BMO has released its Second Quarter 2008 Report and Supplementary Package, so it’s time to recalculate how much room they have to issue new preferred shares – assuming they want to, in this environment!
Step One is to analyze their Tier 1 Capital, reproducing the prior format:
| BMO Capital Structure October, 2007 & April, 2008 |
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| 4Q07 | 2Q08 | |
| Total Tier 1 Capital | 16,994 | 17,633 |
| Common Shareholders’ Equity | 83.8% | 84.3% |
| Preferred Shares | 8.5% | 9.6% |
| Innovative Tier 1 Capital Instruments | 14.3% | 13.8% |
| Non-Controlling Interests in Subsidiaries | 0.2% | 0.2% |
| Goodwill | -6.7% | -7.9% |
Next, the issuance capacity (from Part 3 of the introductory series):
| BMO Tier 1 Issuance Capacity October 2007 & April 2008 |
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| 4Q07 | 2Q08 | ||
| Equity Capital | (A) | 13,126 | 13,499 |
| Non-Equity Tier 1 Limit | (B=A/3), 4Q07 (B=0.428*A), 2Q08 |
4,375 | 5,778 |
| Innovative Tier 1 Capital | (C) | 2,422 | 2,438 |
| Preferred Limit | (D=B-C) | 1,953 | 3,340 |
| Preferred Actual | (E) | 1,446 | 1,696 |
| New Issuance Capacity | (F=D-E) | 507 | 1,644 |
| Items A, C & E are taken from the table “Capital and Risk Weighted Assets” of the supplementary information; Note that Item A includes Goodwill and non-controlling interest Item B is as per OSFI Guidelines; the limit was recently increased. Items D & F are my calculations |
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and the all important Risk-Weighted Asset Ratios!
| BMO Risk-Weighted Asset Ratios October 2007 & April 2008 |
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| Note | 2007 | 2Q08 | |
| Equity Capital | A | 13,126 | 13,499 |
| Risk-Weighted Assets | B | 178,687 | 186,252 |
| Equity/RWA | C=A/B | 7.35% | 7.24% |
| Tier 1 Ratio | D | 9.51% | 9.42% |
| Capital Ratio | E | 11.74% | 11.64% |
| Assets to Capital Multiple | F | 17.17x | 16.22x |
| A is taken from the table “Issuance Capacity”, above B, D & E are taken from BMO’s Supplementary Report C is my calculation. F is from OSFI (4Q07) and BMO’s Supplementary Report (2Q08) |
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