National Bank Of Canada · TSX:NA
National Bank Of Canada — Q3 2020 Earnings Presentation
32 slides from National Bank Of Canada's earnings presentation, Aug 26, 2020
Slide 1: Investor Presentation Third Quarter 2020
INVESTOR PRESENTATION Third Quarter 2020 August 26, 2020
Slide 2: Caution Regarding Forward-Looking Statements
CAUTION REGARDING FORWARD-LOOKING STATEMENTS From time to time, the Bank makes written and oral forward-looking statements such as those contained in this document, in other filings with Canadian securities regulators, and in other communications. All such statements are made in accordance with appl
Slide 3: Overview
OVERVIEW Louis Vachon President & Chief Executive Officer
Slide 4: Highlights - Q3 2020
HIGHLIGHTS - Q3 2020 PTPP(1) Total PCL ▪ Well positioned in a challenging environment: $947 MM $143 MM - Strong balance sheet +5% YoY +66% YoY - Defensive positioning - Diversified earnings stream ▪ Good business performance with PTPP up 5% YoY Net Income EPS - Positive operating leverage $602 MM $1
Slide 5: Segment Highlights - Q3 2020
SEGMENT HIGHLIGHTS - Q3 2020 P&C Banking ▪ Lower revenues from low interest-rate environment and lower client activity due to COVID PTPP: $395 MM ▪ Strong growth in mortgage and deposit volumes (8%) YoY ▪ Value of retail loans under deferral down 60% since Q2 Wealth Management ▪ Strong transaction v
Slide 6: Risk Management
RISK MANAGEMENT William Bonnell Executive Vice-President Risk Management
Slide 7: Provisions for Credit Losses
PROVISIONS FOR CREDIT LOSSES PCL Q3 2020 Total PCL $143M (35bps); 70% lower QoQ ($MM) $81 $143 ▪ Conditions benefited from significant support programs and re-opening of economy PCL on Performing Loans Impaired Non-Retail $74 ▪ Key drivers: revision of macroeconomic $88 factors/scenario weights; por
Slide 8: Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES ACL Q3 20 Total Allowances: ($MM) ▪ Continued to prudently build allowances in the third quarter 70% increase in allowances since Q1 20 ▪ Since Q1 2020, Total Allowances for Credit Losses increased from $769M to $1.3B $1,305 ($43) ▪ 109% increase in allowances for non-ret
Slide 9: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total ACL Consistent with Portfolio Positioning Performing ACL / LTM PCL on Impaired Loans Total ACL / Total Loans excl. FVTPL Q3 20 Q2 20 Q3 19 Q3 20 Q2 20 Q3 19 Total Bank 2.8x 2.8x 1.8x Total Bank 0.84% 0.77% 0.
Slide 10: Gross Impaired Loans and Formations
GROSS IMPAIRED LOANS AND FORMATIONS Gross Impaired Loans(1) (GIL) ($MM) 48 49 ▪ Gross impaired loan ratio increased 1bp to 44 44 43 $794 49bps ($794M) $780 $674 $684 $677 ▪ Net formations declined by $108M from last quarter reflecting: $462 $444 - Net repayments in Commercial - Lower formations in F
Slide 11: Limited Exposure to COVID-19 Most Impacted Industries
LIMITED EXPOSURE TO COVID-19 MOST IMPACTED INDUSTRIES ▪ Limited exposure to COVID-19 most impacted industries (down 9% QoQ) Gross Loans % of ($MM) Book Non-Food / Non-Pharmacy Retailers Essential Services Retailers $379 0.2% n Decrease of 51% in drawings (QoQ) Other Retailers $554 0.3% n Decrease of
Slide 12: Loans Under Deferrals Down to 5.6% of Canadian Portfolio
