BMO Financial Group to Reflect Charges in First Quarter Earnings, Proposes Support for Links and Parkland Structured Investment Vehicles (SIVs), Provides Update on Apex/Sitka Trust and Announces Senior Management Changes



    TORONTO, Feb. 19 /CNW/ - BMO Financial Group (TSX: BMO; NYSE:   BMO) today
announced charges to first quarter earnings and provided further clarity
around certain off-balance sheet vehicles managed by BMO Financial Group. It
also announced senior management changes to take effect March 5th, the day
following BMO's Annual Meeting.

    Asset Valuations at Quarter End

    BMO Financial Group announced today that it expects first quarter results
(three months ended January 31, 2008) will include the following items:

    
    - Charges in BMO Capital Markets for certain trading activities and
      valuation adjustments of approximately $490 million pre-tax
      ($325 million after tax). The charges relate to:

       - Certain transactions previously hedged with ACA Financial Guaranty
         Corporation, a monoline insurer, approximately $160 million pre-tax.
         BMO has liquidated these positions and has no further exposure to
         ACA or transactions that were hedged with ACA.

       - Trading and structured credit-related positions, preferred shares,
         third party Canadian conduits and other mark to market losses,
         approximately $175 million pre-tax.

       - BMO's investment in Apex/Sitka Trust, approximately
         $130 million pre-tax. This is in addition to the $80 million charge
         taken in Q4, 2007. Apex/Sitka Trust is a structured finance vehicle
         to which BMO has not provided backup liquidity.

       - Capital notes in the Links Finance Corporation and Parkland Finance
         Corporation SIVs, approximately $25 million pre-tax. BMO's remaining
         capital notes are valued at approximately $30 million.

    - An increase to the general allowance for credit losses to reflect
      portfolio growth and risk migration, approximately $60 million pre-tax
      ($40 million after tax).

    These items will lower earnings per share in the first quarter by
approximately 70 cents. BMO's Tier 1 Capital Ratio remains strong and was
9.51% as at October 31, 2007 under the Basel I methodology.
    BMO is in the process of completing its review and final first quarter
closing procedures. Accordingly, the above information is based on current
estimates and is subject to change. BMO will release its first quarter 2008
results on March 4, 2008.

    Structured Investment Vehicles

    BMO also today announced a proposal to provide senior ranked support for
the funding of Links Finance Corporation and Parkland Finance Corporation.
Execution of the definitive agreement to provide support will depend on a
number of factors, including approvals of the terms by the SIV boards. BMO
liquidity facilities will backstop the repayment of senior note obligations to
facilitate SIVs access to further senior funding, provide the SIVs with
supplemental funding, and permit the SIVs to continue the strategy of selling
assets in an orderly manner.
    Since July 31, 2007, the assets in Links have been reduced from US$23.4
 billion to US$12.3 billion and the assets in Parkland have been reduced from
(euro)3.4 billion to (euro)1.2 billion, in both cases net of cash. This
reduction principally reflects progress to date in the strategy to reduce the
size of the SIVs.
    BMO said given current market conditions, it is proposing these liquidity
facilities to facilitate the continued orderly management of the SIVs, while
balancing the interests of our shareholders, clients and debt holders.
    The proposed liquidity facilities, which include previous financial
support provided by BMO, will be capped at a maximum of approximately
US$11 billion related to Links and (euro)1.2 billion for Parkland. Given the
terms and conditions of the proposed liquidity facilities and the maturity
profile of the senior notes, the amount to be drawn is expected to be
approximately one half of the amount of the maximum amount of the facilities.
    The strength of BMO's financial position as well as the quality of the
SIVs' assets allows BMO to extend this support without any material adverse
impact on its financial position:

    - Risk of loss of these proposed facilities is low:

      - The asset quality of the SIVs is high; over 90 per cent of
        assets are rated AA or better by Moody's and over 80 per cent by
        Standard & Poor's. Certain of these ratings are on watch. There is
        minimal exposure to U.S. sub-prime mortgages.

