Good morning, and welcome to the BMO Financial Group's Q4 2025 Earnings Release and Conference Call for December 4, 2025. Your host for today is Christine Viau. Please go ahead.

Thank you, and good morning. We will begin the call today with remarks from Darryl White, BMO's CEO; followed by Tayfun Tuzun, our Chief Financial Officer; and Piyush Agrawal, our Chief Risk Officer. Also present to answer questions are our group heads: Matt Mehrotra from Canadian Personal and Business Banking; Sharon Haward-Laird, Canadian Commercial Banking; Aron Levine, U.S. Banking; Alan Tannenbaum, BMO Capital Markets; Deland Kamanga, BMO Wealth Management; and Darrel Hackett, BMO U.S. CEO. [Operator Instructions] As noted on Slide 2, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results, management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darryl and Tayfun will be referring to adjusted results in their remarks unless otherwise noted as reported. I will now turn the call over to Darryl.

Thank you, Christine, and good morning, everyone. This morning, we reported adjusted EPS of $3.28 for the fourth quarter and $12.16 for the year. Fiscal 2025 was a strong year for BMO. We made meaningful progress against our financial and strategic commitments, strengthening profitability, delivering for our clients and supporting the communities we serve. At this time last year, we laid out specific financial commitments and a clear path. And through 2025, we delivered against each of those commitments with disciplined execution. Here are some highlights. Our top imperative is rebuilding our ROE together with profitable earnings growth. These priorities are not mutually exclusive, but mutually reinforcing as we demonstrated in 2025. We increased full year ROE by 150 basis points from 9.8% to 11.3%, and we exited Q4 with momentum at 11.8%. At the same time, we delivered EPS growth of 26% and record net income of $9.2 billion. We made progress across each of our 4 strategic levers. The most important driver was strong operating performance in each of our businesses with PPPT up 18% for the year to $15.8 billion. We met our long-standing commitment to positive operating leverage, achieving 4% for the year. Operating leverage was positive in each segment, driven by disciplined expense management and solid revenue performance. Our efficiency ratio improved by 230 basis points to 56.3%. Strength in risk management remains a core differentiator for BMO. As expected, impaired provisions moderated from the peak in Q4 '24 to 44 basis points this quarter. We built allowances during the first half of the year to account for a slower economy and trade uncertainty, and we are well reserved for potential risks in the environment. Finally, we're actively optimizing our capital position. Over the course of 2025, we returned over $8 billion in capital to…

Thank you, Darryl. Good morning, and thank you for joining us. My comments will start on Slide 9. On a reported basis, fourth quarter EPS was $2.97 and net income was $2.3 billion. Adjusting items are shown on Slide 46 and included a goodwill write-down related to the announced sale of certain U.S. branches. The remainder of my comments will focus on adjusted results. Adjusted EPS of $3.28 was up significantly from $1.90 last year with net income of $2.5 billion, driven by strong PPPT growth of 16% and lower PCLs. Return on equity of 11.8% improved 440 basis points and return on tangible common equity of 15.4% improved 570 basis points. Revenue increased 12%, with broad-based growth across all businesses, including continued strong fee growth in wealth and capital markets and NIM expansion. Expenses grew 9% or 5% excluding higher performance-based compensation and the impact of stronger U.S. dollar, and we delivered positive operating leverage of 3%. Total PCL decreased $768 million from the prior year with lower impaired and performing provisions. Piyush will speak to this in his remarks. Moving to Slide 10. Average loans grew 1% year-over-year, driven by higher residential mortgages and commercial loans in Canada, offset by lower U.S. commercial balances, including the impact of optimization actions. Customer deposits were up 1% from last year with good growth in Canadian everyday banking and commercial operating balances, offset by lower term deposits in both countries. Turning to Slide 11. On an ex-trading basis, net interest income was up 10% from the prior year with good growth in all operating segments supported by continued margin expansion and balanced growth in Canadian P&C and Wealth as well as higher net interest income in Corporate Services. Net interest margin ex trading was 206 basis points, up 7 basis points…

