Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q3 2021 Earnings Presentation
35 slides from Bank Of Montreal's earnings presentation, Aug 24, 2021
Slide 1: Investor Presentation Q3 21
BMO Financial Group Investor Presentation For the Quarter Ended July 31, 2021 August 24, 2021 Q3 21
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 secu
Slide 3: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q3 21
Slide 4: Our Strategy
Our Strategy About Us Helping customers since 8th largest 12+ million 1817 bank in North America by assets1 customers globally Our Purpose Our Strategic Priorities Medium Term Objectives2 Boldly Grow the Good World-class client loyalty and growth EPS growth 7% – 10% in business and life Winning cult
Slide 5: Taking action to support customers, communities for a sustainable and inclusive recovery
Taking action to support customers, communities for a sustainable and inclusive recovery BMO support programs for Facilitating access to Products and capabilities to customers and communities government relief programs help make real financial • Announced a 10-year, $12B • In Canada, over $4.5B in l
Slide 6: Financial Highlights
Financial Highlights Q3’21 YTD Adjusted1 • Q3’21 adjusted1 EPS of $3.44 Net Income1 $2.3B $6.4B • Adjusted1 net income up 79% YTD; continued Reported $2.3B $5.6B momentum in all operating groups and strong credit performance PPPT1,2 Growth 12% 21% • Adjusted1 pre-provision, pre-tax earnings (PPPT)2
Slide 7: Advancing our digital experience in-line with customer preferences
Advancing our digital experience in-line with customer preferences Strong digital foundation in place Accelerated Digital Engagement Delivering speed, efficiency and scale • Top tier digital sales volumes Digital adoption, % 1 3 • Personalized, data-driven experiences, driving customer acquisition e
Slide 8: U.S. segment continuing to deliver strong results
U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis • U.S. segment adjusted1 PPPT1 up 34% YTD; contributed 39% of adjusted1 earnings YTD • Adjusted1 efficiency of 55.2%, adjusted1 operating leverage of 11.7% YTD • #122 in U.S. commercial lending; top-tier
Slide 9: Strong earnings across our diversified businesses
Strong earnings across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial • PPPT1 growth of 14% and ROE2 of 27.4% YTD, • PPPT1,2 growth of 18% and ROE2 of 16.4% YTD, with revenue growth momentum with good revenue growth and expense • Top tier3 financial performance
Slide 10: Financial Results, Tayfun Tuzun, CFO
Financial Results For the Quarter Ended July 31, 2021 Tayfun Tuzun Chief Financial Officer Q3 21
Slide 11: Q3 F2021 - Financial Highlights
Q3 F2021 - Financial Highlights Strong results with PPPT3 up 12% Y/Y and positive operating leverage • Adjusted1 EPS $3.44, up 86% Y/Y (reported $3.41, up 89%) Reported Adjusted1 Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 • Adjusted1 net income $2,292MM (reported $2,275MM) ($MM) Net interest income 3,521 3
Slide 12: Balance Sheet
Balance Sheet Continued deposit growth and stable loans • Average net loans and acceptances down $14.6B, 3% Y/Y, or flat excluding the impact of the weaker U.S. dollar Average Net Loans and Acceptances ($B) – Business & government loans down 4% primarily driven by lower 475.3 460.7 459.1 utilization
Slide 13: Strong Q3'21 CET1 ratio of 13.4%, up from Q2'21
Strong Q3’21 CET1 ratio of 13.4%, up from Q2’21 Common Equity Tier 1 Ratio +48 bps -2 bps +3 bps 13.4% 13.0% Q2 2021 Internal capital Higher source Other Q3 2021 generation currency RWA Basis points may not add due to rounding. • Q3’21 CET1 Ratio of 13.4%, up from Q2’21, well above our target range
Slide 14: Net Interest Margin
Net Interest Margin • Excluding trading, net interest margin increased 2 basis points, primarily due to the impact of interest rate risk hedging, investment and funding activities in Treasury • Lower loan margins in Canadian P&C • Lower deposit margins in U.S. P&C, reflecting the impact of the lower
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to a +100 bps rate shock driven 2/3 by • Term rates decreased in Q3, and remain below averages short rates of recent years • Higher Year 2 benefit to rising rates (+100 bps) of • If term rates remain low, NIM could continue to be approximately $785MM driven
Slide 16: Non-Interest Revenue
Non-Interest Revenue • Adjusted1 NIR net of CCPB2 up 6% Q/Q (reported up 5%) Non-Interest Revenue, net of CCPB2 Adjusted1 ($MM) Q3 21 Q2 21 Q3 20 – Excluding trading, adjusted1 NIR up 3% (reported up Securities Commissions and Fees 264 300 260 3%), primarily driven by higher securities gains and Dep
Slide 17: Non-Interest Expense
Non-Interest Expense • Adjusted1 efficiency ratio2 55.7% (reported 56.0%) Non-Interest Expense Adjusted1 ($MM) Q3 21 Q2 21 Q3 20 • Adjusted1 operating leverage2 of 2.1% (reported 2.6%), Salaries 993 959 1,026 driven by strong operating performance in the P&C Performance-based Compensation 842 763 67
