Viki Lazaris – SVP IR Bill Downe – President & CEO Russ Robertson – CFO Tom Flynn – EVP & CRO Tom Milroy - BMO Capital Markets Gilles Ouellette - Private Client Group Frank Techar - P&C Canada Ellen Costello - P&C US

Sumit Malhotra - Macquarie Capital Markets Robert Sedran – CIBC Markets Cheryl Pate – Morgan Stanley Steve Theriault - Bank of America / Merrill Lynch John Reucassel - BMO Capital Markets Peter Routledge – National Bank Financial Darko Mihelic – Cormark Securities Mario Mendonca - Genuity Capital Markets Michael Goldberg – Desjardins Securities Brad Smith – Stonecap Securities

Welcome to the BMO Financial Group’s second quarter 2010 conference call for May 26, 2010. Your host for today’s call is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Thank you, Operator. Good afternoon everyone and thanks for joining us today. Our agenda for today’s investor presentation is as follows. We will begin the call with remarks from Bill Downe, BMO’s CEO; followed by presentations from Russ Robertson, the bank’s Chief Financial Officer; and Tom Flynn, our Chief Risk Officer. After their presentations we will have a short question-and-answer period where we will take questions from pre-qualified analysts. To give everyone an opportunity to participate please try to keep it to one or two questions and then re-queue. Also with us this afternoon to take questions are BMO business unit heads; Tom Milroy from BMO Capital Markets; Frank Techar, head of P&C Canada and Ellen Costello From P&C U.S. At this time I would like to caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements may be made during this call and there are risks that actual results could differ materially from forecasts, projections, or conclusions in the forward-looking statements. Certain material factors and assumptions were applied in drawing the conclusions or making the forecasts or projections in these forward-looking statements. You can find additional information about such material factors and assumptions and the material factors that could cause actual results to so differ in our Caution Regarding Forward-looking Statements set forth in our news release or on the Investor Relations website. With that said, I will hand things over to Bill.

Thank you Viki and good afternoon everyone on the call. As noted my comments may include forward-looking statements. BMO’s second quarter results were strong and reflect the ongoing progression of improved results for five consecutive quarters. Three factors were particularly significant in Q2. First and foremost our core businesses maintained their positive momentum, a trend which we expect to continue. Second, we experienced a substantial reduction in loan loss provisions. While we expected continued improvement this year the impact was better than we had anticipated. Third, we had a strong quarter in trading operations as our team capitalized on the market environment. At $745 million or $1.26 per share, net income increased significantly compared to both last year and Q1 of this year. Cash EPS came in at $1.28 per share and our ROE was 16.4%. Our performance reflects the success we have achieved so far in delivering on our brand promise and providing clear benefits to our customers. The result has been and continues to be robust top line growth. Specifically in Q2 we generated a 15% increase in revenue relative to last year. Revenue was also up on a linked basis despite fewer days in the quarter. We continue to focus on disciplined expense control across each of our operating groups. Q2 cash productivity was 59.7%, better than both comparable periods and year-to-date our cash productivity was 60.1%. Credit losses declined significantly to $249 million which was the third consecutive quarterly decrease in the provision while formations of $366 million decreased as well. We expect some variability in credit losses in coming quarters but the overall trend is positive. Tom will provide further color and also touch on Europe which I know is on everyone’s mind. Russ will take you through our group results in some detail but let me touch on some quarterly highlights. P&C Canada again generated strong year-over-year performance with revenue growth of 10% reflects volume growth across most products and higher margins. P&C Canada has been delivering strong revenue growth for 7 consecutive quarters. In the quarter, a great deal was accomplished. The integration of Diners Club is going well and results are exceeding our expectations. New product offers continue to appeal to customers in both credit cards with the launch of the World Elite card and in mortgages. We are confident with the direction and approach we are taking in the mortgage business. We are seeing positive results from our new 5-year low rate mortgage and customers who take the low-rate mortgage are benefiting from lower total interest payments and being mortgage free sooner while our traditional mortgage products offer increased features and flexibility. This product reinforces our belief the right advice will help our customers get the right home with the right mortgage. Since the launch of the new product we have generated a very strong pipeline across the mortgage offering with good spreads. Turning to P&C U.S., post the commercial realignment of which I will speak shortly, net income in the quarter was U.S. $45 million and on an actual basis was slightly positive. On April 23rd we announced the FDIC assisted acquisition of the U.S. $2.5 billion in assets and $2.2 billion in deposits from Amcore Bank in Rockford, Illinois. We added 52 branches which reopened as Harris branches the following day. The acquisition expands our branch network into areas of Illinois and Wisconsin where we already have a strong commercial banking presence. We now have the number one market position in Rockford which has above average population growth and average household income and a strong position in Madison which is Wisconsin’s fastest growing city. The integration of this acquisition is on track and the reception from our new customers and employees has been very positive. Private client group generated strong results in the second quarter. Year-over-year the group generated significant growth both in insurance and its traditional wealth business. Revenue grew 19% on the strength of improved equity markets and success in attracting new client assets. Assets under management and administration improved 20% year-over-year after adjusting to include the impact of the weaker U.S. dollar. BMO Capital Markets results were strong both year-over-year and versus Q1 reflecting the strong trading results I highlighted earlier. I would note these results were not yield curve related but reflect the ability to capitalize on the market environment. Investment banking revenues were down in the quarter but the pipeline is building and we continue to make strategic hires in key positions in investment banking as well as in research and we are well positioned for growth. I would like to spend a few minutes updating you on our U.S. commercial banking initiative which is designed to capitalize on an emerging growth opportunity. As I mentioned to you in our first quarter reporting we identified a number of U.S. mid market clients in the BMO Capital Markets business to be better served under a P&C commercial banking model. We have now migrated 500 relationships comprising assets of approximately $6.4 billion. The benefits of this initiative are three-fold. First, by changing the client servicing coverage model we can deepen customer relationships, cross-sell other products and leverage our strong platform to a wider footprint. Second, we can increase market share by acquiring new customers with full banking relationships to coincide with the strategic relaunch of the commercial bank with a strong bank for business positioning. Third, we can improve productivity and efficiencies by better aligning costs with customer value including improving the management of capital devoted accounts with low potential for a meaningful relationship. Turning to our balance sheet our quarter end Tier 1 capital ratio was 13.3% and our tangible common equity to risk weighted asset ratio was 9.8% underlying our capacity for business expansion. New banking regulations continue to evolve and are expected to have less impact on BMO’s balance sheet than on those of most global competitors. In this context we are carrying triple capital in the belief that there are significant opportunities for business growth over the near-term and medium term. Looking back on the first half of fiscal 2010 I can say BMO is delivering on our strategic agenda and looking ahead we will continue to provide customers with a clearly defined brand, will drive solid revenue and balance sheet growth. We anticipate improving credit performance with some quarterly variability. We are investing in all of our businesses while remaining focused on expense control. We are committed to growing organically and through acquisitions and being opportunistic in this environment and we are doing all of this with a relentless focus on delivering an excellent customer experience across all the markets we serve. With that I will turn it over to Russ.

