C O R P O R A T E P A R T I C I P A N T S Viki Lazaris BMO Financial Group SVP IR Bill Downe BMO Financial Group President, CEO Tom Flynn BMO Financial Group EVP, CFO Surjit Rajpal BMO Financial Group EVP, Chief Risk Officer Frank Techar BMO Financial Group President & CEO, P&C Canada Mark Furlong BMO Financial Group President & CEO, BMO Harris Bank, N.A. Tom Milroy BMO Financial Group CEO, BMO Capital Markets C O N F E R E N C E C A L L P A R T I C I P A N T S A N A L Y S T S : Mario Mendonca Canaccord Genuity John Reucassel BMO Capital Markets Robert Sedran CIBC World Markets Steve Theriault BofA Merrill Lynch Andre-Philippe Hardy RBC Capital Markets Peter Routledge National Bank Financial John Aiken Barclays Capital Michael Goldberg Desjardins Securities Cheryl Pate Morgan Stanley Brad Smith Stonecap Securities Inc.

Q3 2011 CONFERENCE CALL

Caution Regarding Forward-Looking Statements Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type are included in this document, and may be included in other filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the safe harbour provisions of, and are intended to be forward-looking statements under, the United States Private Securities Litigation Reform Act of 1995 and any applicable Canadian securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for 2011 and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian and U.S. economies. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that our assumptions may not be correct and that actual results may differ materially from such predictions, forecasts, conclusions or projections. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: general economic and market conditions in the countries in which we operate; weak, volatile or illiquid capital and/or credit markets; interest rate and currency value fluctuations; changes in monetary, fiscal or economic policy; the degree of competition in the geographic and business areas in which we operate; changes in laws or in supervisory expectations or requirements, including capital and liquidity requirements and guidance; judicial or regulatory proceedings; the accuracy and completeness of the information we obtain with respect to our customers and counterparties; our ability to execute our strategic plans and to complete and integrate acquisitions; critical accounting estimates; operational and infrastructure risks; general political conditions; global capital markets activities; the possible effects on our business of war or terrorist activities; disease or illness that affects local, national or international economies; disruptions to public infrastructure, such as transportation, communications, power or water supply; and technological changes. With respect to the M&I transaction, such factors include, but are not limited to: the possibility that the anticipated benefits from the transaction such as it being accretive to earnings and other impacts on earnings, expanding our North American presence and synergies are not realized in the time frame anticipated or at all as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations (including changes to capital requirements) and their enforcement, and the degree of competition in the geographic and business areas in which the combined businesses now operate; the ability to promptly and effectively integrate the businesses of M&I and BMO; reputational risks and the reaction of M&I’s customers to the transaction; diversion of management time on integration and restructuring related issues; and increased exposure to exchange rate fluctuations. A significant amount of M&I’s business involved making loans or otherwise committing resources to specific companies, industries or geographic areas. Unforeseen events affecting such borrowers, industries or geographic areas could have a material adverse effect on the performance of our integrated U.S. operations. We caution that the foregoing list is not exhaustive of all possible factors. Other factors could adversely affect our results. For more information, please see the discussion on pages 29, 30, 61 and 62 of BMO’s 2010 Annual Report, which outlines in detail certain key factors that may affect Bank of Montreal’s future results. When relying on forwardlooking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forward-looking statements, whether written or oral, that may be made, from time to time, by the organization or on its behalf, except as required by law. The forward-looking information contained in this document is presented for the purpose of assisting our shareholders in understanding our financial position as at and for the periods ended on the dates presented and our strategic priorities and objectives, and may not be appropriate for other purposes. In calculating the pro-forma impact of Basel III on our regulatory capital and regulatory capital ratios, we have assumed our interpretation of the proposed rules announced by the Basel Committee on Banking Supervision (BCBS) as of this date and our models used to assess those requirements are consistent with the final requirements that will be promulgated by BCBS and the Office of the Superintendent of Financial Institutions Canada (OSFI). We have also assumed that the proposed changes affecting capital deductions, risk-weighted assets, the regulatory capital treatment for non-common share capital instruments (i.e. grandfathered capital instruments) and the minimum regulatory capital ratios are adopted as proposed by BCBS and OSFI. We also assumed that existing capital instruments that are non-Basel III compliant but are Basel II compliant can be fully included in such estimates. The full impact of the Basel III proposals has been quantified based on our financial and risk positions at July 31 or as close to July 31 as was practical. The impacts of the changes from IFRS are based on our analysis to date, as set out in Transition to International Financial Reporting Standards in the Future Changes in Accounting Policies – IFRS section in our 2010 Annual Report and later in this document. In setting out the expectation that we will be able to refinance certain capital instruments in the future, as and when necessary to meet regulatory capital requirements, we have assumed that factors beyond our control, including the state of the economic and capital markets environment, will not impair our ability to do so. In determining the impact of reductions to interchange fees in the U.S. Legislative Developments section, we have assumed that business volumes remain consistent with our expectations and that certain management actions are implemented that will modestly reduce the impact of the rules on our revenues. Assumptions about the performance of the Canadian and U.S. economies as well as overall market conditions and their combined effect on the bank’s business are material factors we consider when determining our strategic priorities, objectives and expectations for our business. In determining our expectations for economic growth, both broadly and in the financial services sector, we primarily consider historical economic data provided by the Canadian and U.S. governments and their agencies.

Non-GAAP Measures Bank of Montreal uses both GAAP and non-GAAP measures to assess performance. Readers are cautioned that earnings and other measures adjusted to a basis other than GAAP do not have standardized meanings under GAAP and are unlikely to be comparable to similar measures used by other companies. Reconciliations of GAAP to non-GAAP measures as well as the rationale for their use can be found in Bank of Montreal’s Third Quarter 2011 Report to Shareholders and 2010 Annual Report, all of which are available on our website at www.bmo.com/investorrelations. Examples of non-GAAP amounts or measures include: productivity and leverage ratios; revenue and other measures presented on a taxable equivalent basis (teb); amounts presented net of applicable taxes; adjusted net income, revenues, provision for credit losses, earnings per share, ROE, productivity ratio and other adjusted measures which exclude the impact of certain items such as integration costs, amortization of acquisition related intangibles and charges for foreign exchange on hedges. Bank of Montreal provides supplemental information on combined business segments to facilitate comparisons to peers.

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P R E S E N T A T I O N

Operator Please be advised that this conference call is being recorded. Good afternoon, and welcome to the BMO Financial Group's third-quarter 2011conference call for August 23, 2011. Your host for today is Viki Lazaris, Senior Vice President of Investor Relations. Ms. Lazaris, please go ahead.