Thank you, Tayfun, and good morning, everyone. My remarks start on Slide 21. Our credit performance this year was in line with our expectations. Impaired provision for credit losses was 46 basis points for the fiscal year at the lower end of the guidance of high 40s. Through fiscal 2025, performance improved in U.S. banking. At the same time, softness in the Canadian economy, including rising unemployment and trade uncertainty, resulted in higher losses in our Canadian Personal and Commercial business. Now turning to the fourth quarter. Total provision for credit losses was $755 million or 44 basis points with impaired provision of $750 million, down $23 million or one basis point from prior quarter, primarily due to lower losses in U.S. banking with relatively stable losses in Canadian Personal and Commercial banking and capital markets, which increased $7 million and $4 million, respectively. Turning to Slide 22. The performing provision for the quarter was $5 million with a build in Canadian Personal and Commercial, largely offset by a release in U.S. banking, consistent with the risks in the economy and credit trends in our portfolios. Overall, the provision this quarter reflected an improvement in the macroeconomic scenarios and lower balances in certain portfolios, which were offset by the uncertainty in credit conditions. The performing allowance of $4.7 billion provides a robust coverage of 70 basis points over performing loans, and we remain well reserved. Turning to Slide 23. Impaired formations were stable at $1.8 billion this quarter. The increase in the consumer segment came largely from mortgages, which are well secured with low LTVs and we do not expect to see significant losses. Wholesale formations have come down since last year and have been relatively stable over the last 3 quarters. Gross impaired loans increased to $7.1 billion or…

[Operator Instructions] Our first question comes from Paul Holden from CIBC.

A question on ROE. Now given the 11.3% in '25, wouldn't expect you to increase the target at this point. That's for sure. But just wondering in terms of that 15% target, do you think it's realistic that you could achieve that in 2027 given the pace at which you're executing against your strategy? Is it a realistic objective? Or are we going to have to wait a little bit longer?

Paul, it's Darryl. So the 15% is still absolutely the target. Thank you for the question. In terms of the timeline, we're pretty clear to say that, that's our medium-term target, which we sort of think about as 3 to 5 years. And we started to establish that language pretty clearly through the course of this year. So it's difficult for me to put a particular date on when we hit the 15% for you right now. But we also have said and I stand by it, that assuming constructive environments, we hope to get there by the early part of this range.

Our next question comes from John Aiken from Jefferies.

Tayfun, you reiterated your preference for a CET1 ratio, getting closer to 12.5%. You guys are actually a little bit more aggressive in that regard. I'll preface this question by saying that I do agree that 13% is still a little bit too high for you and the group. But how comfortable do you believe that you and BMO are in terms of breaking ranks with the peer group if you drop below 13% before anybody else does?

So John, good question. I will reiterate how we think about our approach to capital management. There are 3 factors that we've been very public about this. One is obviously the regulatory minimums. The second one is the economic -- macroeconomic backdrop and our own performance within that macroeconomic backdrop. And the third one is the peer group distribution. So when we arrived at 12.5% management target, we considered all these 3 points. And we're quite comfortable that at 12.5%. This is a very sound approach to managing our capital ratio. And thus, we've been very public about that for a while now.

Our next question comes from Ebrahim Poonawala from Bank of America.

I guess just 2 questions -- one or 2-part questions since we can only ask one. I guess when we think about the commercial loan growth outlook, ex your optimization actions. I understand that's going to mitigate growth in the near term. But when we look at the U.S., there are obviously mixed signals around what's happening with the economy. Are you actually seeing signs that the tax bill is having an impact on how businesses are behaving around investments and hiring? And when you look at the first half loan growth in the U.S. one, like do you see a pickup? Or do you see risks of downside given the tariff uncertainties? And similarly, in Canada, what needs to happen to really lift the macro overhang if we don't get some clarity on [ CUSMA ] maybe until the back half of '26?

Ebrahim, thanks for the question. It's Aron. So in terms of the U.S. we're hearing from clients, general optimism, obviously, that's cautious and there's always the questions as you're asking. But generally, we're seeing pickup in activity. We're seeing pipelines grow. We're having good conversations with clients that are feeling generally a level of optimism. For us, in particular, as we think about this inflection point that we're hitting with moving out of optimization towards growth, right, the strength of our commercial relationships that really came through with the fee growth that we showed. Second, as Darryl mentioned, hiring over 100 commercial bankers and private advisers over the last 12 months. They're just effectively getting going. So you're going to see that benefit us over the next 12 months. And then, of course, our continued investment in both client-facing and internal technology as we get more efficient, make it easier to do business. So for all of those reasons, I feel very confident that we'll start to see the loan growth, as Darryl mentioned, as we get into the second quarter, third quarter of 2026, again, assuming some of the optimism stays and the U.S. economy stays as we think it will.

Got it. [indiscernible] on Canada.

Yes. Here it comes.

Thank you. Here it comes. It's Sharon. Thanks for the question. I'd say similar to Aron, I've been out talking to clients, and we would describe the tone as cautiously optimistic. There's obviously a lot of pent-up demand and pipelines are very strong. We did see the end of the fourth quarter was stronger than the beginning of the fourth quarter. So we're seeing good momentum going into this coming year. But we're also really focused on deposit growth. And you see we've taken a lot of market share in operating deposits and our TPS business has had double-digit -- high double-digit growth this year as well. So we've had very strong commercial revenue growth, and we're ready for the CapEx. On your question of what has to happen. I think at some point, we are starting to see, especially in the middle market, more clients moving and starting to draw down. But utilization rates are still low. So there's room there as well. Obviously, any more certainty will be a positive contributor to things moving. But whenever things pick up, we think we'll be in a good position to take share.