Thanks Bill and good afternoon. As some of my comments may be forward-looking please note the caution regarding forward-looking statements at the beginning of the presentation. On slide 9 you can see the reported first quarter earnings were $745 million or $1.26 per share. On a cash basis earnings were $1.28 per share and our Tier 1 capital ratio remained very strong. Return on equity continued to improve to 16.4% this quarter. Credit continued to show improvement in the second quarter with quarterly provisions of $249 million which Tom will speak to shortly. I would also like to highlight about 70% of operating revenue is from our retail and wealth operations in Canada and the U.S. The remainder is from our capital markets businesses. Net income from our total U.S. segment was profitable for the second quarter in a row with net income of $26 million on actual loss basis. This quarter’s total bank results continue to demonstrate our strong business performance achieved through revenue growth and continuing attention to expense control. Turning to slide 10, revenues were up $394 million or 15% from the prior year, increasing across most businesses. The weaker U.S. dollar decreased revenue growth by 6%. P&C Canada benefited from volume growth across most products, improved margins and the contribution from the Diners Club acquisition that closed at the end of December. Our Private Client Group had revenue growth across all businesses, the result of improved equity markets and the success of our focus on attracting new client assets. Capital markets revenues grew as a result of higher trading revenues and higher investment securities gains. The prior year was impacted by capital markets environment charges. P&C U.S. revenue decreased as improved spreads in most products were more than offset by lower commercial loan balances and deposit spread compression. Quarter-over-quarter total bank revenue was up $24 million with improved margin, higher trading income and card fees more than offsetting fewer days in the quarter. Net interest income was $1.5 billion in the quarter, up $187 million or 14% from a year ago driven by strong growth in P&C Canada and improved net interest income in corporate services. Quarter-over-quarter net interest income decreased $10 million mainly due to three fewer days. Moving to margins, the total bank net interest margin was up 33 basis points year-over-year. High volumes and more profitable products and higher mortgage refinancing fees improved P&C Canada’s performance. Increased loan spreads despite lower loan balances helped increase P&C U.S. margins. Corporate Services also contributed to the improvement as management actions to lower the negative carry on certain assets, more stable market conditions and the reduced impact of the prior year’s funding activities benefited results. The quarter-over-quarter margin increase of 3 basis points can be attributed to the lower impact of the prior-year’s funding activities. Turning to slide 11, year-over-year expenses decreased $58 million. The weaker U.S. dollar, lower employee costs as well as reductions in premises and equipment including computer costs more than offset increases from acquired businesses and higher performance based compensation which is in line with improved performance. The prior year also included a $118 million severance charge relative to a more modest charge in the current quarter. Quarter-over-quarter expenses decreased $9 million driven by lower employee costs and the weaker U.S. dollar. The current quarter also reflects increased severance costs as well as modest increases in computer, communications and travel costs. The prior quarter also includes a $51 million charge related to stock based compensation costs for employees eligible to retire booked annually in the first quarter in performance based compensation. By actively managing our expenses we have been able to keep them relatively flat despite continuing investment spend to grow our businesses and revenues. On slide 12 we have illustrated the transfer of a number of U.S. mid-market clients who moved from capital markets into P&C U.S. during the quarter. We believe these clients will be better served by a commercial banking model. P&C U.S. assumed total assets of U.S. $6.4 billion and U.S. $3.2 billion in deposits as a result of the transfer. The addition of commercial mid-market clients to P&C U.S. makes this business more comparable to its U.S. peers and as Bill mentioned allows us to concentrate on growing this business, a business in which BMO has proven to be very successful. This move is also expected to create an opportunity for deeper relationships as it allows capital markets to direct its attention to sectors and clients where we have a differentiated competitive advantage. On slide 13 you will see our risk weighted assets were $159 billion at the end of Q2, down $6.6 billion over last quarter. The decrease was driven by the impact of a stronger Canadian dollar and lower corporate and commercial exposures. Our Tier 1 capital ratio was strong at 13.27% in the quarter and it is expected to remain strong through fiscal 2010. Tangible common equity to risk weighted assets ratio also increased to 9.8%. Moving to slide 16, P&C Canada had another good quarter. Revenue increased over the prior year driven by volume growth across most products and improved net interest margin. Personal loan balances grew 15% year-over-year driven by our Homeowner ReadiLine products. While renewed confidence in the equity markets decreased personal deposits by 0.9% our commercial deposits grew 10% from a year ago. Compared to the previous quarter the modest decrease in revenue is attributable to three fewer days and lower margins partially offset by volume growth and the inclusion of a full quarter of Diners Club results versus one month in the previous quarter. The group generated cash operating leverage of just over 6% and a cash productivity ratio of 51%. On slide 18 P&C U.S. results continue to be impacted by the elevated levels of impaired loans and the costs to manage them. Revenues were also impacted by a decrease in commercial loan balances largely as a result of lower overall utilization by commercial customers. As Bill noted earlier on April 23rd we announced the acquisition of certain assets and liabilities of a Rockford, Illinois based bank from the FDIC. This acquisition was effective immediately and added approximately U.S. $2.2 billion in deposits and U.S. $2.5 billion in assets and was an excellent strategic fit that supports our U.S. growth strategy. Turning to slide 19, our Private Client Group had strong year-over-year revenue growth across all businesses. Excluding our insurance business PCG net income was up 79% from a year ago and insurance net income was up 43%. Year-over-year expenses increased as higher commission revenues in line with improved performance and inclusion of the BMO Life Insurance acquisition more than offset the savings from the weaker U.S. dollar. The cash productivity ratio improved to 71.2% in the second quarter. The results in capital markets were up due to trading revenues being significantly higher than the prior year as well as positive investment securities gains in the quarter versus losses last year. Trading revenues a year ago were impacted by losses arising from our Canadian credit protection vehicles. Compared to the first quarter higher trading revenue and improved investment securities gains were partially offset by lower M&A fees, corporate banking revenues and debt underwriting fees. Expenses were up year-over-year due to increased severance costs as well as higher performance based compensation in line with improved revenues. Cash ROE for the group was 24.8% in the quarter, the fourth consecutive quarter in excess of 18% in this business. Finally on slide 23, corporate services results continue to improve benefiting from lower provisions for credit losses under BMO’s expected loss methodology and improved revenues mainly due to lower negative carry on certain asset liability interest rate positions and more stable market conditions. In addition, I would point out we have added some additional disclosure in the press release on IFRS. As you know, Canadian banks will adopt IFRS in six quarters, effective November 1, 2011. In anticipation of substantially completing most of our work by Q4 this year, we expect to be able to provide quantification of the main accounting changes in our 2010 annual report. In conclusion, our results reflect another quarter of strong earnings delivered by our businesses with strong capital levels, revenue growth and good cost management. With that, I will turn things over to Tom.

