Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Investor Presentation (September 2019)
40 slides from Bank Of Montreal's investor presentation, September 2019
Slide 1: Investor Presentation
Investor Presentation September 2019
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 are included in this document, and may be included in other filings with Canadian sec
Slide 3: Who We Are
Who We Are Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America 8th largest $839 billion bank in North America in total assets by assets1 An engaged and diverse team of employees Three operating groups Personal and BMO Wealth BMO Capital
Slide 4: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) 2-year CAGR 9% EPS Growth 7% to 10% per year 8.99 8.15 7.52 Return on 7.90 8.17 15% or more Equity 6.92 Operating 2% or more Leverage Maintain strong capital ratios that exce
Slide 5: Q3 2019 - Financial Highlights
Q3 2019 - Financial Highlights Strong PPPT4 growth in P&C businesses; positive total bank operating leverage • Adjusted1 EPS $2.38, up 1% Y/Y (reported $2.34, up 1%) Reported Adjusted1 ($MM) Q3 19 Q2 19 Q3 18 Q3 19 Q2 19 Q3 18 • Adjusted1 and reported net income up 1% Y/Y 2 Net Revenue 5,779 5,652 5
Slide 6: BMO’s Strategic Footprint
BMO’s Strategic Footprint BMO’s strategic footprint spans strong regional economies. Our three operating groups – Personal and Commercial Banking, BMO Capital Markets and BMO Wealth Management – serve individuals, businesses, governments and corporate customers across Canada and the United States. O
Slide 7: Reasons to Invest in BMO
Reasons to Invest in BMO • Diversified businesses that continue to deliver • Well-capitalized with an attractive dividend yield robust earnings growth and long-term value for shareholders • Creating sustainable efficiency and reinvestment capacity through resource optimization, • Strong foundation b
Slide 8: Differentiating strengths driving competitive advantage
Well-established U.S. Presence Core Strengths Differentiating Digital Investment in Commercial and Wealth strengths and Innovation Management driving Integrated North American Platform competitive advantage Unique Creating Approach Sustainable to Cross-border Efficiency Banking
Slide 9: Diversified businesses delivering resilient and robust earnings
Diversified businesses delivering resilient and robust earnings Adjusted Net Income Driven by diversified sources of revenue by Operating Group – LTM1 % of Operating Groups Net Revenue - LTM BMO CM Canadian BMO Capital 18% P&C Markets Can P&C 35% 21% 40% BMO WM Canadian 16% Personal Banking U.S. P&C
Slide 10: U.S. operations well positioned to capture growth opportunities
U.S. operations well positioned to capture growth opportunities • The United States continues to be a strategically important market for BMO representing over one-third of total bank earnings 2019 Estimated Nominal GDP ($US Trillions) • Diversified businesses are delivering strong growth • U.S. segm
Slide 11: Large North American commercial banking business with advantaged market share
Large North American commercial banking business with advantaged market share Canadian P&C Commercial Loans and Acceptances Commercial Deposits – Canadian P&C ($B) – Canadian P&C ($B) • #2 market share in business lending1 ↑16% ↑9% • Top-tier in upper mid-market2 Y/Y Y/Y • #1 in Agriculture1 82.0 65
Slide 12: Strong Capital Position
Strong Capital Position Strong CET1 Capital Ratio -24 bps +10 bps +27 bps 11.4% 1.65% 9.75% Current OSFI expectation 1.75% Domestic Stability Buffer1 1.0% D-SIB Surcharge 11.3% 2.5% Capital Conservation Buffer 4.5% Minimum CET1 Q2'19 Internal Capital Generation Higher source currency RWA Lower deduc
Slide 13: Creating sustainable efficiency: continuing good progress
Creating sustainable efficiency: continuing good progress Optimize Adjusted1 Efficiency Ratio Trend Enterprise Infrastructure 360 200 bps bps Deliver 65.5% Strategic 63.9% 62.7% Initiatives 61.9% 59.9% 2015 2016 2017 2018 Q3'19 Enable Simplification & • Target to achieve efficiency of 58% or better
Slide 14: Our Commitment to Sustainability
Our Commitment to Sustainability BMO’s sustainability principles—Social Change, Community Building, Financial Resilience and Environmental Impact—align to our strategic priorities because financial performance and corporate responsibility are inextricably connected. Our success depends on meeting ou
Slide 15: Driving Value with Sustainable Solutions
Driving Value with Sustainable Solutions Sustainable Finance BMO announced a commitment to mobilize $400B in sustainable finance by 2025. BMO Capital Markets has underwritten $3B in sustainable development bonds in 2019. BMO Global Asset Management is a Green Bond Principles signatory and has develo
Slide 16: Operating Groups
Operating Groups
Slide 17: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Q3’19 Highlights (Adjusted1) • Highly engaged team focused on providing a personalized banking Net Income $649 million experience, anticipating customers’ needs and finding new ways to help Net Income Growth (Y/Y) 1% • Top-tier comme
Slide 18: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strategic Priorities Capture key growth and loyalty opportunities by delivering a leading digital experience and personalized advice • Continue to improve customer loyalty by deepening primary relationships – In Commercial Banking, target opportunities through
Slide 19: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Q3’19 Highlights (Adjusted1) • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$285 million commitment to the success of our customers and communities • Large-scale, diversified national commercial busines
Slide 20: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strategic Priorities We aim to grow our business and be a leader in our markets by creating a differentiated and intuitive partnership with our customers to address all of their financial needs • Continue to strengthen our competitive position by investing in key c