Viki Lazaris - BMO Financial Group - SVP IR Thank you. 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 Tom Flynn, the Bank's Chief Financial Officer, and Surjit Rajpal, our Chief Risk Officer. After their presentations, we will have a short question-and-answer period, where we will take questions from prequalified analysts. To give everyone an opportunity to participate, please keep it to 1 or 2 questions and then re-queue. Also with us this afternoon to take questions are BMO's business unit heads -- Tom Milroy, from BMO Capital Markets; Giles Ouellette, from the Private Client Group; Frank Techar, Head of P&C Canada; and Mark Furlong, from P&C US. At this time, I caution our listeners by stating the following on behalf of those speaking today. Forward-looking statements may be made during this call. They are subject to risks and uncertainties. Actual results could differ materially from forecasts, projections, or conclusions in the forward-looking statements. Information about material factors that could cause results to differ and the material factors and assumptions underlying these forward-looking statements can be found in our annual MD&A, and in our third-quarter 2011 report to shareholders. With that said, I'll hand things over to Bill.

Bill Downe - BMO Financial Group - President, CEO Thank you, Viki, and good afternoon everyone. As noted, my comments may include forward-looking statements. BMO's third-quarter results were very good and consistent with the business performance we've been delivering this year. Our year-to-date adjusted net income1 has reached more than $2.4 billion, 116% ahead of last year. The investments we're making continue to contribute to top-line growth, and this remains our priority, as we steadily introduce initiatives that further enhance the experience of our customers. On July 5, we closed the acquisition of Marshall and Ilsley, and the closing was successful, on time, and efficient, and we're making good progress on integration. We have a set of defined milestones that we're working towards, as well as a clear view of the business opportunities that are present. Notwithstanding the slower-than-expected US economy, we remain confident about the future of our US businesses and the results we'll generate, and I'll speak more on this later in the call. Before moving to a review of the third-quarter numbers, I'd like to thank Ellen Costello for her significant contributions at Harris over the 5 years leading up to our recent acquisition, and formally acknowledge Ellen's new position as CEO of BMO Financial Corp. In the role of US country head for BMO Financial Group, Ellen is responsible for providing governance and regulatory oversight for all of BMO's US businesses. She remains a key member of the BMO management and performance committees. Mark Furlong, President and CEO of BMO Harris Bank, joins us on the call today and, as Viki mentioned, is with us to participate in the Q&A session. Mark leads our US personal and commercial business, and we're pleased to welcome him on BMO's management team.

1 on a reported basis: YTD net income was $2.4 billion, 14% ahead of last year.

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Tom will provide detail on the Q3 results in a moment, but let me touch briefly on the overall results and the performance of our business groups. On an adjusted basis, net income1 was up 24% to $843 million, including 26 days of M&I's results; EPS1 was $1.36, representing an ROE1 of 15.6%, compared with 13.9% last year; and reported net income in the quarter was $793 million. Revenues on an adjusted basis1 increased 13% year over year, while expenses1 were up 8%, resulting in positive operating leverage and a productivity ratio1 of 62.2%. We remain committed to achieving the medium-term operating leverage target of 1.5% on an adjusted basis. Credit performance continues to be good. In Q3, specific provisions for credit loss was $174 million, compared with $214 million last year, and $187 million in Q2. Surjit will provide more color on credit later in the call. BMO remains well capitalized, the Basel II common equity ratio was 9.1% at the end of the third quarter and this includes the impact of M&I, which increased risk-weighted assets by $45 billion. As we've discussed in previous calls, we continue to be confident in comfortably meeting the Basel III 2013 requirements. Some brief comments now on the performance of our business groups. P&C Canada's net income was $432 million, up 2% from a year ago and up 8% from Q2. Revenue growth has moderated as expected, increasing 2.5% year over year, with good volume growth across most products and stable margins compared to last quarter. While there was increased initiative spending and growth in the sales force in the quarter, expense growth slowed to 3% from last year. We continue to invest in the business with a disciplined approach that carefully tracks the relationship between revenue and expenses. Our customer loyalty, as measured by net promoter score, continues to improve in both personal and commercial segments, and we've seen an increase in the average number of product categories used by both personal and commercial customers. That's not just a function of hiring more people. Our front line team is in fact working more efficiently. The latest tracking data shows that the productivity of our core sales force has increased by 10% year to date, a trend that we expect to maintain. Turning now to the United States, we're reporting essentially a new set of results that includes both the legacy Harris and for 26 days for this quarter, the former M&I. P&C US net income of US$95 million was up substantially from US$50 million a year ago, with M&I contributing US$27 million after recording PCLs on an expected loss basis. Excluding M&I, net income increased US$18 million or 39%, with increased revenue driven in part by higher net interest margins, and increased securities gains and lower expenses. The acquisition of M&I transforms our US presence by adding scale and providing a strong entry into attractive new markets. In Canadian dollars, M&I adds approximately $29 billion of net loans, $34 billion of deposits to BMO's balance sheet, along with 2 million customers, predominantly to the P&C US business. Notably, our US commercial bank has more than doubled in size, already a strength for both Harris and M&I; commercial banking now represents a great opportunity, and a top priority for the P&C US leadership team. Last year, we transferred a large portfolio of assets from capital markets to commercial banking, and we're now starting to see the benefits in both lending and cash management services. This focus, in concert with our strong balance sheet and capital, represents a tremendous competitive advantage in the marketplace for BMO Harris Bank, and we haven't wasted a day. The strength and reputation of our commercial banking team is uncontested in the Midwest, as we build on our position as the bank for business. Private Client Group's net income was $120 million, up 14% from last year, with very strong year-over-year growth from our traditional wealth business. Insurance net income was down from a year ago, primarily due to the effects of long-term interest rate movements. The acquisition of M&I almost triples the size of our US wealth business as measured by assets under management and administration. Our US private banking presence now operates from twice as many outlets, BMO's ultra-high net worth business is now one of the 10 largest in the US as measured by assets, and our global asset management business is one of the 100 largest investment managers worldwide, also measured by assets, now managing over $100 billion in combined assets.

1 on a reported basis: net income was up 18%; EPS was $1.27, ROE was 14.7%, compared with 13.7% last year; revenues increased 13% Y/Y; expenses increased 11% Y/Y productivity ratio was 64.5%.