Our next question comes from Gabriel Dechaine from National Bank Financial.

I know the impaired PCL discussion over the past while it's focused on the U.S., but I want to ask about the Canadian credit card book. We're seeing the delinquency rates there rise above the peer average. We're seeing the balances shrink over the course of the year. And I'm wondering what I should take away from that data? Are you -- did you grow too fast at a certain point in time? Are we maybe going to see a blip in post-Christmas period credit metrics? And then I'll throw this one in there while I'm at it for Darryl, M&A, would you be willing to issue stock to do a deal? Or are you looking at more tuck-in type things?

Thanks for the question, Gabe. It's Matt speaking. I'll just go back to the comments at the beginning of the call on the macro economy. That -- the overall conditions are definitely affecting mass consumers and particularly the lower end of the credit spectrum, not surprisingly, unemployment and solvency is up. Those stresses are more visible for us given our portfolio composition. We tend to have a smaller premium book, think about sort of large airline co-brand hasn't been a big part of our business up until recently with Porter. We've made adjustments that manage our exposure to that segment and equally on the flip side are seeing good growth with Porter and sort of our premium segment overall, 16,000 accounts acquired since launch. They have a deep active collector base. So overall, we're looking ahead towards that top end of the market. But I mean, obviously, with the macro conditions as they are, the impact on that lower segment is visible for us, and we're waiting for that improvement.

Our next question comes from Mario Mendonca from TD Securities.

Sort of similar question to what Gabe just asked on acquisitions. There's plenty of speculation that BMO is actively looking to make an acquisition in the U.S. banking. And I know it's difficult for you to comment on that speculation because that would be a speculation, but perhaps you could speak to this. If BMO were to do a deal in the U.S., would you sacrifice that ROE target of 12%, at least for a few years, for the benefit of that increased scale?

Yes. Okay. So it's Darryl, Mario. Thanks, Gabe, for the question as well. We rolled into the next one pretty quickly. So it's fine. I'll pair them together. The short answer to Mario's question is no, and absolutely no. So let me step back and give you a little bit of color behind that. I think we've been pretty clear about how we think about capital deployment and achieving the ROE targets is the top imperative across the bank and in U.S. banking. So every decision that we make is evaluated through that lens. Will it support the ROE improvement and sustainable profitable growth or not? That applies to an organic growth decision and it applies to M&A decisions as well. I've also said before good management teams always have their M&A antenna up. But equally, you got to be really disciplined. And we would only take a hard look at anything that met both the strategic and the ROE objectives. We've discussed a lot about how we're optimizing the redeployment in the United States. You saw it in my comments. You saw it in our new slide. You heard from Aron just now. The reinvestment is targeted at densifying and building local scale in markets where we think we're positioned to compete and win. So that's a really important point when you think about your question. Is there a tuck-in opportunity in those markets that would enable us to continue our ROE journey and not slow it down. In fact, if it would accelerate it, might we look at it? Sure. But if it doesn't meet those criteria, both strategically and financially, we're not on. Our #1 priority is to grow organically, and we're confident we could do that and reach those objectives with or without M&A.

Okay. And I need one quick clarification on the restructuring. Is that a number you're leaving in the core number? Or are you going to take that out and adjust that for it? It sounds like you're leaving it in, but some clarification?

Yes. We are leaving it in. We've always -- yes, we -- our record is that we typically leave it in.

Our last question comes from Darko Mihelic from RBC.

I have a 2-part question. Just the first part of this is just a clarification on the corporate segment. Can you just speak to what it was that you did in the quarter that had this segment do much better than the typical loss? And importantly for me is just whatever was done in there, it doesn't seem like it has any kind of impact on the tractoring or anything like that? That's just the most important part of the answer to that. And the second part of my question is completely unrelated to -- with the disclosure you provided, Piyush, one of the things that -- on NBFI, one of the things I just want to confirm with you is you mentioned in your remarks that the -- there's no losses, so to speak, in a significant part of this book. And I guess, where I am with that is, were there losses in the other parts of the book and specifically, Piyush, I'm very interested in understanding if any part of this NBFI lending contributed to the higher losses we saw in '24 and to some extent '25?

