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## Change in Net Interest Income, Average Assets and Average Net Interest  Margin 

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## Net Interest Income 

Net interest income for the year was $4,935 million, an increase of $294 million or 6% from 2001. The increase was driven by volume growth in personal and commercial banking. 

Net interest margins averaged 1.99% and were up 8 basis points from a year earlier. The increase was attributable to changes in asset mix, as relatively higher-yielding retail banking assets rose strongly, while relatively lower-yielding wholesale banking assets were reduced. 

Average assets rose $4.8 billion but increased $9.7 billion in Personal and Commercial Client Group, reflecting solid growth in Canada, particularly in residential mortgages. Canadian retail and commercial deposits also experienced solid growth. U.S. retail and business banking grew very strongly, partly due to the acquisition of Joliet in July 2001. Margins declined in Canada, reflecting a low interest rate environment and a highly competitive lending market. 

Net interest income growth in Private Client Group was largely attributable to businesses acquired in the United States. The group’s net interest margins on assets are relatively high because its personal term deposits balances exceed its loans balances. 

Investment Banking Group average assets fell $4.3 billion due to the weak corporate lending environment and strategic reduc- tions in non-relationship loans. The interest margin was largely unchanged. The effects of higher spreads in capital markets businesses were only partially offset by lower spreads in cash management businesses and lower loans balances. 

## Non-Interest Revenue 

Non-interest revenue, which comprises all revenues other than net interest income, declined $298 million to $3,924 million from $4,222 million in 2001. Non-recurring items in 2001 totalled $155 million. This included $321 million of gains on sales of our investment in Bancomer and $12 million of gains on sales of branches, partially offset by $178 million of write-downs on our investments in CBOs. There were no non-recurring items in 2002. Excluding non-recurring items in 2001, non-interest revenue for 2002 declined $143 million or 4% from 2001. The additive effect of acquired businesses increased non-interest revenue by $152 million. The remainder of the non-interest revenue section is presented excluding non-recurring items. 

Securities commissions and fees rose $71 million. These fees largely consist of full-service and self-directed retail broker- age commissions within Private Client Group and institutional equity trading commissions within Investment Banking Group. 

Net interest income is comprised of earnings on assets, such as loans and securities, including interest and dividend income and BMOGLYPH<213>s share of income from investments accounted for using the equity method of accounting, less interest expense paid on liabilities, such as deposits. 

Net interest margin is the ratio of net interest income to average assets. 

Institutional revenues rose, but most of the increase related to direct investing acquisitions, as client-trading volumes declined. Deposit and payment service charges, which represent income earned on both retail and commercial deposit accounts, rose $62 million while card fees increased $56 million. Both increases were due to robust volume growth and service initiatives. 

Lending fees decreased $46 million due to lower corporate lending activities in Investment Banking Group as demand weakened. Investment management and custodial fees decreased $22 million, partly due to lower equity market values. 

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