114        (1)      (1%)
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of intangible
     assets (after tax)           25         1        4%
    -----------------------------------------------------
    Cash net income              139         -         -
    -----------------------------------------------------

    Productivity ratio (teb)   76.7%                1.4%
    Cash productivity
     ratio (teb)               73.2%                1.2%
    Net interest margin on
     earning assets (teb)      3.37%              (0.30%)
    Average earning assets    21,658     1,515        8%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    -----------------------------------------------------
    Net interest income (teb)    669        16        2%
    Non-interest revenue         164        18       12%
    -----------------------------------------------------
    Total revenue (teb)          833        34        4%
    Non-interest expense         637        35        6%
    Net Income                   105         3        3%
    Average assets            21,524     2,183       11%
    -----------------------------------------------------
    -----------------------------------------------------
    


    Q4 2007 vs Q4 2006

    Net income increased $8 million or 35% from a year ago. On a U.S. dollar
basis, net income was US$32 million, up US$11 million or 51%. Excluding
acquisition integration costs, net income was US$33 million. On this basis,
net income increased for the fourth consecutive quarter, growing US$9 million
or 38% from US$24 million in the fourth quarter of 2006.
    Revenue fell $7 million or 2.9%. On a U.S. dollar basis, revenue
increased US$20 million or 8.5%. The acquisition of First National Bank &
Trust (FNBT) added US$13 million to revenues. The benefits of improved loan
and deposit growth were partially offset by the effects of the continued
customer shift to higher cost deposits and competitive pressures on commercial
loan pricing. The impact of a 23 basis point reduction in net interest margin
largely offset the effects of 11% growth in loans (8.2% excluding FNBT) and
9.3% growth in deposits (3.5% excluding FNBT).
    Non-interest expense decreased $17 million or 9.5%, but increased
US$1 million, or 1.1% on a U.S. dollar basis. Excluding FNBT operating costs
of US$9 million and integration costs, expense decreased US$5 million or 3%
and reflects active and disciplined core expense management. Our cash
productivity ratio improved 560 basis points to 70.4%. Excluding the impact of
integration costs in the current period, the cash productivity ratio was 69.7%
and reflects management's continued focus on controlling expense growth
through reducing personnel costs, slowing branch expansion and other
initiatives.

    Q4 2007 vs Q3 2007

    Net income rose $6 million or 22%. On a U.S. dollar basis, excluding
acquisition integration costs in both periods, net income increased $4 million
or 15%.
    Revenue decreased $8 million or 3.4% from the third quarter, but
increased $9 million or 3.3% on a U.S. dollar basis. The increase was due to
volume growth and increased service charge fees. Net interest margin fell by
3 basis points but has been stable for most of 2007 after declining over much
of fiscal 2006.
    Non-interest expense decreased $16 million or 9.0%. On a U.S. dollar
basis, non-interest expense decreased US$4 million or 2.7%, primarily due to a
$5 million reduction in acquisition-integration costs.

    Fiscal 2007 vs Fiscal 2006

    Net income decreased $1 million or 1.2%. On a U.S. dollar basis, net
income improved $3 million or 3.0%. We have continued to achieve volume growth
over the year and margins have stabilized over most of 2007. Management has
focused on actively managing expenses in the difficult operating environment.
    Revenue rose $2 million or 0.3%. On a U.S. dollar basis, revenue
increased $34 million or 4.1%. Acquisitions contributed US$39 million to
increased revenue. In the rest of our business, the effects of loan and
deposit growth and higher service charge fees were more than offset by the
impact of lower net interest margins. Excluding FNBT, loans grew
US$1.7 billion or 10.3% and deposits grew US$0.7 billion or 4.4%. Net interest
margin was down 30 basis points due to competitive pressures on pricing and
the continued shift of customers' preferences from higher-spread to lower-
spread deposit products. The overall decline in net interest margin was
mitigated by pricing actions in certain deposit categories. Net interest
margin has been stable for most of 2007.
    Non-interest expense increased $15 million or 2.2%. On a U.S. dollar
basis, expense increased US$35 million or 5.9%. Excluding acquisitions, which
contributed US$28 million to our costs, expense growth was 2.3%. The remaining
increase reflected operating costs of our new branch technology platform,
increased costs associated with branches opened during fiscal 2006 and higher
business volumes. These factors were partially offset by the impact of expense
management initiatives. As a result of expense growth exceeding revenue
growth, our cash productivity ratio deteriorated by 120 basis points to 73.2%.
Excluding acquisition-integration costs, our cash productivity ratio was
71.6%.
    Our Retail Net Promoter Score, a measure of the strength of customer
loyalty, was 41, up from 39 in 2006.


    
    Private Client Group (PCG)


    (Canadian $ in                              Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    155        10        7%         1        2%
    Non-interest revenue         355        35       11%       (11)      (3%)
    -------------------------------------------------------------------------
    Total revenue (teb)          510        45       10%       (10)      (2%)
    Provision for
     credit losses                 1         -         -         -         -
    Non-interest expense         352        17        5%        (5)      (1%)
    -------------------------------------------------------------------------
    Income before income taxes   157        28       22%        (5)      (2%)
    Income taxes (teb)            50         5       12%        (7)      (9%)
    -------------------------------------------------------------------------
    Net income                   107        23       27%         2        1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            1         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income              108        23       26%         2        1%
    -------------------------------------------------------------------------

    Return on equity           35.8%                7.2%                0.1%
    Cash return on equity      36.1%                7.1%                0.1%
    Productivity ratio (teb)   68.9%               (3.1%)               0.2%
    Cash productivity
     ratio (teb)               68.6%               (3.0%)               0.2%
    Net interest margin on
     earning assets (teb)      9.12%              (0.68%)             (0.45%)
    Average earning assets     6,770       875       15%       417        7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)           62         4        6%         -         -
    Non-interest expense          65         7       13%         6       12%
    Net Income                    (2)       (2)   (+100%)       (4)   (+100%)
    Cash net income               (2)       (2)   (+100%)       (5)   (+100%)
    Average assets             2,210       151        7%       107      5.1%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in                              Increase/
     millions, except         Fiscal-          (Decrease)
     as noted)                  2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)    613        44        8%
    Non-interest revenue       1,441       117        9%
    -----------------------------------------------------
    Total revenue (teb)        2,054       161        8%
    Provision for
     credit losses                 3         -         -
    Non-interest expense       1,427        85        6%
    -----------------------------------------------------
    Income before income taxes   624        76       14%
    Income taxes (teb)           216        23       11%
    -----------------------------------------------------
    Net income                   408        53       15%
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of intangible
     assets (after tax)            4         -         -
    -----------------------------------------------------
    Cash net income              412        53       15%
    -----------------------------------------------------

    Return on equity           35.1%                4.6%
    Cash return on equity      35.4%                4.5%
    Productivity ratio (teb)   69.4%               (1.4%)
    Cash productivity
     ratio (teb)               69.2%               (1.3%)
    Net interest margin on
     earning assets (teb)      9.66%              (0.33%)
    Average earning assets     6,352       649       11%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Total revenue (teb)          243         -         -
    Non-interest expense         240         1         -
    Net Income                     2        (1)     (41%)
    Cash net income                4        (1)     (27%)
    Average assets             2,108         8      0.4%
    -----------------------------------------------------
    -----------------------------------------------------
    


    Q4 2007 vs Q4 2006

    Net income was $107 million, up $23 million or 27%, as our continued
momentum contributed to outstanding results.
    Revenue increased $45 million or 9.7% and $53 million or 11% excluding
the impact of the weaker U.S. dollar. Non-interest revenue increased 11%,
primarily due to higher fee-based revenue in Full-Service Investing, higher
mutual fund revenue and higher trust & investment revenue in North American
Private Banking. Strong growth in transaction volumes in BMO InvestorLine also
contributed to the growth. Net interest income increased 7.0% primarily due to
higher deposit balances and spreads in the brokerage businesses.
    Non-interest expense increased $17 million or 5.0% and $24 million or
7.2% excluding the impact of the weaker U.S. dollar, primarily due to higher
investment spending in our client-facing sales force and supporting technology
and higher revenue-based costs. The cash productivity ratio improved 301 basis
points over the prior year.
    The Group's $275 billion of assets under management and administration
and term deposits were affected by the weaker U.S. dollar and softer market
conditions. Assets increased $19 billion or 6.9% 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.

    Q4 2007 vs Q3 2007

    Net income increased $2 million or 1.4%.
    Revenue decreased $10 million or 1.7% and $4 million or 0.8% excluding
the impact of the weaker U.S. dollar. This decline was primarily due to lower
commission revenue in Full-Service Investing, partially offset by higher
mutual fund revenue.
    Non-interest expense decreased $5 million or 1.5% and $1 million or 0.2%
excluding the impact of the weaker U.S. dollar. Revenue-based costs declined
in line with lower revenue, and our businesses continued to invest for the
future.
    Results for the quarter benefited from a lower effective tax rate. The
cash productivity ratio deteriorated 18 basis points over the prior quarter.

    Fiscal 2007 vs Fiscal 2006

    Net income was a record $408 million, up $53 million or 15% from 2006.
Private Client Group continues to innovate and invest in growing for the
future.
    Revenue increased $161 million or 8.4% and $172 million or 9.1% excluding
the impact of the weaker U.S. dollar, with all lines of business contributing
to the growth. Non-interest revenue increased 8.8%, primarily driven by higher
fee-based revenue in Full-Service Investing and in the mutual fund businesses,
and higher trust & investment revenue in North American Private Banking.
Strong growth in assets and transaction volumes in BMO InvestorLine was offset
by pricing changes resulting from competitive pricing pressures in the
industry. Net interest income increased 7.7% primarily due to increased
deposit balances and spreads in the brokerage businesses and term investment
products.
    Non-interest expense increased $85 million or 6.3% and $94 million or
7.0% excluding the benefit of the weaker U.S. dollar, primarily due to higher
revenue-based costs and increased investment spending to drive future revenue
growth.
    The cash productivity ratio improved by 136 basis points over the prior
year.

    
    BMO Capital Markets

    (Canadian $ in                              Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    233        42       22%       (21)      (8%)
    Non-interest revenue         188      (254)     (57%)     (249)     (57%)
    -------------------------------------------------------------------------
    Total revenue (teb)          421      (212)     (34%)     (270)     (39%)
    Provision for
     credit losses                19         -         -         -         -
    Non-interest expense         397         6        1%       (48)     (11%)
    -------------------------------------------------------------------------
    Income before income taxes     5      (218)     (98%)     (222)     (98%)
    Income taxes
     (recovery) (teb)            (43)      (78)   (+100%)      (74)   (+100%)
    -------------------------------------------------------------------------
    Net income                    48      (140)     (74%)     (148)     (75%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Amortization of intangible
     assets (after tax)            -         -         -         -         -
    -------------------------------------------------------------------------
    Cash net income               48      (140)     (74%)     (148)     (75%)
    -------------------------------------------------------------------------

    Trading Products revenue      (2)     (278)   (+100%)     (276)   (+100%)
    Investment and
     Corporate Banking
     and Other revenue           423        66       18%         6        1%
    Return on equity            3.0%              (13.1%)             (11.8%)
    Cash return on equity       3.0%              (13.1%)             (11.8%)
    Productivity ratio (teb)   94.3%               32.5%               29.8%
    Cash productivity
     ratio (teb)               94.3%               32.5%               29.9%
    Net interest margin on
     earning assets (teb)      0.52%              (0.05%)             (0.09%)
    Average earning assets   178,100    46,078       35%    13,143        8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      353        98       38%       206     +100%
    Non-interest expense         191        44       30%        29       18%
    Net Income                   111        41       59%       112     +100%
    Average assets            81,427    19,666       32%     5,558        7%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in                              Increase/
     millions, except         Fiscal-          (Decrease)
     as noted)                  2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)    974       201       26%
    Non-interest revenue         995    (1,012)     (50%)
    -----------------------------------------------------
    Total revenue (teb)        1,969      (811)     (29%)
    Provision for
     credit losses                77        (2)      (3%)
    Non-interest expense       1,565       (37)      (2%)
    -----------------------------------------------------
    Income before income taxes   327      (772)     (70%)
    Income taxes
     (recovery) (teb)            (98)     (337)   (+100%)
    -----------------------------------------------------
    Net income                   425      (435)     (51%)
    -----------------------------------------------------
    -----------------------------------------------------

    Amortization of intangible
     assets (after tax)            -         -         -
    -----------------------------------------------------
    Cash net income              425      (435)     (51%)
    -----------------------------------------------------

