Insurance and Wealth Management: BMO faring better in 2020

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By Aurélia Morvan | Dec. 15, 2020, 1:06 p.m.

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BMO Financial Group reported net income of $1.6 billion for fourth quarter 2020, which ran from August 1 to November 30. This result amounts to growth of 32.7% or $390 million (M) from the $1.2 net income reported in Q4 2019.

All the same, BMO's net income fell by 11.5% or $661 million for 2020 as a whole. Net income is $5.1 billion, down from $5.8 billion in 2019. "Total provision for credit losses was $432 million, an increase of $179 million from the prior year, primarily due to the impact of COVID-19," the financial institution says.

Insurance and wealth management advance

For 2020 overall, three BMO businesses declined and two grew, including BMO Wealth Management. BMO Wealth Management reported net income of $1.1 billion in 2020, up 3.5% or $37 million from the $1.06 billion reported in 2019.

For the fourth quarter alone, this segment recorded net income of $320 million, for growth of 20.3% or $54 million from Q4 2019.

BMO Wealth Management is made up of two sub-sectors, insurance and wealth management, each of which saw gains:

BMO's wealth management businesses alone reported net income of $893 million in 2020, compared with $861 million in 2019, up 3.7% or $32 million. For Q4 alone, the sub-segment reported net income of $253 million, for growth of 7.2% or $17 million from Q4 2019.

For its insurance business alone, BMO reported net income of $203 million in 2020, compared with $198 million in 2019, up 2.5% or $5 million. For the fourth quarter alone, the sub-sector reported net income of $67 million, equal to an increase of 123.3% or $37 million from Q4 2019.

Revenue also increasing

BMO Wealth Management's net revenue, net of claims, commissions and changes in policy benefit liabilities (CCPB), for both sub-segments combined, was $1.3 billion, compared with $1.2 billion in the fourth quarter of 2019. Net revenue climbed 6.2% or $77 million, "primarily due to higher online brokerage revenues and the benefit from higher global markets, partially offset by lower net interest income, as the benefit from strong loan and deposit growth was more than offset by lower margins," BMO explains.

For the year 2020 as a whole, this revenue was $5 billion, compared with $4.95 billion in 2019. The increase amounts to 0.9% or $47 million.

Looking at the results in detail:

Wealth management revenue, net of CCPB, was $4.6 billion in 2020, up 0.8% or $38 million from 2019. In the fourth quarter alone, revenue was $1.2 billion, up 2.3% or $27 million.
Insurance revenue, net of CCPB, was $407 million in 2020, compared with $398 million in 2019. This represents an increase of 2.3% or $9 million. In the fourth quarter alone, revenue was $127 million, up 64.9% or $50 million.

One more sector progresses, 3 decline

The Corporate Services segment also saw an upturn, although it remains in the red. It reported a net loss of $391 million in 2020, versus a net loss of $627 million in 2019. This result represents an increase of $236 million.

BMO's other three sectors declined for the year 2020, but remain in the black.

Personal and Commercial Banking in Canada posted net revenue of $2 billion in 2020, compared with $2.6 billion in 2019, for a decrease of 22.7% or $596 million. Personal and Commercial Banking in the U.S. reported net revenue of $1.3 billion in 2020, compared with $1.6 billion in 2019, for a downturn of 20.7% or $334 million. BMO Capital Markets net income was $1.1 billion, down 0.4% or $4 million.