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 Viki Lazaris – SVP IR

Andre Hardy - RBC Capital Markets Mario Mendonca - Genuity Capital Markets John Reucassel - BMO Capital Markets Steve Theriault - Bank of America / Merrill Lynch Jim Bantis – Credit Suisse Michael Goldberg – Desjardins Securities Cheryl Pate – Morgan Stanley Darko Mihelic – Cormark Securities Sumit Malhotra - Macquarie Capital Markets

Good afternoon and welcome to BMO Financial Group’s first quarter 2010 conference call for March 2, 2010. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Good afternoon everyone and thanks for joining us today. Our agenda for today’s investor presentation is as follows. We’ll 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’ll 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 four business unit heads, Tom Milroy from BMO Capital Markets; Gilles Ouellette, from the Private Client Group; Frank Techar, head of P&C Canada; and Ellen Costello from P&C US. At this time I would like to caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements maybe 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 the 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. As noted my comments may include forward-looking statements. As you saw in our news release earlier today BMO has begun the year with a very good first quarter. Our results point to the earning power of the bank and underline the momentum in our core businesses. Our performance reflects strong top line growth attributable to the success we’ve seen in delivering our brand promise that has clear benefits for our customers, disciplined expense control in each of our operating groups, credit performance slightly better than expectations, and our strong capital position. Quarterly revenue exceeded $3 billion for the first time and net income increased significantly from last year to $657 million or $1.12 per share with an ROE of 14.3%. Cash EPS came in at $1.13 a share and our pre provision pre-tax earnings were $1.2 billion. We’re very pleased with these results. They reflect continuing progress in meeting the objectives we’ve laid out and are indicative of success against our strategic priorities. Our Tier 1 capital ratio was 12.5% and our tangible common equity to risk weighted asset ratio was 9.5%. While the new regulatory capital standards are not yet finalized our expectation is BMO will be less impacted relative to many peers and competitors and our capacity for business growth provides flexibility and positions us well to take advantage of strategic opportunities. Russ will take you through our group results in some detail but I’d like to touch on some of the quarterly highlights. In the first quarter P&C Canada again generated strong year over year performance, revenue increased 12% and net income was up 28% reflecting growth in each of our lines of business. This group has delivered revenue growth over 9% for six consecutive quarters and over the same period cash productivity has steadily improved by 7.1% reaching 50.2% in the current quarter. Our US P&C business continued to attract strong growth in deposits with year over year increase of 5.2% for the quarter. Mortgage and auto originations also remained strong. While earnings reflected continued pressure of impaired loans we expect this will begin to abate later in the year. I’m going to comment shortly on an important initiative underway that will create opportunities for future growth in this business. Private client group continues to generate good results. There was strong revenue growth across all of our businesses in particular full service investing, mutual funds, and North American private banking. Assets under management and administration increased $27 billion from a year ago and adjusting for the weaker US dollar the growth was 18% demonstrating good momentum in attracting new client assets and the improvement in equity markets. BMO life insurance acquisition also added to our revenue growth. And finally BMO capital markets results were good despite moderation in interest rate sensitive businesses. We’ve also seen improvements in investment banking revenue and in the pipeline for the quarter. Before leaving a discussion of our operating groups, I’d like to take a moment to touch on the potential we see for growth in our US commercial banking business. There are now signs of economic recovery starting to emerge in the US Midwest. We’re already seeing it in our first quarter consolidated US operations. Emerging formations in commercial and industrial, lending were lower and we expect losses to begin to reduce in the coming quarters. Companies are beginning to rebuild their working capital and inventories and we expect customers to begin to use their lines and put new lines in place. At the same time the Chicago market has undergone significant change in the competitive landscape with many traditional competitors distracted. With all this in mind we took a strategic review of BMO capital markets US midmarket client base to identify which would be better served using the P&C US commercial banking model. By migrating accounts we’re going to create capacity for account growth and significantly reduce our cost to serve each account. Equally important we’ll be able to provide these customers with more effective lending and operating services while creating the opportunity to win investment banking mandates. We believe this is an opportunity to take share from our competitors. To put this initiative into perspective we expect it will more than double the size of our US commercial banking business. Migrating relationships that are primarily lending accounts into P&C US also allows our investment bank to focus its attention fully on sectors and clients where we have differentiated competitive advantage and where we gain the most traction from a high touch investment banking model. We expect the US commercial business to account for much greater proportion of our revenue and profitability and the ROE of both P&C US and BMO capital markets to begin to improve. Before handing off to Russ I’d like to offer an observation on the new rules announced for government insured mortgages in Canada. Given the prospect of higher interest rates and the recent run up in housing prices in some markets we think these measures are prudent. In fact late in 2008 BMO took early action in the management of our mortgage portfolio in view of the downturn. We proactively eliminated cross selling of other lending products to insure mortgage applicants and going into 2010 we also changed our qualification rules which we continuously evaluate. This demonstrates a consistent lending discipline through the cycle and we continue to believe that credit management is a core strength of BMO. Its important to us that customers’ mortgages make sense for their financial situation. We’re taking a strong advisory role helping our customers get the right mortgage and the right house. You can expect BMO to find ways to help customers with products that continue to build our business and acknowledge the government’s prudent approach. And to that end today we’re announcing a new 3.75% five year fixed rate mortgage. The great rate and maximum 25 year amortization, this easy to understand product will help Canadians become mortgage free faster and given them peace of mind with the prospect of rates rising later this year. Looking ahead the outlook for BMO is continued momentum, driving solid revenue and deposit growth, committed to expense control, and continued execution of strategy to deliver excellent customer experience across all of our businesses. And with that, over to you Russ.

