Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q2 2017 Earnings Presentation
41 slides from Bank Of Montreal's earnings presentation, July 2017
Slide 1: Investor Presentation Q2 17
Investor Presentation July 2017 Q2 17 Investor Presentation Q2 2017 1
Slide 2: Forward looking statements & non-GAAP measures
Forward looking statements & non-GAAP measures Caution Regarding Forward-Looking Statements We caution that the foregoing list is not exhaustive of all possible factors. Other factors and Bank of Montreal’s public communications often include written or oral forward-looking risks could adversely aff
Slide 3: BMO Financial Group: Who we are
BMO Financial Group 8th largest bank in North America1 with an attractive and diversified business mix Who we are Q2 2017 Results * Adjusted2 Reported Net Revenue ($B)3 5.0 5.0 • Established in 1817, Canada’s first bank Net Income ($B) 1.3 1.25 • In Canada: a full service, universal bank across EPS
Slide 4: Reasons to Invest
Reasons to Invest • Strong, diversified businesses that continue to • Well-capitalized with an attractive dividend yield deliver robust earnings growth and long-term value for shareholders: • Committed to customer experience, measured through a disciplined loyalty program – Large North American comm
Slide 5: Our priorities are clear
Our priorities are clear Our strategic framework outlines the basic principles that sustain our growth Our Strategic Priorities Sustainability Principles The clearly defined statements of purpose that guide the The guidelines we follow as a responsibly managed bank consider bank’s long-term decision
Slide 6: BMO's Strategic Footprint
BMO’s Strategic Footprint Our three operating groups serve individuals, businesses, governments and corporate customers across Canada and the United States with a focus in key U.S. Midwest states. Our significant presence in North America is bolstered by operations in select global markets in Europe
Slide 7: Diversified by businesses, customer segments and geographies
Diversified by businesses, customer segments and geographies Adjusted Net Income by Canadian P&C Operating Group – LTM1,2 • Full range of financial products and services to eight million customers • Over 900 branches and nearly 3,300 ABMs • Strong commercial banking business, as evidenced by BMO’s n
Slide 8: A more personal bank for a digital world
A more personal bank for a digital world In every area of our business, customers are benefiting from the enhanced capabilities of our technology platform Integration of 1,400 applications across the bank through a Renewed Underlying Architecture sophisticated connector grid. Allows us to introduce
Slide 9: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Dividends Declared ($ per share) 15-year CAGR +8% • Quarterly dividend of $0.90 per share, up 5% Y/Y • Dividend yield of 3.8%1 3.60 1 • BMO has the longest running dividend payout 3.24 3.40 record of any company in Canada, at 188 years 2.80 2.80 2
Slide 10: Q2 2017 - Financial Highlights
Q2 2017 - Financial Highlights Net income growth reflects benefits from diversified business • YTD adjusted1 net income5 of $2.8B up 21% Y/Y (reported $2.7B, up 34%); YTD EPS of $4.20, up 21% (Reported $4.06 up 34%) • Q2’17 reported net income of $1.25B up 28% Y/Y; EPS of $1.84 up 27% Y/Y • Adjusted
Slide 11: Strong Capital Position
Strong Capital Position Strong capital with CET1 Ratio at 11.3% Common Equity Tier 1 Ratio +2 bps -15 bps +11bps +24 bps 11.3% 11.1% 2017 Q1 Internal capital Share Issuance Other Higher RWA 2017 Q2 generation (excluding FX) Basis points may not add due to rounding • Q2’17 CET1 Ratio of 11.3%, up fro
Slide 12: Investor Presentation Q2 2017
Investor Presentation Q2 2017 12
Slide 13: Operating Groups
Operating Groups Investor Presentation Q2 2017 13
Slide 14: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Highly engaged team of dedicated employees focused Focused on capturing key growth and loyalty opportunities on providing a personalized banking experience while capitalizing on the shift to digital channel
Slide 15: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Good volume growth with loans up 5% and deposits up 8% • YTD net income3 up 21%; revenue increased 9% with positive operating leverage of 5.0% • Q2’17 net income up 1% Y/Y • Revenue up 3% Y/Y reflecting higher balances and higher non-interest revenue, partially