    Trading Products revenue     281    (1,090)     (80%)
    Investment and
     Corporate Banking
     and Other revenue         1,688       278       20%
    Return on equity            7.8%              (10.9%)
    Cash return on equity       7.8%              (10.9%)
    Productivity ratio (teb)   79.4%               21.8%
    Cash productivity
     ratio (teb)               79.4%               21.8%
    Net interest margin on
     earning assets (teb)      0.60%              (0.02%)
    Average earning assets   162,309    37,527       30%
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      481      (675)     (58%)
    Non-interest expense         641         -         -
    Net Income                   (56)     (362)   (+100%)
    Average assets            74,109    19,972       37%
    -----------------------------------------------------
    -----------------------------------------------------
    


    Q4 2007 vs Q4 2006

    Net income was $48 million, down $140 million or 74% from a year ago,
reflecting the after-tax impact of $211 million of charges related to
deterioration in capital markets and $16 million of losses in our commodities
business. Excluding these significant items, net income was $275 million, up
$87 million or 47% from a year ago.
    Revenue fell $212 million or 34%. Revenue in the quarter was affected by
the $318 million charge related to deterioration in capital markets and losses
of $24 million in our commodities businesses. The $318 million charge included
$169 million of losses related to trading and structured-credit related
positions and preferred shares, a $134 million write-down related to Canadian
ABCP holdings, and a $15 million write-down booked in securities gains in the
Other segment, related to investments in capital notes of the Links Finance
Corporation (Links) and Parkland Finance Corporation SIVs. Excluding the
significant items noted above, revenue increased $130 million or 20%. Revenue
was negatively affected by the $26 million or 4.1 percentage point impact of
the weaker US dollar.
    Trading Products revenue fell $278 million or 101%, but increased
$49 million or 18% excluding the trading revenue related items noted above.
Our foreign exchange trading business benefited from volatility as currency
markets experienced increased demand and wider spreads. There were
improvements in interest-rate-sensitive businesses and increased commissions
revenues.
    Investment and Corporate Banking and Other revenue increased by
$66 million or 18%, and by $81 million or 22% excluding the $15 million write-
down in SIVs noted above. There were higher lending revenues due to increased
corporate banking assets and higher investment securities gains, including a
$41 million gain on the sale of a merchant banking investment. Debt
underwriting and merger and acquisition fees improved slightly while equity
underwriting activity declined slightly.
    Net interest income improved primarily due to increased revenues in our
interest-rate-sensitive businesses, with a relatively smaller increase in
corporate banking assets. Net interest margin deteriorated 5 basis points due
to growth in our lower-spread trading assets including increased levels of
high quality, highly liquid assets.
    Non-interest expense increased $6 million or 1.3%. Higher professional
fees were partially offset by lower performance-based compensation, which was
down due to reductions in revenue. The weaker U.S. dollar lowered the
translated value of U.S. expenses by $19 million. The income tax recovery in
the current quarter was due to a high proportion of the Group's income being
attributable to lower-tax-rate jurisdictions.

    Q4 2007 vs Q3 2007

    Net income decreased $148 million or 75%. Third quarter results were
affected by $149 million of commodities losses ($97 million after tax).
Adjusted for the net impact of commodity losses in both periods and write-
downs and valuation adjustments in the current quarter, net income decreased
$18 million or 6.2%.
    Revenue decreased $270 million or 39% on a reported basis, due to lower
trading revenues. Excluding the commodities losses in both periods and the
write-downs and valuation adjustments in the current quarter, revenue fell by
$77 million or 9.1%. Capital markets activities slowed significantly in the
fourth quarter. There were reductions in merger and acquisition fees,
underwriting activities and commission revenues. Our market share in debt and
equity underwriting, measured using each syndicate member's allocated portion
of the issue amount corresponding to its underwriting percentage on the deal,
decreased from the previous quarter. The aggregate amount raised from our
deals increased. Net investment securities gains increased as results included
a $41 million gain on sale of a merchant banking investment.
    Non-interest expense was $48 million or 11% lower, mainly due to lower
performance-based compensation, in line with weaker fee-based revenues.

    Fiscal 2007 vs Fiscal 2006

    Net income decreased $435 million or 51%. Adjusted for the net impact of
$318 million ($211 million after tax) of write-downs and valuation adjustments
in the fourth quarter of 2007 and $853 million of losses in our commodities
business ($440 million after tax and associated performance-based
compensation), net income rose $216 million or 25%.
    Revenue fell $811 million or 29%, but increased $360 million or 13%
excluding fourth quarter write-downs, valuation adjustments and full year
commodities losses. There were significant increases in mergers and
acquisitions fees, underwriting activity, lending fees and commissions.
Although trading revenues were down because of commodities losses and write-
downs in interest rate trading, equity and foreign exchange trading revenues
increased.
    Net interest income increased due to higher trading net interest income
and higher revenues in our interest-rate-sensitive businesses. Higher
corporate banking assets also contributed to the increase in net interest
income, partially offset by reduced spreads on corporate loans in the
competitive environment.
    Non-interest expense decreased $37 million or 2.4%, due to lower
performance-based compensation. The productivity ratio deteriorated because of
the reduced trading revenue.
    The group earned income before income taxes for the year; however,
results include an income tax recovery since a high proportion of the group's
income was attributable to lower-tax-rate jurisdictions.

    
    Corporate Services, Including Technology and Operations


    (Canadian $ in                              Increase/           Increase/
     millions, except                          (Decrease)          (Decrease)
     as noted)               Q4-2007         vs. Q4-2006         vs. Q3-2007
    -------------------------------------------------------------------------
    Net interest income (teb)    (90)      (63)   (+100%)       (2)      (6%)
    Non-interest revenue          71        31       81%        65     +100%
    -------------------------------------------------------------------------
    Total revenue (teb)          (19)      (32)   (+100%)       63       75%
    Provision for (recovery of)
     credit losses                42       132     +100%        61     +100%
    Non-interest expense          25        (9)     (26%)       15     +100%
    Restructuring charge          24        24     +100%        24     +100%
    -------------------------------------------------------------------------
    Total non-interest expense    49        15       47%        39     +100%
    Income before income taxes
     and non-controlling
     interest in subsidiaries   (110)     (179)   (+100%)      (37)     (56%)
    Income taxes
     (recovery) (teb)           (110)      (32)     (43%)      (36)     (52%)
    Non-controlling interest
     in subsidiaries              19         -         -         1        5%
    -------------------------------------------------------------------------
    Net income (loss)            (19)     (147)   (+100%)       (2)     (11%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      (24)        -         -         7       23%
    Provision for (recovery of)
     credit losses                44        69     +100%        35     +100%
    Non-interest expense         (11)       (9)   (+100%)       (1)      10%
    Restructuring charge           8         8     +100%         8     +100%
    -------------------------------------------------------------------------
    Total non-interest expense    (3)       (1)     (50%)        7       65%
    Income taxes                 (19)      (20)   (+100%)       (6)     (46%)
    Net income (loss)            (50)      (48)   (+100%)      (28)   (+100%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in                              Increase/
     millions, except         Fiscal-          (Decrease)
     as noted)                  2007     vs. Fiscal-2006
    -----------------------------------------------------
    Net interest income (teb)   (359)     (207)   (+100%)
    Non-interest revenue         214       109     +100%
    -----------------------------------------------------
    Total revenue (teb)         (145)      (98)   (+100%)
    Provision for (recovery of)
     credit losses               (85)      165       66%
    Non-interest expense          84       (47)     (35%)
    Restructuring charge         159       159     +100%
    -----------------------------------------------------
    Total non-interest expense   243       112       87%
    Income before income taxes
     and non-controlling
     interest in subsidiaries   (303)     (375)   (+100%)
    Income taxes
     (recovery) (teb)           (312)     (117)     (60%)
    Non-controlling interest
     in subsidiaries              75        (1)      (1%)
    -----------------------------------------------------
    Net income (loss)            (66)     (257)   (+100%)
    -----------------------------------------------------
    -----------------------------------------------------

    U.S. Select Financial
     Data (US$ in millions)
    Revenue                      (96)      (10)     (12%)
    Provision for (recovery of)
     credit losses                17       101     +100%
    Non-interest expense         (26)      (41)   (+100%)
    Restructuring charge          26        26     +100%
    -----------------------------------------------------
    Total non-interest expense     -       (15)   (+100%)
    Income taxes                 (31)        8       20%
    Net income (loss)           (100)     (104)   (+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, 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 CM) and only relatively minor variance
amounts are retained within T&O. As such, results in this section largely
reflect the other corporate units outlined above.
    The net loss in the quarter was $19 million, compared with net income of
$128 million in the fourth quarter a year ago. Reduced earnings were primarily
due to: a securitization gain last year of $23 million and other reductions in
securitization-related revenues; higher provisions for credit losses including
a $50 million increase in the general allowance for credit losses this year
and a $35 million reduction last year; and the $24 million ($15 million after
tax) net restructuring charge, partially offset by lower corporate costs.
    Net income decreased $2 million from the third quarter. Higher
provisions, including the increase in the general allowance, and higher
expenses due to the net restructuring charge were largely offset by better
securitization-related revenues and tax benefits.
    The net loss for the year was $66 million, compared with net income of
$191 million for 2006. Excluding the $159 million of restructuring charges
($103 million after tax), net income fell by $154 million, mostly due to
reduced revenues and higher provisions for credit losses including the impact
of changes in the general allowance, partially offset by lower corporate
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, November 27, 2007 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,
March 3, 2008 by calling 416-641-2196 (from within Toronto) or 1-888-742-2491
(toll-free outside Toronto) and entering passcode 7581.
    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, March 3, 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
    August 2007 $ 65.90                  Shareholder Services
    September 2007 $ 63.43               Corporate Secretary's Department
    October 2007 $ 61.01                 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

    Annual Meeting 2008
    -------------------
    The next Annual Meeting of Shareholders will be held on Tuesday, March 4,
    2008 in Quebec City, Quebec.





                            Financial Highlights
    -------------------------------------------------------------------------
    (Unaudited) (Canadian $
     in millions,
     except as noted)             For the three months ended
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                   October      July     April   January   October   October
                        31,       31,       30,       31,       31,       31,
                      2007      2007      2007      2007      2006      2006
    -------------------------------------------------------------------------

    Income Statement
     Highlights
    Total revenue $  2,200  $  2,555  $  2,528  $  2,066  $  2,461    (10.6)%
    Total revenue
     (teb)(a)        2,244     2,609     2,571     2,105     2,494    (10.1)
    Provision for
     credit losses     151        91        59        52        16     +100
    Non-interest
     expense         1,655     1,659     1,614     1,673     1,613      2.6
    Net income         452       660       671       348       696    (35.0)
    -------------------------------------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share    $   0.87  $   1.28  $   1.29  $   0.67  $   1.35  $ (0.48)
    Diluted cash
     earnings per
     share(a)         0.89      1.30      1.31      0.68      1.37    (0.48)
    Dividends
     declared
     per share        0.70      0.68      0.68      0.65      0.62     0.08
    Book value
     per share       28.29     28.81     28.95     28.90     28.89    (0.60)
    Closing share
     price           63.00     66.59     69.46     70.01     69.45    (6.45)
    Total market
     value of
     common
     shares
     ($ billions)     31.4      33.2      34.7      35.1      34.8     (3.4)
    -------------------------------------------------------------------------



                                          As at
    -------------------------------------------------------------------------
                                                                      Change
                                                                        from
                   October      July     April   January   October   October
                        31,       31,       30,       31,       31,       31,
                      2007      2007      2007      2007      2006      2006
    -------------------------------------------------------------------------
    Balance Sheet
     Highlights
    Assets        $366,524  $359,154  $356,527  $355,491  $319,978     14.5 %
    Net loans and
     acceptances   201,188   205,612   203,210   205,472   190,994      5.3
    Deposits       232,050   229,027   221,615   217,114   203,848     13.8
    Common
     shareholders'
     equity         14,102   14,374     14,475    14,472    14,465     (2.5)
    -------------------------------------------------------------------------