Thanks Bill and good afternoon. As some of my comments may be forward-looking, please note the caution regarding forward-looking statements on slide one. On slide two you can see the reported first quarter earnings were $657 million or $1.12 per share. On a cash basis earnings were $1.13 per share and our Tier 1 capital ratio remains very strong. Return on equity in the quarter improved to 14.3% while we maintained higher capital levels as we deal with regulatory uncertainty. Credit costs remain elevated as expected with quarterly provisions of $333 million which Tom will discuss shortly. This quarter’s results reflect continued strong performance in our core businesses, achieved through revenue growth and continuing attention to expense control a key priority across the bank. Turning to slide three revenues were up $583 million or 24% from the prior year. This increase is across most operating groups. The weak US dollar decreased revenue growth by 5.2%. P&C Canada benefited from volume growth, pricing actions taken in 2009 and strong deposit growth. Our private client group increased through the inclusion of BMO Life Assurance as well as organic growth. Capital markets revenues grew from our continued client focus and maintaining a diversified portfolio of businesses. While our P&C US reported consistent revenue levels with growth in margins offset by the continued impact of impaired loans. Quarter over quarter revenue was up $36 million as improved margins, securities gains, M&A, and underwriting activities more than offset lower securitization income in corporate services. Net interest income was $1.5 billion in the quarter, up $205 million or 15% from a year ago driven by strong growth in P&C Canada and a return to a more normal net interest income level in corporate services. Quarter over quarter net interest income increased $90 million or 6% mainly due to higher earnings in capital markets and solid growth in P&C Canada. The total bank net interest margin was up 34 basis points year over year. Actions taken in 2009 to mitigate the impact of rising long-term funding costs as well as deposit growth outpacing loan growth improved P&C Canada’s performance. Corporate services also contributed to the improvement as management actions to lower the negative carry on certain assets and more stable market conditions benefited results. The quarter over quarter increase of 12 basis points can be attributed to higher volumes in more profitable products in P&C Canada and improved trading spreads in capital markets. On slide four we have illustrated the change we made this quarter to report all securitized mortgage balances in P&C Canada. This change increases the group’s average earning assets by approximately $15 billion and reduces reported net interest margin. However the net interest margin trend is unchanged with margins improving over 2009 and the impact of P&C’s net income was insignificant. The approach is consistent with our peers and prior periods were restated in our supplementary package. Turning to slide five year over year expenses on a reported basis were flat however the weaker US dollar lowered expenses by $70 million year over year. Acquired business added $23 million while expenses were lowered as a result of lower salaries, reduced severance, computer costs, and professional fees. Performance based compensation was higher primarily due to the strength of capital markets and PCG’s results. We also continue to focus on reducing discretionary expenses. Lower staffing levels decreased our salary expense due in part to staff reductions that relate to the severance charge we took in Q2, 2009. Annualized savings from these reductions are expected to exceed the $118 million charge we took last year and while we are keeping tight control on spending as we have said we do intend to redeploy some of these savings into more front line staff. Quarter over quarter expenses increased $60 million or 3%, $51 million of the increase is related to stock based compensation costs for employees eligible to retire that we book in the first quarter with the remainder due to higher variable compensation in line with higher revenues and higher benefit costs offset in part by a weaker US dollar. On slide six you’ll see that our risk weighted assets were $166 billion at the end of Q1, down $1.5 billion over last quarter. The decrease was driven by the impact of a stronger Canadian dollar, lower corporate and commercial loan volumes, and lower trading and bank exposures. These decreases were partially offset by an increase in retail loans and mortgages. Our Tier 1 capital ratio was strong at 12.53% in the quarter and is expected to remain strong through fiscal 2010. Tangible common equity to RWA ratio also increased to 9.5%. A quick comment on slide eight, this slide shows that about 70% of both operating revenue and net income is from our retail operations in Canada and the US including PCG. The remainder obviously is from capital markets businesses. Moving to slide nine, P&C Canada continued its strong performance in the first quarter. Revenue rose over both comparable quarters as volumes across most products increased and margins continued to improve. Personal loan balances grew 13% year over year driven by our homeowner ready line products. Personal deposits increased 5.4% year over year and commercial deposits grew 7.7% from a year ago. Market share in most categories remained in line with Q4. Expenses increased modestly as higher initiative spending and advertising costs offset savings from lower stopping levels. The group generated cash operating leverage of just over 11% and a cash productivity ratio of 50.2%. On slide 11 P&C US results remain impacted by the elevated levels of impaired loans and the cost to manage them. Our focus in 2010 is on profitable growth in both loans and deposits while maintaining effective expense control. This focus has been demonstrated by an improved core cash productivity of 72% and increased net interest margin, deposit growth, and stronger commercial midmarket mortgage and auto loan originations. Turning to slide 12 our private client group had a strong quarter with revenue growth across all businesses, in particular full service investing, mutual funds, and North American private banking. Excluding our insurance business PCG net income was up 93% from a year ago as improved equity markets and the success of our focus on attracting new clients increased our assets. Results a year ago included a charge of $11 million after-tax related to the decision to purchase auction rate securities from a client account. Insurance net income was also up 38% from the prior year. revenue increases were achieved while keeping expenses relatively flat. Expenses include $19 million from a BMO Life Assurance acquisition. The cash productivity ratio improved to 72% in the first quarter. Market conditions of some of our businesses also improved in our capital markets business with revenue up 27% from the prior year. As expected trading revenues adjusted for capital markets environment charges were down from the prior year as volatility in the market decreased and spreads narrowed. Compared to Q4 revenues grew 3% due to higher investment securities gains, improved M&A activity, and increases in debt underwriting. Commission revenues also improved while trading revenues and corporate banking net interest income were relatively unchanged. Expenses were higher than both comparable quarters due to higher variable compensation, consistent with improved revenue performance. Q4 also included an adjustment to variable compensation to align with annual performance. I would also point out that cash ROE for this group was 18.4% in the quarter. This is the third quarter of ROE in excess of 18% in this business. Finally on slide 16, corporate services results have improved significantly benefiting from lower provisions for credit losses under BMO’s expected loss methodology and higher revenues mainly due to lower negative carry on certain asset liability interest rate positions, and more stable market conditions. In conclusion our results reflect another quarter of high quality earnings delivered by our businesses with strong capital and good cost management. With that I’ll turn things over to Tom.