Thanks Russ. Good afternoon. Before I begin I draw your attention to the caution regarding forward-looking statements. I will start with slide 26 where we provide a breakdown of the loan portfolio. The portfolio was well diversified with 74% in loans from Canada and 21% in the U.S. Consumer loans are 63% of the Canadian portfolio and 85% of these are secured. Our U.S. portfolio mix is 43% consumer with commercial and capital market loans making up the larger portion. Included in our other countries portfolio exposures to the European countries of Greece, Ireland, Italy, Portugal and Spain are modest at approximately $260 million. Moving to slide 27, we provide details on our U.S. loan portfolio. As we have discussed in past quarters losses on this portfolio are higher than those in Canada. The portfolio represents 21% of total loans, is well diversified and our underwriting practices are more conservative than the industry overall. As a result, provisions are lower. The U.S. consumer portfolios are relatively evenly spread across first mortgage, home equity and auto loans. The portfolio has been impacted by weak labor and real estate markets but all three segments continue to perform better than peers. The general C&I portfolio is well diversified and is performing reasonably. U.S. commercial real estate continues to experience weakness. Before adding our recent acquisition this sector represented $3.2 billion or 2% of total loans. Investor owned mortgages represent approximately 5% of the U.S. portfolio and the developer portfolio is approximately 2%. The investor owned mortgages are mostly confined to our Midwest footprint, are well diversified by property type and were underwritten prudently. This portfolio continues to experience negative migration given the environment. The developer portfolio has continued to reduce and is under $1 billion in size. We believe that migration in this portfolio has peaked. Information on the Amcore portfolio that we acquired in the quarter is shown on the bottom right of the page. This portfolio is $1.5 billion in size at its market value. The portfolio is 23% consumer loans with the balance split fairly evenly between C&I and commercial real estate related. The acquired portfolio benefits from a loss share arrangement whereby 80% of losses on loans will be absorbed by the FDIC. Turning to slide 28 the chart shows the segmentation of impaired loan formation for the quarter. Impaired migration has slowed compared to previous quarters. Formations were $366 million, down from $456 million last quarter. U.S. portfolio continues to account for the majority of formations. U.S. formations were $252 million and were diversified across sectors with the commercial real estate and investor owned mortgage portfolios making up the largest portion at 39%. The acquired portfolio added $427 million to impaired loans but did not impact the allowance for credit losses as under GAAP the assets were recorded at their fair market value and no allowance was taken on them. As previously stated, these assets benefit from an 80/20 loss share with the FDIC. Within Canada, formations were well diversified across a number of sectors. Gross impaired loans were down to $3 billion versus $3.1 billion last quarter before the addition of approximately $400 million from the acquisition that closed in the quarter. Slide 29 details the provision for credit loss by business group. As a general comment, the provision benefited from lower migration and uncertain portfolio stabilization during the quarter. The capital markets and P&C U.S. commercial provisions in particular came in better than expected. The consolidated specific provision was $249 million, better than Q1 which was $333 million and well below the quarterly average for fiscal 2009. Moving now to the line of business splits that are shown in the table, the P&C Canada provision was up in the quarter due to higher commercial losses and also due to the inclusion for the first time of the Diners Club portfolio which added $10 million to the consumer line. The higher commercial provisions were driven by a few large accounts rather than a more broad based weakness in the portfolio. Consistent with last quarter the P&C Canada consumer loss number on the table includes losses on securitized credit cards. These losses are recorded in the financial statements as negative NIR under securitization accounting and therefore are backed out of the total number at the bottom of the table to arrive at the total provision. Moving now to P&C U.S. provisions decreased quarter-over-quarter. The consumer portfolio continues to be pressured by weak labor and housing markets. Commercial provisions were down in the quarter. Given our level of ongoing strain in the commercial portfolio provisions will likely be higher here for the next few quarters. Lastly, capital market provisions benefited from recoveries and reversals in the quarter in general although the impact from the recession is not over the capital markets portfolio is stabilizing as larger companies take advantage of better markets to strengthen their balance sheets and to benefit from the recovery. Turning to slide 30 you can see a segmentation of the specific provision by geography and sector. The Canadian provision was $139 million, close to the level of last quarter. The consumer and credit card segments continued to be the largest drivers of Canadian provisions. U.S. provision was $123 million, down 67 from Q1 largely due to lower provisions in commercial real estate, manufacturing and financials. Consumer loans account for the majority of the U.S. provisions. That concludes my presentation and we can now move to Q&A.