LOANS UNDER DEFERRALS DOWN TO 5.6% OF CANADIAN PORTFOLIO(1) Deferrals as at Q3 2020 Retail (As at July 31, 2020) ▪ New deferral requests: 10K in Q3 vs. 75K in Q2(1) Number of Value of As % of Loans Loans ($MM) Loans Balances ▪ Value of retail loans under deferral declined by RESL 14,405 $3,651 5.0%
Slide 13: Retail Mortgage and HELOC Portfolio
RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province As at July 31, 2020 ▪ Insured mortgages account for 38% of the 55% Uninsured & HELOC total RESL portfolio (70% in Alberta) Insured ▪ Distribution across product and geography remained stable 68% ▪ Uninsured mortgages and HELOC in
Slide 14: Financial Review
FINANCIAL REVIEW Ghislain Parent Chief Financial Officer and Executive Vice-President, Finance
Slide 15: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio ▪ Strong CET1 ratio of 11.4%(2) ▪ Strong pre-tax pre-provision earnings supported by favorable business mix 0.45% (0.11%) 0.03% ▪ Total PCL of $143M (11 bps after-tax) (0.25%) (0.08%) ▪ RWA growth absorbed 25 bps (see next 11.39% 11.43% slide) Q2 20 Net Income Tota
Slide 16: RWA Growth
RWA GROWTH Risk-Weighted Assets ($MM) ▪ RWA growth primarily driven by Credit Risk ▪ Limited impact from rating migration: 2 bps $603 - 8 bps of CET1 from non-retail portfolio $1,287 $169 $94,814 - Partly offset by 6 bps improvement in retail (low delinquency due to government programs) $92,755 Q2 2
Slide 17: Strong Capital and Liquidity Positions
STRONG CAPITAL AND LIQUIDITY POSITIONS Capital and Capital Ratios ($MM) ▪ Our capital levels remain strong Q3 20 Q2 20 Q1 20 Capital ▪ Total capital ratio of 15.1% CET1 $10,840 $10,568 $10,046 ▪ Strong liquidity coverage ratio of 161% Tier 1 $13,290 $13,368 $12,846 Total $14,336 $14,370 $13,755 Capi
Slide 18: Appendices
APPENDICES
Slide 19: Overview – Q3 20 Results
APPENDIX 1 │ OVERVIEW – Q3 20 RESULTS Total Bank Summary Results ($MM, TEB) ▪ Revenue up by 4%, led by Financial Q3 20 Q2 20 (1) QoQ YoY Markets, Wealth Management and USSF&I Q3 19 Revenues 2,021 2,112 1,946 (4%) 4% ▪ Pre-tax pre-provision earnings up 5% YoY Non-Interest Expenses 1,074 1,121 1,042 (
Slide 20: Personal and Commercial Banking
APPENDIX 2 │ PERSONAL AND COMMERCIAL BANKING P&C Summary Results ($MM) ▪ Revenues down 4% YoY, mainly driven by: Q3 20 Q2 20 Q3 19 QoQ YoY - Lower margin Revenues 852 848 891 - (4%) - Lower client activity Personal 536 524 564 2% (5%) - Offset by good mortgage and deposit Commercial 316 324 327 (2%)
Slide 21: Wealth Management
APPENDIX 3 │ WEALTH MANAGEMENT Wealth Management Summary Results ($MM) ▪ Transaction volumes remained elevated in Q3 20 Q2 20 Q3 19 QoQ YoY Q3 Revenues 450 474 437 (5%) 3% ▪ Fee-based are up 3% YoY due to strong Fee-Based 266 267 259 - 3% net sales Transaction & Others 78 97 66 (20%) 18% Net Interes
Slide 22: Financial Markets
APPENDIX 4 │ FINANCIAL MARKETS Financial Markets Summary Results ($MM, TEB) ▪ Solid growth in Global Markets, mainly due to higher revenues in fixed income Q3 20 Q2 20 Q3 19 QoQ YoY - Higher volumes in fixed income secured Revenues 503 598 441 (16%) 14% funding Global Markets 302 396 267 (24%) 13% -