Thanks Russ, and good afternoon. Before I begin I draw your attention to the caution regarding forward-looking statements. I’ll start with slide three where we provide a breakdown of our loan portfolio. The portfolio is well diversified with 72% of loans in Canada and 22% in the US. With the Canadian portfolio 63% of assets are consumer loans. Of this total approximately 85% is secured. Our US portfolio mix is 44% consumer with commercial and capital markets loans together making up the larger portion. Slide four provides details on our US loan portfolio. As we have discussed in past quarters, credit losses in the US are higher than those in Canada. That said it is important to point out that the portfolio represents just 22% of total loans and is well diversified and that our underwriting practices were more conservative than the industry overall. US consumer portfolios are relatively evenly spread across first mortgage, home equity and auto loans. The portfolios continue to be impacted by the economic environment but performance is better than peers. Commercial real estate sector continues to experience weakness in the US. Loans in this sector are $3.9 billion or 2% of total loans. Within this investor owned mortgages represent approximately 5% of US portfolio and the developer portfolio is 3%. Investor owned mortgages are concentrated in our Midwest footprint, are diversified by property type and were underwritten prudently. As previously noted we continue to closely manage our exposures in this sector and we have not seen substantial change quarter over quarter. The general C&I portfolio is well diversified. We are continuing to see migration in this portfolio and performance is reasonable given the environment. Turning to slide five we provide information on formations, formations in the quarter were $456 million, down from $735 million in Q4 and down from the quarterly average we saw in 2009. Almost all of the decrease in formations came from the US capital markets and commercial portfolios. The chart shows that the majority of formations continue to come from the US. US formations were spread across C&I, commercial real estate and mortgages and financials. The financials category largely relates to $100 million formation from a credit from our US securitization vehicle on which we took a $20 million provision in the quarter. This is the first impaired loan from the vehicle in two years. Within Canada formations were well diversified across a number of sectors. Slide six details our provision for credit loss by business group. The consolidated specific provision was $333 million, lower than Q4 which was $386 million. We have made a change in the presentation on this slide that is consistent with the securitization reporting change that Russ mentioned earlier. In the P&C Canada business segment we now include actual credit losses on securitized assets. In the quarter those losses were $53 million, the same level as Q4. The losses are related to securitized credit cards. Under securitization accounting these credit costs are recorded in the financial statements as negative NIR in our corporate segment not as PCL. On the fourth row from the bottom of the table we therefore back out these credit costs to arrive at the consolidated PCL of $333 million for the quarter. The Canadian P&C consumer and commercial portfolio continues to perform well. Consumer provisions increased somewhat over last quarter which is reflective of continued high unemployment levels. Delinquencies have been stable. P&C US provisions continue to be higher. Our performance here similar to other banks is impacted by the weak real estate market and high unemployment. While the provision was down quarter over quarter we expect conditions to continue to be challenging here through 2010. Lastly capital market provisions were down quarter over quarter and were concentrated in the US. We continue to see slower migration in our capital market’s portfolio. Turning to slide seven you can see a segmentation of the specific provision by geography and sector. The Canadian provision was $138 million, versus $124 in Q4. The consumer loan and credit card segments continue to be the largest components of Canadian provisions. The US provision was $190 million, down $71 million from Q4. US commercial real estate and mortgages and consumer loans account for the majority of US provisions. Slide eight shows information on our consumer credit performance against peers in Canada and the US. As detailed on the slide our performance across multiple products compares well to peers. A high portion of our consumer portfolio is secured and we continue to maintain our disciplined approach to lending. That concludes my presentation and we can now move to the Q&A.

(Operator Instructions) Your first question comes from the line of Andre Hardy - RBC Capital Markets Andre Hardy - RBC Capital Markets: The trading revenues behaved a lot better than what global investment dealers have reported, just wondering if you have any insights on why that might have been.