(Operator Instructions) The first question comes from the line of Sumit Malhotra - Macquarie Capital Markets. Sumit Malhotra - Macquarie Capital Markets: I just want to make sure I got the provision information correctly. The $69 million in reversals you identified when you talk about the variability in the provisioning line over the next couple of quarters potentially how much does this line play into your thinking? If you could give us a little bit of color on what portfolio exactly within the U.S. or the other countries line this came from?

Sure. I think the best disclosure on this is in the press release on page 11. In the table on the middle of the page there we break down the provision between new specific provisions and then we show reversals and recoveries. What that shows is during Q2 about half of the improvement in the provision in the quarter came from higher levels of reversals and recoveries. The other half came from just lower new specifics. So, that is the contribution from the two sources for the change quarter-over-quarter. Looking forward, I would say that number one reversals and recoveries are hard to predict. The number this quarter was higher than we expected. It came both from the U.S. and also from the other jurisdiction portfolio where we had one European provision reverse. Going forward we expect some recoveries but not the level probably next quarter we experienced this quarter. Sumit Malhotra - Macquarie Capital Markets: The $69 million certainly on the page I think that is the best number we have seen since 2004. So this is kind of a line you are pointing to when you say there is likely to be some variability going forward?

Yes, this quarter the provision came in better than expected and we had higher reversals than recoveries and in addition, we didn’t have any significant specific provisions in the capital market portfolio. So we had a bit of a double wind coming from that area. Looking forward given where we are in the cycle we think there is still some risk of provisions to pop up on the capital markets side and recoveries may be a little bit lower. Sumit Malhotra - Macquarie Capital Markets: Staying with you, if we look at the relationship between provisions and net write offs or net charge offs you basically flattened the reserve build this quarter after having built reserves over the last couple of years. If I look back at BMO in 2004, 2005 or 2006 period the bank consistently was able to reduce the level of reserves or allowance it was holding. As we hear BASL make references to dynamic provisioning how reasonable is it to expect provisions can be less than charge offs as we continue to see the credit cycle improve?

I would say there is significant question about what the approach the industry takes to provisioning will be going forward. There is a lot of debate on the topic right now. I would say there is no clarity as to where that debate is headed. If I was modeling I would not be assuming any significant reduction to the general allowance going forward. Sumit Malhotra - Macquarie Capital Markets: Bill told us it isn’t yield curve that drove the trading revenue this quarter although we do see trading assets at the end of the quarter up about $6 billion sequentially. Should we draw any linkage to the extra capital or assets that are allocated to the trading side and the results we saw in Q2?

No I actually think the results what was driving the trading was really principally the interest rate trading which you can see in the materials in the sub-pack and that was a combination really of just market opportunities and some of the increased volatility where we were able to provide services and spreads went in our direction. I think in the type of markets we have overall in the quarter with the credit market improving we were able to take advantage of it. Sumit Malhotra - Macquarie Capital Markets: So the balance sheet growth don’t read too much into that?

No, the balance sheet growth and you are probably looking at page 30 on the press release, I think if you go back a few pages it was mostly in the on page 39 you will see the securities that are valued using market prices. It was mostly, about half of it was in government agencies which was a combination of us ramping up our fixed income business in the U.S. and some other trading strategies. Most of the remaining increase was in the equities line and was related really to our structured notes business and some of the equity [TRS].