Slide 18: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strong results with PPPT2 up 19% Y/Y and positive operating leverage • Net income1 $815MM, up $496MM Y/Y Reported Adjusted1 ($MM) Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 • Adjusted1 PPPT2 $1,196MM, up 19% Y/Y (reported $1,195MM, up 19%) Net interest income 1,660 1,
Slide 19: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strong results with double digit PPPT2 growth and continued positive operating leverage Figures that follow are in U.S. dollars Reported Adjusted1 1 (US$MM) Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 • Adjusted net income $453MM, up $254MM Y/Y (reported $448MM, up $256MM)
Slide 20: BMO Wealth Management
BMO Wealth Management Record revenue and NIAT performance • Adjusted1 net income $406MM, up 16% Y/Y (reported Reported Adjusted1 $401MM, up 18%) ($MM) Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 2 • Traditional Wealth adjusted1 net income up 19% Y/Y Net Revenue 1,442 1,398 1,295 1,442 1,398 1,295 (reported
Slide 21: BMO Capital Markets
BMO Capital Markets Continued strong results driven by record I&CB performance • Adjusted1 net income of $564MM, up 30% Y/Y Reported Adjusted1 (reported $558MM, up 31%) ($MM) Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 • Adjusted1 PPPT2 of $674MM (reported $666MM) Global Markets 881 919 981 881 919 981 I&CB
Slide 22: Corporate Services
Corporate Services • Adjusted1 and reported net loss of $52MM for the Reported2 Adjusted1,2 quarter, compared with an adjusted1 and reported ($MM) Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 net loss of $117MM in the prior year Revenue 36 (3) (83) 36 (32) (83) 2 • Adjusted1 and reported net loss $65MM bette
Slide 23: Risk Review, Patrick Cronin, Chief Risk Officer
Risk Review For the Quarter Ended July 31, 2021 Patrick Cronin Chief Risk Officer Q3 21
Slide 24: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q3’21 PCL ratio on Impaired Loans is 6 bps, down Q3 21 Q2 21 Q3 20 ($MM) 7 bps Q/Q $ Bps $ bps $ bps PCL on Impaired Loans ($MM) Consumer – Canadian P&C 86 20 100 24 130 33 Commercial – Canadian P&C 15 6 54 24 127 56 Total Canadian P&C 101 1
Slide 25: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing Loans (APL) and PCL on APL to • The APL decreased $126MM to $2,703MM, Q3 21 driven by a reduction in PCL on performing loans Performing Loans (PCL) Q2 21 Q3 21 Q3 21 Performing Foreign By Operating Group APL1 PCL APL1 Loans Exchange
Slide 26: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio 51 bps, down 14 bps Q/Q Formations Gross Impaired Loans By Industry ($MM, as at Q3 21) Formations ($MM) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 149 23 172 400 283 683 Service Industries 72 31 103 210 245 455
Slide 27: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances • Portfolio is well diversified by geography Canada & By Industry U.S. Total % of Total and industry Other1 ($B, as at Q3 21) Residential Mortgages 126.4 8.0 134.4 28% • Business & Government loans up 2% Q/Q Consumer Instalment and Other or up 1% exc
Slide 28: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk May 3, 2021 to July 30, 2021 (pre-tax basis and in millions of Canadian dollars) 40 30 20 10 0 (10) (20) (30) Daily Revenue Total Trading VaR Risk Review August 24, 2021 28
Slide 29: Appendix
Appendix
Slide 30: Canadian Personal & Commercial Banking - Balances
Canadian Personal & Commercial Banking - Balances Gross Loans & Acceptances ($B) Deposits ($B) 227.0 231.7 269.1 222.8 225.6 257.9 264.6 261.3 213.1 251.0 113.3 112.4 115.8 104.5 110.2 130.3 129.4 129.6 128.5 130.5 48.3 50.0 51.6 50.7 52.3 8.2 7.8 8.1 7.9 8.3 93.4 97.4 97.1 101.4 91.6 92.7 82.6 90.0
Slide 31: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars Gross Loans & Acceptances (US$B) Deposits (US$B) 110.0 111.7 110.8 110.3 95.41 95.41 93.81 93.51 93.91 106.1 8.1 8.5 8.7 8.4 8.8 10.0 8.6 8.5 8.8 8.7 48.0 48.2 48.6 48.1 50.5 77.3 78.3 76.6 76.3 76.4 61.8 63.7 62
Slide 32: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($166.6B) • Total Canadian residential-secured lending HELOC $76.1 portfolio at $166.6B, representing 35% of total Uninsured Mortgages loans $33.1 Insured Mortgages 25% ─ LTV1 on uninsured of 48% 25% ─ 90-day delinquency rate
Slide 33: Sectors Impacted by COVID-19 Pandemic
Sectors Impacted by COVID-19 Pandemic Gross Loans & % of Total By Industry of Heightened Focus Acceptances GL&A • Sectors highly impacted by COVID-19 make up less ($B, as at Q3 21) than 5% of the portfolio (GL&A) Hotels 4.5 1.0% • Portfolio is diversified and well-secured by real estate Restaurants
Slide 34: Adjusting Items
Adjusting Items Adjusting items1 - Pre-tax ($MM) Q3 21 Q2 21 Q3 20 YTD Q3 21 YTD Q3 20 Acquisition integration costs2 (3) (2) (5) (8) (11) Amortization of acquisition-related intangible assets2 (19) (24) (32) (68) (91) Impact of divestitures3,4 (24) (771) - (795) - Restructuring Costs3 24 - - 24 - A
Slide 35: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON SUKHWINDER SINGH Director, Investor Relations Director, Investor Relations 416.867.7834 416.867.4734 bill2.anderson@bmo.com Sukhwinder.singh@bmo.com