                                  For the three months ended
    -------------------------------------------------------------------------
                             October      July     April   January   October
                                  31,       31,       30,       31,       31,
                                2007      2007      2007      2007      2006
    -------------------------------------------------------------------------
    Primary Financial
     Measures (%)(b)
    Average annual five year
     total shareholder return   14.2      17.2      16.6      17.8      19.1
    Diluted earnings per
     share growth              (35.6)     (7.2)      3.2     (42.7)      5.5
    Diluted cash earnings per
     share growth(a)           (35.0)     (7.1)      3.1     (42.9)      3.8
    Return on equity            12.2      18.0      18.3       9.2      19.4
    Cash return on equity(a)    12.5      18.2      18.5       9.5      19.6
    Net economic profit (NEP)
     growth(a)                 (78.1)    (19.8)     (4.2)    (+100)     (1.0)
    Revenue growth             (10.6)     (0.6)      2.3     (16.7)     (6.1)
    Revenue growth (teb)(a)    (10.1)      0.2       2.8     (16.2)     (5.9)
    Non-interest
     expense-to-revenue ratio   75.2      64.9      63.8      81.0      65.5
    Non-interest
     expense-to-revenue ratio
     (teb)(a)                   73.7      63.6      62.8      79.5      64.6
    Cash non-interest
     expense-to-revenue ratio
     (teb)(a)                   73.3      63.2      62.3      78.9      64.2
    Provision for credit
     losses-to-average loans
     and acceptances
     (annualized)               0.29      0.18      0.12      0.10      0.03
    Gross impaired loans and
     acceptances-to-equity
     and allowance for credit
     losses                     4.07      3.49      3.86      4.19      3.81
    Cash and
     securities-to-total
     assets ratio               33.1      31.0      28.6      28.4      27.2
    Tier 1 capital ratio        9.51      9.29      9.67      9.76     10.22
    Credit rating
      Standard & Poor's           A+        A+       AA-       AA-       AA-
      Moody's                    Aa1       Aa1       Aa1       Aa3       Aa3
    -------------------------------------------------------------------------
    Other Financial Ratios
     (% except as noted)(b)
    Twelve month total
     shareholder return         (5.8)      8.0      11.3       6.0      24.1
    Dividend yield              4.44      4.08      3.92      3.71      3.57
    Price-to-earnings ratio
     (times)                    15.3      14.5      14.8      15.1      13.5
    Market-to-book value
     (times)                    2.23      2.31      2.40      2.42      2.40
    Net economic profit
     ($ millions)(a)              71       280       289       (37)      325
    Return on average assets    0.48      0.72      0.77      0.40      0.86
    Net interest margin on
     average earning assets     1.47      1.61      1.65      1.64      1.78
    Net interest margin on
     average earning assets
     (teb)(a)                   1.53      1.68      1.71      1.70      1.83
    Non-interest
     revenue-to-total revenue   45.7      51.2      52.4      42.1      50.6
    Non-interest
     revenue-to-total revenue
     (teb)(a)                   44.8      50.1      51.5      41.3      49.9
    Non-interest expense
     growth                      2.6       3.6       3.5       5.9      (0.9)
    Total capital ratio        11.74     11.18     11.03     11.20     11.76
    Equity-to-assets ratio       4.2       4.3       4.3       4.3       4.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (Unaudited)
    (Canadian $ in millions,
     except as noted)
                   For the twelve months ended
    -------------------------------------------
                                        Change
                                          from
                   October   October   October
                        31,       31,       31,
                      2007      2006      2006
    -------------------------------------------
    Income Statement
     Highlights
    Total revenue $  9,349  $  9,985      (6.4)%
    Total revenue
     (teb)(a)        9,529    10,112      (5.8)
    Provision for
     credit losses     353       176     100.4
    Non-interest
     expense         6,601     6,353       3.9
    Net income       2,131     2,663     (20.0)
    -------------------------------------------
    Common Share
     Data ($)
    Diluted
     earnings
     per share    $   4.11  $   5.15  $  (1.04)
    Diluted cash
     earnings per
     share(a)         4.18      5.23     (1.05)
    Dividends
     declared
     per share        2.71      2.26      0.45
    Book value
     per share       28.29     28.89     (0.60)
    Closing share
     price           63.00     69.45     (6.45)
    Total market
     value of
     common
     shares
     ($ billions)     31.4      34.8      (3.4)
    -------------------------------------------



            For the twelve months ended
    -------------------------------------------


                             October   October
                                  31,       31,
                                2007      2006
    -------------------------------------------
    Primary Financial
     Measures (%)(b)
    Average annual five year
     total shareholder return   14.2      19.1
    Diluted earnings per
     share growth              (20.2)     11.2
    Diluted cash earnings per
     share growth(a)           (20.1)      9.4
    Return on equity            14.4      19.2
    Cash return on equity(a)    14.7      19.5
    Net economic profit (NEP)
     growth(a)                 (51.0)     10.3
    Revenue growth              (6.4)      1.5
    Revenue growth (teb)(a)     (5.8)      1.5
    Non-interest
     expense-to-revenue ratio   70.6      63.6
    Non-interest
     expense-to-revenue ratio
     (teb)(a)                   69.3      62.8
    Cash non-interest
     expense-to-revenue ratio
     (teb)(a)                   68.8      62.4
    Provision for credit
     losses-to-average loans
     and acceptances
     (annualized)               0.17      0.09
    Gross impaired loans and
     acceptances-to-equity
     and allowance for credit
     losses                     4.07      3.81
    Cash and
     securities-to-total
     assets ratio               33.1      27.2
    Tier 1 capital ratio        9.51     10.22
    Credit rating
      Standard & Poor's           A+       AA-
      Moody's                    Aa1       Aa3
    -------------------------------------------
    Other Financial Ratios
     (% except as noted)(b)
    Twelve month total
     shareholder return         (5.8)     24.1
    Dividend yield              4.30      3.25
    Price-to-earnings ratio
     (times)                    15.3      13.5
    Market-to-book value
     (times)                    2.23      2.40
    Net economic profit
     ($ millions)(a)             603     1,230
    Return on average assets    0.59      0.86
    Net interest margin on
     average earning assets     1.59      1.81
    Net interest margin on
     average earning assets
     (teb)(a)                   1.65      1.86
    Non-interest
     revenue-to-total revenue   48.2      52.5
    Non-interest
     revenue-to-total revenue
     (teb)(a)                   47.3      51.8
    Non-interest expense
     growth                      3.9       0.3
    Total capital ratio        11.74     11.76
    Equity-to-assets ratio       4.2       4.7
    -------------------------------------------
    -------------------------------------------

    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, reporting on a
        taxable equivalent basis (teb) 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.



                      Consolidated Financial Statements

                      Consolidated Statement of Income
    -------------------------------------------------------------------------
    (Unaudited)
    (Canadian $ in millions,
     except as noted)                For the three months ended
    -------------------------------------------------------------------------
                         October       July      April    January    October
                        31, 2007   31, 2007   30, 2007   31, 2007   31, 2006
    -------------------------------------------------------------------------

    Interest, Dividend
     and Fee Income
    Loans (Note 2)     $   2,971  $   2,935  $   2,839  $   2,812  $   2,739
    Securities               910        786        731        726        589
    Deposits with
     banks                   387        291        230        220        214
    -------------------------------------------------------------------------
                           4,268      4,012      3,800      3,758      3,542
    -------------------------------------------------------------------------
    Interest Expense
    Deposits               2,328      1,968      1,833      1,776      1,686
    Subordinated debt         51         46         40         43         43
    Preferred shares
     and capital
     trust securities         24         24         26         25         25
    Other liabilities        669        727        697        718        573
    -------------------------------------------------------------------------
                           3,072      2,765      2,596      2,562      2,327
    -------------------------------------------------------------------------
    Net Interest Income    1,196      1,247      1,204      1,196      1,215
    Provision for
     credit losses
     (Note 3)                151         91         59         52         16
    -------------------------------------------------------------------------
    Net Interest
     Income After
     Provision for
     Credit Losses         1,045      1,156      1,145      1,144      1,199
    -------------------------------------------------------------------------
    Non-Interest
     Revenue
    Securities
     commissions and
     fees                    265        299        303        278        247
    Deposit and payment
     service charges         183        180        182        183        183
    Trading revenues
     (losses) (Note 2)      (165)        40        (10)      (352)        90
    Lending fees             105        102        100         99         90
    Card fees (Note 2)      (105)        79         70         63        105
    Investment
     management and
     custodial fees           83         81         81         77         76
    Mutual fund
     revenues                148        151        140        137        130
    Securitization
     revenues                 61         65         83         87         55
    Underwriting and
     advisory fees           103        160        159        106        104
    Securities gains,
     other than trading      148          6         48         44         46
    Foreign exchange,
     other than trading       48         30         33         21         27
    Insurance income          52         55         77         46         49
    Other (Note 2)            78         60         58         81         44
    -------------------------------------------------------------------------
                           1,004      1,308      1,324        870      1,246
    -------------------------------------------------------------------------
    Net Interest Income
     and Non-Interest
     Revenue               2,049      2,464      2,469      2,014      2,445
    -------------------------------------------------------------------------
    Non-Interest Expense
    Employee
     compensation
     (Note 8)                901      1,024        969        931        934
    Premises and
     equipment               350        325        320        308        328
    Amortization of
     intangible assets        11         11         13         11         11
    Travel and business
     development              92         72         64         59         76
    Communications            36         38         42         33         39
    Business and
     capital taxes             6          -         17         24         19
    Professional fees        108         62         67         64         92
    Other                    127        127        122        108        114
    -------------------------------------------------------------------------
                           1,631      1,659      1,614      1,538      1,613
    -------------------------------------------------------------------------
    Restructuring
     Charge (Note 9)          24          -          -        135          -
    -------------------------------------------------------------------------
    Income Before
     Provision for
     (Recovery of)
     Income Taxes and
     Non-Controlling
     Interest in
     Subsidiaries            394        805        855        341        832
    Income taxes
     (Note 2)                (77)       127        165        (26)       117
    -------------------------------------------------------------------------
                             471        678        690        367        715
    Non-controlling
     interest in
     subsidiaries             19         18         19         19         19
    -------------------------------------------------------------------------
    Net Income         $     452  $     660  $     671  $     348  $     696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Preferred share
     dividends         $      12  $       9  $      13  $       9  $       8
    Net income
     available to
     common
     shareholders      $     440  $     651  $     658  $     339  $     688
    Average common
     shares
     (in thousands)      498,379    499,793    500,510    501,136    500,432
    Average diluted
     common shares
     (in thousands)      506,173    507,913    509,943    510,320    510,166
    -------------------------------------------------------------------------
    Earnings Per
     Share (Canadian $)
    Basic               $   0.89  $    1.30  $    1.31  $    0.68  $    1.37
    Diluted                 0.87       1.28       1.29       0.67       1.35
    Dividends Declared
     Per Common Share       0.70       0.68       0.68       0.65       0.62
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    ----------------------------------------------
    (Unaudited)
    (Canadian $ in millions,
     except as noted)
                      For the twelve months ended
    ----------------------------------------------
                          October    October
                         31, 2007   31, 2006
    ----------------------------------------------
    Interest, Dividend
     and Fee Income
    Loans (Note 2)     $  11,557  $   9,985
    Securities             3,153      2,158
    Deposits with
     banks                 1,128        769
    ----------------------------------------------
                          15,838     12,912
    ----------------------------------------------
    Interest Expense
    Deposits               7,905      5,743
    Subordinated debt        180        169
    Preferred shares
     and capital
     trust securities         99         99
    Other liabilities      2,811      2,157
    ----------------------------------------------
                          10,995      8,168
    ----------------------------------------------
    Net Interest Income    4,843      4,744
    Provision for
     credit losses
     (Note 3)                353        176
    ----------------------------------------------
    Net Interest
     Income After
     Provision for
     Credit Losses         4,490      4,568
    ----------------------------------------------
    Non-Interest
     Revenue
    Securities
     commissions and
     fees                  1,145      1,051
    Deposit and payment
     service charges         728        729
    Trading revenues
     (losses) (Note 2)      (487)       718
    Lending fees             406        337
    Card fees (Note 2)       107        396
    Investment
     management and
     custodial fees          322        298
    Mutual fund
     revenues                576        499
    Securitization
     revenues                296        100
    Underwriting and
     advisory fees           528        407
    Securities gains,
     other than trading      246        145
    Foreign exchange,
     other than trading      132        102
    Insurance income         230        204
    Other (Note 2)           277        255
    ----------------------------------------------
                           4,506      5,241
    ----------------------------------------------
    Net Interest Income
     and Non-Interest
     Revenue               8,996      9,809
    ----------------------------------------------
    Non-Interest Expense
    Employee
     compensation
     (Note 8)              3,825      3,824
    Premises and
     equipment             1,303      1,211
    Amortization of
     intangible assets        46         44
    Travel and business
     development             287        253
    Communications           149        131
    Business and
     capital taxes            47         94
    Professional fees        301        287
    Other                    484        509
    ----------------------------------------------
                           6,442      6,353
    ----------------------------------------------
    Restructuring
     Charge (Note 9)         159          -
    ----------------------------------------------
    Income Before
     Provision for
     (Recovery of)
     Income Taxes and
     Non-Controlling
     Interest in
     Subsidiaries          2,395      3,456
    Income taxes
     (Note 2)                189        717
    ----------------------------------------------
                           2,206      2,739
    Non-controlling
     interest in
     subsidiaries             75         76
    ----------------------------------------------
    Net Income         $   2,131  $   2,663
    ----------------------------------------------
    ----------------------------------------------
    Preferred share
     dividends         $      43   $     30
    Net income
     available to
     common
     shareholders      $   2,088   $   2,633
    Average common
     shares
     (in thousands)      499,950     501,257
    Average diluted
     common shares
     (in thousands)      508,614     511,173
    ----------------------------------------------
    Earnings Per
     Share (Canadian $)
    Basic              $    4.18   $    5.25
    Diluted                 4.11        5.15
    Dividends Declared
     Per Common Share       2.71        2.26
    ----------------------------------------------
    ----------------------------------------------

    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.