The next question comes from the line of Robert Sedran – CIBC Markets. Robert Sedran – CIBC Markets: The European exposure you noted, is that on balance sheet direct exposure or does that include anything you might have off balance sheet as well in terms of the SIVs.

That was an on balance sheet exposure. Robert Sedran – CIBC Markets: Can you quantify for us how much we should be thinking in the off-balance sheet side? I think I read in the press release it is less than the 260. Am I thinking about that correctly?

You are asking about… Robert Sedran – CIBC Markets: How much would be in [Parkland] or…

Exposure to the countries I mentioned earlier? Robert Sedran – CIBC Markets: Yes.

It would be in total less than the on balance sheet amount. Robert Sedran – CIBC Markets: When I look at the retail and consumer PCLs they do seem to be staying stubbornly high even though it feels like employment is getting better. Is there some kind of a lag we should be looking for before these numbers start to improve? I have been working under the assumption the new loans you may have added in the past couple of years are if not bullet proof certainly are a lot higher quality than they might have been from the previous loans. Is it volume related or is there some sort of lag we should be expecting?

If I am looking at page 29 of my slides, on the Canadian side last quarter we were at 161 for consumer and 155 this quarter. The 155 includes about $10 million from the acquisition we did of the Diners portfolio and that was new this quarter. It wasn’t in last quarter. If you back that out we are better by about 10%. We think the trend is positive in this portfolio. There can be a little bit of a lag and we have had volume growth so those two things might moderate and improve relative to what you would expect but we think the trend there will be positive. On the U.S. side provisions are I would say basically elevated and moving around quarter to quarter. We are seeing some early signs of stabilization but not really signs yet of improvement. Robert Sedran – CIBC Markets: Is it more of a 2011 story you think on the U.S. side?

For the most part I think so. Yes.

The next question comes from the line of Cheryl Pate – Morgan Stanley. Cheryl Pate – Morgan Stanley: I wanted to talk a little bit about the net interest margin X trading and how we should be thinking about that in a rising rate environment potentially and the lag impact you would expect following rate increases?

On Page 8 of the press release we have the margin analysis. Just putting X trading for the moment, the first comment I would make is the improvement we are seeing while we are seeing improvement in P&C Canada year-over-year a significant part of the improvement was really corporate. If you look at the [NEE] line further on in the press release, the improvement year-over-year and quarter-over-quarter from the negative carry we had on surplus cash positions has been contained now with more normal markets and those anomalies we were dealing with a year ago have improved and you see very significant improvement in [NEE] and in corporate. That is what is driving the overall improvement in NIMS within the bank I would say. We would expect in a rising rate environment our margins will improve and perhaps with that I will ask if Frank wants to speak specifically of P&C Canada.

Sequentially we saw four basis point decline in our margins. As our loan growth continues to accelerate and deposit growth softens a bit we are going to see that margin moderate I guess at the levels we have seen for the last couple of quarters. To Russ’s point in a rising rate environment we would expect our margin to improve and so we kind of have two things offsetting it as we are looking forward into the future. So we are not anticipating in P&C Canada any large increase in margin but we are not anticipating a large decrease either. We think we will have some offsetting factors and we will maintain sort of the current level at least for the next few quarters. Cheryl Pate – Morgan Stanley: On the securities gains, sort of been running around the $50 million mark the last couple of quarters. Is that a trend that is likely to continue in the near-term? How should we think about that going forward?

It is a little difficult to say because obviously the gains are a function of the market movements and the volatility in the markets. I think it is fair, I have trouble forecasting that myself. I would say obviously given the portfolio we have we are likely to have security gains quarter to quarter. The actual amount of them could have some movement in it. It is kind of hard to say if it is a fixed, non-volatile number. Cheryl Pate – Morgan Stanley: With markets at sort of improved levels you would expect something…

That would be right. If they stay where they are and continue to improve we should see continued securities gains.

The next question comes from the line of Steve Theriault - Bank of America / Merrill Lynch. Steve Theriault - Bank of America / Merrill Lynch: Some pretty good improvement in risk weighted assets in the quarter. If I look at page 23, the schedule on RWAs in the supplementary, I note about an $8 billion in risk weighted for corporate and [SMEs]. We have seen some declines in past quarters but this is much larger. It doesn’t seem to be to be fully explained by interest rates or run off when I look at the loan balances or the in-quarter currency movement. What caused that sharp decline this quarter?

There were really three factors that contributed to the decline and they were roughly equal in size. The first is FX. The second is lower volumes which are partly related to lower utilization. The third which shows up in the corporate, small and medium enterprise line relates to a model recalibration we introduced in the quarter. So that might be the missing piece from what you might expect. Steve Theriault - Bank of America / Merrill Lynch: That would be 1/3, 1/3, 1/3 in terms of the impact?

Approximately. Steve Theriault - Bank of America / Merrill Lynch: What is the risk weighting on the loss share Amcore assets?

It is 80/20% and 20/150%. Steve Theriault - Bank of America / Merrill Lynch: The U.S. P&C margin up quite a bit this quarter. It doesn’t often get that much attention. How much more improvement could we see here in the absence of increased short rates in the U.S.? Is this repricing coming through?

Yes, it is repricing. We have two portfolios that have facilities that continue to come up for renewal in our small business and commercial and as we reprice those that is coming into the margin. Also the transfer has affected the broadening in the margin because the mid-market loans have wider spreads on them than other parts of the portfolio. Steve Theriault - Bank of America / Merrill Lynch: Looking forward?