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BMO Capital Markets net income for the quarter was $279 million, substantially above the same quarter last year when trading was unusually weak, and 19% ahead of Q2. We also benefited from a higher recovery of prior periods income taxes in the quarter and ROE in the quarter increased 25.5%. In addition to increased trading, particularly interest rate-related trading, we experienced higher M&A and equity underwriting fees, and increased securities commissions. Given the market volatility and economic uncertainty, I'd expect moderation in near-term income relative to the good year-to-date results. Underscoring our financial performance, we continue to gain recognition for the work we do for our clients. In The Wall Street Journal's annual Best On the Street Research Survey, BMO Capital Markets had 6 top 5 finishes, which placed us fifth overall in the US. What's more, 3 of our awards were first-place finishes, which tied us for number one in that metric. In terms of overall statistics, we now have 75 research analysts covering 925 issuers. I'd now like to spend a few moments updating you on where we stand relative to the integration of M&I. Let me stress, again, that our market position in the heart of the United States is unique. The core of our operations cover a 6-state area with a GDP greater than Canada, where you'll find a wide range of industries and a number of important Fortune 500 companies, as well as thousands of small and medium-sized enterprises. Our key markets include major population centers -- Chicago, Milwaukee, St. Louis, Indianapolis, Kansas City, and Minneapolis-St. Paul. As indicated in my opening remarks, the closing was very efficient. In terms of senior management, all top and level two leader positions were in place on close. We opened on July 6 with our new organization fully in place. We recognize how important it is to ensure employees understand the vision and strategy of the Bank they're working for under the BMO Harris Bank name. And, through our Institute For Learning, more than 8,000 leaders and employees have completed a comprehensive orientation program, confirming a consistent integrated customer focus. We've already integrated our human resources process, with employee compensation, benefits, payroll, and training all in place, along with a common intranet. Workforce reductions have been identified as we continue to work on eliminating duplication, and to date, we've reduced full-time employment by 475. The introduction of the new BMO Harris Bank name has been met with high receptivity from both employees and customers. On the M&I side, employees are energized by putting the challenging circumstances of the past few years behind them and getting back to focusing on customers. We're seeing great initiative across the business from day one. Front-line staff have been pursuing referral opportunities on their own, making things happen for customers prior to the introduction of the common teller platform. Among customers, there's been a high level of recognition and acceptance of the BMO name. And even against a subdued economic backdrop, we're confident in our ability to deliver a customer experience that stands out, and grow as a consequence. Let me close with some comments on the economic environment and business outlook. There's no question that the large data revisions of the last month or so have shown that we had weaker growth in the second half of 2010 and the first quarter of 2011 than was previously recognized. Q2 of 2011 has shown consumer spending to be essentially flat, confidence low, and it's most likely that the GDP revision numbers on Friday will reflect continued low growth. Accordingly, the risk of an economic downturn is higher and equity markets are clearly reflecting the uncertain prospects for growth. We continue to believe that continued moderate economic growth is the more likely scenario. With this backdrop, businesses are looking for confirmation, carefully managing capital expenditure and inventory levels, and at BMO we're maintaining tight discipline around expense growth as we continue to focus on exceeding our customers' expectations and delivering on our strategic priorities. The integration of M&I is important, but all 47,000 BMO employees remain focused on helping customers to grow their savings, control spending, borrow smartly, and invest wisely. Looking at our results going forward, I remain optimistic. We expect a lift in our results from the integration synergies we've identified. We're differentiated by our leverage to, and opportunities in, the commercial business. Credit trends are

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positive. Our increased US leverage should provide significant upside when the US economy recovers, and our Canadian retail and capital markets businesses are well positioned for continued earnings growth. And with that, I'll pass it over to Tom to take you through our third-quarter financial results in more detail.

Tom Flynn - BMO Financial Group - EVP, CFO Thanks, Bill, and good afternoon. Some of my comments may be forward-looking. Please note the caution regarding forward-looking statements at the beginning of the presentation. I'll start with the financial highlights on slide 8. Adjusted net income was $843 million, up 24% from last year. Adjusted EPS was $1.36, up 19% from a year ago. Last quarter, we introduced adjusted results to better position us for reporting core performance after the acquisition of M&I. Net adjustments this quarter totaled $50 million after tax, or $0.09 per share. Adjustments, all on an after-tax basis, include integration costs for M&I of $32 million, amortization of acquisition-related intangible assets of $12 million, and a charge to revenue for hedging FX risk on the M&I acquisition of $6 million. Except for the amortization of intangibles, all adjustments were booked in corporate. Reported net income of $793 million was up 18% from last year, and return on equity was 14.7%. Current quarter financials reflect 26 days of M&I results. M&I added $117 million of revenue, and $32 million to adjusted net income. On a reported basis, there was a loss of $10 million, given integration costs. The provision for credit losses was down year over year by $40 million, and relatively stable versus last quarter. BMO's capital position and ROE remains strong. Our common equity ratio is 9.1%, and our Tier 1 ratio is 11.5%. Turning to slide 9, I'll touch briefly on revenue growth. Total revenue was $3.3 billion, an increase of 13% year over year. Ex M&I, revenue was up 8.6%. Net interest income was $1.7 billion, up $121 million or 7.7% year over year, with M&I contributing $69 million of that. Non-interest revenue was $1.6 billion, up $246 million or 18% from a year ago, with M&I contributing $48 million. There was strong growth in BMO Capital Markets, largely due to better trading and M&A revenues. Moving now to the quarter-over-quarter view, revenue increased 1.7%. Net interest income increased $72 million or 4.4%, driven by 3 additional days in the quarter and the impact of M&I. This was partially offset by corporate services, which had a very strong Q2. Non-interest revenue was down 1% from the second quarter, as decreases in corporate and BMO Capital Markets were partially offset by improved revenues in P&C US and Private Client Group. Total Bank net interest margin, excluding trading, was down 13 basis points year over year, reflecting declines in BMO Capital Markets and the impact of lower deposit spreads in a low-rate environment in P&C Canada. These decreases were partially offset by improved net interest margins in P&C US and Private Client Group. Quarter over quarter, total Bank net interest margin excluding trading was down 17 basis points. The decrease was driven mainly by corporate services, which was very strong in Q2. Margins in P&C Canada and P&C US were stable from Q2. The weaker US dollar reduced revenue growth by 2.5% year over year. Moving to slide 10, on an adjusted basis, expenses were up 8% year over year, reflecting higher performance-based compensation, business investments, and acquisitions. Year over year, BMO's expenses increased 3.9%, excluding the impact of the M&I acquisition. On an adjusted basis, operating leverage was 4.9%, and the productivity ratio was 62.2%. We're focused on managing our expenses in a disciplined way in the current environment. Slide 11 provides comments on the M&I acquisition and its impact on results. The acquisition closed on July 5 for consideration of $4 billion, payable in the form of 67 million BMO common shares. M&I contributed adjusted net income of $32 million, a reported net loss of $10 million, and revenue of $117

