Bank Of Montreal · TSX:BMO
Bank Of Montreal — Investor Day (September 2020)
34 slides from Bank Of Montreal's investor day presentation, Sep 30, 2020
Slide 1: Investor Event
Investor Event September 30, 2020
Slide 2: Forward looking statements & non-GAAP measures
Forward looking statements & non-GAAP measures Caution Regarding Forward-Looking Statements Bank of Montreal’s public communications often include written or oral forward-looking statements. Statements of this type may be included in this presentation, and may be included in other filings with Canad
Slide 3: Opening Comments
Opening Comments Darryl White | Chief Executive Officer
Slide 4: Strong, diversified, fully integrated North American Commercial Bank
Strong, diversified, fully integrated North American Commercial Bank Leader in commercial banking in Canada and the U.S. • Top 101 commercial lender in North America Revenue ($B) Diversified growth driven by 22.8 • Quality and reputation of the business 18.1 6.6 • Experienced bankers with deep indus
Slide 5: North American Commercial Banking
North American Commercial Banking Dave Casper | Chief Executive Officer, BMO Financial Corp. and Group Head, North American Commercial Banking Christine Cooper | Head, Canadian Commercial Banking Nadim Hirji | Head, Canadian Commercial Banking Dan Clark | Head, North American Transportation Finance
Slide 6: Strong North American Commercial franchise
Strong North American Commercial franchise Top 10 Commercial lender in North America1 with Diverse North American footprint an integrated platform and broad-based capabilities Top tier market position in our flagship markets, #2 in Canada2, #1 in Wisconsin, #2 in Chicago National specialty businesse
Slide 7: Leading franchise executing on a consistent strategy
Leading franchise executing on a consistent strategy M&I acquisition Transportation Finance ($13B loans) acquisition ($11B loans) 2010 2015 2019 2020 Q3 YTD CAGR1 6.6 4.4 5.2 Revenues1 ($B) 2.8 10% Revenue contribution to BMOFG 23% 24% 29% 30% Deposits ($B) $42 $86 $112 $142 13% Loans ($B) $50 $105
Slide 8: Canadian Commercial: Proven results, continued momentum
Canadian Commercial: Proven results, continued momentum Local presence with leading market position1, National market and diverse sector coverage #2 in national lending share; #1 in BC & Atlantic; #2 in Quebec & Prairies Diversified business with 13 specialty businesses, BEST providing deep expertis
Slide 9: Technology & Innovation: Integrated North American vertical
Technology & Innovation: Integrated North American vertical Launched April 2019, integrated North American Delivering solutions across full life-cycle Technology & Innovation vertical Unified and dedicated coverage team across Commercial Banking, Capital Markets and Wealth Management Mature Strong s
Slide 10: Transportation Finance: Sustain our market leadership
Transportation Finance: Sustain our market leadership Top tier market position with a sizable coverage Steady improvement in freight demand across North American footprint Deep sector expertise, leading financier to Truck – Freight Recovery Index commercial truck and trailer segment 200 45+ years in
Slide 11: U.S. Commercial: Positioned to selectively grow market share
U.S. Commercial: Positioned to selectively grow market share Local presence in 11 of the top 50 U.S. MSAs; Geographic coverage #11 in WI and #21 in Chicago 13 national specialty businesses, providing deep sector expertise that our clients value ~12K clients, reflecting diverse client base across U.S
Slide 12: U.S. Commercial: Growth is driven by strategic choices
U.S. Commercial: Growth is driven by strategic choices Organic Growth Acquisition Growth Investment Grade +$36.7B +$21B 46% of total portfolio 70.4 21.0 7.2 3.0 6.5 10.0 10.0 12.7 Institutional & Investment Diversified Asset Backed Grade Commercial Sponsor Organic Businesses2 Businesses3 Real Estate
Slide 13: U.S. Commercial growth market: Dallas-Ft. Worth (DFW)
U.S. Commercial growth market: Dallas-Ft. Worth (DFW) Established Commercial presence in 2016, in Significant opportunity parallel with BMO Transportation Finance acquisition Strong presence in North Texas with over 250 Commercial employees, and 8 specialty businesses BMO presence Organic client acq
Slide 14: North American Commercial Banking
Capabilities Local presence Industry expertise Broad product suite (lending, payment & North Talent liquidity services) Customer Tenured bankers Experience American Deep industry expertise Locally connected Competitive Industry-leading loyalty Customer referrals Commercial Advice driven advantages B
Slide 15: Risk
Risk Pat Cronin | Chief Risk Officer Mike Wood | Head, U.S. Corporate and Commercial Credit Dean Anastas | Head, Corporate and Commercial Credit, Canada and International Jim Gallagher | Head, Special Accounts Management Unit (SAMU)
Slide 16: Long track record of excellence in credit risk management
Long track record of excellence in credit risk management Strong risk culture with Proactive risk Long history in clear and consistent risk Stable credit quality management during commercial lending appetite COVID times • Harmonized North/South • Cornerstone of growth for the • Maintained credit qua
Slide 17: Disciplined and integrated approach to risk management
Disciplined and integrated approach to risk management PCL on Impaired Loans as a % of Average Net Loans & Acceptances 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.52% Cdn Peers Historical Avg. (1990-2019) 0.38% BMO Historical Avg. (1990-2019) 0.60% 0.39% Cdn Peers Avg. 0.40% 0.38% BMO 0.20% 0.00% '20 '20Q