Looking forward I would repeat similar comments as to Frank. I think we will see [lift] on interest rates go up. We could begin to see, there is some pricing pressure in the U.S. because of the lack of loan growth that is emerging in the marketplace. So maintaining our discipline there is important going forward.

The next question comes from the line of John Reucassel - BMO Capital Markets. John Reucassel - BMO Capital Markets: I guess one of the problems of moving the SME book out of the capital markets business is you get a little better picture of the BMO Capital Markets U.S. operations. The $3 million in earnings there was there something going on in BMO Capital Markets U.S. that was unusual? I guess the corollary is $256 million out of Canada. Was there something unusual in there as well? What should we expect out of the U.S. capital markets business?

You are quite right to say that with the movement we focus now on the U.S. business the smaller business. I think as Bill said it allows us to really focus on what we are trying to do there not distracted by the commercial loan portfolio. The Q2 results did have some noise in them. They were impacted by a number of non-recurring items both in revenue and expense. We would expect going forward given the investment we are putting into the business we would see net income certainly well up from where we were this quarter but probably not back to where we were in Q1. So if you look at what we did over the course of the first six months I think $53 million we would expect we would do better than that in the remaining part of the year. I think going forward you will see that revenue grow as we start to see the revenue catch up with the investments we have made over the last number of quarters. We are pretty broadly optimistic about that business and confident we can possibly grow it going forward. John Reucassel - BMO Capital Markets: Was there something unusual in Canada that gave you the 256?

In Canada related to the question I think the Canadian number is cleaner. We obviously had a very good outing in the trading products businesses and trading generally and the interest rate area that I mentioned before. Also we had some gains in our net investment securities. John Reucassel - BMO Capital Markets: With the U.S. financial reform bill being tabled and voted on in the Senate there just seems to be a lot of headwinds for regional banking in the United States. Could you give us a sense of if it was implemented as proposed what would this do to earnings out of the U.S. business on a normalized basis? How tough is it to get your targeted returns in this space in the U.S. given these new proposals? I am trying to get a sense of the challenges there.

I will start and if Ellen wants to supplement I will let her do that. I think there are a couple of things in the Financial Reform bill when we look at it we actually think might be a little bit helpful. There is a big emphasis on responsible consumer practices. If you look at the way we do business the approach we take to customer relationship management, more of an advice based, high service model, some of the burden around additional consumer regulation I think is just going to reinforce the wisdom of the way we approach the market. I think there are going to be some competitors that are just going to get squeezed out of some segments of the market. As you know, we don’t have a card business in the U.S. and I think in that area in particular there is going to be real pressure on some of the competitors. The opportunity for market consolidation for smaller regional banks I think will continue just as a consequence of that. I feel that with respect to personal and commercial banking it won’t be disadvantaged. Obviously all of the things that relate to the wholesale business are really subject to the reconciliation process. So whether simple things like the swaps business for banks have to go into some other entity once again I think that intelligent minds will prevail. The panel that is going to do the reconciliation as I understand it has been identified. On Monday I think there is 16-17 very responsible people who have been identified to work through that process. I also think they are working against a relatively quick timeline as I understand it. From what I have read the President wants to sign a reconciled bill within 3-4 weeks. That I think reduces the uncertainty as well. I think both the Senate bill and the House bill had some extraordinary features. They were allowed to go forward I think in order to give them a good airing out. Aside from the damage that could be done to the wholesale businesses which I think it would fall into the heading of “random” if it does occur we feel good about the business model. With respect to the others I think that is going to be resolved relatively quickly in any case. John Reucassel - BMO Capital Markets: So we are clear, you don’t expect out of the financial reform bill this to impede your ability to generate reasonable returns on the P&C bank in the U.S. Is that a fair statement?

I think that is true. I think to the extent the provisions do put a burden you have to realize it is a capital constrained market and our pricing power has increased. So I think the ability to pass through the costs will be greater than what some of the commentary would suggest. John Reucassel - BMO Capital Markets: A clarification. A lot of questions on spreads. A few different people answered. Is the conclusion here on spreads that yes higher rates are helpful but competition is going to keep some sort of lid on whether it is all bank or P&C bank spread improvement from materially increasing from the levels in Q2? Is that a fair summary of what the view is?

I think that is a pretty good summary of what we said on the last call and I think it holds.

The next question comes from the line of Peter Routledge – National Bank Financial. Peter Routledge – National Bank Financial: I have a question on P&C Canada’s strategy but I would like to direct it to Tom Flynn. BMO has prided itself over the last many years on having lower credit costs than peers asset class by asset class. While P&C Canada is healthy earnings growth medium term may well require some market share expansion. One means of achieving this is greater tolerance for credit risk and perhaps surrendering some of the outperformance for higher market share. Particularly this could be the case in commercial lending. From your perspective how favorable are you to this trade off and how would you approach the issue?

I don’t know I would express our approach to the business through the trade off lens. We have prided ourselves as you say on outperforming on a like portfolio basis which we think we are doing through this downturn as we have done in the past. In the approaches we are taking to growing the business now we aren’t in any systematic way either on the consumer side or the commercial side dialing up the risk profile. I think we have had really healthy dialogue between Frank and his leadership team and the risk group around trying to identify opportunities in the market that we think will give rise to growth opportunities with the risk profile that we are comfortable with. Our objective is to retain the position we have had in credit loss leadership. Peter Routledge – National Bank Financial: So no real change in your overall profile?