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million. Preliminary goodwill is $1.8 billion, in line with our initial estimate. I note that the allocation of the purchase price is subject to refinement as we complete the valuation process. The acquisition adds $29 billion to loans after adjusting for future expected credit losses and $34 billion to deposits. Annual cost savings from integration are expected to exceed $300 million. As Bill mentioned, our integration plans are moving forward as planned. Integration and restructuring costs, which are reported in corporate, are expected to approximate $600 million over the next few years. In reporting results, we'll incorporate the components of M&I into the appropriate operating group. The table on the top right shows the contribution by segment this quarter. Corporate will include integration and restructuring costs, any changes in the estimate of future expected losses as provision for credit loss and the amortization of the rate mark on assets and liabilities in net interest income. Slide 12 details capital and risk weighted assets. Our capital ratios are strong, with a common equity ratio of 9.1, and a Tier 1 ratio of 11.5. The acquisition of M&I reduced these ratios in line with expectations. BMO's pro forma Basel III common equity and Tier 1 ratios, 6.6% and 8.8% respectively, position us well for the adoption of Basel III. Moving to slide 15, P&C Canada net income of $432 million increased 2% year over year. Higher revenue driven by volume growth across most products was partially offset by a lower net interest margin, higher expenses, and higher credit losses based on BMO's expected loss methodology. Year over year, net income growth was 4.9% adjusted to reflect provisions on an actual loss basis. Quarter over quarter, net income was up $30 million or 7.9%, driven by volume growth, the impact of 3 more days in the current quarter, and expense management. Net interest margin was stable during the quarter. Year to date, the productivity ratio is at 51.7%. Loan growth was solid, with personal loans up 5.7%, and commercial loans up 4.5% year over year. Moving to slide 17, P&C US net income of $95 million was up $45 million from a year ago, with M&I contributing $27 million of the increase. M&I results here reflect a charge for expected credit losses of $18 million, using BMO's expected loss methodology. Excluding M&I, P&C US net income increased $18 million due to higher net interest margins, increased security gains, and good expense management. During the quarter, approximately $1 billion of impaired real estate secured assets were transferred to corporate to allow our business to focus on ongoing customer relations. The transfer will also help us present a clearer picture of our core business performance. Prior period loans, revenues, and expenses have been restated to reflect the impact of the transfer. In addition, $1.5 billion of similar assets acquired in the M&I acquisition are also managed and recorded in corporate. Turning to slide 18, Private Client Group net income was $120 million, up 14% from a year ago. M&I contributed $4 million to the Q3 net income. The acquisition of Lloyd George that was completed April 28 had a minimal impact on net income. Earnings in the Private Client Group, excluding insurance, were up $30 million or 43% as we continue to see good growth in all of our businesses here. Insurance net income of $19 million was down $15 million from a year ago, due to the effect of unfavorable long-term interest rate movements on policyholder liabilities. Overall, revenue increased 13% from the prior year. Revenue was up 20%, excluding the insurance business, and 12%, excluding acquisitions. Assets under management and administration were up $177 billion year over year, with $153 billion of that from acquisitions. Turning to slide 20, BMO Capital Markets delivered net income of $279 million in the third quarter, up $149 million year over year. Revenue increased 23% from last year as trading revenues were significantly higher, due largely due to more favorable trading environment. M&A fees, securities commissions, and equity underwriting fees were also higher year over year. Quarter-over-quarter net income was up 19%, revenue was relatively unchanged, and expenses decreased by $10 million. Net income for the quarter benefited from a higher recovery of prior-period income taxes. Year-to-date capital markets earnings are $771 million, up 28%, and ROE is almost 23%.

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Lastly, on slide 22, corporate services reported a net loss of $130 million, or $92 million on an adjusted basis. As noted earlier, certain impaired real estate assets were transferred to corporate from P&C US, together with similar assets acquired on the M&I transaction. Revenues were $28 million lower than a year ago, primarily due to the impact of the M&I acquisition, and the less favourable impact from hedging activities, partially offset by a lower group TEB offset. Provision for credit losses was $34 million lower. Expenses were higher, mainly due to costs relating to the M&I integration. The adjusted net loss in Q3 increased from Q2, reflecting a more normalized level of revenue for corporate. Lower revenue versus Q2 reflects the strong results last quarter, which resulted from interest on the settlement of income tax matters and securitization-related revenue, and also the impact of the M&I acquisition. In conclusion, BMO delivered another good quarter of earnings, contributing to strong year-to-date performance, and the balance sheet and capital position remains strong. With that, I'll turn it over to Surjit.

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer Thanks, Tom, and good afternoon. Before I begin, I'd like to draw your attention to the caution regarding forward-looking statements. To begin, I note that we are pleased with our current performance this quarter, with improvements again in both specific provisions and gross impaired loans. I'll spend some time today focusing on M&I, which clearly is a very significant development for BMO. In terms of risk integration of M&I, we are harmonizing risk processes and integrating BMO's strong credit discipline into the business culture. We are progressing well with this integration and embedding our risk framework throughout the M&I organization. Looking now in more detail, I'll start with slide 27, where we provide a breakdown of our loan portfolio. As expected, the geographic mix has changed with the purchase of M&I. 68% of our loans are in Canada, and 28% in the US, a change from 78% and 17% respectively last quarter. P&C consumer represents 64% of the Canadian portfolio, and is 87% secured. Our US portfolio mix is 37% consumer, with 95% of this is secured. The remainder is largely commercial. In this quarter, we transferred $2.4 billion of stressed assets secured by real estate, comprising of $1 billion from Harris, and $1.4 billion, or US$1.5 billion, from M&I to corporate services. It represents about 4% of the US portfolio. This transfer will allow the business to better focus on customer relationships, while at the same time leveraging the M&I experience in managing impaired assets. Turning to slide 28, we provide details on the total US loan portfolio. Our $23 billion consumer portfolio consists of 37% first mortgages and 35% real estate secured credit lines, with the remainder in auto and other consumer loans. The C&I portfolio of approximately $29 billion is well diversified across industries. While primarily in the US Midwest, with the addition of the M&I portfolio we have become more diverse by state. With the acquisition of M&I, our exposure in the commercial real estate sector has increased from US$2.8 billion to US$10 billion. We are currently managing this portfolio with the focus on reducing distressed assets. Slide 29 provides an overview of the M&I purchase portfolio. Over 75% of this portfolio is in the US Midwest, a marketplace we know well from existing operations. The consumer segment represents 30% of the total and is predominantly secured by real estate. The C&I loan portfolio is well diversified across sectors, loan size, and regions, and totals about US$14 billion. The commercial real estate segment is primarily invested on commercial mortgages, with 45% located in Wisconsin. The figures on this slide reflect the fair value of the acquired portfolio, which is adjusted for the credit mark associated with expected future credit losses. We are satisfied that the credit mark of approximately $3.5 billion taken on the loan portfolio outstanding is appropriate and reflects the more comprehensive assessment of the portfolio conducted since our original review. Adding the $1 billion write-down booked at M&I prior to the close validates the mark estimated at the outset of $4.7 billion and affirms the quality of our original due diligence.

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Turning to slide 30, we provide information on gross impaired loans information. The purchase loans are recorded at fair value and, as such, there are no impaired loan formations or gross impaired loans. Formations are $252 million for the quarter, and increased from $147 million last quarter. Canadian formations were $115 million, up from $39 million in the second quarter, with the increase primarily attributable to a small number of large commercial accounts. The US formations were $137 million, versus $108 million in the previous quarter with the largest contribution coming from the commercial real estate and investor owned mortgage sector. Gross impaired loan balances continued to reduce at $2.3 billion, compared to $2.5 billion last quarter. On the next slide, number 31, we provide details of provisions for credit losses. The consolidated specific provision was $174 million, down from $187 million last quarter, and $214 million a year ago. The purchase portfolio has no impact on the provisions. Moving now to the business segment details that are shown in the table to the right. P&C Canada provisions were up slightly in the quarter to $161 million, from $151 million, with both the consumer and commercial portfolios contributing equally. P&C US provisions were down this quarter, in part due to the transfer of real estate secured assets to corporate services mentioned previously. On a consistent basis, including the $19 million of provisions for these assets, the total P&C US provisions were down from $79 million to $70 million. Total US provisions were relatively flat for the quarter, $76 million versus $79 million last quarter. Capital markets provisions were modest at $7 million. Turning to slide 32, we provide a segmentation of the specific provisions by geography and sector. The Canadian provision was $94 million, down from $98 million last quarter, and $110 million a year ago. The credit card and consumer loan segments continue to be the largest drivers of Canadian provisions at 36% and 35% of the total respectively. The US provision was $80 million, a reduction from $90 million last quarter and $104 million a year ago. The retail sector accounts for about two-thirds of the US specific provision. On slide 33, I would note that the Bank's market value exposure rose quarter over quarter from $15 million to $16.7 million, due to increased credit exposures from more active underwriting activity as well as moderately higher interest rate risk. Exposure in the Bank's available for sale portfolios remain relatively unchanged and is largely held in asset swap positions with government securities. In conclusion, while the economic outlook remains uncertain, we are confident in our proven risk management capabilities to manage to an unsettled environment. That concludes my presentation, and we can now move to the Q&A. Q U E S T I O N A N D A N S W E R

Operator Thank you. (Operator Instructions). Our first question is from Mario Mendonca from Canaccord Genuity. Please go ahead.

