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## Financial Results 

Investment Banking Group net income rose $115 million or 24%. Excluding a write-down of $178 million ($105 million after tax) in the group’s equity investment in its own CBOs in 2001, which was categorized as a non-recurring item for reporting purposes, net income for fiscal 2002 improved by $10 million to $592 mil- lion. There were no non-recurring items in 2002. Difficult capital markets and credit conditions created a much more challenging environment in 2002. The improvement in this year’s net income was reflective of a significantly lower provision for credit losses, which was primarily due to a change in BMO’s loan loss alloca- tion methodology, as discussed below. 

Revenue declined $263 million to $2,534 million. Excluding non-recurring items, revenue declined $441 million or15%. Weak North American economic and credit environments contributed to a general downturn in investment banking fees and downward pressure on corporate lending volumes. Trading-related revenue declined $204 million to $383 million, having been particularly robust in 2001. Net investment securities losses totalled $142 mil- lion in 2002, including final CBO write-downs of $103 million, compared with net losses of $195 million in 2001. Notwithstand- ing the challenging business and market environments, revenue benefited from strong restructuring activity and income trust origination in Investment and Corporate Banking, from increased spreads in our interest-rate-sensitive businesses in Capital Mar- kets and from strong fee-based revenue growth in Securitization and Credit Investment Management. 

Provisions for credit losses declined $318 million to $227 mil- lion in 2002. In 2002, the provision for credit losses was based on expected losses over an economic cycle. Corporate Support is charged for differences between expected loss provisions charged to the client groups and provisions required under GAAP. As explained more fully on page 48, in 2001 there were some differ- ences in how loan loss provisions were charged to client groups and to Corporate Support. Accordingly, the provision for credit losses should be considered in conjunction with provisions charged to Corporate Support for comparative purposes. 

Non-interest expenses were reduced $91 million or 6%, largely due to a reduction in performance-based compensation and a disciplined approach to cost management. These improvements were partly offset by severance costs in 2002. 

## 2001 Compared with 2000 

Net income in 2001 was $477 million, a decrease of $207 million. Excluding the write-down of equity investments in our own CBOs, net income was $582 million, or $102 million below 2000. Revenue increased 4% but excluding non-recurring items, rev- enue rose $278 million or 10%, driven by significantly improved results in Capital Markets, which benefited from interest rate reductions and improved client-driven trading activity. Strong dividend income, securitization fees and increased loan spreads also contributed to the increase. Merger and acquisition activi- ties, new issue activities and equity market volumes all declined in the weaker business environment. The provision for credit losses increased $389 million due to the effect of deteriorating economic conditions in North America on our U.S. mid-market corporate and Canadian portfolios. Expenses increased $96 mil- lion or 7% due to higher performance-based compensation and increased employee costs. 

## Investment Banking Group ($ millions, except as noted) 

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