                      Consolidated Financial Statements

                         Consolidated Balance Sheet
    -------------------------------------------------------------------------

    (Unaudited)
    (Canadian $ in millions)                      As at
    -------------------------------------------------------------------------
                         October       July      April    January    October
                        31, 2007   31, 2007   30, 2007   31, 2007   31, 2006
    -------------------------------------------------------------------------

    Assets
    Cash Resources     $  22,890  $  25,041  $  19,502  $  22,873  $  19,608
    -------------------------------------------------------------------------
    Securities
    Trading               70,773     67,716     63,600     58,401     51,820
    Investment (Note 2)        -          -          -          -     14,166
    Available-for-sale
     (Note 2)             26,010     17,046     17,529     18,235          -
    Other (Note 2)         1,494      1,456      1,460      1,465      1,414
    Loan substitutes           -         11         11         11         11
    -------------------------------------------------------------------------
                          98,277     86,229     82,600     78,112     67,411
    -------------------------------------------------------------------------
    Loans (Note 2)
    Residential
     mortgages            52,429     62,297     62,908     63,109     63,321
    Consumer instalment
     and other personal   33,189     33,009     31,913     31,474     30,418
    Credit cards           4,493      4,347      3,899      3,764      3,631
    Businesses and
     governments          62,650     63,795     60,956     58,108     56,030
    Securities borrowed
     or purchased under
     resale agreements    37,093     34,216     35,063     41,843     31,429
    -------------------------------------------------------------------------
                         189,854    197,664    194,739    198,298    184,829
    Customers'
     liability under
     acceptances          12,389      8,993      9,530      8,252      7,223
    Allowance for
     credit losses
     (Note 3)             (1,055)    (1,045)    (1,059)    (1,078)    (1,058)
    -------------------------------------------------------------------------
                         201,188    205,612    203,210    205,472    190,994
    -------------------------------------------------------------------------
    Other Assets
    Derivative
     instruments
     (Note 2)             32,585     30,030     38,711     37,361     30,411
    Premises and
     equipment             1,980      2,015      2,047      2,057      2,047
    Goodwill               1,140      1,232      1,252      1,306      1,098
    Intangible assets        124        149        174        207        152
    Other (Note 2)         8,340      8,846      9,031      8,103      8,257
    -------------------------------------------------------------------------
                          44,169     42,272     51,215     49,034     41,965
    -------------------------------------------------------------------------
    Total Assets       $ 366,524  $ 359,154  $ 356,527  $ 355,491  $ 319,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and
     Shareholders'
     Equity
    Deposits (Note 2)
    Banks              $  34,100  $  30,561  $  28,256  $  33,811  $  26,632
    Businesses and
     governments
     (Note 10)           121,748    120,757    114,504    104,994    100,848
    Individuals           76,202     77,709     78,855     78,309     76,368
    -------------------------------------------------------------------------
                         232,050    229,027    221,615    217,114    203,848
    -------------------------------------------------------------------------
    Other Liabilities
    Derivative
     instruments
     (Note 2)             33,584     30,543     40,192     38,842     31,446
    Acceptances           12,389      8,993      9,530      8,252      7,223
    Securities sold
     but not yet
     purchased            25,039     28,551     24,692     19,472     15,398
    Securities lent
     or sold under
     repurchase
     agreements           31,263     30,992     31,027     40,965     31,918
    Other                 12,055     10,682     10,055     11,083     10,758
    -------------------------------------------------------------------------
                         114,330    109,761    115,496    118,614     96,743
    -------------------------------------------------------------------------
    Subordinated Debt
     (Notes 2 and 10)      3,446      3,446      2,395      2,745      2,726
    -------------------------------------------------------------------------
    Preferred Share
     Liability
     (Note 11)               250        450        450        450        450
    -------------------------------------------------------------------------
    Capital Trust
     Securities            1,150      1,150      1,150      1,150      1,150
    -------------------------------------------------------------------------
    Shareholders'
     Equity
    Share capital
     (Note 11)             5,607      5,318      5,272      5,225      4,827
    Contributed
     surplus                  58         56         55         55         49
    Retained earnings
     (Note 2)             11,166     11,158     11,017     10,836     10,974
    Accumulated other
     comprehensive
     loss (Note 2)        (1,533)    (1,212)      (923)      (698)      (789)
    -------------------------------------------------------------------------
                          15,298     15,320     15,421     15,418     15,061
    -------------------------------------------------------------------------
    Total Liabilities
     and Shareholders'
     Equity            $ 366,524  $ 359,154  $ 356,527  $ 355,491  $ 319,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.



                      Consolidated Financial Statements

               Consolidated Statement of Comprehensive Income
    -------------------------------------------------------------------------
    (Unaudited)                            For the              For the
    (Canadian $ in millions)         three months ended  twelve months ended
    -------------------------------------------------------------------------
                                       October   October   October   October
                                      31, 2007  31, 2006  31, 2007  31, 2006
    -------------------------------------------------------------------------
    Net income                        $    452  $    696  $  2,131  $  2,663
    Other Comprehensive Income
      Net change in unrealized
       gains on available-for-sale
       securities                           87         -        32         -
      Net change in unrealized gains
       (losses) on cash flow hedges         39         -      (115)        -
      Net loss on translation of net
       foreign operations                 (447)      (27)     (613)     (177)
    -------------------------------------------------------------------------
    Total Comprehensive Income        $    131  $    669  $  1,435  $  2,486
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



          Consolidated Statement of Changes in Shareholders' Equity
    -------------------------------------------------------------------------
    (Unaudited)                            For the              For the
    (Canadian $ in millions)         three months ended  twelve months ended
    -------------------------------------------------------------------------
                                       October   October   October   October
                                      31, 2007  31, 2006  31, 2007  31, 2006
    -------------------------------------------------------------------------
    Preferred Shares
    Balance at beginning of period    $    946  $    596  $    596  $    596
    Issued during the period (Note 11)     250         -       600         -
    -------------------------------------------------------------------------
    Balance at End of Period             1,196       596     1,196       596
    -------------------------------------------------------------------------
    Common Shares
    Balance at beginning of period       4,372     4,169     4,231     4,022
    Issued under the Shareholder
     Dividend Reinvestment and Share
     Purchase Plan                          28        27       113        89
    Issued under the Stock Option
     Plan                                   23        43       132       169
    Issued on the exchange of
     shares of a subsidiary
     corporation                             -         -         1         -
    Repurchased for cancellation
     (Note 11)                             (12)       (8)      (66)      (49)
    -------------------------------------------------------------------------
    Balance at End of Period             4,411     4,231     4,411     4,231
    -------------------------------------------------------------------------
    Contributed Surplus
    Balance at beginning of period          56        47        49        35
    Stock option expense                     2         2         9        14
    -------------------------------------------------------------------------
    Balance at End of Period                58        49        58        49
    -------------------------------------------------------------------------
    Retained Earnings
    Balance at beginning of period      11,158    10,653    10,974     9,801
    Cumulative impact of adopting new
     accounting requirements for
     financial instruments (net of
     income taxes of $39) (Note 2)           -         -       (71)        -
    Net income                             452       696     2,131     2,663
    Dividends - Preferred shares           (12)       (8)      (43)      (30)
              - Common shares             (348)     (311)   (1,353)   (1,133)
    Common shares repurchased for
     cancellation (Note 11)                (79)      (56)     (458)     (327)
    Share issue expense                     (5)        -       (14)        -
    -------------------------------------------------------------------------
    Balance at End of Period            11,166    10,974    11,166    10,974
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive
     Income on Available-for-Sale
     Securities
    Balance at beginning of period         (52)        -         -         -
    Impact of remeasuring
     available-for-sale securities
     to market value on November 1,
     2006 (net of income taxes of $1)        -         -         3         -
    Unrealized gains on
     available-for-sale securities
     arising during the period
     (net of income taxes of $41
     and $6)                                80         -        15         -
    Reclassification to earnings of
     realized losses in the period
     (net of income taxes of $4
     and $12)                                7         -        17         -
    -------------------------------------------------------------------------
    Balance at End of Period                35         -        35         -
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive
     Loss on Cash Flow Hedges
    Balance at beginning of period        (205)        -         -         -
    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 $64)                               28         -      (128)        -
    Reclassification to earnings of
     losses on cash flow hedges (net
     of income taxes of $5 and $6)          11         -        13         -
    -------------------------------------------------------------------------
    Balance at End of Period              (166)        -      (166)        -
    -------------------------------------------------------------------------
    Accumulated Other Comprehensive
     Loss on Translation of Net
     Foreign Operations
    Balance at beginning of period        (955)     (762)     (789)     (612)
    Unrealized loss on translation
     of net foreign operations          (1,196)      (72)   (1,697)     (472)
    Impact of hedging translation
     gains of net foreign operations
     (net of income taxes of $397,
     $23, $575 and $156)                   749        45     1,084       295
    -------------------------------------------------------------------------
    Balance at End of Period            (1,402)     (789)   (1,402)     (789)
    -------------------------------------------------------------------------
    Total Accumulated Other
     Comprehensive Loss                 (1,533)     (789)   (1,533)     (789)
    -------------------------------------------------------------------------
    Total Shareholders' Equity        $ 15,298  $ 15,061  $ 15,298  $  15,061
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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.



