National Bank Of Canada · TSX:NA
National Bank Of Canada — Q2 2023 Earnings Presentation
34 slides from National Bank Of Canada's earnings presentation, May 31, 2023
Slide 1: Investor Presentation Second Quarter 2023
INVESTOR PRESENTATION Second Quarter 2023 May 31, 2023
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES Caution Regarding Forward-Looking Statements Certain statements made in this document are forward-looking statements. In addition, representatives of the Bank may make forward-looking statements orally to analysts, investors, the media and o
Slide 3: Overview
OVERVIEW Laurent Ferreira President & Chief Executive Officer
Slide 4: Q2 2023 – Solid Financial Performance
Q2 2023 – SOLID FINANCIAL PERFORMANCE Revenues ($MM; YoY) Reported: $2,479 ; +2% ▪ Solid results and industry-leading ROE amidst challenging environment (1) Adjusted : $2,611 ; +5% PTPP(2) ($MM; YoY) ▪ Strong CET1 ratio of 13.3%(5) Reported: $1,105 ; (3%) (1) Adjusted : $1,237 ; +4% ▪ Sound liquidit
Slide 5: Q2 2023 – Diversified Business Mix Providing Resilience
Q2 2023 – DIVERSIFIED BUSINESS MIX PROVIDING RESILIENCE P&C Banking ▪ Revenues up 14% YoY on margin expansion and balance sheet growth Revenues: +14% YoY ▪ NIM up 24 bps YoY and down 1 bp QoQ PTPP(1): +22% YoY ▪ Personal: Slowdown in mortgage growth, as anticipated ▪ Commercial: Strong loan growth o
Slide 6: Financial Review
FINANCIAL REVIEW Marie Chantal Gingras Chief Financial Officer and Executive Vice-President, Finance
Slide 7: Q2 2023 – Balanced Approach Across the Bank
Q2 2023 – BALANCED APPROACH ACROSS THE BANK Q2 2023 Performance (YoY) ▪ Adjusted revenues up 4.8% YoY Reported Adjusted(1) - Continued NII growth in P&C Banking and Wealth Revenue growth 1.6% 4.8% Management Expense growth 5.8% 5.8% - Strong performance from C&IB PTPP growth(2) (3.1%) 3.8% Operating
Slide 8: Maintaining Strong NII and NIM
MAINTAINING STRONG NII AND NIM(1) Net Interest Income, non-trading - Adjusted(2) ▪ NII (non-trading) up 18% YoY ($MM) - P&C: up 20% YoY, mainly on deposit margin expansion, +18% YoY and balance sheet growth 1,373 - WM: up 50% YoY, continuing to benefit from higher interest 1,256 1,280 rates and a st
Slide 9: Continued Balance Sheet Growth
CONTINUED BALANCE SHEET GROWTH Loans and BA’s(1) ($B) ▪ Total loans of $216B(1), up 11% YoY and 3% QoQ - Personal banking: +3% YoY ; flat QoQ 210.4 215.8 200.9 206.7 194.0 - Commercial banking: +11% YoY ; +3% QoQ - Corporate banking: +32% YoY ; +7% QoQ - ABA: +25% YoY ; +7% QoQ - Credigy: +23% YoY ;
Slide 10: Diversified Funding Profile & Sound Liquidity Metrics
DIVERSIFIED FUNDING PROFILE & SOUND LIQUIDITY METRICS Balance Sheet Overview ($B, as at April 30, 2023) Balance sheet reflects our diversified business model $418 $418 Other Assets 26 Other Liabilities 24 ▪ Core banking activities well funded through Unsecured Funding 37 Cash & Reverse Repos 59 Whol
Slide 11: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio(1) 0.10% ▪ Robust CET1 ratio of 13.3%, up 76 bps 0.44% 0.67% QoQ (0.18%) 13.34% - Solid organic growth (0.27%) 12.58% - Reduction in credit and operational RWA from Basel III reforms ($4.1B / 44 bps) ▪ Credit risk RWA, excluding Basel III reforms, up $1,639MM (18 b
Slide 12: Risk Management
RISK MANAGEMENT William Bonnell Executive Vice-President Risk Management
Slide 13: Provisions for Credit Losses (PCL)
