BMO Financial Group is focusing more sharply on customer service and growth in its core businesses, said president and CEO Bill Downe at Scotia Capital’s Financials Summit 2007 conference on Tuesday.

BMO’s Canadian personal and commercial banking business posted record earnings of $350 million in the third quarter, up 14% over a year ago, excluding the IPO gain related to MasterCard International and tax recoveries. Cash productivity was 53.3% — also a record. Year-over-year, revenue in commercial banking grew almost 7%, loans grew 7.7%, and deposits grew 9.6% as share increased strongly for the second quarter in a row, rising 56 basis points year-over-year.

Downe noted that BMO’s emphasis on branch-originated sales is paying-off in its cards business, where core revenues grew 13% year-over-year. Year to date, BMO has seen new cardholders rise by 40% and the number of applications coming from the branches has increased by 118%. Downe said BMO is looking for the best way to distribute other products through its branches. “In our mortgage business, we exited the broker channel, which has low spread and fewer cross-sell opportunities. We are hiring more mortgage specialists. We expect to increase volumes and regain lost share – but with a much higher margin.”

Commenting on the major management renewal of BMO’s Canadian retail banking arm, Downe said: “The new executive team has considerable line experience, and throughout the organization, managers are closer to the customers, and decision-making is closer to the front line. More than a third of the 28 district heads are new appointments.”

As for the performance of the Private Client Group, Downe stated, “The Private Client Group is delivering outstanding results. PCG’s efficiency is top decile, with a cash productivity ratio of 68.4%.”

BMO Capital Markets reported net income of $196 million in the third quarter. “Excluding the impact of the commodities losses, these are exceptional results,” Downe said. Adjusted for those losses, earnings grew 45% from a year ago to $293 million.

BMO’s U.S. personal and commercial arm, Chicago-based Harris Bank, has averaging acquisition integration expenses of between $4 million and $6 million for the past three quarters; but without those expenses, Q1, Q2, and Q3 of this year generated consecutive growth in earnings — up 19% from Q4, 2006.

“We have a very strong franchise here with an enviable network of high quality locations, strong customer satisfaction and loyalty scores, and a breadth of service beyond the reach of smaller competitors. We see real opportunity in business banking. We can gain real leverage as we add more branches to our network,” Downe noted.

In referring to comments by U.S. Federal Reserve Chairman Ben Bernanke, who stated in a recent speech that delinquency rates for sub-prime mortgages with adjustable rates rose to about 13.5% in June, Downe stressed, “Harris does not originate sub-prime and has very little direct retail exposure with sub-prime characteristics. Harris’s overall delinquency rate was 0.4% in June.”