                      Consolidated Financial Statements

                    Consolidated Statement of Cash Flows

    -------------------------------------------------------------------------
    (Unaudited)                            For the              For the
    (Canadian $ in millions)         three months ended  twelve months ended
    -------------------------------------------------------------------------
                                       October   October   October   October
                                      31, 2007  31, 2006  31, 2007  31, 2006
    -------------------------------------------------------------------------
    Cash Flows from Operating
     Activities
    Net income                        $    452  $    696  $  2,131  $  2,663
    Adjustments to determine net cash
     flows provided by (used in)
     operating activities
      Write-down of securities,
       other than trading                   18         -        18         9
      Net gain on securities, other
       than trading                       (166)      (46)     (264)     (154)
      Net (increase) in trading
       securities                       (5,986)   (6,492)  (23,028)   (8,565)
      Provision for credit losses          151        16       353       176
      Gain on sale of securitized
       loans (Note 4)                      (47)      (44)     (202)      (69)
      Change in derivative
       instruments
        (Increase) decrease in
         derivative asset               (3,861)    1,637    (4,991)      238
        Increase in derivative
         liability                       5,186       220     6,127     3,328
      Amortization of premises
       and equipment                        99        95       390       360
      Amortization of intangible
       assets                               11        11        46        44
      Net decrease in future
       income taxes                        (36)      (85)     (176)     (153)
      Net increase (decrease) in
       current income taxes               (211)       20      (800)      144
      Change in accrued interest
        (Increase) in interest
         receivable                       (255)     (309)     (129)     (468)
        Increase in interest payable       378       207       537       303
      Changes in other items and
       accruals, net                     5,125     1,551     6,051     2,595
      Gain on sale of land and
       buildings                            (6)        -        (6)        -
    -------------------------------------------------------------------------
    Net Cash Provided by (Used in)
     Operating Activities                  852    (2,523)  (13,943)      451
    -------------------------------------------------------------------------
    Cash Flows from Financing
     Activities
    Net increase in deposits            16,926     2,259    45,222    13,108
    Net increase (decrease) in
     securities sold but not yet
     purchased                          (2,981)    1,145    10,328      (708)
    Net increase in securities lent
     or sold under repurchase
     agreements                          2,363     3,845     2,325     9,987
    Net increase (decrease) in
     liabilities of subsidiaries           (27)     (448)      335       (94)
    Repayment of subordinated debt           -         -      (483)     (425)
    Proceeds from issuance of
     subordinated debt                       -         -     1,200       700
    Redemption of preferred share
     liability                            (200)        -      (200)        -
    Proceeds from issuance of
     preferred shares                      250         -       600         -
    Proceeds from issuance of
     common shares                          51        70       245       258
    Share issue expense                     (5)        -       (14)        -
    Common shares repurchased for
     cancellation (Note 11)                (91)      (64)     (524)     (376)
    Dividends paid                        (360)     (319)   (1,396)   (1,163)
    -------------------------------------------------------------------------
    Net Cash Provided by Financing
     Activities                         15,926     6,488    57,638    21,287
    -------------------------------------------------------------------------
    Cash Flows from Investing
     Activities
    Net (increase) decrease in
     interest bearing deposits with
     banks                                (339)      185    (5,709)      901
    Purchases of securities, other
     than trading                      (17,716)   (9,111)  (50,366)  (20,433)
    Maturities of securities, other
     than trading                        3,736     2,616    24,635     9,494
    Proceeds from sales of
     securities, other than trading      3,469     3,657    11,824     7,920
    Net (increase) decrease in
     loans, customers' liability
     under acceptances and loan
     substitute securities               1,029    (4,031)  (14,570)  (20,184)
    Proceeds from securitization
     of loans (Note 4)                     694     2,241     3,330     4,994
    Net (increase) decrease in
     securities borrowed or purchased
     under resale agreements            (4,736)      344    (8,280)   (3,723)
    Proceeds from sales of land
     and buildings                          45         -        45         -
    Premises and equipment -
     net purchases                        (169)     (204)     (420)     (583)
    Acquisitions (Note 7)                    1         -      (386)      (76)
    -------------------------------------------------------------------------
    Net Cash Used in Investing
     Activities                        (13,986)   (4,303)  (39,897)  (21,690)
    -------------------------------------------------------------------------
    Effect of Exchange Rate Changes
     on Cash and Cash Equivalents       (2,085)       (6)   (2,606)       (2)
    -------------------------------------------------------------------------
    Net Increase (Decrease) in Cash
     and Cash Equivalents                  707      (344)    1,192        46
    Cash and Cash Equivalents at
     Beginning of Period                 2,943     2,802     2,458     2,412
    -------------------------------------------------------------------------
    Cash and Cash Equivalents at
     End of Period                    $  3,650  $  2,458  $  3,650  $  2,458
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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 twelve months ended October 31, 2007 (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, 2006 as set out on pages 96 to 133 of our 2006 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, 2006, except as described in Note 2.

    Note 2 - Changes in Accounting

    Change in Estimate
    During the quarter ended October 31, 2007, we increased the liability for
    future customer redemptions related to our loyalty rewards program in
    Personal and Commercial Banking Canada's Mastercard business. The impact
    of this change on our Consolidated Statement of Income for the quarter
    ended October 31, 2007 was a reduction in non-interest revenue, card fees
    of $185 million, a decrease in the provision for income taxes of
    $65 million and a decrease in net income of $120 million.

    Changes in Accounting Policy
    On November 1, 2006, we adopted the Canadian Institute of Chartered
    Accountants' ("CICA's") accounting requirements for securities, hedging
    derivatives, other comprehensive income and certain other financial
    instruments. Prior periods have not been restated.

    On November 1, 2006, we made the following adjustments to our balance
    sheet to adopt the new requirements:

    (Canadian $ in millions)                                           As at
    -------------------------------------------------------------------------
                                                            November 1, 2006
    -------------------------------------------------------------------------
    Increase (decrease)
    Consolidated Balance Sheet
    Available-for-sale securities(a)                                  $    4
    Loans(b)(ii),(d)                                                     (87)
    Other assets                                                          51
    Derivative instruments - asset(b)                                     70
    Deposits(b)(ii)                                                       38
    Derivative instruments - liability(b)                                110
    Subordinated debt(b)(ii)                                               9
    Retained earnings                                                    (71)
    Accumulated other comprehensive income -
     available-for-sale securities(a)                                      3
    Accumulated other comprehensive loss -
     cash flow hedges(b)(i)                                              (51)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The impact of these changes on our Consolidated Statement of Income is as
    follows:

                                                        For the      For the
                                                          three       twelve
                                                         months       months
    (Canadian $ in millions)                              ended        ended
    -------------------------------------------------------------------------
                                                     October 31,  October 31,
                                                           2007         2007
    -------------------------------------------------------------------------
    Increase (decrease) in net income
    Consolidated Statement of Income
    Interest, Dividend and Fee Income - Loans(d)         $    2       $    9
    Non-Interest Revenue - Trading revenues
     (losses)(c)                                             (8)           7
    Non-Interest Revenue - Other(b)(i)(ii)                    8            1
    Income taxes                                             (1)          (6)
    -------------------------------------------------------------------------
    Net Income                                           $    1       $   11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other Comprehensive Income
    The new rules require that we present a new Consolidated Statement of
    Comprehensive Income, which is comprised of net income, changes in
    unrealized gains or losses related to available-for-sale securities,
    changes in unrealized gains or losses related to cash flow hedges and the
    net unrealized foreign exchange gain or loss for the period related to
    our net investment in foreign operations. This statement has been
    included above our Consolidated Statement of Changes in Shareholders'
    Equity.

    (a) Securities
    The new rules require us to classify securities other than trading
    securities as held-to-maturity or available-for-sale.

    Available-for-sale securities are measured at fair value with unrealized
    gains and losses recorded in other comprehensive gain (loss) on
    available-for-sale securities in our Consolidated Statement of Changes in
    Shareholders' Equity until the security is sold, or if an unrealized loss
    is considered other than temporary, the unrealized loss is recorded in
    income. Gains and losses on disposal are recorded in our Consolidated
    Statement of Income in securities gains (losses), other than trading.
    Interest income earned and dividends received on equity securities are
    recorded in our Consolidated Statement of Income in interest, dividend
    and fee income, securities. We have not classified any of our securities
    as held-to-maturity. Available-for-sale securities where there is no
    quoted market price, including securities whose sale is restricted, will
    continue to be recorded at amortized cost.

    The new rules do not affect accounting for our merchant banking
    investments or investments in corporate equity where we exercise
    significant influence, but not control. These are recorded as other
    securities in our Consolidated Balance Sheet. Additional information on
    our policies related to securities, determining fair value and other than
    temporary impairment is included in Note 3 to our consolidated financial
    statements for the year ended October 31, 2006.

    On November 1, 2006, we remeasured our available-for-sale securities at
    fair value, as appropriate. A net unrealized gain of $3 million was
    recorded in opening accumulated other comprehensive income on
    available-for-sale securities.

    (b) Hedging Derivatives
    The new rules require us to record all of our hedging derivatives at fair
    value. Prior to November 1, 2006, we accounted for derivatives that
    qualified as accounting hedges on an accrual basis.

    The types of hedging relationships that qualify for hedge accounting have
    not changed under the new rules. We will continue to designate our hedges
    as either cash flow hedges or fair value hedges. A description of the
    items or transactions that we hedge and the risk management policy for
    each type of hedge is included in Note 9 to our consolidated financial
    statements for the year ended October 31, 2006.

    (i) Cash Flow Hedges
    Cash flow hedges modify exposure to variability in cash flows for
    variable rate interest bearing instruments or the forecasted issuance of
    fixed rate liabilities.

    Under the new rules, we will continue to record interest receivable or
    payable on the derivative as an adjustment to interest, dividend and fee
    income in the Consolidated Statement of Income over the life of the
    hedge.

    To the extent that changes in the fair value of the derivative offset
    changes in the fair value of the hedged item, they are recorded in other
    comprehensive income. Any portion of the change in fair value of the
    derivative that does not offset changes in the fair value of the hedged
    item (the ineffectiveness of the hedge) is recorded directly in
    non-interest revenue, other in the Consolidated Statement of Income.
    Gains on the ineffective portion of our cash flow hedges totalled
    $9 million for the quarter ended October 31, 2007 (losses of less than
    $1 million for the twelve months ended October 31, 2007).

    For cash flow hedges that are discontinued before the end of the original
    hedge term, the unrealized gain or loss in other comprehensive income is
    amortized to interest, dividend and fee income in the Consolidated
    Statement of Income as the hedged item impacts earnings. If the hedged
    item is sold or settled, the entire unrealized gain or loss is recognized
    in interest, dividend and fee income in the Consolidated Statement of
    Income. The amount of other comprehensive loss that is expected to be
    reclassified to the Consolidated Statement of Income over the next
    12 months is $64 million ($42 million after tax). This will be offset by
    increased net interest income on assets and liabilities that were hedged.

    On November 1, 2006, we remeasured our cash flow hedging derivatives at
    fair value. The portion of the fair value that offset the fair value of
    the hedged item was an $8 million gain ($5 million after tax) and was
    recorded in opening accumulated other comprehensive income. The
    ineffective portion of cash flow hedges recorded in opening retained
    earnings totalled less than $1 million. We also reclassified $86 million
    ($56 million after tax) of deferred losses related to cash flow hedges
    that were discontinued prior to November 1, 2006 from other assets to
    opening accumulated other comprehensive income.

    (ii) Fair Value Hedges
    Fair value hedges modify exposure to changes in a fixed rate instrument's
    fair value caused by changes in interest rates. These hedges convert
    fixed rate assets and liabilities to floating rate. Our fair value hedges
    include hedges of fixed rate commercial and personal loans, securities,
    deposits and subordinated debt.

    Under the new rules, we will continue to record interest receivable or
    payable on the derivative as an adjustment to interest, dividend and fee
    income in the Consolidated Statement of Income over the life of the
    hedge.

    For fair value hedges, not only is the hedging derivative recorded at
    fair value but fixed rate assets and liabilities that are part of a
    hedging relationship are adjusted for the changes in value of the risk
    being hedged (quasi fair value). To the extent that the change in the
    fair value of the derivative does not offset changes in the quasi fair
    value adjustment to the hedged item (the ineffectiveness of the hedge),
    the net amount is recorded directly in non-interest revenue, other in the
    Consolidated Statement of Income. Losses on the ineffective portion of
    our fair value hedges totalled $1 million for the quarter ended
    October 31, 2007 (gains of $1 million for the twelve months ended
    October 31, 2007).

    For fair value hedges that are discontinued, we cease adjusting the
    hedged item to quasi fair value. The quasi fair value adjustment on the
    hedged item is recorded as an adjustment to the interest income/expense
    on the hedged item over its remaining term to maturity. If the hedged
    item is sold or settled, any remaining quasi fair value adjustment is
    included in the determination of the gain or loss on sale or settlement.
    We did not hedge any commitments during the year ended October 31, 2007.

    When we remeasured fair value hedging derivatives at fair value on
    November 1, 2006, we made a corresponding adjustment to the carrying
    value of the items that we hedge with those derivatives (quasi fair value
    adjustment). The difference between these two amounts was recorded in
    opening retained earnings and totalled less than $1 million. On
    November 1, 2006, we also reclassified deferred amounts related to fair
    value hedges that were discontinued prior to November 1, 2006 from other
    assets to adjust the carrying amount of the items that were previously
    hedged. Quasi fair value adjustments related to these two activities were
    comprised of an increase in loans of $3 million, an increase in deposits
    of $38 million, an increase in subordinated debt of $9 million and an
    increase in other assets of $6 million.

    (c) Fair Value Option
    The new rules allow management to elect to measure 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. Financial instruments must have been designated on
    November 1, 2006, when the new standard was adopted, or when new
    financial instruments were acquired, and the designation is irrevocable.

    We issue structured notes that include embedded options. We enter into
    derivatives which manage our exposure to changes in the structured note
    fair value caused by changes in interest rates. The structured notes are
    designated as trading under the fair value option, which better aligns
    the accounting result with how the portfolio is managed. These notes are
    classified as deposits. The fair value and amount due at contractual
    maturity of these notes as at October 31, 2007 were $762 million and
    $791 million, respectively. The impact of recording these notes as
    trading was a decrease in non-interest revenue, trading revenues of
    $7 million for the quarter ended October 31, 2007 (increase of $8 million
    for the twelve months ended October 31, 2007). The decrease was offset by
    a gain on the derivatives.

    Securities in our insurance subsidiaries that support our insurance
    liabilities have been designated as trading securities under the fair
    value option. Since the actuarial calculation of insurance liabilities is
    based on the recorded value of the securities supporting them, recording
    the securities at fair value better aligns the accounting result with how
    the portfolio is managed. The fair value of these securities as at
    October 31, 2007 was $30 million. The impact of recording these as
    trading securities was a decrease in non-interest revenue, insurance
    income of $1 million for both the quarter and twelve months ended
    October 31, 2007.