Slide 18: Risk culture: A defining characteristic of BMO
Risk culture: A defining characteristic of BMO Clear, consistent Personal and harmonized accountability wholesale for credit lending-based decisions risk appetite Seasoned risk Risk teams managers with embedded business and risk across the expertise footprint *Shaded areas on map denote location of
Slide 19: Credit origination
Credit origination 1st and 2nd Line establish clear policies, standards and financing guidelines 1ST LINE • Documents risk appetite for Origination & pre-screening products, industries and sectors by the business 2ND LINE • Sets underwriting parameters, New transactions are pre- Continues to Commerc
Slide 20: Ongoing credit monitoring
Ongoing credit monitoring Robust controls and monitoring in place at the enterprise, • Enterprise framework for managing diversification, by single portfolio/segment, and name, industry, product, portfolio and geography transaction levels Enterprise • Enterprise wide stress testing • Underwriting pa
Slide 21: Special Accounts Management Unit (SAMU)
Special Accounts Management Unit (SAMU) SAMU is a specialized group within risk management that manages underperforming commercial & corporate loans >$1MM Proactive and early management leads to higher repatriations and Mandate How it’s done COVID response lower loss rates Help underperforming Dedic
Slide 22: Long history of commitment in commercial lending
Long history of commitment in commercial lending Commercial lending is an important growth engine for While Business & Government PCL tends to increase more quickly in BMO times of stress, long-term loss rates are lower than consumer • U.S. Commercial (53% of loans) • Canadian Commercial (47% of loa
Slide 23: Business and Government overview
Business and Government overview Focused growth over last 5 years relatively consistent Business & Government Loan Growth1 with peer average 300 $CAD Billions 250 5-year Diversification is a key ingredient to portfolio growth CAGR2 200 Year-to-date growth in F2020 has moderated in line 150 11.6% wit
Slide 24: Commercial portfolio overview
Commercial portfolio overview Well diversified between Canada and U.S. and within Commercial Loan Growth1 the two countries 200 $CAD Billions Canadian Commercial U.S. Commercial Diversified by industry sector, product type and without 150 47% 47% any significant single name concentrations 47% 45% 47
Slide 25: Commercial risk metrics
Commercial risk metrics New borrowers risk profile is stronger than the existing No Change in Risk Appetite: WAPD1 (Portfolio vs. New) total portfolio 0.89% 0.88% 0.85% 0.83% Consistent credit quality over time, including consistent 0.77% 0.79% 0.78% 0.79% Portfolio watch and impaired balances throu
Slide 26: Commercial loan growth has not impacted credit quality
Commercial loan growth has not impacted credit quality New borrowers from F2018 and F2019 have not Commercial Impaired Balances – New vs. Existing materially contributed to the increase in impaired balances or PCL 96% 92% 4% 8% Q4 F2019 Q3 F2020 PCL has grown in recent quarters, with stress in Comme
Slide 27: Stress testing is fundamental to our risk management approach
Stress testing is fundamental to our risk management approach Portfolio Stress Testing Commercial Real Estate 3 Year Loss Rates Run individual portfolios through broad range of tail and more likely scenarios to: Scenario Probability • Ensure Risk-Return is appropriate Q3 F2020 COVID-related 1 ~ 10%
Slide 28: Commercial lending has low loss rate on formations
Commercial lending has low loss rate on formations Well structured and highly secured portfolio Commercial Impaired PCL / Impaired Formations contributing to a manageable loss rate of ~30% over the last three years • >80% of the total portfolio secured or government guaranteed1 60% 30% manageable 50
Slide 29: Payment deferrals
Payment deferrals 13% of commercial portfolio has received payment Canadian Commercial Payment Deferrals1 relief since the start of the pandemic with only 5% % of portfolio outstandings still on deferral 19.2% ~90% of active relief is set to expire by October 2020 10.8% Less than 10% of expired reli
Slide 30: Industries of heightened focus
Industries of heightened focus Industries of heightened focus Commercial Lending Portfolio: Industries of heightened focus represent 10% of the commercial $19B of $190B Commercial lending portfolio portfolio 3% - Retail trade (excl. Food & Bev and Auto) 2% - Hotels Other Industries of Industries, He
Slide 31: Key takeaways
Key takeaways 1 Commercial credit risk 2 Recent loan growth has This is a result of: profile within risk not disproportionately Strong risk culture appetite and consistent impacted credit quality, Robust credit process with expectations impairments, or PCL SAMU team excellence Portfolio diversificat
Slide 32: Closing Remarks
Closing Remarks Tom Flynn | Chief Financial Officer
Slide 33: Key takeaways
Key takeaways North American Strong risk culture Proven Commercial Banking and consistent strategy strength risk appetite over time • Unparalleled expertise and • Disciplined and integrated risk • Resilient earnings power industry knowledge management • Strong balance sheet and capital • Good profit
Slide 34: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations Email: investor.relations@bmo.com