So I'll begin with the first question, Darko. We have not done anything unique this quarter. So if you're asking, like, have you triggered something on your latter investments, et cetera, that resulted in outperformance? No. I think sometimes, we will have quarters when we may have some gains and that go to corporate services. We are doing a very good job in managing the overall liquidity and the low-yielding asset balances, which typically contributes to revenues in corporate services. And it's reflected in our margin improvement as well. As you can see, I mean, we've done a very good job in managing the margin. But there is nothing unique to the quarter. In some quarters, it happens to be higher. Some quarters, it tends to be lower. But there's nothing that we triggered caused this outcome.

Okay. Let me Darko -- it's Piyush, let me talk to the NBFI. So the NBFI sector, you've disclosed information as you saw in the appendix. It's a big part of our business. It's a very profitable part of our business, very high returns. The big piece, as you saw is our equity subscription lines, 50% of it. We've been in this for a long time. I think you understand this business well. Over 99% almost is investment grade, and it's at the epicenter of a one client business of how we take this exposure and have multiproduct relationships across TPS, across wealth, across capital markets. In the other pieces, again, it's an amalgamation of many forms of clients, but it's well secured, well structured. Over 10 years, I would tell you, the loss rate is one basis point, and some of that came from what we've disclosed 2 years ago in the insurance sector. It's not a typical NBFI segment, but depending on how the nomenclature is, we have included insurance as well. So it's a high-performing, high investment grade, very, very low gross impaired loans. So what I would leave you with is, well secured, well structured, managed by dedicated teams and specialized underwriting criteria.

Our next question comes from Ebrahim Poonawala from Bank of America.

So I guess, Tayfun for you, as we think about the regulatory changes in the U.S., the SLR change, et cetera, does that -- any of that actually impact how you think about the capital levels within BMO's U.S. bank or the holding company? Like could any of that change? And I'm just wondering, as we think about the path to the 12% ROE, is there an element of capital flex that we may be underappreciating, especially in light of what seems like we could have a pretty busy period of rule making in the U.S. around some of the capital requirements?

Yes. Good question. Our capital position in the U.S. today and in the coming quarters, we'll continue to be above our peers. So today, the FC has 13.75% CET1 capital. The bank has 14.73% capital. So those are very strong levels. And given our income accretion, they are expected to go up. There is nothing in our ROE outlook that would be achieved by a lower capital position in the U.S. We're currently continuing to keep that accretion. So any changes from a regulatory perspective potentially could give us more flexibility, but we're not baking that into our ROE outlook. Our desire is to continue to utilize that capital supporting our balance sheet growth.

Got it. And if I could follow up, maybe, Darryl, for you, given just how frequently bank M&A comes up with any conversation on BMO. One, why would you not want to do a deal in a world with the regulatory backdrop and wide open, you have excess capital. I'm assuming you could deploy some of that U.S. capital in a deal, I get it needs to meet the financial hurdles, but we didn't scale and -- scale be the way to go when you think about density, regional scale a priority for you?

Okay. Ebrahim, thanks for the question. Look, the first thing is we don't -- we don't think about M&A timing regulatory environment, timing windows. You've seen us do deals in different administrations, and you've seen us do it through different macro environments as well. It's all about whether we have something that fits both strategically and financially, and I've reemphasized on this call the discipline that we're applying to that. And so I'll just come back to my question -- my answer earlier when I say that the focus is on densification and regional scale in markets where we can win. We have a really good strategy that Aron is leading in terms of making sure we have the highest probability of climbing up that ROE curve as fast as possible in the U.S. organically. And right now, that's job one. If something comes along that fits in the tuck-in category where we can accelerate that and not slow it down, yes, we'll have a good look. Otherwise, we've got other things to do.

We have no further questions. I would like to turn the call back over to Darryl White for closing remarks.

Okay. Thanks, everyone, for your questions this morning. I'll just wrap up by saying we had a really strong 2025, and we're well positioned for the year ahead. As I think about today's call, I'm reminding all of us that we're laser-focused on achieving our ROE imperative as quickly as possible and delivering earnings growth at the same time. And we'll share more on those plans and our outcomes at our Investor Day in March. Before closing the call, I want to acknowledge the contributions of our CFO, Tayfun, on his last quarterly call before retiring at the end of the year. Over the course of the last 5 years, he has served as an exceptional CFO, executive committee member and trusted adviser, and he has had a tremendous impact on BMO's growth trajectory, strategy and ambition to win. He's taken significant personal initiative to develop the next generation of leaders and strengthen the future of the bank. Tayfun, thank you for your leadership. And with that, I wish everybody a happy holiday season and look forward to speaking to you again in the New Year.

This concludes the BMO Financial Group's Q4 2025 Earnings Release and Conference Call. Thank you for your participation. You may now disconnect.