    On November 1, 2006, we remeasured the portfolio of structured notes and
    certain of the securities in our insurance subsidiary at fair value. The
    net unrealized loss of less than $1 million was recorded in opening
    retained earnings.

    (d) Effective Interest Method
    Loan origination costs are included in our loan balances and are
    recognized in interest, dividend and fee income, loans, over the life of
    the resulting loan. Prior to November 1, 2006, an equal amount of loan
    origination costs was recognized each period over the life of the
    resulting loan. The new rules require that we use the effective interest
    method to recognize loan origination costs whereby the amount recognized
    varies over the life of the loan based on principal outstanding.

    As at November 1, 2006, we adjusted our deferred loan origination costs
    to what the balance would have been had we always used the effective
    interest method to recognize loan origination costs. The impact was a
    decrease in loans, residential mortgages of $87 million, a decrease in
    future income tax liability of $30 million and a decrease in retained
    earnings of $57 million.

    Note 3 - 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 October 31, 2007 and October 31, 2006 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
    -------------------------------------------------------------------------
                             Specific         General
                             Allowance       Allowance           Total
    -------------------------------------------------------------------------
                        October  October  October  October  October  October
                             31,      31,      31,      31,      31,      31,
                           2007     2006     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Balance at beginning
     of period          $   157  $   164  $   888  $   943  $ 1,045  $ 1,107
    Provision for
     credit losses          101       51       50      (35)     151       16
    Recoveries               24       24        -        -       24       24
    Write-offs             (117)     (86)       -        -     (117)     (86)
    Foreign exchange
     and other               (8)       -      (40)      (3)     (48)      (3)
    -------------------------------------------------------------------------
    Balance at end
     of period          $   157  $   153  $   898  $   905  $ 1,055  $ 1,058
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    (Canadian $ in millions)        For the twelve months ended
    -------------------------------------------------------------------------
                             Specific         General
                             Allowance       Allowance           Total
    -------------------------------------------------------------------------
                        October  October  October  October  October  October
                             31,      31,      31,      31,      31,      31,
                           2007     2006     2007     2006     2007     2006
    -------------------------------------------------------------------------
    Balance at beginning
     of period          $   153  $   169  $   905  $   959  $ 1,058  $ 1,128
    Provision for
     credit losses          303      211       50      (35)     353      176
    Recoveries               91      112        -        -       91      112
    Write-offs             (391)    (338)       -        -     (391)    (338)
    Foreign exchange
     and other                1       (1)     (57)     (19)     (56)     (20)
    -------------------------------------------------------------------------
    Balance at end
     of period          $   157  $   153  $   898  $   905  $ 1,055  $ 1,058
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 4 - Securitization

    During the quarter ended October 31, 2007, we securitized residential
    mortgages totalling $708 million for total cash proceeds of $694 million
    ($3,400 million and $3,330 million respectively, for the twelve months
    ended October 31, 2007). There are no expected credit losses as the
    mortgages are guaranteed by third parties. We retained responsibility for
    servicing these mortgages. We recorded a loss of $1 million in
    non-interest revenue, securitization revenues, $25 million of deferred
    purchase price in available-for-sale securities and $6 million of
    servicing liability in other liabilities related to the securitization of
    those loans (gain of $11 million, $125 million and $26 million
    respectively, for the twelve months ended October 31, 2007). The key
    weighted-average assumptions used to value the deferred purchase price
    for these securitizations was an average term of 4.9 years, a prepayment
    rate of 10.0%, an interest rate of 5.41% and a discount rate of 4.79%
    (4.6 years and 9.7%, 5.24% and 4.62% respectively, for the twelve months
    ended October 31, 2007).

    In addition, gains on sales of loans sold to all revolving securitization
    vehicles were $48 million for the quarter ended October 31, 2007
    ($191 million for the twelve months ended October 31, 2007).

    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 $25,465 million as at October 31, 2007
    ($25,791 million in 2006) of which $17,536 million relates to Canadian
    assets, 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. We use our credit adjudication process in deciding whether
    to enter into these agreements just as we do when extending credit in the
    form of a loan. To the extent that we have purchased commercial paper,
    our exposure under the liquidity facilities is reduced by an equal
    amount. As at October 31, 2007, we have a net exposure of $5,564 million
    from commercial paper held ($448 million in 2006) classified as trading
    securities, and backstop liquidity facilities of $31,475 million
    ($32,603 million in 2006), of which $20,756 million relates to
    Canadian facilities and the balance are U.S. facilities. No amounts were
    drawn as at October 31, 2007 and 2006. Included in backstop liquidity
    facilities in 2006 was $634 million related to a credit facility that has
    since been terminated. The fair value of derivatives outstanding with
    these Variable Interest Entities ("VIEs") and recorded in our
    Consolidated Balance Sheet was a derivative liability of $20 million as
    at October 31, 2007 ($5 million in 2006). During the year ended
    October 31, 2007, we changed the nature of the liquidity lines offered to
    certain of our Canadian vehicles to global style liquidity lines, which
    have objective criteria for determining when they can be drawn upon.
    Previously, we offered market disruption liquidity lines, which had more
    subjective criteria.

    Beginning in the quarter ended October 31, 2007, we consolidated two VIEs
    as we are exposed to the majority of the expected losses and/or residual
    returns through our ownership of their asset-backed commercial paper. We
    included in our Consolidated Balance Sheet at October 31, 2007 other
    assets totalling $311 million and $59 million as a deposit liability.

    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 $6,552 million as at October 31, 2007
    ($6,803 million in 2006). We are not required to consolidate our bank
    securitization vehicles. We also provide liquidity support to certain of
    our bank securitization vehicles for the face value of the commercial
    paper outstanding. We use our credit adjudication process in deciding
    whether to enter into these agreements just as we do when extending
    credit in the form of a loan. The total contract amount of the liquidity
    support was $5,100 million and $5,000 million as at October 31, 2007 and
    2006, respectively. No amounts were drawn at October 31, 2007 and 2006.
    During the year ended October 31, 2007, we changed the nature of the
    liquidity lines offered to bank securitization vehicles to global style
    liquidity lines, which have objective criteria for determining when they
    can be drawn upon. The fair value derivatives outstanding with these
    vehicles and recorded in our Consolidated Balance Sheet was a derivative
    liability of $52 million as at October 31, 2007 ($27 million in 2006). We
    held $367 million of the commercial paper issued by these vehicles 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 $22,754 million as at October 31, 2007 ($28,892 million in
    2006). 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,
    commitment 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
    $53 million as at October 31, 2007 ($76 million in 2006). We have
    provided a funding commitment of $1.3 billion to purchase senior notes
    issued by the SIVs. As at October 31, 2007, $350 million was drawn and
    included in the amount disclosed as available-for-sale securities. The
    total contract amount of letters of credit for backstop liquidity
    facilities is $221 million as at October 31, 2007 ($184 million in 2006);
    no amounts were drawn at October 31, 2007 and 2006. The fair value of our
    derivative contracts outstanding with these SIVs and recorded in our
    Consolidated Balance Sheet was a derivative liability of $11 million as
    at October 31, 2007 ($18 million in 2006). We are not required to
    consolidate these VIEs. Subsequent to the year ended October 31, 2007, an
    additional $904 million was drawn against the funding commitment for the
    purchase of senior debt.

    Capital Trusts
    BMO Subordinated Notes Trust (the "SN Trust") was created in 2007 to
    issue $800 million of BMO Trust Subordinated Notes - Series A. SN Trust
    used the proceeds of the offering to purchase a senior deposit note from
    the Bank. We are not required to consolidate the SN Trust. Refer to
    Note 10 for more details on the subordinated notes issued by the
    SN Trust.

    We also provide liquidity support amounting to $30 million to the
    SN Trust. As at October 31, 2007, $5 million had been drawn.

    BMO Capital Trust (the "Trust") was created to issue BMO Capital Trust
    Securities ("BOaTS"). As at October 31, 2007, the Trust had assets of
    $3,140 million ($3,180 million in 2006). The Trust is a VIE which we are
    required to consolidate.

    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 also
    sponsor VIEs that provide investors access to debt portfolios through the
    issuance of commercial paper. 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 $440 million as at October 31, 2007 ($470 million
    in 2006). Assets held by the VIEs in which we have a significant variable
    interest but we do not consolidate totalled $2,365 million as at
    October 31, 2007 ($762 million in 2006). Our exposure to loss from VIEs
    related to this activity is limited to the amount of our investment,
    which totalled $553 million as at October 31, 2007 ($216 million in
    2006).

    Note 6 - Guarantees

    Guarantees include contracts where we may be required to make payments to
    a counterparty based on changes in the value of an asset, liability or
    equity security that the counterparty holds due to changes in an
    underlying interest rate, foreign exchange rate or other variable. In
    addition, contracts under which we may be required to make payments if a
    third party does not perform according to the terms of a contract and
    contracts under which we provide indirect guarantees of the indebtedness
    of another party are considered 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 our customers if our customers are
    unable to make the required payments or meet other contractual
    requirements.

    The maximum amount payable under standby letters of credit and guarantees
    was $12,395 million as at October 31, 2007 ($11,007 million in 2006).
    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
    October 31, 2007 and 2006 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
    $38,466 million as at October 31, 2007 ($38,606 million in 2006). The
    amount drawn on the backstop liquidity facilities was $16 million as at
    October 31, 2007 ($nil in 2006).

    Credit Enhancement Facilities
    Where warranted, we provide partial credit enhancement facilities to
    transactions within asset-backed commercial paper programs administered
    by us and by third parties. Credit enhancement facilities were included
    in $5,449 million of backstop liquidity facilities as at October 31, 2007
    ($4,088 million in 2006). Credit enhancement was also provided in the
    form of program letters of credit; $nil and $181 million were included in
    standby letters of credit and guarantees as at October 31, 2007 and 2006,
    respectively. The facilities' terms are generally no longer than one
    year, but can be several years. None of the credit enhancement
    facilities that we have provided have been drawn upon.

    Derivatives
    Certain of our derivative instruments meet the accounting definition of a
    guarantee when we believe they are related to an asset, liability or
    equity security held by the guaranteed party at the inception of a
    contract.

    Written credit default swaps require us to compensate a counterparty
    following the occurrence of a credit event in relation to a specified
    reference obligation, such as a bond or a loan. The maximum amount
    payable under credit default swaps was equal to their notional amount of
    $42,433 million as at October 31, 2007 ($23,657 million in 2006). The
    terms of these contracts range from one month to 10 years. The fair value
    of the related derivative liabilities included in the derivative
    instruments in our Consolidated Balance Sheet was $466 million at
    October 31, 2007 ($19 million in 2006).

    Written options include contractual agreements that convey to the
    purchaser the right, but not the obligation, to require us to buy a
    specific amount of a currency, commodity, debt or equity instrument at a
    fixed price, either at a fixed future date or at any time within a fixed
    future period. The maximum amount payable under these written options
    cannot be reasonably estimated due to the nature of these contracts. The
    terms of these contracts range from one month to eight years. The fair
    value of the related derivative liabilities included in the derivative
    instruments in our Consolidated Balance Sheet was $662 million at
    October 31, 2007 ($2,407 million in 2006).

    Written options also include contractual agreements where we agree to pay
    the purchaser, based on a specified notional amount, the difference
    between a market price or rate and the strike price or rate of the
    underlying instrument. The maximum amount payable under these contracts
    is not determinable due to their nature. The terms of these contracts
    range from four months to 25 years. The fair value of the related
    derivative liabilities included in derivative instruments in our
    Consolidated Balance Sheet was $118 million as at October 31, 2007
    ($114 million in 2006).

    In order to reduce our exposure to these derivatives, we enter into
    contracts that hedge the related risks.

    Note 7 - Acquisitions

    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.

    Villa Park Trust and Savings Bank
    On December 1, 2005, we completed the acquisition of Chicago-based Villa
    Park Trust and Savings Bank ("Villa Park"), a community bank, for total
    cash consideration of $76 million. The results of Villa Park's operations
    have been included in our consolidated financial statements since that
    date. The acquisition of Villa Park provides us with the opportunity to
    expand our banking services in the Chicago, Illinois market. 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. Villa Park is part
    of our Personal and Commercial Banking U.S. reporting segment.