I’m not sure, obviously our business is largely focused in Canada. But I think its important to remember that the earlier [develop] that we had in Q1 of 2009 were a lot lower than they would have been if it hadn’t been for the charges we took. So our trading revenues are actually down year over year. They’re at a level that we think is, we thought we had a good quarter. We think it reflects the diversified nature of our revenue flows and builds on the work that we’ve been doing to ensure that we drive strong sustainable returns throughout the cycle. So I’m not really sure what the others are up to but I know that’s what we’re focusing on. Andre Hardy - RBC Capital Markets: Can you help us understand how much of your trading is flow driven versus prop and how much above average spreads might have helped last year versus other factors such as volumes.

If I could turn to the prop piece, we really, our strategy is really a client focused strategy. That being said like everyone else we have a certain amount of our revenues come from prop activities. They would, we would think over the cycle be somewhere in the neighborhood of 10% of our overall capital markets revenues. The type of proprietary strategy we pursue though are generally lower risk and all subject to VAR and other limits so its not a big piece of our business. Obviously last year it would have been greater than that and was significant. But in the quarter we’re starting to return to levels that we would expect to see through the cycle. Andre Hardy - RBC Capital Markets: Page 29 of the sub pack has the expected loss rates for different loan categories, can you help me understand the timing of increasing expected loss rates on corporate exposures, when every single indicator is telling us that the corporate world is getting better.

This is a bit of a funny table and the expected loss numbers that you see on that table moved up as you’ve noted pretty significantly quarter over quarter for corporate. The loss numbers that you’re looking at there are for the portfolio that is in default. And we arrive at the number by making our best judgment about the expected loss on that part of the portfolio and the number can move around quarter to quarter because of assessments that are made. So it’s a bit of a lagging indicator I would say in that its based on a focus on the defaulted portfolio as opposed to the performing.

Your next question comes from the line of Mario Mendonca - Genuity Capital Markets Mario Mendonca - Genuity Capital Markets: The domestic operating leverage, double-digit now for the last couple of quarters, is there anything you can offer on just some indication going forward because it does seem a little bit, I don’t think I’ve seen it that way before, double-digit operating leverage for two consecutive quarters. Is there anything you can offer us going forward.

Obviously we’re really happy with the terrific quarter again, strong revenue growth and well managed expenses and looking forward my expectation is revenue growth levels compared to this quarter might moderate a little bit. We obviously on a year over year basis have seen the benefit of some repricing activity. That repricing activity on a linked basis is starting to slow. In fact in this quarter the five basis points that we saw in our margin improvement was all as a result of mix and the sale of high spread products relative to our lower spread mortgage and term products. So we know its going to be slowing. I believe and what we’re focused on is increasing the growth in our balance sheet. We saw that in Q1 as well. Personal deposits continue to grow more rapidly, consumer loans continue to grow more rapidly. Credit cards continue to grow more rapidly and the commercial business is also starting to pick up. So my expectation is we can continue to compete and do it at a revenue level that is in excess of some of the numbers you’ve seen historically from us but I do think its going to moderate a bit as we go through the year. On the expense side we have done a great job in managing our core expenses while continuing to invest in the strategy that we’ve put forward. You can see in the sub pack that we’re down about 900 people year over year for a number of reasons but we’re really focused on the productivity of our sales force and once we’re comfortable that we’re at the levels that we want to be relative to unit sales and the productivity we will see an increase in our staffing levels going forward. So my expectation is we’ll probably see a little bit higher expense growth as we go through the year but we’ve always had a medium term target of 3% from an operating leverage perspective, obviously we’re much better than that over the last few quarters and we’re going to continue to move forward on that basis. Mario Mendonca - Genuity Capital Markets: On the drip, it was obviously very important this quarter, 3.7 million shares, given where your capital ratios are and what some of your peers have done with the discount is there any, are you contemplating changing anything with the drip.

Obviously we didn’t make a decision in that direction in this quarter. I think that the whole policy around the drip is clearly something that we’re studying. After a difficult year in 2009 I know that our retail shareholders who have been active participants in the drip are very appreciative of its existence. At the same time we have to keep our eye on the capital. As you said the Tier 1 capital ratio continues to strengthen and the TC to risk weighted asset ratio continues to strengthen and in the absence of asset growth and we are looking hopefully to asset growth as Frank said as the year unfolds or opportunities for consolidation we would have to take that under consideration, there’s no question. Mario Mendonca - Genuity Capital Markets: And just to follow-up on the last point about asset growth, last quarter you suggested that you expected to see it in the second half, is that still your expectation.

It is. I guess with respect to the level of economic growth we feel more confident in the recovery but I think we’ve said pretty consistently we think that the rate of growth for the next couple of years is going to be somewhat muted. So I think its really a question of what goes on in the minds of our commercial clients first and foremost. Because the initial use of credit lines has been really focused on rebuilding working capital and starting to refill the inventory chain. We’ve seen very little investment in equipment or structures and I think that’s when you’re going to start to see credit utilization. So whether it’s the third and fourth quarter of the year or the fourth quarter and the first quarter of next year, I’m not certain. I do know that when I have been out talking to commercial clients that they’re all evaluating what they ought to be doing and two quarters ago I’d say everybody was too cautious to think about making a move, now I’m seeing the same level of thought going into when are we going to start to reinvest. So its either the second half of the year or delayed by a quarter but I still believe that we’ll start to see demand pick up.