Slide 16: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Rich heritage of 170 years in the U.S. Midwest, with a Aim to grow our business and be a leader in our markets by deep commitment to our communities and helping our creating a differentiated, intuitive customer
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Continued good expense management with positive operating leverage • Adjusted1 net income of $260MM, down 7% Y/Y (reported $248MM, down 7%) Figures that follow are in U.S. dollars • YTD net income down 2%, includes negative impact of 6.5% from loss on sale of indir
Slide 18: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Our Strategic Priorities • Planning and advice-based approach that integrates Deliver on our clients’ wealth management needs now and investment, insurance, specialized wealth management and into the future by enhancing the client experience, while c
Slide 19: BMO Wealth Management
BMO Wealth Management Strong results in both Traditional Wealth and Insurance with continued benefit from productivity initiatives • YTD adjusted1 net income up 66% (reported up 83%) reflecting an investment write-down, improved equity markets and business growth; net revenue2 up 15% • Q2 adjusted1
Slide 20: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Our Strategic Priorities • Unified coverage and integrated distribution across our Aim to be a lead North American investment bank enabling North American platform and complementary global clients to achieve their goals. We offer an integrated platform
Slide 21: BMO Capital Markets
BMO Capital Markets Good Y/Y net income growth and continued positive operating leverage • YTD net income up 28%; revenue up 17% with positive operating leverage of 8.1% • Q2 adjusted1 and reported net income up 12% Y/Y reflecting strong investment banking performance • Revenue up 13% Y/Y – Investme
Slide 22: Risk Overview
Risk Overview Investor Presentation Q2 2017 22
Slide 23: Risk Management
Risk Management We have a disciplined and integrated approach to risk Our Approach to Risk Management Diversified Sources of Revenue1 • Understand and manage BMO Capital • Protect our reputation Markets • Diversify. Limit tail risk Canadian P&C Investment • Maintain strong capital and liquidity & Co
Slide 24: Our loans are well diversified by geography and industry
Our loans are well diversified by geography and industry Gross Loans & Acceptances Loans by Geography3 Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q2 17) Residential Mortgages 104.1 8.9 113.0 29% 32% Canada Consumer Instalment and Other 64% U.S. 51.1 10.8 61.9 16% Personal Other 4%
Slide 25: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q2 16 Q1 17 Q2 17 • Q2’17 PCL ratio at 28 bps, up 9 bps Q/Q ($MM) primarily due to higher losses in U.S. P&C Consumer – Canadian P&C 105 98 104 Commercial and Capital Markets Commercial – Canadian P&C 22 20 24 • Year-to-date PCL ratio at 23 bp
Slide 26: Specific Provision for Credit Losses
Specific Provision for Credit Losses Specific PCL as a % of Average Net Loans & Acceptances 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.54% 0.40% 0.40% 0.31% 0.20% YTD 0.23% 0.00% '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17Q1'17Q2 B
Slide 27: Oil and Gas and Alberta Consumer Portfolios
Oil and Gas and Alberta Consumer Portfolios Oil and Gas Balances – By Sector Oil and Gas – Corporate/Commercial ($B, as at Q2 17) • Oil and Gas loans of $7.0B and $9.4B in $0.6 undrawn exposure1, of which more than half 9% is investment grade • Portfolio represents 2% of total bank loans $1.6 Consum
Slide 28: Canadian Residential Mortgages
Canadian Residential Mortgages • Canadian residential mortgage portfolio at $104.1B, represents 27% of total loans, well below the Canadian peer average of 41% ─ 55% of the portfolio is insured; Loan-to-value (LTV)1 on the uninsured portfolio is 54% ─ 70% of the portfolio has an effective remaining
Slide 29: Canada's housing market remains resilient
Canada’s housing market remains resilient • Steady immigration, young buyers, low mortgage rates and foreign wealth continue to drive home sales • Recent actions by the Ontario Government have moderated a hot housing market in the Greater Toronto region • Expect real estate markets across the rest o
Slide 30: Structure of the Canadian residential mortgage market with comparisons to the U.S.