    Future Acquisitions

    Pyrford International plc
    On November 2, 2007, we announced that we had reached a definitive
    agreement to purchase Pyrford International plc, a London, U.K.-based
    asset manager, for total cash consideration of approximately $50 million.
    The acquisition of Pyrford International plc will provide us with the
    opportunity to expand our investment management capabilities outside of
    North America. The acquisition of Pyrford International plc is subject to
    regulatory approval. The acquisition of Pyrford International plc is
    expected to close during the quarter ending January 31, 2008, at which
    time it will be recorded in our consolidated financial statements as the
    acquisition of a business. Pyrford International plc will be part of our
    Private Client Group reporting segment.

    Ozaukee Bank
    On July 10, 2007, we announced that we had reached a definitive agreement
    to purchase Ozaukee Bank. Under the agreement, Ozaukee Bank shareholders
    will receive approximately 3 million shares of Bank of Montreal. The
    exact number of shares will be determined based on a formula prior to
    closing. The acquisition of Ozaukee Bank is subject to regulatory
    approval and the approval of Ozaukee Bank shareholders. The acquisition
    of Ozaukee Bank will provide us with the opportunity to expand our
    banking locations into Wisconsin. The acquisition of Ozaukee Bank is
    expected to close during the quarter ending January 31, 2008, at which
    time it will be recorded in our consolidated financial statements as the
    acquisition of a business. Ozaukee Bank will be part of our Personal and
    Commercial Banking U.S. reporting segment.

    Merchants and Manufacturers Bancorporation, Inc.
    On July 10, 2007, we announced that we had reached a definitive agreement
    to purchase Merchants and Manufacturers Bancorporation, Inc. ("Merchants
    and Manufacturers") for total cash consideration of approximately
    $146 million. The acquisition of Merchants and Manufacturers will provide
    us with the opportunity to expand our banking locations into Wisconsin.
    The acquisition of Merchants and Manufacturers is subject to regulatory
    approval and the approval of Merchants and Manufacturers shareholders.
    The acquisition of Merchants and Manufacturers is expected to close
    during the quarter ending January 31, 2008, at which time it will be
    recorded in our consolidated financial statements as the acquisition of a
    business. Merchants and Manufacturers will be part of our Personal and
    Commercial Banking U.S. reporting segment.

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

                                                      October 31, October 31,
    (Canadian $ in millions)                                2007        2006
    -------------------------------------------------------------------------
                                               First     bcpbank       Villa
                                            National      Canada        Park
    -------------------------------------------------------------------------
    Cash resources                           $   110     $    47     $    16
    Securities                                   317          23          54
    Loans                                      1,009         293         247
    Premises and equipment                        30           9           5
    Goodwill                                     175          13          44
    Core deposit intangible asset                 37           5           7
    Other assets                                  52           2           4
    -------------------------------------------------------------------------
    Total assets                               1,730         392         377
    -------------------------------------------------------------------------
    Deposits                                   1,375         339         296
    Other liabilities                             10          12           5
    -------------------------------------------------------------------------
    Total liabilities                          1,385         351         301
    -------------------------------------------------------------------------
    Purchase price                           $   345     $    41     $    76
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The allocation of the purchase price for First National and bcpbank
    Canada is subject to refinement as we complete the valuation of the
    assets acquired and liabilities assumed.

    Note 8 - Employee Compensation

    Change in Accounting Policy
    During the year ended October 31, 2006, we adopted the CICA's new
    accounting requirements for stock-based compensation. The new rules
    require that stock-based compensation granted to employees eligible to
    retire be expensed at the time of grant. Previously, we amortized the
    cost over the vesting period.

    Stock Options
    During the twelve months ended October 31, 2007, we granted a total of
    1,229,500 stock options. The weighted-average fair value of these options
    was $7.56 per option and was determined using a trinomial option pricing
    model, based on the following weighted-average assumptions:

    For stock options granted during the twelve months ended October 31, 2007
    -------------------------------------------------------------------------
    Expected dividend yield                                             4.2%
    Expected share price volatility                                    15.6%
    Risk-free rate of return                                            4.0%
    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:

                                    Pension               Other employee
    (Canadian $ in millions)     benefit plans         future benefit plans
    -------------------------------------------------------------------------
                                 For the three             For the three
                                  months ended              months ended
    -------------------------------------------------------------------------
                           October 31,  October 31,  October 31,  October 31,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Benefits earned by
     employees                $    35      $    34      $     6      $     4
    Interest cost on accrued
     benefit liability             53           53           12           11
    Actuarial loss
     recognized in expense         13           20            6            2
    Amortization of plan
     amendment costs                3            2           (4)          (3)
    Expected return on
     plan assets                  (68)         (64)          (1)          (1)
    -------------------------------------------------------------------------
    Benefits expense               36           45           19           13
    Canada and Quebec
     pension plan expense           8            8            -            -
    Defined contribution
     expense                        2            2            -            -
    -------------------------------------------------------------------------
    Total pension and other
     employee future benefit
     expenses                 $    46      $    55      $    19      $    13
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                    Pension               Other employee
    (Canadian $ in millions)     benefit plans         future benefit plans
    -------------------------------------------------------------------------
                                For the twelve            For the twelve
                                 months ended              months ended
    -------------------------------------------------------------------------
                           October 31,  October 31,  October 31,  October 31,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Benefits earned by
     employees                $   149      $   137      $    22      $    18
    Interest cost on accrued
     benefit liability            217          208           49           46
    Actuarial loss
     recognized in expense         59           82           18           14
    Amortization of plan
     amendment costs               11            6           (7)          (7)
    Expected return on
     plan assets                 (277)        (253)          (5)          (5)
    -------------------------------------------------------------------------
    Benefits expense              159          180           77           66
    Canada and Quebec
     pension plan expense          52           49            -            -
    Defined contribution
     expense                       13           10            -            -
    -------------------------------------------------------------------------
    Total pension and other
     employee future benefit
     expenses                 $   224      $   239      $    77      $    66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 9 - Restructuring Charge

    On January 31, 2007, we recorded a restructuring charge of $135 million
    in our Consolidated Statement of Income. During the quarter we continued
    to implement the restructuring initiatives. The objectives of the
    restructuring are to enhance customer service by directing spending and
    resources on front-line sales and service improvements; creating more
    efficient processes and systems across the company and continuing to
    accelerate the pace of growth.

    During the fourth quarter, we changed our estimate for restructuring,
    resulting in a $16 million reduction in the original accrual. Severance-
    related charges were less than originally anticipated due to higher
    levels of attrition and redeployment within the Bank.

    On October 31, 2007, we recorded an additional restructuring charge of
    $40 million in the Consolidated Statement of Income. The additional
    charge relates to the elimination of approximately 400 positions across
    all support functions and business groups and is all severance related.

                            Severance-    Premises-
                              related      related
    (Canadian $ in millions)  charges      charges        Other        Total
    -------------------------------------------------------------------------
    Opening balance           $   117      $    11      $     7      $   135
    Paid in the quarter            (7)           -           (7)         (14)
    -------------------------------------------------------------------------
    Balance as at
     January 31, 2007             110           11            -          121
    Paid in the quarter            (5)         (10)           -          (15)
    -------------------------------------------------------------------------
    Balance as at
     April 30, 2007               105            1            -          106
    Paid in the quarter           (17)           -            -          (17)
    -------------------------------------------------------------------------
    Balance as at
     July 31, 2007                 88            1            -           89
    Paid in the quarter           (17)           -            -          (17)
    Reversal in the quarter       (15)          (1)           -          (16)
    Additional charge in the
     quarter                       40            -            -           40
    -------------------------------------------------------------------------
    Balance as at
     October 31, 2007         $    96      $     -      $     -      $    96
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Note 10 - Subordinated debt

    On September 26, 2007, we issued $800 million of innovative subordinated
    debentures, BMO Trust Subordinated Notes (BMO TSNs - Series A), through
    BMO Subordinated Notes Trust ("SN Trust"). SN Trust is a variable
    interest entity which we are not required to consolidate (see Note 5);
    therefore, the BMO TSNs - Series A issued by SN Trust are not reported on
    our Consolidated Balance Sheet. SN Trust used the proceeds of the
    issuance to purchase a senior deposit note from us which is reported as a
    business and government deposit liability on our Consolidated Balance
    Sheet. All the BMO TSNs - Series A will be exchanged automatically,
    without the consent of the holders, into our Series E Subordinated Notes
    upon the occurrence of specific events, such as a wind-up of Bank of
    Montreal, a regulatory requirement to increase capital, violations of
    regulatory capital requirements, or changes to tax legislation.

    We have guaranteed the payments of principal, interest and redemption
    price, if any, and any other amounts on the BMO TSNs - Series A when they
    become due and payable. This guarantee is subordinate to our deposit
    liabilities and all other liabilities, except for other guarantees,
    obligations or liabilities that are designated as ranking either equally
    with or subordinate to the subordinated indebtedness.

    The senior deposit note bears interest at an annual rate of 5.90% and
    will mature on September 26, 2022. We require approval from the
    Superintendent of Financial Institutions Canada before we can redeem any
    part of our subordinated debt.

    During the quarter ended July 31, 2007, we redeemed all of our 7.92%
    Debentures, Series 22, due 2012, totalling $150 million. The debentures
    were redeemed at a redemption price of 100 per cent of the principal
    amount plus unpaid accrued interest to the redemption date.

    During the quarter ended July 31, 2007, we issued $1.2 billion of
    subordinated debt under our Canadian Medium-Term Note Program. The issue,
    Series D Medium-Term Notes, Second Tranche, is due June 2017. Interest on
    this issue is payable semi-annually at a fixed rate of 5.20% until
    June 21, 2012, and at a floating rate equal to the rate on three month
    Bankers' Acceptances plus 1.00%, paid quarterly, thereafter to maturity.

    During the quarter ended April 30, 2007, our US$300 million 7.80% Notes
    matured.

    Note 11 - Share Capital

    During the quarter ended October 31, 2007, we issued 10,000,000 5.25%
    Non-Cumulative Perpetual Class B Preferred Shares, Series 14, at a price
    of $25.00 per share, representing an aggregate issue price of
    $250 million.

    On September 6, 2007, we commenced a normal course issuer bid, effective
    for one year. Under this bid, we may repurchase up to 25,000,000 common
    shares, approximately 5% of our outstanding common shares. We
    participated in a normal course issuer bid during the period from
    September 6, 2006 to September 5, 2007, under which we were able to
    repurchase up to 15,000,000 common shares, approximately 3% of our then
    outstanding common shares.

    During the quarter ended October 31, 2007, we repurchased 1,406,300
    common shares at an average cost of $64.83 per share, totalling
    $91 million. During the quarter ended October 31, 2006, we repurchased
    975,000 common shares at an average cost of $65.84 per share, totalling
    $64 million. During the twelve months ended October 31, 2007, we
    repurchased 7,621,600 common shares at an average cost of $68.80 per
    share, totalling $524 million. During the twelve months ended October 31,
    2006, we repurchased 5,919,400 common shares at an average cost of
    $63.58 per share, totalling $376 million.

    On August 27, 2007, we redeemed all our 8,000,000 Non-Cumulative Class B
    Preferred Shares, Series 4 that were classified as preferred share
    liabilities, at a price of $25.00 per share, together with declared and
    unpaid dividends to the date of redemption. This represents an aggregate
    redemption price of approximately $200 million.

    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)                         October 31, 2007
    -------------------------------------------------------------------------
                                    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              498,562,702      4,411    -
    -------------------------------------------------------------------------
    Share Capital                             $ 5,607
    -------------------------------------------------------------------------
    Stock options issued                                 20,656,713
     under stock option plan                      n/a     common shares
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (a) For additional information refer to Notes 20 and 21 to our
        consolidated financial statements for the year ended October 31, 2006
        on pages 118 to 121 of our 2006 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 - United States Generally Accepted Accounting Principles

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

    (Canadian $ in millions,
     except earnings per         For the three            For the twelve
     share figures)               months ended             months ended
    -------------------------------------------------------------------------
                           October 31,  October 31,  October 31,  October 31,
                                 2007         2006         2007         2006
    -------------------------------------------------------------------------
    Net Income - Canadian
     GAAP                     $   452      $   696      $ 2,131      $ 2,663
    United States GAAP
     adjustments                   12          (15)         (16)         (57)
    -------------------------------------------------------------------------
    Net Income - United States
     GAAP                     $   464      $   681      $ 2,115      $ 2,606
    -------------------------------------------------------------------------
    Earnings Per Share
      Basic - Canadian GAAP   $  0.89      $  1.37      $  4.18      $  5.25
      Basic - United States
       GAAP                      0.90         1.35         4.14         5.14
      Diluted - Canadian GAAP    0.87         1.35         4.11         5.15
      Diluted - United States
       GAAP                      0.90         1.32         4.08         5.04
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Hybrid Financial Instruments
    Effective November 1, 2006, we adopted the new United States accounting
    standard on hybrid financial instruments. The new rules allow us to elect
    to measure certain hybrid financial instruments at fair value in their
    entirety, with any changes in fair value recognized in earnings. Under
    the previous rules, only the embedded derivative in the hybrid financial
    instrument was recorded at fair value. We did not elect to measure any
    hybrid financial instruments at fair value. The new standard did not have
    any impact on our consolidated financial statements.