Your next question comes from the line of John Reucassel - BMO Capital Markets John Reucassel - BMO Capital Markets: On the HELOC loan portfolio that, I think its about $24 billion in Canada, I believe that’s the undrawn and committed, how much is on the balance sheet now for Canada and HELOC.

The number on the balance sheet right now is about $16, $17 billion. John Reucassel - BMO Capital Markets: Are those, would you give a HELOC to someone that you don’t have their, if they had a mortgage, would you give them a HELOC if you didn’t have their mortgage.

Let me give you a few parameters around the portfolio including addressing the question that you’ve asked about, overall the portfolio is performing very well, losses on the portfolio are running below 10 basis points so really at a diminimous kind of a level. We don’t write home equity product with a loan to value above 80% and so its got a conservative loan to value profile and the average loan to value on the portfolio would be about 50%. And 90% of the portfolio is either in a first mortgage position or in a second behind a BMO first. So the short answer to your question is no. John Reucassel - BMO Capital Markets: And then one of the things I have a hard time figuring out with all these new rules on capital is liquidity proposals and are you able to quantify what the impact would be on BMO from what they proposed, are you able to do that for us now. Its just hard for us to know, is it just you’re going to carry more cash on the balance sheet or is it more retail funding or how are we from the outside going to measure this.

It’s a difficult thing to deal with really because right now as you know we just have a paper that’s been put out for discussion. The industry is quantifying the impacts from the capital paper and the liquidity paper and then there will be significant discussions from the spring through to about the end of the year and we’ll end up we expect with guidance at that time. I think given the degree of uncertainty that exists around what the ultimate rules will be and what balance sheets will look like when they’re implemented down the road, its very difficult to quantify what the impact would be of the liquidity rules. John Reucassel - BMO Capital Markets: I just want to make sure I understand your outlook for loan growth, I heard Frank talk about moderating revenue growth in Canadian P&C so I assume part of that is volume and you talked about growth coming from commercial, does that mean you don’t have very high expectations for the corporate loan book. I guess trying to get a consolidated view of total loan growth over the next year or so.

Well I think I would say when I talk about the commercial business I would say commercial users of credit and that would include the corporate universe too which has, the large corporate universe has been very conservative in their CapEx plans for the year. What I think I heard Frank say and obviously I’ll let him clarify is that he saw moderation in revenue growth from spread expansion but that we expected to see volume pick up. At some point we will see volume pick up. If you look at the balance sheets of the industry, North American industry, they have contracted quite significantly as has the use of credit. So I think you can’t extrapolate that from its current levels very far and there has to be a rebuilding of the use of credit so we do think we’ll see some volume growth. In Canada in commercial banking we have a strong market share and so to grow much faster than the market I think always a challenge on the loan side, certainly we’re focused on growing our commercial deposit share and so I think commercial banking will have some revenue and net income growth opportunities. In the United States I think its very significant. We have a reputation, a strong reputation as a commercial lender and the realignment that I spoke to is going to give us more people calling in the market. I think it obviously has some economic benefits in our model but its going to give us better market coverage of a larger universe of accounts. And it’s at a time when I think the market is very uneven. There are a number of US banks that are being extremely cautious with respect to their balance sheets because they still have a capital rebuilding challenge and some of the very large universal banks have other priorities. And finally and I think this is an extremely important point customer loyalty is being, has a great deal more visibility and we’ve seen this in, if I think back over the last three decades, we’ve seen this coming out of downturns where we’ve been able to build market share on the back of a very significant reversal because we have a reputation for being consistent in support of our customers. A lot of business comes from reputation and referral and I think that this is an area where BMO and the Harris brand as well is going to be able to capitalize, so, I do think that the movement of accounts is going to improve, the economics of the business, but I think more importantly its going to improve our ability to grow.

Your next question comes from the line of Steve Theriault - Bank of America / Merrill Lynch Steve Theriault - Bank of America / Merrill Lynch: Last quarter you noted that part of the bank’s ability to ultimately get to your 17% to 20% ROE target was related to the notion that the bank’s running at conservative capital ratios. So with the proposed changes we saw in December and granted there’s a fair bit of uncertainty there, do you feel any less confident regarding sustainable ROE of the bank or the timing it will take to get there.

If I understand your question is it that the boundaries that are being established in the quantitative impact study appear to be imposing potentially higher capital requirements on banks and would that change my view of our ability to earn a good return on equity. Steve Theriault - Bank of America / Merrill Lynch: Yes.

Well at the time of the last call we were looking at where we thought the questionnaire was going to come out and I would say there have been no surprises. The issues around the kinds of things that could reduce capital whether its pension or deferred tax or I guess another one that’s obviously very visible is other than wholly owned subsidiaries and I think where our confidence comes from is first of all when you look at the Canadian banking universe we have less in the way of issues than the US and European banks as a hole and then within Canada you just come back to the fact that we have a high proportion of our Tier 1 is common, it’s the highest among the Canadian banks. And we don’t have a number of those other issues so in an environment where the ultimate rules are going to be determined by just how feasible it is and in the end global capital markets require a vibrant banking system and I think the regulators are going to take the results of the QIS and come up with a sensible framework that we’re starting out in a strong position. As those new rules are imposed its going to change pricing in the market and I think when you start with very strong capitalization you don’t have to bid for capital, you don’t have to issue equity in order to grow your business you can take advantage of that. So I think there’s some trade offs, there will obviously be some adjustments that will need to be made as new rules are finalized. I think there will be some opportunities that will pretty much offset the negative impacts. So I remain I wouldn’t say optimistic, I remain cautiously optimistic. Steve Theriault - Bank of America / Merrill Lynch: Trying to piece together maybe this isn’t the best idea but trying to piece together the actual versus expected losses in the segmented disclosures, so if I look at BMO capital markets for example, the actual losses are down considerably in the quarter and the reported PCL in the segment is up considerably is there any way to reconcile that and are you still married to this method of disclosure or is there any consideration going forward to a more typical approach here.