Mario Mendonca - Canaccord Genuity - Analyst Good afternoon. Maybe two quick questions. This whole issue about a correction in Canadian housing has come up on a few occasions in the past, and it's picking up a little bit of steam right now so Surjit, could you take us through what your views are on what sort of housing price correction, and I don't mean in any individual city, just more broadly, would it take to create a scenario where residential mortgage

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PCLs or consumer loan PCLs in Canada generally move to uncomfortable levels? If you could just give us some sensitivity there.

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer Thank you. You've got to look at the residential mortgage issue more in the context of the structure we have. Between the insurance on higher rate mortgages, and the low loan to value on the uninsured mortgages. That structure allows the real estate prices to fall quite considerably before having a material impact on the financials. To answer your question more specifically, we do conduct a number of stress tests and stressing the price declines in real estate does not have too material an impact because when you look at some of the numbers, we have the loan to value on average is a pretty robust number. It gives you enough of a cushion. The loan to value in the mid-60% gives you the ability to absorb a lot of losses. So I don't know whether that answers your question, but if you're looking for a stress that would cause you to lose a lot of money, given the guaranteed structure, I think that would have to be quite material. Ballpark, I think if you have something like a 30% reduction in prices, your current rate of let's say between 1 or 2 or in some cases 3 basis points could go up to 10, 12 basis points. That's about it. I'm just giving you a ballpark number.

Mario Mendonca - Canaccord Genuity - Analyst That's helpful. My second question more generally is on the expense line. If I look at expenses this quarter, and even if I take out the $53 million or so associated with the integration, I take that expense level and, again, make another adjustment for the $75 million that related to M&I, it looks like expenses on a total Bank basis from one quarter to the next actually declined, which is a little bit surprising, given the 3 fewer days in the previous quarter. Is there anything you can tell us about the expense levels this quarter, BMO standalone, removing M&I for a moment, why would expenses have been so light this quarter?

Tom Flynn - BMO Financial Group - EVP, CFO It's Tom, Mario. I'll respond to that. On page 10, we provided detail on our expenses, and in the chart on the right you see the expenses ex-M&I, which is an attempt to show you a pure core expense level, excluding both the one-time costs associated with M&I and the additional mix that goes with the acquisition. And as you pointed out, the expenses are down about 1% quarter-over-quarter. Up about 3.9% year over year. There isn't anything particularly unique going on here, other than I would say greater attention being paid to managing expenses carefully in an environment that feels like it's going to deliver less revenue growth than we expected. Every quarter there are items that move around but there's nothing really significant this quarter for us.

Mario Mendonca - Canaccord Genuity - Analyst Thank you.

Operator Thank you. Our next question is from John Reucassel from BMO Capital Markets. Please go ahead.

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John Reucassel - BMO Capital Markets - Analyst Thank you. And a question, I think it might be for Surjit. I just want to understand, the last data point we have for M&I's loans was March 31, 2011, about $35.2 billion, and it looks like we're now -- M&I's about $30 billion now. So including the mark, there's about a $4 billion reduction in the loans in the last 4 or 5 months. Could you talk about how much has been sold or attrition, or what's happened there in the loan book in M&I since March 31st?

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer It's a combination of factors. There was some sale. There was a reduction in some of the indirect auto loans of about -- I think about $1 billion or so. There were lower utilizations in some of the clients. And I think between those two major factors, I think that would explain a lot of the reduction and yes, there was some loan sales as well, but not material enough to warrant any comment.

John Reucassel - BMO Capital Markets - Analyst So would the $4 billion reduction, the lower utilization, is that other competitors pricing your customers out there, or are you concerned about that, or how should we look at that decline in the loans?

Tom Flynn - BMO Financial Group - EVP, CFO It's Tom Flynn, John. The biggest reason for the $4 billion is the credit mark, which is, as Surjit said, about $3.5 billion. So that's a big driver. Excluding that, the balance is still down, reflects some lower utilization, some sales, not that significant, but some sales of impaired assets and some reduction in commercial real estate assets generally.

John Reucassel - BMO Capital Markets - Analyst Okay.

Tom Flynn - BMO Financial Group - EVP, CFO Our hope would be that given some seasonality in parts of the portfolio, we'll see a bit of a pickup in the C&I over the balance of the year.

John Reucassel - BMO Capital Markets - Analyst Tom, just for you, two quick questions. The commercial real estate loans that are going to the corporate services, I assume those aren't run-off. Just want to be clear on that. And the expected loss on the M&I was $18 million in the quarter, does that mean on a regular quarter it's $50 million? And that would imply, I guess, on a $30 billion loan book about 70 basis points. Are those numbers right, or are those too high?

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Tom Flynn - BMO Financial Group - EVP, CFO I'll let Surjit speak to the expected loss. The answer to the question about whether or not the real estate that was moved into corporate is on run-off is that it is, the intention is to work it out using our special asset management group and to take that down to 0 over time.

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer On the expected loss, the way we've looked at it is we have taken exactly what we had in the legacy Harris book and adjusted for the business mix and coming up with the expected loss number and as you know the expected loss number is really a performance management tool and so the number you see there is reflective of how we measuring Harris in the past.

John Reucassel - BMO Capital Markets - Analyst The 70 basis point -- my understanding is you were looking at 40 to 50 basis point expected loss on M&I. Maybe that's over time, not right away. It looks like you're running about 70 basis points. Is that right, Surjit?

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer The 70 basis points is the right number you're looking at. The longer term number would be lower than that, so depends on which point in the cycle you're looking at it. The expected loss number varies depending on where you are in the business cycle.

John Reucassel - BMO Capital Markets - Analyst Okay. Thank you, Surjit.

Operator Thank you. Our next question is from Robert Sedran from CIBC. Please go ahead.

Robert Sedran - CIBC World Markets - Analyst Good afternoon, just two questions. The first one is for Frank Techar, actually. There was concern after last quarter about the ongoing margin pressure in fact intensifying margin pressure. So I guess a 1 basis point decline seems like a positive result. Can you talk about whether you were protecting the margin and maybe seeding some share, or whether things settled down a bit for the quarter and perhaps the outlook for the next few, if you can.