    Pensions and Other Employee Future Benefits
    Effective November 1, 2006, United States GAAP requires us to recognize
    the excess of the fair value of our plan assets compared to the
    corresponding benefit obligation as an asset and the shortfall of the
    fair value of our plan assets compared to the corresponding benefit
    obligation as a liability. This is done on a plan-by-plan basis. The
    offsetting adjustment is recorded in Accumulated Other Comprehensive
    Income. This new guidance replaces the United States GAAP requirement to
    recognize an additional minimum pension liability in cases where the
    obligation, calculated without taking salary increases into account,
    exceeds the fair value of plan assets at year end. There is no change in
    the calculation of the pension and other employee future benefits
    expense.

    Financial Instruments
    Effective November 1, 2006, we adopted new Canadian accounting
    requirements for financial instruments, hedges and other comprehensive
    income, which are harmonized with the United States accounting standards
    (see Note 2).

    Note 14 - 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 products and services to personal and business clients in Canada
    through branches and direct banking channels such as telephone banking,
    online banking and a network of automated banking machines.

    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 the United
    States, primarily in the Chicago area and Indiana, 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 Technology and Operations ("T&O") and 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 for Corporate Services
    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.

    T&O manages, maintains and provides governance over our information
    technology, real estate, operations services and sourcing. The unit
    focuses on enterprise-wide priorities that improve quality and
    efficiency.

    Operating results for T&O are included with Corporate Services for
    reporting purposes. However, costs of T&O services are transferred to
    P&C, PCG, and BMO CM and only minor amounts are retained in T&O's
    results. As such, results for Corporate Services largely reflect
    operating results of Corporate units.

    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 Notes 1 and 2.
    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").
    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, are as
    follows:

    (Canadian $ in millions)
    -------------------------------------------------------------------------
    For the three months             P&C
     ended October 31, 2007       Canada    P&C U.S.         PCG      BMO CM
    -------------------------------------------------------------------------
    Net interest income        $     770   $     172   $     155   $     233
    Non-interest revenue             344          46         355         188
    -------------------------------------------------------------------------
    Total Revenue                  1,114         218         510         421
    Provision for credit losses       81           8           1          19
    Non-interest expense             696         161         352         397
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                 337          49         157           5
    Income taxes                      53          17          50         (43)
    Non-controlling interest
     in subsidiaries                   -           -           -           -
    -------------------------------------------------------------------------
    Net Income                 $     284   $      32   $     107   $      48
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 121,706   $  22,159   $   7,480   $ 220,232
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     106   $     628   $     313   $      91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                                             Teb       Total
    For the three months       Corporate  Total (teb      adjus-       (GAAP
     ended October 31, 2007   Services(1)   basis)(2)     tments       basis)
    -------------------------------------------------------------------------
    Net interest income        $     (90)  $   1,240   $     (44)  $   1,196
    Non-interest revenue              71       1,004           -       1,004
    -------------------------------------------------------------------------
    Total Revenue                    (19)      2,244         (44)      2,200
    Provision for credit losses       42         151           -         151
    Non-interest expense              49       1,655           -       1,655
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                (110)        438         (44)        394
    Income taxes                    (110)        (33)        (44)        (77)
    Non-controlling interest
     in subsidiaries                  19          19           -          19
    -------------------------------------------------------------------------
    Net Income                 $     (19)  $     452   $       -   $     452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $   4,308   $ 375,885   $       -   $ 375,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $       2   $   1,140   $       -   $   1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the three months             P&C
     ended October 31, 2006       Canada    P&C U.S.         PCG      BMO CM
    -------------------------------------------------------------------------
    Net interest income        $     755   $     184   $     145   $     191
    Non-interest revenue             403          41         320         442
    -------------------------------------------------------------------------
    Total Revenue                  1,158         225         465         633
    Provision for credit losses       79           7           1          19
    Non-interest expense             675         178         335         391
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                 404          40         129         223
    Income taxes                     132          16          45          35
    Non-controlling interest
     in subsidiaries                   -           -           -           -
    -------------------------------------------------------------------------
    Net Income                 $     272   $      24   $      84   $     188
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 116,318   $  22,123   $   6,708   $ 170,999
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $      93   $     582   $     323   $      98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Teb       Total
    For the three months       Corporate  Total (teb      adjus-       (GAAP
     ended October 31, 2006   Services(1)   basis)(2)     tments       basis)
    -------------------------------------------------------------------------
    Net interest income        $     (27)  $   1,248   $     (33)  $   1,215
    Non-interest revenue              40       1,246           -       1,246
    -------------------------------------------------------------------------
    Total Revenue                     13       2,494         (33)      2,461
    Provision for credit losses      (90)         16           -          16
    Non-interest expense              34       1,613           -       1,613
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                  69         865         (33)        832
    Income taxes                     (78)        150         (33)        117
    Non-controlling interest
     in subsidiaries                  19          19           -          19
    -------------------------------------------------------------------------
    Net Income                 $     128   $     696   $       -   $     696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $   3,895   $ 320,043   $       -   $ 320,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $       2   $   1,098   $       -   $   1,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the twelve months            P&C
     ended October 31, 2007       Canada    P&C U.S.         PCG      BMO CM
    -------------------------------------------------------------------------
    Net interest income        $   3,065   $     730   $     613   $     974
    Non-interest revenue           1,678         178       1,441         995
    -------------------------------------------------------------------------
    Total Revenue                  4,743         908       2,054       1,969
    Provision for credit losses      323          35           3          77
    Non-interest expense           2,670         696       1,427       1,565
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries               1,750         177         624         327
    Income taxes                     500          63         216         (98)
    Non-controlling interest
     in subsidiaries                   -           -           -           -
    -------------------------------------------------------------------------
    Net Income                 $   1,250   $     114   $     408   $     425
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 119,164   $  23,477   $   7,091   $ 207,084
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     106   $     628   $     313   $      91
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Teb       Total
    For the twelve months      Corporate  Total (teb      adjus-       (GAAP
     ended October 31, 2007   Services(1)   basis)(2)     tments       basis)
    -------------------------------------------------------------------------
    Net interest income        $    (359)  $   5,023   $    (180)  $   4,843
    Non-interest revenue             214       4,506           -       4,506
    -------------------------------------------------------------------------
    Total Revenue                   (145)      9,529        (180)      9,349
    Provision for credit losses      (85)        353           -         353
    Non-interest expense             243       6,601           -       6,601
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                (303)      2,575        (180)      2,395
    Income taxes                    (312)        369        (180)        189
    Non-controlling interest
     in subsidiaries                  75          75           -          75
    -------------------------------------------------------------------------
    Net Income                 $     (66)  $   2,131   $       -   $   2,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $   3,759   $ 360,575   $       -   $ 360,575
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $       2   $   1,140   $       -   $   1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the twelve months            P&C
     ended October 31, 2006       Canada    P&C U.S.         PCG      BMO CM
    -------------------------------------------------------------------------
    Net interest income        $   2,941   $     740   $     569   $     773
    Non-interest revenue           1,639         166       1,324       2,007
    -------------------------------------------------------------------------
    Total Revenue                  4,580         906       1,893       2,780
    Provision for credit losses      314          30           3          79
    Non-interest expense           2,597         681       1,342       1,602
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries               1,669         195         548       1,099
    Income taxes                     527          80         193         239
    Non-controlling interest
     in subsidiaries                   -           -           -           -
    -------------------------------------------------------------------------
    Net Income                 $   1,142   $     115   $     355   $     860
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 114,364   $  21,890   $   6,545   $ 161,811
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $      93   $     582   $     323   $      98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                             Teb       Total
    For the twelve months      Corporate  Total (teb      adjus-       (GAAP
     ended October 31, 2006   Services(1)   basis)(2)     tments       basis)
    -------------------------------------------------------------------------
    Net interest income        $    (152)  $   4,871   $    (127)  $   4,744
    Non-interest revenue             105       5,241           -       5,241
    -------------------------------------------------------------------------
    Total Revenue                    (47)     10,112        (127)      9,985
    Provision for credit losses     (250)        176           -         176
    Non-interest expense             131       6,353           -       6,353
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                  72       3,583        (127)      3,456
    Income taxes                    (195)        844        (127)        717
    Non-controlling interest
     in subsidiaries                  76          76           -          76
    -------------------------------------------------------------------------
    Net Income                 $     191   $   2,663   $       -   $   2,663
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $   4,521   $ 309,131   $       -   $ 309,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $       2   $   1,098   $       -   $   1,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Corporate Services includes Technology and Operations.
    (2) 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.


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

    (Canadian $ in millions), Taxable equivalent basis(1)
    -------------------------------------------------------------------------

    For the three months                      United       Other
     ended October 31, 2007       Canada      States   countries       Total
    -------------------------------------------------------------------------
    Net interest income        $     935   $     235   $      70   $   1,240
    Non-interest revenue             750         370        (116)      1,004
    -------------------------------------------------------------------------
    Total Revenue                  1,685         605         (46)      2,244
    Provision for credit losses       87          63           1         151
    Non-interest expense           1,204         412          39       1,655
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                 394         130         (86)        438
    Income taxes                      11          35         (79)        (33)
    Non-controlling interest
     in subsidiaries                  15           4           -          19
    -------------------------------------------------------------------------
    Net Income                 $     368   $      91   $      (7)  $     452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 233,006   $ 109,894   $  32,985   $ 375,885
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     423   $     717   $       -   $   1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the three months                      United       Other
     ended October 31, 2006       Canada      States   countries       Total
    -------------------------------------------------------------------------
    Net interest income        $     962   $     247   $      39   $   1,248
    Non-interest revenue             904         297          45       1,246
    -------------------------------------------------------------------------
    Total Revenue                  1,866         544          84       2,494
    Provision for credit losses       20          (3)         (1)         16
    Non-interest expense           1,170         406          37       1,613
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries                 676         141          48         865
    Income taxes                     107          36           7         150
    Non-controlling interest
     in subsidiaries                  14           5           -          19
    -------------------------------------------------------------------------
    Net Income                 $     555   $     100   $      41   $     696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 193,685   $  97,805   $  28,553   $ 320,043
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     410   $     688   $       -   $   1,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    For the twelve months                     United       Other
     ended October 31, 2007       Canada      States   countries       Total
    -------------------------------------------------------------------------
    Net interest income        $   3,745   $     973   $     305   $   5,023
    Non-interest revenue           3,836         582          88       4,506
    -------------------------------------------------------------------------
    Total Revenue                  7,581       1,555         393       9,529
    Provision for credit losses      257          99          (3)        353
    Non-interest expense           4,785       1,653         163       6,601
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries               2,539        (197)        233       2,575
    Income taxes                     546        (150)        (27)        369
    Non-controlling interest
     in subsidiaries                  55          20           -          75
    -------------------------------------------------------------------------
    Net Income                 $   1,938   $     (67)  $     260   $   2,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 216,572   $ 111,150   $  32,853   $ 360,575
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     423   $     717   $       -   $   1,140
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    For the twelve months                     United       Other
     ended October 31, 2006       Canada      States   countries       Total
    -------------------------------------------------------------------------
    Net interest income        $   3,709   $   1,016   $     146   $   4,871
    Non-interest revenue           3,686       1,375         180       5,241
    -------------------------------------------------------------------------
    Total Revenue                  7,395       2,391         326      10,112
    Provision for credit losses      181          (3)         (2)        176
    Non-interest expense           4,520       1,695         138       6,353
    -------------------------------------------------------------------------
    Income before taxes and
     non-controlling interest
     in subsidiaries               2,694         699         190       3,583
    Income taxes                     650         207         (13)        844
    Non-controlling interest
     in subsidiaries                  55          21           -          76
    -------------------------------------------------------------------------
    Net Income                 $   1,989   $     471   $     203   $   2,663
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Average Assets             $ 191,929   $  90,317   $  26,885   $ 309,131
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Goodwill (As At)           $     410   $     688   $       -   $   1,098
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) 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


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