Correct. Peter Routledge – National Bank Financial: Frank any thoughts?

The only thing I would add to that is if you look at the performance in our consumer loan book and our commercial book recently over the last couple of quarters I think we are demonstrating the growth is accelerating and the share is starting to respond. To Tom’s point I am confident that staying the course relative to our risk appetite is not going to be an impediment for us in competing and growing share across all of our product categories. Our strategy is focused in other places and we think we can compete and grow share with the profile we have had in the past. Peter Routledge – National Bank Financial: I saw your disclosure on the European countries and the financial institutions in those countries. What about European banks outside of the five countries mentioned? Say in France or Germany? Do you have any material exposures you are perhaps watching more closely?

I would say we don’t have any exposures that are of concern. Europe is obviously a massive developed part of the global economy and so we do have exposures to Europe generally including to European banks. They are not out-sized and we are comfortable with them.

The next question comes from the line of Darko Mihelic – Cormark Securities. Darko Mihelic – Cormark Securities: When I look at the expected losses that you run through your segment and I add them all up I get about $221 million in expected losses annualized for $884 million. When I look at that number and I look at it relative to history it looks as though it is high especially in cap markets where you have had a net recovery and you are looking for what I would deem to be elevated losses. My question is actually pretty straight forward. If you had to do it all over again today and set expected losses for the individual segments based upon what you see today would the expected losses come down?

Tom Milroy is sitting here beside me with a smile on his face because he would like his expected loss to come down. We are happy with where they are sitting right now. Being within basically 10% of the actual loss I think is really great outcome because there is a lot of complexity in the process. So having an expected loss that close to the actual to me is a good performance. The expected loss does move through the cycle. It moves through the cycle in particular in capital markets. So the expected loss in that segment reflects a degree of migration we experienced through the cycle. We would expect the expected loss number for the capital markets portfolio assuming the portfolio size stays the same to trend down going forward based on some positive migration. Darko Mihelic – Cormark Securities: Looking at the expected losses it is close to 50 basis points in loan loss provision of average loans [inaudible] which for me looks relatively high to what I am used to for BMO. I think in the past it has been somewhere close to 30-35 basis points. Are you moving materially off of that?

No. I think your observation is correct. What the higher EL reflects is the point we are at in the cycle. We are at a relatively bad point in the cycle and therefore expected loss in the capital markets portfolio is somewhat elevated and we would expect it to trend down over the next few years and to trend down towards the historical average we have seen. So the higher EL doesn’t reflect a difference in the risk profile we have today relative to what we would have had a few years ago at a comparable point in the cycle.

The next question comes from the line of Mario Mendonca - Genuity Capital Markets. Mario Mendonca - Genuity Capital Markets: My question is similar to what Darko was asking about but more along the lines of not only trending down for the long-term after say 35 basis points but what is your outlook on recoveries? You certainly had one this quarter. You are giving us some caution here we shouldn’t expect this regularly but given the nature and complexion of the credit crisis or the way the credit losses unfolded on this cycle what is your outlook for recovery say in 2011?

I won’t give you a number but I will give you some flavor. If you look at recoveries when the economy recovers going back in time they tend to be not insignificant and the recoveries together with fewer new specifics gives rise historically to a pretty steep drop off in specifics. So that is a historical pattern. This downturn I think dollar for dollar we will see a somewhat lower level of recoveries because more of the losses have come from U.S. retail portfolios and those losses are mainly residential real estate related and I think the recovery potential from that portfolio would be lower than it would be than from a corporate loan portfolio. Mario Mendonca - Genuity Capital Markets: On the negative carry and on the excess cash you were referring to, two questions. One, is it essentially we have moved to a normalized level here or is there room for further improvement next quarter? Secondarily, if you could describe the mechanism, what exactly happened in the quarter? Was it a reinvestment of excess cash in higher yielding securities? Was it a rolling off of higher funding costs? What was the mechanism that caused the margin to improve?

On the first question yes I think we have reached a more normal level so the negative [NEE] you see in the quarter in corporate would I think be a normal quarter. The mechanism one would be the surplus cash has particular term maturities have occurred and that excess cash has been used so the negative carry has just been reduced because lower amounts are being held in corporate. Secondly, just more normal market conditions where some of those anomalies we have talked about in prior quarters have disappeared. That has diminished the negative [NEE] as well. Mario Mendonca - Genuity Capital Markets: What are the anomalies? If you could just provide one example.

One example was the 1-3 month issue we talked about a year ago with our wholesale funding repriced on a three month basis whereas our transfer pricing to groups was on a one-month basis. So as those rates moved apart that caused funding costs residual to end up in corporate and that has diminished almost totally. Mario Mendonca - Genuity Capital Markets: You have provided in the past sort of a global outlook on what you figure loan growth could look like for the bank. Your last comments I recall were perhaps we wouldn’t see significant loan growth in 2010 but you feel okay about 2011. Has anything changed?