      - Capital note holders will continue to bear the economic risk from
        actual losses up to the full amount of their investment. BMO is not
        providing any protection from the economic risk to capital note
        holders, now or in the future. The net asset values of the capital
        notes as at February 12th are approximately US$877 million for Links
        and approximately (euro)146 million for Parkland.

      - The risk of loss for BMO under the proposed arrangement is considered
        low given the high asset quality and the fact that the advances under
        the liquidity facilities will rank ahead of the subordinate capital
        note holders.

    - The impact on Tier 1 Capital is not material.

    - The amount of these liquidity facilities represents approximately
      3 per cent of BMO's total assets at October 31, 2007.

    - Asset sales and maturities and the maturity profile of the senior notes
      reduce the size of the expected funding to a level significantly below
      the full amount of the liquidity facilities.
    

    Apex/Sitka Trust

    BMO is continuing its discussions with a number of counterparties on
restructuring alternatives for Apex/Sitka Trust. The conduit's underlying
positions are super senior positions with exposures to high quality
diversified corporate debt through collateralized debt obligations. The
ratings on these positions continue to be rated AAA, although they are under
review. Charges taken in BMO's fourth quarter 2007 and first quarter 2008 in
connection with Apex/Sitka Trust total $210 million, leaving BMO with a net
position of $495 million. The charges that BMO has taken reflect its
expectations with respect to the probability of Apex/Sitka Trust being
restructured. If Apex/Sitka is not restructured, it is expected that BMO would
incur an additional charge that would approximate its remaining net investment
of $495 million pre-tax. If BMO determines it is in its interest to do so, it
may provide additional support to Apex/Sitka Trust.

    Management Changes

    At the same time, BMO said it would be implementing a number of senior
management changes reflecting its ongoing succession plans. All the changes
are effective from March 5, 2008.
    Thomas E. Flynn is appointed Chief Risk Officer, BMO Financial Group,
taking over from Robert L. McGlashan who announced his intention to retire
late last year. Mr. Flynn has served as Interim Chief Financial Officer since
October, 2007. Prior to that, he was Executive Vice-President, Finance and
Treasurer. He joined the Company in 1992 and went on to serve in a number of
senior roles within the BMO Capital Markets business, including serving as
Head of the Financial Services Corporate and Investment Banking Group.
    He will report to Bill Downe, President and Chief Executive Officer of
BMO Financial Group.
    Russel C. Robertson joins BMO Financial Group as Interim Chief Financial
Officer from Deloitte and Touche LLP in Toronto where he has served as
Vice-Chairman since 2002. Mr. Robertson began his career in 1969 with Arthur
Andersen LLP in Toronto and held a number of increasingly senior roles in that
company including Canadian Managing Partner. He is an experienced audit
partner with extensive financial services experience. Most recently at
Deloitte and Touche he has been lead client service partner for BMO Financial
Group. In his new role, he will also report to Mr. Downe.
    Thomas V. Milroy is appointed Chief Executive Officer of BMO Capital
Markets succeeding Yvan Bourdeau. Mr. Milroy has been Co-President of
BMO Capital Markets for the past two years. He joined BMO in 1994 and has held
increasingly senior roles within BMO Capital Markets. He will report to
Mr. Downe.
    In his new role, Mr. Bourdeau will become Vice-Chair BMO Capital Markets
with accountability for account coverage, while continuing to focus on the
execution of our China/international objectives. He has been with the Company
since 1972 and served in numerous key positions across the bank.
    Concurrent with these changes, Eric Tripp, who also served as
Co-President of BMO Capital Markets, will assume the new position of
President, BMO Capital Markets. He will report to Tom Milroy. Mr. Tripp joined
BMO in 1994 and since then has held increasingly responsible positions within
the company.
    Commenting on these appointments, Mr. Downe said: "In line with our
ongoing succession plans, these changes maintain our strong leadership team
and position us well for the future as we push ahead with our aggressive
agenda.
    "Tom Flynn's experience in our Capital Markets business and senior
finance roles has made him well suited to lead the Risk function as we move
ahead with plans to enhance all aspects of our Risk Management. I welcome
Russel Robertson to his interim role within BMO as Karen Maidment continues
with her health treatment. He is a respected and experienced executive who
knows our Company and the financial services industry well and can hit the
ground running as CFO. Tom Milroy has demonstrated that he has the experience
and vision to lead BMO Capital Markets and he will be ably supported by
Eric Tripp with whom he has partnered so well in the past. Yvan Bourdeau has
served BMO with distinction in his long career and will continue to do so as
Vice-Chair. Finally, I thank Bob McGlashan for his 35 years of dedicated
service to BMO and wish him well for his upcoming retirement."

