The multinational parent of a $263-billion-AUM asset manager is making cuts. Yet investment management capabilities and distribution are still key priorities for the publicly traded firm.

Kristi Lynn Mitchem BMO Global Asset Management CEO

The team at BMO released their fiscal Q4 2019 earnings on Tuesday. (The bank's fiscal Q4 and fiscal 2019 year concluded on October 31, 2019.) BMO has a wealth management branch that includes BMO Global Asset Management (BMO GAM).

On their earnings call, chief executive officer Darryl White stated that "In Wealth Management, we have clear momentum in key businesses that positions us for enhanced profitability going forward. In our Unified Private Wealth business, we grew our client base and deepened relationships, delivering record levels of net new assets and in our full service brokerage, strong loan and deposit growth in Private Banking and significant gains in client loyalty."

The BMO team also indicated plans to cut five percent of the bank's global workforce. It was not mentioned where these cuts would take place, but more than 2,000 jobs would be affected.

White says on the call, "Our financial objectives remain unchanged. Our goals over the medium-term are to achieve average earnings per share growth of 7% to 10%, return on equity of 15% or more and in an annual net operating leverage of 2%. While some of these targets may be more challenging in the current environment we remain committed to them in the longer term."

According to BMO's earnings release, Q4 2019's net income of C$1.194 billion (US $904.57 million) was down 30 percent year-on-year from Q4 2018. This is in part due to restructuring. BMO Wealth Management reported net income was at C$267 million (US $202.28 million), an increase of C$48 million (US $36.36 million), or 22 percent year on year, and adjusted net income was C$301 million (US $228.04 million), an increase of C$72 million (US $54.55 million) or 31 percent year on year.

In BMO's Management’s Discussion and Analysis, the BMO team notes that a key priority in the wealth management segment is to "build on our leadership position in key asset management markets through enhanced investment and distribution capabilities." It is noted that BMO GAM accounts for 29 percent of Wealth Management's total net revenues. (The total revenue for BMO Wealth Management was C$7.662 billion (US $5.80473 billion), while revenue net of CCPB was at C$4.953 billion (US $3.75239 billion), so that 29 percent could translate BMO GAM's net revenue into USD$1.088 billion.) The BMO team also reveals that the wealth management unit's AUM increased $32.9 billion or 8 percent from the prior year to $471.2 billion, and AUA increased $10.7 billion or 3 percent from the prior year to $393.6 billion.

Overall, BMO beats Q4 non-GAAP EPS expectations of C$2.43 (USD $1.84) by C$0.02, (US $0.015) misses Q4 GAAP EPS expectations of C$1.78 (US $1.35) by C$0.60 (US $0.45), and beats revenue expectations of C$6.09 billion (US $4.61 billion) (+3.4% year-on-year) by C$230 million (US $174.25 million).

BMO GAM has more than 1,200 employees and more than 20 offices, and as of July 31 the unit had US $263 billion in AUM. 

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