To the first question its pretty hard to reconcile movement in any quarter between actual losses and the expected loss. The expected loss as you know is calculated by looking at the ratings distribution in the portfolio and its uping capital markets and the other groups because year over year there was negative migration in the portfolios and we’ve also assumed growth. And so that’s why the expected loss is up in the segment as reported numbers. The specific provision for capital markets is down by a reasonable amount quarter over quarter and that just reflects the impact of slowing migration in the portfolio in particular in the US. In terms of how we feel about this approach, its kind of funny because we’re the only Canadian bank that uses the expected loss methodology but over the last year there’s been more discussion internationally about moving to some kind of an expected loss provisioning approach for the banking industry globally. And so the plan is to keep with this approach for now and to participate in the debate that’s going on in the industry with respect to a possible change to expected loss provisioning overall. And obviously not sure where that’s going to go but the fact that that debate is occurring I think reinforces the idea that thinking about expected loss through the cycle as you do business has merit.

Your next question comes from the line of Jim Bantis – Credit Suisse Jim Bantis – Credit Suisse: Looking on page 35 of the sub pack and we’re seeing a notable increase in consumer installment and personal loans on gross impaired loans and I’m wondering if you can give us a little bit of color on what’s causing this trend that’s been picking up since really the second half of 2009 and where you see the trend going.

Most of the increase is coming from the US and our delinquency rates in the US are up and the impaireds are up and really it’s a function of continued high [employment] rate in the US and the housing market that is still weak in the US. We expect delinquency levels and impaired levels to continue to be elevated in the US possibly with a little bit of an upward trend for a while. Whereas in Canada things really look as if they’re stabilizing. Jim Bantis – Credit Suisse: Is there a particular product or region that’s causing the uptick here.

In the US its coming from for us and from the industry both the home equity product and the mortgage product and in Canada there’s no real significant split by geography. I would point out that a good portion I think its about 70% of the Canadian residential mortgages that are impaired are insured and so ultimately we don’t expect to have a loss there even though they are classified as impaired. Jim Bantis – Credit Suisse: I just wanted to follow-up with Bill’s earlier comments about the initiative to transfer a group of loans or a segment of loans from BMO capital markets to the US business, I’m wondering if you can give us a little more quantitative color on this with respect to maybe the timing. You talked about the size being the more than double the size of the US commercial loan portfolio if you could give us a base of what that size is and maybe from Ellen’s perspective what the impact would be from an earnings.

I’ve commented on it, why don’t I turn it over to Ellen and let her give you the parameters.

As Bill touched on we expect this will more than double the size of our existing business which has a book of about $6.5 billion on both loans and deposits. It will adjust our mix significantly. I think you know that we were low weighted on commercial and that was one of the drivers of our weak productivity in ROE. So it will make a difference on our ROE and productivity and most importantly as Bill talked about it will add more resources to our current effort underway to take advantage of the destruction in the marketplace. We’ve already made some great gains there and this will only help accelerate that. We are expecting to have the numbers nailed down by the second quarter. It would be really hard for me to give you anything definitive at this point but you will see improving trends on both productivity and ROE. Jim Bantis – Credit Suisse: When you think of the mix of business, I’m just trying to get a sense of the average size of the client, the loan size, if you could just give a little color on that.

The commercial midmarket portfolio that we currently have in P&C has an average customer sales size between $150 and $200 million. This will increase our average to about $400 to $500 million. Jim Bantis – Credit Suisse: That’s pretty meaningful and I guess the bottom line of this when the transition is complete we’ll see the shift in wholesale earnings for the bank draw down from this 38%, 40% level and we’ll see a notable pick up in the Harris earnings going forward.

You will.

Your next question comes from the line of Michael Goldberg – Desjardins Securities Michael Goldberg – Desjardins Securities: You said in your presentation 99% of your retail portfolio in the United States is secured, but in that portfolio could you tell us what amount of loans do you estimate loan to values over 100% or 120% and on loans where the value of the asset has fallen to below the amount of the loan are you actually experiencing problems with borrowers walking away.

I’ll take a crack at that, to answer the last part of the question first, we’re not seeing significant what people refer to as strategic defaults which is where people walk away from mortgages that are underwater for purely financial reasons. So there’s been some discussion of that being a potential risk in the industry, we’re alert to the risk but we’re not seeing it as a significant trend in the portfolio. And I would point out that Illinois where the bulk of our portfolio is, is a recourse state which gives us some protection from that risk. In terms of the part of the portfolio that’s underwater, clearly given 25% to 28% decrease in house prices, some portion of both the mortgage and the home equity portfolio is under water. In general the strong majority, the vast majority of the portfolio was underwritten at loan to value ratios initially below 90%. So I don’t have the number at my fingertips but the majority of the portfolio would clearly still be well above water.