    CAUTION REGARDING FORWARD-LOOKING STATEMENTS

    Bank of Montreal's public communications often include written or oral
forward-looking statements. Statements of this type are included in this
document, and may be included in other filings with Canadian securities
regulators or the U.S. Securities and Exchange Commission, or in other
communications. All such statements are made pursuant to the 'safe harbor'
provisions of, and are intended to be forward-looking statements under, the
United States Private Securities Litigation Reform Act of 1995 and any
applicable Canadian securities legislation. Forward-looking statements may
involve, but are not limited to, comments with respect to our objectives and
priorities for 2008 and beyond, our strategies or future actions, our targets,
expectations for our financial condition or share price, and the results of or
outlook for our operations or for the Canadian and U.S. economies.
    By their nature, forward-looking statements require us to make
assumptions and are subject to inherent risks and uncertainties. There is
significant risk that predictions, forecasts, conclusions or projections will
not prove to be accurate, that our assumptions may not be correct and that
actual results may differ materially from such predictions, forecasts,
conclusions or projections. We caution readers of this document not to place
undue reliance on our forward-looking statements as a number of factors could
cause actual future results, conditions, actions or events to differ
materially from the targets, expectations, estimates or intentions expressed
in the forward-looking statements.
    The future outcomes that relate to forward-looking statements may be
influenced by many factors, including but not limited to: general economic and
market conditions in the countries in which we operate; interest rate and
currency value fluctuations; changes in monetary policy; the degree of
competition in the geographic and business areas in which we operate; changes
in laws; judicial or regulatory proceedings; the accuracy and completeness of
the information we obtain with respect to our customers and counterparties;
our ability to execute our strategic plans and to complete and integrate
acquisitions; critical accounting estimates; operational and infrastructure
risks; general political conditions; global capital market activities; the
possible effects on our business of war or terrorist activities; disease or
illness that impacts on local, national or international economies;
disruptions to public infrastructure, such as transportation, communications,
power or water supply; and technological changes.
    Assumptions about the level of asset sales, expected asset sale prices
and risk of default of the underlying assets of the structured investment
vehicles were material factors we considered when establishing our
expectations of the future performance of our interests in the structured
investment vehicles discussed in this release. Key assumptions included that
assets would continue to be sold with a view to reducing the size of the
structured investment vehicles, under various asset price scenarios.
    We caution that the foregoing list is not exhaustive of all possible
factors. Other factors could adversely affect our results. For more
information, please see the discussion on pages 28 and 29 of BMO's 2007 Annual
Report, which outlines in detail certain key factors that may affect BMO's
future results. When relying on forward-looking statements to make decisions
with respect to Bank of Montreal, investors and others should carefully
consider these factors, as well as other uncertainties and potential events,
and the inherent uncertainty of forward-looking statements. Bank of Montreal
does not undertake to update any forward-looking statement, whether written or
oral, that may be made, from time to time, by the organization or on its
behalf.




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


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