Frank Techar - BMO Financial Group - President & CEO, P&C Canada Thanks, Rob. Just a little bit of context before I get to your answer. Going back to 2010, our NIM increased by 13 basis points. And even with the declines we've seen over the last couple of quarters, year-to-date, we're up one basis point over 2010. So even given the competitive pressure and the

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continuing low rate environment, the business continues to perform well and I'd have to say is in much better shape than it was 18 months ago from a business mix perspective. There is no doubt that the outlook on NIM going forward is for continuing pressure, competitive pressure remains and the low rate environment is putting pressure on deposit margin. So in Q3, those 2 pressures, both competition and the low rates that we continue to see, those 2 pressures were offset for us by some positive mix shift. You might have noticed in the quarter that our deposits grew by more than our loans and we did see a little higher growth in our retail and commercial card businesses, which you know are high spread. So we saw some positive mix offsetting to some degree the pressures that we are continuing to see. So my expectation as we go through the next quarter is, more down side risk on margins for the same reasons that we're seeing right now.

Robert Sedran - CIBC World Markets - Analyst That's helpful. Thanks, Frank. Just a second question I guess, both Bill and Tom mentioned that the integration on M&I is moving forward as planned. I guess I would just like a little bit more detail on those plans in terms of seeing the synergies roll into the results, at least $300 million is expected on an annualized basis when you're done. Is it reasonable to assume $150 million in 2012? Is that number high? Low? Should we expect more in 2013 and beyond? Please.

Tom Flynn - BMO Financial Group - EVP, CFO It's Tom. I'll respond to that. The total expectation is for synergies to be in excess of $300 million. We would expect to have all of that on a run rate basis at the end of '13, so not in the reported numbers over the full year but on a run rate at the very end of the year for 2013 on a reported basis, would expect something like 75% and in 2012 in the order of 30%, 35%.

Robert Sedran - CIBC World Markets - Analyst Thank you.

Operator Thank you. Our next question is from Steve Theriault from Bank of America-Merrill Lynch. Please go ahead.

Steve Theriault - BofA Merrill Lynch - Analyst Thanks very much. First question for Frank Techar, please. Frank, there was a large credit card deal announced last week, and I think it's fair to say there was a belief that BMO might have been interested in those receivables. Maybe you can update us on your card strategy and provide your perspective on why that business would or would not have been a good fit for BMO.

Frank Techar - BMO Financial Group - President & CEO, P&C Canada Thanks, Steve. I won't comment specifically on the deal, but I will make a couple of comments about our business. Both the personal and commercial card businesses are important products for us and will continue to be important products in the future and our strategy's pretty simple in those segments. We're focusing on opportunities to leverage our core customers and build core customers where we have the

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opportunity to build strong share of wallet. And our focus is to promote our cards as payment products, not credit products, and I think over time you've seen at least with the MasterCard acceptance brand, we've had the strongest net retail sales by far in the segment, and our objective would be to continue that. And I think you've also seen that we've managed our losses near the low end of our Canadian peers, and we've been leading the industry with lowest losses for many years. So we're focused on net retail sales and we're focused on continuing to manage a high quality portfolio with the ability to grow the business with our core customers. So that's going to be our focus, going forward. I think you saw us execute against that strategy when we made the Diner's acquisition. We're very confident that acquisition is going to continue to bear fruit as it has from the time we've closed, and now in particular, with the M&I acquisition in the US, we have a larger commercial customer base to sell those products to. So that's going to be the focus in the segment for us, and we'll look at opportunities as they come up.

Steve Theriault - BofA Merrill Lynch - Analyst Another one, if I might. Interest rates have clearly been falling, but I haven't seen any reduction in posted mortgage rates, so maybe a follow-up to Rob's question. Could we see any signs of margin tailwinds in Q4, if rates remain at current levels, or is that benefit likely to be competed away in your view, Frank?

Frank Techar - BMO Financial Group - President & CEO, P&C Canada I'd stick with the comment I made a bit earlier in that I think there's more down side risk in Q4 and Q1 than there is upside, for sure.

Steve Theriault - BofA Merrill Lynch - Analyst One last one if I might for Mark Furlong. You indicate somewhere in the MD&A where you talk about US$40 million pretax impact from the new interchange rules in US P&C. So can you talk to us a bit about how much of a mitigation impact you're expecting and also what sorts of strategies are you expecting to implement and what does the timing look like for that?

Mark Furlong - BMO Financial Group - President & CEO, BMO Harris Bank, N.A. Good afternoon. The mitigation right now is just a few $1 million dollars, so there's still more work underway, but it's right around that number. So we still have progress to make on that.

Steve Theriault - BofA Merrill Lynch - Analyst Are there changes to the fee structure coming down the pipe any time soon or that's something you're ready to talk about today?

Mark Furlong - BMO Financial Group - President & CEO, BMO Harris Bank, N.A. There will be. Some of the things like debit rewards will go away. You've seen all the major banks take that away. It’s a variety of things like that all have two or three million each. None were stand-out differentiators on their own. They're all little pieces like that.

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Steve Theriault - BofA Merrill Lynch - Analyst Thanks very much.

Operator Thank you. Our next question is from Andre Hardy from RBC Capital Markets. Please go ahead.

Andre-Philippe Hardy - RBC Capital Markets - Analyst Thank you. One for Tom Milroy, and one for Tom Flynn, so for Tom Milroy, it would be real helpful if you could elaborate on Bill Downe's comment that capital markets revenues will be more subdued near-term, and Tom Flynn, with organic revenue growth potentially slower in the next few quarters and perhaps longer, can you help us understand how much flexibility you have on expenses, i.e., under what types of revenue growth scenarios you should be able to get positive operating leverage, and under what type of scenarios would it become more difficult.

Tom Milroy - BMO Financial Group - CEO, BMO Capital Markets Okay, Andre, it's Tom Milroy. Maybe I will kick that off first. First of all, I think you've seen we had a quarter that was pretty consistent with what we had done in Q2 and the bottom line benefited from a tax recovery and some lower expenses. But when we look forward, obviously, we're not oblivious to all of the stresses that have come from the recent extreme volatility in the markets, and when you look at that, there's obviously some negatives. That volatility, negative to some of the positions that we would be carrying, also importantly sends clients to the sidelines. So that's going to have some pressure. But if we get back to a place where we get some sense of economic growth and confidence back in the markets that we're operating, I think we'll see opportunities. If volatility comes down from the extreme levels but remains elevated, that's actually good across a bunch of our different businesses, we should see better spreads and better trading opportunities and with confidence back in the market, we should see some of the transactions and business that we have in our pipelines actually get done. So we're right now, I imagine like you are, watching closely, and looking for signs of some return to normalcy after August ends, and we get into the second month.

Andre-Philippe Hardy - RBC Capital Markets - Analyst Are you willing to share with us just how bad August was or you'll hold off until the next call?

Tom Milroy - BMO Financial Group - CEO, BMO Capital Markets Yes, I think like everyone else, there's been some pressure but we'll talk to you about that in 3 months' time.