Your next question comes from the line of Cheryl Pate – Morgan Stanley Cheryl Pate – Morgan Stanley: I’m wondering if you could give us some color on some of the trends you saw in the mortgage business this quarter as well as expectations for the year in terms of growing share of wallet increasing profitability and then maybe tie that to your view on the net interest margin.

I think everybody knows the mortgage business is one of those businesses that we have a little bit of a different point of view on relative to the competition, a little bit different strategy on that we’ve been executing over the last couple of years. We have and will continue to see run off in our broker portfolio for at least another couple of years and its having a significant impact on our share. What we are doing to try to offset that decline is build up our proprietary mobile mortgage specialist sales force. Last year in a tough market we increased the size of the sales force by about 6%, this year we have plans to increase it by almost 30% and we’re well on our way to achieving that objective. So increasing that sales force is part of the strategy. To this point in time we are seeing significant growth from our mortgage specialist channel so we’re confident that we’re on track from a strategic perspective. We have I think I mentioned earlier that we have reduced the number of our generalist sales people in our branches as we look at our productivity performance branch by branch. And that has had an impact on our mortgage business and the growth in our mortgage business through our branch channel. So my expectation is again as I said earlier as we become more confident with our performance management system and the productivity of our generalist sales force we will start to add people back into our branches and our mortgage growth will improve as a result of that as well. So for the time being I think we’re going to see mortgage growth at the level we’re at. As we go through the next few quarters and our sales forces grows we’ll see improving growth. Our objective is to continue to focus on growing share in this product ultimately but its going to take some time given the transition we’re going through in the portfolio that we have at this point. Bill mentioned earlier our new mortgage product that we are launching today. Another big part of our strategy is to be very competitive and creative in support of our customer promise. I think this mortgage product is going to help as we go into the mortgage season this year and so we’ve got some other tactics underway to try to get the growth growing and obviously the lower growth of this product compared to the strong growth in our consumer lending and credit card products is having the impact on the spread that you’ve seen over the course of the last year and my expectation is that will continue moving forward. Cheryl Pate – Morgan Stanley: I wonder if you can talk a little bit about the asset sensitivity to rate increases, looks like from reading through the report slight positive to earnings in both the 100 basis point increase and decrease scenario, so any color you could share there.

That’s correct, we expect that with rising rates that it will be positive to earnings. That’s correct. We think it will be positive and there will be some margin expansion with the rising rates.

Your next question comes from the line of Darko Mihelic – Cormark Securities Darko Mihelic – Cormark Securities: I’m going to try and take a crack at this sizing initiative on the loan book, forgive me if I bounce around a little bit here but I’m trying to look at page eight of the supplemental and page 10 and sort of combine these two loan books. If I combine the average current loans and acceptances of P&C US and BMO cap markets its about a $31 billion loan book. So if I take a $6.5 billion slice of that and double it, you’d still be lower than where you were a year ago which is about $40 billion. I guess my question is what about underlying growth elsewhere. So if we double $6.5 billion but we reduce the size of the other loan books and I guess the question is the run off continuing in your portfolio for the foreseeable future.

It goes to what the logic for the change is. What we don’t want to do is as we continue to refine the capital utilization of capital markets is to miss an opportunity to serve the commercial banking universe that is within our geographic market but not in the areas of concentration of capital markets so the mere movement of the account coverage from one part of the portfolio to the another has an expense benefit because we expect to be more efficient in the management of those accounts. But the real revenue lift is a very specific belief that we have that this is the time to increase prospect coverage in the market and take share from our competitors. I’m looking at the same revenue decline numbers as you are. Its happening across the market and we have done a better job of protecting if you like our balance sheet in the US than the market itself. So it gives us confidence that we can grow share if the market starts to grow and this is something that we’re anticipating that will happen. I think we’ll continue to grow share and I think they’ll be complimentary. The real question is will it be a couple of quarters I guess as we complete this process and as the market starts to recover. So I think Ellen spoke specifically to how we’re going to go about it and the timeline. I’m hoping that in the second calendar quarter we’ll be able to give you some more specifics about the second fiscal quarter rather, we’ll give you more specifics about the accounts that have been transferred but I think its that latter half of the year when we start to see a pick up in credit utilization, that attraction that I’m hoping that we’re going to show is going to be there. One of the things I do have a great deal of confidence in is the enthusiasm of the professionals that work in both groups. They brought this framework forward on the basis that it was going to stimulate growth for the bank and stimulate the origination of investment banking opportunities whether its fixed income or equity raising or M&A. And we’ve talked about this client universe for a long time. It’s a very significant block of commercial accounts many of which are privately owned, many of which at some point in the future are going to have a succession event and by making this adjustment at a time when we think the market is going to grow again we want to own a significant part of the market and that’s the logic behind it. Darko Mihelic – Cormark Securities: If we could just circle back to the interest rate sensitivity, I’m actually interested in that as well because it looks as though from a structural point of view you are more asset sensitive but also in a very peculiar way your insurance business seems to be quite sensitive to interest rates and it seems like a 1% move would give you $80 million after tax and earnings. For perspective I think the midpoint of Sun Life’s range is zero, so can you maybe talk, is this a strategy of Bank of Montreal to move up the interest rate sensitivity curve and can you talk to maybe perhaps in slightly more layman’s terms, forget about a 1% interest rate increase which is theoretical and we really don’t know how to use that, to maybe a potential situation where we have the Bank of Canada raise rates by 50 basis points in the back half of the year, what kind of impact that would have on your margin. Can you help us in any way with that regard.