Slide 21: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Q3’19 Highlights (Adjusted1) • Planning and advice-based approach that integrates investment, insurance, specialized wealth management and core banking Net Income $257 million solutions, offered by a team of highly skilled professionals Net Income Gr
Slide 22: BMO Wealth Management
BMO Wealth Management Strategic Priorities Deliver on our clients’ current and evolving personal wealth, insurance and institutional asset management needs through an exceptional client experience, a focus on innovation and productivity and collaboration across BMO • Provide outstanding support and
Slide 23: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Q3’19 Highlights (Adjusted1) Net Income $318 million • Unified coverage and integrated distribution across our North American platform and complementary global footprint, delivering Net Income Growth 5% a seamless and exceptional client experience Effi
Slide 24: BMO Capital Markets
BMO Capital Markets Strategic Priorities BMO Capital Markets' vision is to be a top 10 North American investment bank, enabling clients to achieve their goals. We offer an integrated platform, differentiated by innovative ideas and unified coverage • Maintain leading market share in Canada by streng
Slide 25: Risk Overview
Risk Overview
Slide 26: Our loans are well-diversified by geography and industry
Our loans are well-diversified by geography and industry Loans by Geography3 Gross Loans & Acceptances Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q3 19) Residential Mortgages 110.5 11.6 122.1 27% 35% Canada Consumer Instalment and Other 63% U.S. 54.9 11.1 66.0 15% Personal Other Ca
Slide 27: Canadian Residential-Secured Lending (RESL)
Canadian Residential-Secured Lending (RESL) Residential-Secured Lending by Region ($143.5B) • Total Canadian residential-secured lending portfolio at $143.5B, representing 32% of total loans, below peer $63.9 average of approximately 46% HELOC Uninsured Mortgages ─ LTV1 on uninsured of 51% 24% $27.9
Slide 28: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q3 19 Q2 19 Q3 18 ($MM) PCL in bps 28 Total Canadian P&C 174 122 120 Total U.S. P&C 61 18 54 19 18 16 22 Wealth Management - (1) 2 18 13 Capital Markets 7 12 3 14 12 Corporate Services 1 (1) (2) Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 PCL on Impaired Lo
Slide 29: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations • GIL ratio 55 bps, up 2 bps Q/Q Formations Gross Impaired Loans By Industry ($MM, as at Q3 19) Canada & Canada & U.S. Total U.S. Total Other Other1 Formations ($MM) Consumer 217 91 308 516 398 914 Oil & Gas 0 141 141 10 314 324 741 679 522 443 467 Service I
Slide 30: Economic and Housing Overview
Economic and Housing Overview
Slide 31: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 20182 2019E2 2020E2 20182 2019E2 2020E2 20182 2019E2 2020E2 GDP Growth 1.9 1.5 1.7 2.9 2.3 1.8 1.9 1.1 1.1 Inflation 2.3 2.0 2.0 2.4 1.8 2.0 1.8 1.3 1.8 Interest Rate (3mth Tbills) 1.37 1.60 1.40 1.97 2.10 1.6
Slide 32: Canada’s housing market is stable
Canada’s housing market is stable • Past increases in interest rates and policy changes slowed the housing market, but recent data show a pickup in sales in response to recent declines in mortgage rates • We expect real estate markets across the country to increase moderately this year • The Toronto
Slide 33: Structure of the Canadian residential mortgage market with comparisons to the United States
Structure of the Canadian residential mortgage market with comparisons to the United States • 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 e
Slide 34: Liquidity & Wholesale Funding Mix
Liquidity & Wholesale Funding Mix
Slide 35: Liquidity and Funding Strategy
Liquidity and Funding Strategy Cash and Securities to Total Assets Ratio (%) • BMO's Cash and Securities to Total Assets 28.2 29.9 29.3 28.2 28.3 Ratio reflects a strong and stable liquidity position Q3'18 Q4'18 Q1'19 Q2'19 Q3'19 Customer Deposits1 ($B) 317.8 329.2 341.7 351.3 361.2 • BMO’s large ba
Slide 36: Canadian Bail-in Regime
Canadian Bail-in Regime • Canadian bail-in regime effective since September 23, 2018 (implementation date) Canadian Approach • Bail-in eligible senior unsecured debt that is issued after the implementation date will be subject to conversion in a resolution scenario Statutory / Contractual Subordinat
Slide 37: Manageable TLAC Requirements and no incremental funding
Manageable TLAC Requirements and no incremental funding • Canadian D-SIBs will be required to meet a Supervisory Target Funding Profile as at July 31, 2019 ratio by November 1, 2021 40.0% — Risk-based TLAC ratio of 23.25% (Minimum 21.5% of 35.8% RWA TLAC ratio plus a Domestic Stability Buffer of 37.
Slide 38: Diversified Wholesale Term Funding Program
Diversified Wholesale Term Funding Program • BMO's wholesale funding principles seek to match the term of assets with the term of funding. Loans for example are funded with customer deposits and capital, with any difference funded with longer-term wholesale funding • BMO has a well diversified whole
Slide 39: Diversified Wholesale Funding Platform
Diversified Wholesale Funding Platform • Programs provide BMO with diversification and cost effective funding Canada1 U.S.1 Europe, Australia & Asia1 • Canadian MTN Shelf (C$8B) • SEC Registered U.S. Shelf (US$25B) • Note Issuance Programme (US$20B) • Fortified Trust (C$5B) • Global Registered Cover
Slide 40: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com JILL HOMENUK TOM LITTLE Head, Investor Relations Director, Investor Relations 416.867.4770 416.867.7834 jill.homenuk@bmo.com tom.little@bmo.com
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