Tom Flynn - BMO Financial Group - EVP, CFO Andre, it's Tom Flynn. On your question, it's hard to be specific about the level of revenue growth that would result in a given level of operating leverage or positive operating leverage, but what I can tell you is that we recognize that there is currently caution around the growth outlook. We are looking to manage

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expenses in a more disciplined way as a result. At the same time, as we've talked about for the last few years, we do want to invest in the business in areas and are continuing to do that, although the bar is higher on those investments. Just to give you a few numbers, in P&C Canada this quarter the revenue growth was about 3% and the expense growth was about 3%. The rounding gave a negative operating leverage of 0.5%. But that shows a pretty tight relationship of expenses to revenues. Next quarter in P&C Canada, just given what we see coming down the pipe from a project perspective, operating leverage is likely to be somewhat negative but the bigger message I think is that there needs to be an appropriate relationship between revenue and expense growth and we're focused on that.

Andre-Philippe Hardy - RBC Capital Markets - Analyst Thank you.

Operator Thank you. Our next question is from Peter Routledge from National Bank Financial. Please go ahead.

Peter Routledge - National Bank Financial - Analyst Just a follow-up from Andre's question for Tom Milroy on trading revenues. Tom, I looked at, about 1 year ago, the earnings transcript, you explained the dip in trading revenues at that time as tied to some negative marks on non-core legacy positions and the rationale was they went up to prior quarter and they came back down in the third quarter of 2010. So if I look at slide 33 on the daily trading revenues, you see some pretty significant gains at the end of each month, May, June, July. So I guess the first question would be, are we seeing a bit of a replay of some positive marks in the last quarter on those legacy positions? And then I guess the second part of the question would be how much spread narrowing, in terms of BMO's credit spread versus counter-parties, how much of a tail-wind was that to this quarter's trading revenues.

Tom Milroy - BMO Financial Group - CEO, BMO Capital Markets I think when you look at that slide, what you're really seeing there, is the impact by and large of credit valuation adjustments on top of what would be the normal trading activity. So I wouldn't read a lot into that. When we look forward to the impact of the first couple of weeks of August, one of the things that happened across the industry was that the marks that we use for credit valuation adjustments gapped out, and so that will have an impact. Those are marks that can come back to you over time, and so part of the reason that I wasn't prepared to get into a sense of where we are and where we're going to be at the end of the quarter is simply 2 weeks don't a quarter make, and we've seen and had other situations where you get off to a rough start for one reason or another and then as the business comes back, we had the opportunity to continue to perform and end up if not where we want to be, at least better than it might look from in the point in time.

Peter Routledge - National Bank Financial - Analyst The CDA adjustments were general across the portfolio, weren't necessarily related just to the legacy positions?

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Tom Milroy - BMO Financial Group - CEO, BMO Capital Markets No, I would say they were related as much to our active positions.

Peter Routledge - National Bank Financial - Analyst Okay. And then just a question on the rise in formations. Consumer credit in Canada looked to deteriorate, at least based on rising formations. Is that an early warning signal for weakening in the household sector generally? And secondly, the other explanation for the rise in formations was commercial real estate in the US. Is there any reason to think your marks on your CRE loans might be too low, if you had a real stress in the US CRE markets?

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer Let me start with the P&C Canada comment you made on consumer. I think when you're looking at the formations, the variation is not so much from consumer as it was from the large commercial portfolios that we have. Last quarter, we had hardly anything coming from the large end of the commercial portfolio, and anything from that sector generally is lumpy. So we've seen some larger accounts coming into the formation numbers from commercial. So isn't as much consumer. And I think from a stress standpoint, I think we do understand that a strong Canadian dollar will have some impact on those formations for industries that do depend on exports or where the prices align with the US dollar. And so I think that's more the reason for the increase in commercial from the formations in Canada. With respect to your comment on real estate in the US, we are very satisfied that the mark at this point in time is very appropriate now.

Peter Routledge - National Bank Financial - Analyst Fair to call it conservative?

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer I would characterize it somewhat conservative, yes.

Peter Routledge - National Bank Financial - Analyst Okay.

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer And of course, you never know. The market is down quite considerably in the US already and as I said, it's probably bobbing at the bottom and unless something catastrophic happens and the market comes down much more than it has, we'll be very comfortable with that mark.

Peter Routledge - National Bank Financial - Analyst Thank you.

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Operator Thank you. Our next question is from John Aiken from Barclays Capital. Please go ahead.

John Aiken - Barclays Capital - Analyst Good afternoon. On the US side of the operations, you're actually quite deposit-rich. Is there any indications that in the immediate term or near term you might be able to comfortably deploy those deposits on a risk-adjusted basis or are we looking for growth in the US operations largely to come from the synergies expected from the M&I transaction?

Mark Furlong - BMO Financial Group - President & CEO, BMO Harris Bank, N.A. This is Mark Furlong. To think through the excess liquidity there, I think if you look at the loan portfolio, you'd say in the near term, consumer loans probably decline in the construction and commercial real estate probably decline, so that's not going to be a use for it. At this point both the former Harris and the former M&I, C&I line utilization a little below 50% former Harris, a little be above 50%, former M&I. Both are down now. There's some seasonality in those numbers. We have a pretty good size auto dealer portfolio and this is the ramp-down period of time where you sell the 2011 models. 2 or 3 months from now the lots begin to fill up with 2012s, so you'll see line utilization increase. Most can have pretty big swings from as much as 25% or 30% utilization to 75% or 80%. On the AG side, another big portfolio as you empty grain out of terminals, and start to look at empty terminals that fill up in the fall, again we'll have utilization there. Could swing as much as 0% to 10% utilization all the way up to 80% to 90%. I think that as we look at loan growth, we think it's probably in the all-in portfolio probably later into 2012. There will be some aspects of the portfolio that will show some increase, just the normal seasonal stuff that occurs in the fall. Another piece I'd tell you in there is that the former Harris portfolio and the C&I side has had some nice increase, and a lot of that came in the third quarter, the third fiscal quarter, and that really is due to really a Harris team that kept their eye on the ball despite all the work that was going on in the integration and had some nice growth in this portfolio and is really across several sectors, including, on the dealer side, actually growing the auto dealer business. Looking across diversified and looking across other segments, they had some growth so I think there's a chance we can use some of that liquidity over the course of the loan growth. It's just probably going to take a couple quarters.

John Aiken - Barclays Capital - Analyst Great. Thanks for the color, Mark.

Operator Thank you. Our next question is from Michael Goldberg from Desjardins Securities. Please go ahead.

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Michael Goldberg - Desjardins Securities - Analyst Thank you. First, maybe just kind of big picture. What comfort can you give us about liquidity of European banks? What are you doing to protect yourself? And what's BMO exposure on balance sheet and derivative?

Bill Downe - BMO Financial Group - President, CEO Michael, that was a multiple part question and Surjit is making a small adjustment to the paper in front of him so he can give you a complete answer.