Slide 23: US Specialty Finance & International
APPENDIX 5 │ US SPECIALTY FINANCE & INTERNATIONAL USSF&I Summary Results ABA Bank ($MM) ▪ Strong growth with earnings up 35% YoY, Q3 20 Q2 20 Q3 19 QoQ YoY loans up 45% and deposits up 38% Revenues 210 183 174 15% 21% Credigy 104 82 95 27% 9% ▪ Solid credit position: well-diversified ABA 105 99 79 6
Slide 24: Other
APPENDIX 6 │ OTHER Other Segment Summary Results ($MM, TEB) ▪ Incremental expenses of $44M YTD for health and safety measures in the Adjusted Results Q3 20 Q2 20 Q3 19 (1) context of the pandemic Revenues 6 9 3 Non-Interest Expenses 58 82 57 ▪ Decrease in variable compensation Pre-Tax / Pre-Provisio
Slide 25: Total Loan Portfolio Overview
APPENDIX 7 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category ($B) ▪ Secured lending accounts for 94% As at of Retail loans July 31, 2020 % of Total Retail ▪ Indirect auto loans represent 1.8% of total Secured - Mortgage & HELOC 78.8 48% loans ($2.9B) (1) Secured - Other 9.0 5% U
Slide 26: Regional Distribution of Canadian Loans
APPENDIX 8 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Portfolios Prudently Positioned to Face the Crisis As at July 31, 2020 Within the Canadian loan portfolio: Maritimes(2) ▪ Limited exposure to unsecured consumer Oil and loans (3.7%) Quebec Ontario Regions(1) BC/MB Territories Total Retail ▪ Modest
Slide 27: Oil & Gas and Pipelines Sector
APPENDIX 9 │ OIL & GAS AND PIPELINES SECTOR O&G Producers and Services Exposure Gross Loans in $MM and % of Total Loans ▪ O&G producers and services exposure $3,956 significantly reduced - 29% reduction in outstanding loans: down from $4B in Q1/15 to $2.8B in Q3/20 $2,798 - Reduction as a % of total
Slide 28: Daily Trading and Underwriting Revenues vs. VaR
APPENDIX 10 │ DAILY TRADING AND UNDERWRITING REVENUES VS. VAR ($MM) 30 25 20 15 10 5 0 May-2020 June-2020 July-2020 (5) (10) (15) (20) (25) TRADING P&L Trading VaR 28
Slide 29: Trading VaR Trend
APPENDIX 11 │ TRADING VaR TREND ($MM) Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 (5.6) (6.1) (6.2) (9.5) (14.2) 29
Slide 30: Loan & Deposit Overview
APPENDIX 12 │ LOAN & DEPOSIT OVERVIEW Loans and BA’s(1) Deposits(2) ($B) ($B) 168.5 162.7 161.8 158.9 151.3 153.3 156.2 152.0 143.1 145.3 58.9 64.2 61.3 56.5 57.2 102.3 90.6 95.0 84.1 85.3 94.9 96.1 97.2 98.5 100.5 59.0 60.1 61.4 63.9 66.2 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20 Q3 19 Q4 19 Q1 20 Q2 20 Q3 20
Slide 31: Range of Macroeconomic Scenarios - IFRS9
APPENDIX 13 │ RANGE OF MACROECONOMIC SCENARIOS - IFRS9 Canada Real GDP NBC Macroeconomic Forecast: Q3 vs. Q2 ($ Trillions) (Full Calendar Years) 2.25 Base Scenario C2020 C2021 C2022 Real GDP (Annual Average % Change) 2.15 As at April 30 (4.8%) 4.0% 1.9% As at July 31 (7.1%) 4.9% 3.0% 2.05 1.95 Unemp
Slide 32: Investor Relations Contact Information
Investor Relations Contact Information W: www.nbc.ca/investorrelations investorrelations@nbc.ca 1-866-517-5455 Linda Boulanger, Vice President 514-394-0296 | linda.boulanger@bnc.ca Marianne Ratté, Senior Director 514-412-5437 | marianne.ratte@bnc.ca Arslan Benbakouche, Senior Manager 514-412-802
National Bank of Canada — Q3 2020 Earnings Presentation on 6ix