PROVISIONS FOR CREDIT LOSSES (PCL) PCL ($MM) Q2 Total PCL POCI ▪ PCL of $85M (16 bps), reflecting continued Performing strong performance and resilient portfolio mix 173 Impaired (excl. POCI) Total (bps) 40 17 16 16 Q2 PCL on Impaired Loans (excl. POCI) 11 20 123 1 ▪ Provision of $52M (10 bps) $87 0
Slide 14: Allowance for Credit Losses (ACL)
ALLOWANCE FOR CREDIT LOSSES (ACL) ACL ($MM) Total Allowances + 4% ▪ Increased by 4% ($53M) QoQ ▪ Remain ~61% above pre-pandemic level $1,235 ▪ Maintaining prudent level of allowances in light $1,182 $1,131 of continued uncertainties $1,058 $1,093 Impaired (1) Impaired (1) Impaired (1) $337 Impaired
Slide 15: Gross Impaired Loans and Formations (excluding POCI)
GROSS IMPAIRED LOANS AND FORMATIONS (excluding POCI) $1,400M Gross Impaired Loans (GIL) Excluding POCI Loans(1) 60 ($MM) 50 ▪ Gross impaired loans (excl. POCI) of $814M, $1,200M 39 stable at 38 bps QoQ 38 38 40 $1,000M 31 30 $812 $793 $814 $800M 30 ▪ Net formations of $65M, increase of $44M $611 $61
Slide 16: Retail Mortgage and HELOC Portfolio
RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province ▪ Uninsured mortgages and HELOC in GTA and (As at April 30, 2023) GVA represent 12% and 2% of the total 54% portfolio and have an average LTV(1) of 54% ▪ Uninsured mortgages and HELOC for condos represents 9% of the total portfoli
Slide 17: Retail Mortgages Rate Type and Maturity Profile
RETAIL MORTGAGES RATE TYPE AND MATURITY PROFILE (As at April 30, 2023) Canadian Mortgages Distribution by Rate Type ▪ 32% of mortgage portfolio is variable rate ▪ For variable rates, the monthly payments are adjusted to reflect rate increases, allowing borrowers to progressively Variable Rate adapt
Slide 18: Appendices
APPENDICES
Slide 19: Appendix 1 – Total Bank – Q2 2023 Results
APPENDIX 1 │ TOTAL BANK – Q2 2023 RESULTS Total Bank Summary Results – Q2 2023 ($MM, TEB) (1) Q2 23 Q1 23 Q2 22 QoQ YoY Adjusted Results ▪ Adjusted revenues(1) up 5% YoY Revenues 2,611 2,712 2,491 (4%) 5% Non-Interest Expenses 1,374 1,403 1,299 (2%) 6% (2) ▪ Adjusted PTPP (1)(2) up 4% YoY Pre-Tax /
Slide 20: Appendix 2 – Personal and Commercial Banking
APPENDIX 2 │ PERSONAL AND COMMERCIAL BANKING P&C Summary Results – Q2 2023 ($MM) ▪ Revenues up 14% YoY, mainly from margin Q2 23 Q1 23 Q2 22 QoQ YoY expansion, and balance sheet growth Revenues 1,100 1,124 962 (2%) 14% - NIM up 24 bps YoY and down 1 bp QoQ, Personal 624 623 571 - 9% reflecting highe
Slide 21: Appendix 3 – Wealth Management
APPENDIX 3 │ WEALTH MANAGEMENT Wealth Management Summary Results – Q2 2023 ($MM) ▪ Revenues up 7% YoY with continued NII Q2 23 Q1 23 Q2 22 QoQ YoY growth, up 50% YoY Revenues 617 637 579 (3%) 7% Fee-Based 350 347 359 1% (3%) ▪ Positive operating leverage of 3% Transaction & Others 77 82 93 (6%) (17%
Slide 22: Appendix 4 – Financial Markets
APPENDIX 4 │ FINANCIAL MARKETS Financial Markets Summary Results – Q2 2023 (TEB, $MM) ▪ Revenues up 6% YoY: Q2 23 Q1 23 Q2 22 QoQ YoY - C&IB up 22% YoY: Strong performance led by Revenues 672 689 632 (2%) 6% M&A and lending activity Global Markets 385 397 396 (3%) (3%) - Global Markets: Continued mo
Slide 23: Appendix 5 – USSF&I - ABA
APPENDIX 5 │ USSF&I - ABA ABA Summary Results – Q2 2023 ($MM) ▪ Strong growth on both sides of the balance Q2 23 Q1 23 Q2 22 QoQ YoY sheet Revenues 178 180 164 (1%) 9% Non-Interest Expenses 65 61 52 7% 25% ▪ Slower revenue growth reflecting lower deposit Pre-Tax / Pre-Provisions 113 119 112 (5%) 1%
Slide 24: Appendix 6 – USSF&I - Credigy