Surjit Rajpal - BMO Financial Group - EVP, Chief Risk Officer Yes, let me start out by telling you that we've been looking at Europe for the past several months and our direct exposure to the European banks that are under stress are very, very miniscule. That's how I would characterize it. So when you look at it from any credit risk that we've taken on the European banks, it's nominal. To the extent there is some, it's largely in very short-dated trade finance. Cumulatively, it's a very, very small number, I'm talking about, if I look at the stressed European banks, it would add up to less than $300 million. I'm approximating over here, but it would be that small a number. With respect to the European exposures in our off-balance sheet structured vehicles, again, that's very small. For example, in the case of our Links and Parkland, the only exposure we have there is a small exposure to government guaranteed Irish bank senior debt and there's really no exposure to the other stressed countries at all. So Apex again, there's a very small piece, fractions of percentages in countries which are in the Europe periphery and so again, not material. In our trading books, there is exposure to European countries but it is largely AAA-rated and those that are not rated, the securities are under $200 million to European countries, so it's a very small number. We have been working on this for a while so we feel very comfortable with the exposure on that front. Tom, do you have anything to add to that from a trading perspective?

Tom Milroy - BMO Financial Group - CEO, BMO Capital Markets The only thing I would add is our counter-party exposure to the PIGS countries is very low and the European exposure outside of those countries are in the most cases collateralized under CSAs with low or no thresholds so we feel pretty comfortable with where we are.

Michael Goldberg - Desjardins Securities - Analyst Thank you, I just wonder if it's fair to synthesize the comments made by Bill initially about expecting capital markets contribution to moderate and then the comment about the credit valuation adjustments that contributed to trading in the third quarter, should we take this together as looking like you're probably not going to match the $269 million of trading revenue if things continue as they are in the fourth quarter?

Bill Downe - BMO Financial Group - President, CEO Michael, since it was my comment that gave rise to your question, I think it's very early in the quarter. As you look across the history of trading revenues in every quarter, the variability is quite high and we're not

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complete 1 month yet. So I think it's way premature to try to call a quarter and I don't think we would presume to do that.

Michael Goldberg - Desjardins Securities - Analyst Okay. Thank you very much.

Operator Thank you. Our next question is from Cheryl Pate from Morgan Stanley. Please go ahead.

Cheryl Pate - Morgan Stanley - Analyst Hi. Good afternoon. Just a quick question for Mark Furlong on the net interest margin in the US P&C business. If we strip out the contribution from M&I during this quarter, looks like the legacy Harris portfolio's up 6 basis points sequential quarter. I'm just wondering if any color you can give on the driver there. I would assume more coming from growth on the deposit side, given some industry pressures on the C&I and auto lending portfolios, but if there's anything else you can give in terms of sort of yield or margins on the lending side, that maybe positively contributing there as well and as well, the outlook for the margin over the next couple of quarters.

Mark Furlong - BMO Financial Group - President & CEO, BMO Harris Bank, N.A. Actually, you answered the question pretty well. I'll just add one piece to it. Deposit growth is pretty good. Occurred a little more on commercial side than personal side. Another piece that's occurred is the wind down of low-spread loans that have continued to move off the balance sheet with a concerted effort. So that has been kind of a positive factor as well too. So a really good mix of deposits in the franchise at the former Harris franchise. Looking forward, as we continue to wind down some of the commercial real estate and construction that would be lower spread, lower all-in spread in some cases, that would be a positive to margin. However, really when you look at as you said the competitive pressures in the market, flat to slightly down would be more of the pressure you'd probably see on the margin going forward. The M&I margin's a little bit lower than the Harris margin, as you put the franchise together, a lot of it has to do with deposit mix so that will also weight down the margin a little bit between the 2 organizations, In the former Harris franchise, about $3 billion more of DD&A, the former M&I franchise had about $2 billion of money market, $1 billion more of time so that will weight it down a little too. All in all, there are competitive pressures out there, the spreads are holding up okay at this point in time.

Cheryl Pate - Morgan Stanley - Analyst Great, thanks.

Operator Thank you. Our last question is from Brad Smith from Stonecap Securities. Please go ahead.

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Brad Smith - Stonecap Securities Inc. - Analyst Thanks very much. My questions relate more to the capital position of the Bank at the end. I believe Bill, at the beginning, you mentioned that M&I had contributed $45 billion I think you said to the risk weighted assets. I note that the risk weighted assets themselves are up 33%, 34% or $53 billion. I'm trying to reconcile that $45 billion number with first off, the $35 billion that the banking entity M&I reported at June 30, and that was $35 billion. And then at the original acquisition date, it looked more like the expectation was that it would add $30 billion. So it seems to be a rather large increase. I was just wondering if there was something that's changed there that you could provide some color on.

Tom Flynn - BMO Financial Group - EVP, CFO It's Tom Flynn, Brad. A few things. The RWA number came in pretty much in line with the expectation that we had at the time that we announced the deal. So no big change there. The difference between the loan portfolio and the RWA number reflects a few things, including a higher risk weighting on the lower rated loans that come from M&I. So the parts of the portfolio that are lower rated are risk weighted in the standardized approach at 150%, so there's a meaningful gross-up from the base loan level that results from that. And there are also RWA associated with the other assets that come from the M&I business and an increase in operational risk, just picking up the revenue that comes from the business. So overall, in line with what we expected and I think the biggest driver of the difference between the reported balance sheet and the RWA number would be the higher risk weighting for the lower-quality assets.

Brad Smith - Stonecap Securities Inc. - Analyst So, to be clear, then, if the risk weighted amount at the end of October was expected to be $30 billion, Tom, and M&I was reporting $40 billion of risk weighted assets, it was sort of an implied $10 billion sort of saving coming out of that, and now we're $15 billion the other way. It still seems to be a very large swing factor relative to where you say expectations were. I think in your original presentation, you said 170 basis point contraction, assuming an $800 million equity raise, which I believe is now zero. And the contraction was 230 basis points just quarter to quarter what we saw here.

Tom Flynn - BMO Financial Group - EVP, CFO Your $30 billion number is not right. I'm not sure where you're getting it. That's not the right number. The big driver of the increase is the one that I mentioned, related to the risk weighting of the lower risk-weighted assets.

Brad Smith - Stonecap Securities Inc. - Analyst Then one just follow-up question. In the, again, dealing with the capital, the exposure at default in the Bank line on page 23 is I believe $55 billion. That's up about $9 billion quarter to quarter, and yet there really is no material change in the risk assets opposite that. Can you just talk to that? What would cause that large a change in the EAD with no corresponding change in the risk weighted assets?

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Tom Flynn - BMO Financial Group - EVP, CFO It's Tom, Brad. We'll confirm this to get back to you but I'm pretty sure that's repo activity with bank counter-parties that give rise to the growth exposure, but a low RWA.

Brad Smith - Stonecap Securities Inc. - Analyst The bulk of that was attracting RWA is somehow different than what happened this quarter?

Tom Flynn - BMO Financial Group - EVP, CFO Correct.

Brad Smith - Stonecap Securities Inc. - Analyst Thank you.

Operator Thank you. There are no further questions registered at this time. I would like to turn the meeting back over to Ms. Lazaris.

Viki Lazaris - BMO Financial Group - SVP IR Thanks very much for joining us today and we'll take any further questions you have down in the Investor Relations office. Thanks and have a great day.

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