If the Bank of Canada was to raise rates by 50 basis points over the back half of the year that would be roughly in line with the market expectations and we’ve taken steps in our capital market business to decrease our exposure to rising short-term rates so we’ve mitigated our exposure to that risk and I think the short answer to your question is that with an orderly increase in rates we wouldn’t expect any significant short-term impact to the P&L. Darko Mihelic – Cormark Securities: Why the sensitivity in the insurance business.

The sensitivity there I think relates to the duration of the assets and the liabilities and the liabilities are very long dated and so when rates go up in the actuarial models you assume that you reinvest on the maturity of the existing fixed income portfolio at a higher rate and in insurance accounting present value that and that produces a positive impact. So it comes from the duration mismatch between the assets and the liabilities. Darko Mihelic – Cormark Securities: Well aware of that, I’m just curious about the actual magnitude, why its so sensitive to interest rates. Presumably your balance sheet for your entire insurance operation would be a smidgeon relative to Sun Life.

I really can’t comment on the structure of their balance sheet or how they report their sensitivity, so this is the number that we have for our book.

Your final question comes from the line of Sumit Malhotra - Macquarie Capital Markets Sumit Malhotra - Macquarie Capital Markets: First on the line you call reductions and impairments loans and acceptances, there’s a few things that run through that, the FX, the repayments and the actual, sorry the sales and the actual repayments, you have a comment in the press release about sales being relatively small in the quarter. I think the FX move was only about 1% on a spot basis, so are we looking at a very large recovery or recoveries that you booked this quarter and can you give me a little bit more color on where that might have been coming from.

So this is on page 38 of the sub pack, on the table on the bottom, and if you’re looking at the number I’m looking at the reduction in impaired loans at $265 so that’s up from the average of the last number of quarters and the biggest single driver is that we had a number of accounts move out of impaired status and larger accounts, so its three accounts totaled $150 million that moved out of impaired. And that was a higher rate of moving out of impaired than we’ve seen in the last few quarters. The FX as you said had an impact but it wasn’t that significant. It was about $25 million of the $265 and recoveries which we show up above on the table on the top in the third row were $45 million in the quarter which was basically in line with where we’ve been running. So there’s no significant change in the recovery story in the quarter. Sumit Malhotra - Macquarie Capital Markets: Any theme in the should we call them repayments or return from—

I wouldn’t make too much of it but I think the direction is consistent with the theme related to a slowing in migration and a somewhat more positive outlook to the capital market credit picture. Sumit Malhotra - Macquarie Capital Markets: Well the second part for you if we stay on this page the additions or the formations in the quarter also trended lower, the 456 and we spoke briefly earlier about the 99 that came from the fairway conduit, the first time we’ve seen anything there in two years, so if I want to play ball here we can say you’re at about 350 on additions in the quarter. You’ve talked about this in the past, now recovery is looking better, formations trending lower, how do you feel about the 333 in provisions this quarter if you’re thinking about your 2010 run rate.

Bill said in his comments that the 333 came in better than expected or it was better than we expected which we were happy to see. I think at this point we would say that we expect the specific provision in 2010 to be below the level that we saw last year and the quarterly average run rate last year was about 385. This level this quarter was a pretty good number. We had a down tick in P&C US commercial and reasonably significant down tick in capital markets. So I’m not sure in the next quarter or two that there’s going to be a continuation in the trend. At the same time we think that we’ll come in below the level last year and we may have some ups and downs in any quarter given movements on both to the corporate side and the commercial side. Sumit Malhotra - Macquarie Capital Markets: There’s been some press in the last month or so about FDIC operations and transactions in the Chicago land area, you certainly have taken the prudent approach in terms of acquisitions and that’s been the right thing, your tone surrounding the US and what you’re hearing from accounts sounds much improved, you’re seeing some better trends in credit, are we at the stage now given BMO’s very strong relative and absolute capital position and current and proposed standards that you’re looking a little bit more closely than you may have in the past at deals.

I think in the context of FDIC and that’s how you started the question, the quality of assets and in that I mean beyond the loans because you can in some sense insulate yourself from the future default risk of the loans, but the quality of the deposit base and the customer base that we have seen in the vast majority of FDIC transactions that we have pre reviewed or in anticipation, have not improved, wasn’t good. And I think in most cases it probably won’t get much better. The improvement may be in the higher quality banks where their prospects I think have improved and so I continue to view the FDIC avenue as one that may present us with an individual bank or two that are an infill but as a strategy for using capital or growing the bank. It doesn’t seem to be to me to be a very well grounded one. I have not any evidence of a change in the environment if you like with respect to receptivity. But I think confidence levels across the board are starting to improve as people think about the future of the businesses and as I’ve said on previous calls, the greatest opportunity is probably well run banks that prior to the downturn would have thought about being in the position of consolidator and just don’t have the capital cushion to allow them to engage in that and that’s where their Boards of Directors may say a combination is better for our shareholders and better for our customers. But I think that’s something that’s going to unfold over the course of [2007] and there isn’t a moment a week or a month that’s going to make an immediate difference. I continue to remain positive in the view for what will be available in the course in the year.

Thanks for joining us today and as always if there’s any further questions please contact the Investor Relations team. Thanks.