No, I would say it is a little more sharply focused in line with what I said in the last quarterly call, I think the U.S. recovery is continuing clearly to be business led and we haven’t seen borrowing pick up to the extent I think it will. Business activity is picking up. What manufacturers are saying is they are filling orders now on a delay. They haven’t fully rebuilt their inventory. I think what we see is still quite unusually low line utilization and we are not going to have to put new lines in place to get a pickup in borrowings in commercial banking. I think that is really why we have focused the resources we have in commercial banking and the believe that it might not be in the last five months of this year but I think we are going to see progressively as we go through the next 3-4 quarters not only a pickup in line utilization but in new customer account openings. That is where I think we will see the growth. With respect to personal lending in the U.S. the unemployment rate is basically keeping consumers in a relatively conservative space. They are maintaining their savings rate. There is not a lot of labor mobility right now. People who have a job are staying put. I think when they have a little more confidence there will be a little more movement. It will take that kind of movement to create activity in the housing market. Right now you have a housing market where the correct level is pretty well understood but there isn’t very much movement meaning there aren’t very many buyers for the available supply of houses. I think that is where we will see the loan growth. First in commercial going in 2011 and there is no telling what next spring will bring for the consumer. Mario Mendonca - Genuity Capital Markets: Can you close the loop on Canada?

I will let Frank speak about Canada. Canada has actually done nicely this year but I will let him provide a little bit more background there.

This quarter was the first quarter in four that our loan growth outpaced our deposit growth. We are seeing a pickup in the growth both on the consumer side and the commercial side and the expectation is that is going to continue. I just echo Bill’s comment especially in our corporate finance unit in our commercial business utilizations are down and the expectation is that as we go through the next 12-18 months that should pickup as the economy continues to improve. My expectation is I am pretty optimistic on both consumer and commercial that going to continue to accelerate on the loan side of the balance sheet.

The next question comes from the line of Michael Goldberg – Desjardins Securities. Michael Goldberg – Desjardins Securities: We are often told the best indicator of what is going to happen to trading revenue is the amount of volatility. We have certainly had a lot of volatility since the beginning of May but perhaps it has been in areas that hadn’t been anticipated. Can you give us some idea of the impact of this volatility on your trading revenue? Again, bottom line can the second quarter level of total trading revenue be sustained given the volatility we are seeing now in the going in unpredicted directions?

I think you are right to say it is a little tricky in the sense of figuring out how the volatility will play out. Obviously it hurts some of the businesses and it helps others. It does generally dampen market activity so that will have some impact if it carries on for an extended period of time. What we have seen though is a period of volatility and then everything comes back to a more normal spot. When I look at the business more on a year-over-year basis I think it is fair to point out the lumpy things we experienced before, all of those positions are either gone or substantially reduced. A number of what I would call ongoing core businesses that turned out to have more volatility than we expected in the last cycle those have also been reduced. Finally where we are positioned now we have consciously reduced risk generally in order to be able to take advantage of opportunities that might come from a further downturn. So depending on how things move we are pretty optimistic we can continue to deliver solid trading revenue. Michael Goldberg – Desjardins Securities: You indicated you continue to benefit from easy monitoring policy and the fiscal conditions out there. Really what I am getting at is your interest rate trading in particular was very strong and given the volatility is that type of strength sustainable as you see it?

I want to be clear. In the interest rate sensitive businesses it is different than interest rate trading. This businesses were actually the ones that really benefited from the easing we saw last year and as Bill said that yield curve type business is down sharply year-over-year. So what we are talking about is less predicated on that. I think the volatility we are experiencing now is more the shots that are coming one, from the uncertainty surrounding regulatory reform and two, what is happening in Europe generally and the interrelated mix of that to markets around the world. Again it is difficult to predict but we feel pretty well positioned and we think if the market stabilizes we will be in pretty good shape.

The next question comes from the line of Brad Smith – Stonecap Securities. Brad Smith – Stonecap Securities: My question relates to the impaired loan disclosures on page 37. If I back out the $437 million of acquired impaired loans during the quarter it looks like the consolidated number for the U.S. came down about $85 million or 4% which is great. When I think back to the March 31 disclosures for your FDIC regulated U.S. P&C banking business it was actually an increase of about $123 million. I guess my question is would the difference between a consolidated U.S. segment loans improvement of $85 million and $123 million of deterioration in your FDIC regulated entity reflect that basically the improvement in impaired loans is happening outside of the P&C Bank and in the wholesale capital markets portfolio?

I think there are a few things happening. Number one, as you know the time periods are different between the two statements. Number two, FX had a positive impact on the numbers or lowered the numbers which obviously would not be in the U.S. disclosures. Then number three some of the capital market activities aren’t captured in the public filings we make in the U.S. and the trends there we have talked about were generally positive. Brad Smith – Stonecap Securities: On a translated basis would the same entity as your FDIC entity after FX etc. have seen a flattening or improvement in its impaired loans?

Well the currency move in the quarter in the BMO quarter was about $0.04 to $0.05. So it would have been just on that basis roughly flat. Brad Smith – Stonecap Securities: Dealing again with the loan portfolio I see the financials on page 32 of your sub pack reduced by about $1.35 billion sequentially. I was wondering if there was a particular transaction that caused that further reduction in that exposure?

The biggest cause of the reduction is coming from our two SIVs and we had fairly high maturities in the quarter and also some asset sales. I think together those two things accounted for $600-700 million so that is the most significant item.

There are no further questions registered at this time. I would like to return the meeting to Ms. Lazaris.

Thanks for joining us today. We wish you luck tomorrow with the busy day you have ahead of you. As always if there is any questions please call the Investor Relations team. Have a great day.

Thank you. This concludes today’s conference. Please disconnect your lines at this time and we thank you for your participation.