APPENDIX 6 │ USSF&I - CREDIGY Credigy Summary Results – Q2 2023 ($MM) Q2 23 Q1 23 Q2 22 QoQ YoY ▪ Assets stable QoQ: Revenues 108 137 120 (21%) (10%) (2) - Slower activity in new deals Net Interest Income 110 136 131 (19%) (16%) Non-Interest Income (2) 1 (11) - Portfolio amortization Non-Interest Ex
Slide 25: Appendix 7 – Other
APPENDIX 7 │ OTHER Other Segment Summary Results – Q2 2023 ($MM) Adjusted Results(1) Q2 23 Q1 23 Q2 22 ▪ Revenues for the Other segment of $(63)MM, Revenues (63) (57) 33 in line with expectations Non-Interest Expenses 20 48 44 ▪ Expenses down YoY reflecting a variable (2) Pre-Tax / Pre-Provisions (8
Slide 26: Appendix 8 – Balance Sheet - P&C
APPENDIX 8 │ BALANCE SHEET - P&C Average Loans and BA’s Average Deposits ($B) ($B) 145.3 146.5 137.1 85.1 84.0 78.9 50.8 52.1 46.0 2.3 2.2 45.5 44.3 2.0 41.4 10.5 11.0 11.2 78.5 81.2 80.9 37.5 39.6 39.7 Q2 22 Q1 23 Q2 23 Q2 22 Q1 23 Q2 23 Mortgage loans Personal loans Credit cards Commercial Persona
Slide 27: Appendix 9 – Total Loan Portfolio Overview
APPENDIX 9 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category ($B) ▪ Secured lending accounts for 95% As at of Retail loans April 30, 2023 % of Total Retail ▪ Indirect auto loans represent 1.9% of total loans Secured - Mortgage & HELOC 97.3 45% ($4.1B) Secured - Other (1) 13.3 6%
Slide 28: Appendix 10 – Regional Distribution of Canadian Loans
APPENDIX 10 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Prudent Positioning (As at April 30, 2023) Within the Canadian loan portfolio: Maritimes (2) ▪ Limited exposure to unsecured consumer loans Oil and Quebec Ontario Regions (1) BC/MB Territories Total (2.8%) Retail Secured ▪ Modest exposure to unse
Slide 29: Appendix 11 – Prudent Provisioning in Uncertain Economic Environment
APPENDIX 11 │ PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total Allowances Cover 8.6X NCOs Performing ACL / LTM PCL on Impaired Loans Total ACL / LTM Net Charge-Offs 9.7x 8.4x 8.6x 7.8x 7.1x 6.4x 6.2x 6.4x 6.7x 6.2x 5.9x 3.3x 1.8x 2.6x Q1 20 Q2 21 Q2 22 Q3 2
Slide 30: Appendix 12 – Real Estate and Construction Real Estate
APPENDIX 12 │ REAL ESTATE AND CONSTRUCTION REAL ESTATE Total Portfolio by Sector ($24.3B) Corporate Banking (11%) ▪ Primarily diversified Canadian REIT Short Term Construction (21%) ▪ Mainly residential construction (~ 65%) and contractors ▪ No US exposure Commercial Banking CRE (68%) ▪ 55% of 5-yea
Slide 31: Appendix 13 – Daily Trading and Underwriting Revenues vs. VaR
APPENDIX 13 │ DAILY TRADING AND UNDERWRITING REVENUES VS. VAR ($MM) 30 25 20 15 10 5 0 February, 2023 March, 2023 April, 2023 (5) (10) (15) Trading P&L Trading VaR 31
Slide 32: Appendix 14 – Range of Macroeconomic Scenarios – IFRS 9
APPENDIX 14 │ RANGE OF MACROECONOMIC SCENARIOS – IFRS 9 Canada Real GDP NBC Macroeconomic Forecast: Q2/23 vs. Q1/23 ($ Trillions) (Full Calendar Years) Base Scenario C2023 C2024 Real GDP (Annual Average % Change) As at Jan. 31, 2023 0.7 % 1.5 % As at Apr. 28, 2023 0.9 % 0.5 % Unemployment Rate (Aver
Slide 33: Appendix 15 – Reconciliation of Non-GAAP Financial Measures
APPENDIX 15 │ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($MM, except EPS) (1) Q2 23 Q1 23 Non- Non- Total Income Net Diluted Total Income Diluted Interest PTPP(3) PCL Interest PTPP(3) PCL Net Income Revenues taxes Income EPS Revenues taxes EPS Expenses Expenses Adjusted Results(2) 2,611 1,374 1,
Slide 34: Investor Relations Contact Information
Investor Relations Contact Information W: www.nbc.ca/investorrelations investorrelations@nbc.ca 1-866-517-5455
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