Structure of the Canadian residential mortgage market with comparisons to the U.S. • Conservative lending practices, strong underwriting and documentation discipline have led to low delinquency rates — Over the last 30 years, Canada’s 90-day residential mortgage delinquency rate has never exceeded 0
Slide 31: Recent mortgage policy developments in Canada
Recent mortgage policy developments in Canada April 2017 - Ontario Fair Housing Plan • The Province announced a suite of 16 measures to attempt to address home price growth and stretched housing affordability, including: — Non-resident speculation tax of 15% applied to property purchases in a define
Slide 32: Appendix
Appendix Investor Presentation Q2 2017 32
Slide 33: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 2016 2017E2 2018E2 2016 2017E2 2018E2 2016 2017E2 2018E2 GDP Growth 1.5 2.8 1.9 1.6 2.2 2.2 1.8 1.7 1.5 Inflation 1.4 1.5 1.8 1.3 2.1 2.1 0.2 1.5 1.5 Interest Rate (3mth Tbills) 0.49 0.65 1.15 0.32 0.90 1.50 (
Slide 34: Canadian Personal and Commercial Banking – Balances
Canadian Personal and Commercial Banking – Balances Average Loans & Acceptances ($B) Average Deposits ($B) 212.7 214.1 203.6 98.4 98.3 93.4 150.1 151.4 140.1 44.0 44.7 44.7 95.0 96.7 89.7 8.4 8.8 8.6 57.8 60.8 62.5 50.4 55.1 54.7 Q2'16 Q1'17 Q2'17 Q2'16 Q1'17 Q2'17 Commercial Loans & Acceptances Cre
Slide 35: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Average Loans & Acceptances (US$B) Average Deposits (US$B) 76.2* 75.9* 75.2* 5.4 5.3 5.3 67.1 10.1 9.8 9.7 Personal 65.6 65.4 Loans 5.0 4.9 5.0 6.0 3.8 3.3 2.0 1.9 25.5 24.8 23.1 2.2 Commercial 47.5 50.1 50.0 Loans 40.1 42.3 42.3 Q2'16 Q1'17 Q2'17 Q2'16
Slide 36: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations Formations Gross Impaired Loans • GIL ratio 63 bps, up 3 bps Q/Q By Industry ($MM, as at Q2 17) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 170 96 266 383 596 979 Agriculture 12 51 63 73 230 303 Oil & Gas 54 82 136 100 181 281 Service Indus
Slide 37: Trading-related Net Revenues versus Value at Risk
Trading-related Net Revenues versus Value at Risk Investor Presentation Q2 2017 37
Slide 38: Corporate Governance
Corporate Governance • Code of Conduct based on BMO’s values, provides ethical guidance and expectations of behaviour for all directors, officers and employees • Governance practices reflect emerging best practices and BMO meets or exceeds legal, regulatory, TSX, NYSE and Nasdaq requirements • Direc
Slide 39: Environmental, Social and Governance (ESG) at BMO
Environmental, Social and Governance (ESG) at BMO Operating our business responsibly and considering the ESG impacts of our activities Responsible • BMO was the first Canadian bank to launch an impact investing mutual fund focused on gender diversity – the BMO Women in Leadership Fund, launched in A
Slide 40: Adjusting Items
Adjusting Items Adjusting1 items – Pre-tax ($MM) Q2 17 Q1 17 Q2 16 Amortization of acquisition-related intangible assets2 (43) (37) (40) Acquisition integration costs2 (21) (22) (24) Restructuring costs3 - - (188) Adjusting items included in reported pre-tax income (64) (59) (252) Adjusting1 items –
Slide 41: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com Jill Homenuk Christine Viau Head of Investor Relations Director, Investor Relations 416.867.4770 416.867.6956 jill.homenuk@bmo.com christine.viau@bmo.com Investor Presentation Q2 2017 41