Bank Of Montreal · TSX:BMO
Bank Of Montreal — Investor Presentation (December 2018)
40 slides from Bank Of Montreal's investor presentation, December 2018
Slide 1: Investor Presentation
Investor Presentation December 2018
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: BMO Financial Group
BMO Financial Group 8th largest bank in North America1 with an attractive and diversified business mix Who we are F2018 Results * Adjusted2 Reported Net Revenue ($B)3 21.7 21.7 • Established in 1817, Canada’s first bank Net Income ($B) 6.0 5.5 • In Canada: a full service, universal bank across EPS (
Slide 4: Reasons to Invest
Reasons to Invest • 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 built fo
Slide 5: Strategic Priorities
Strategic Priorities • Well-diversified, double-digit commercial loan Drive leading growth in priority growth and good deposit growth areas by earning customer loyalty • Improved loyalty scores across businesses • Established EI3 Group to drive enterprise-wide, Simplify, speed up, and improve sustai
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 with
Slide 7: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns 1 Dividends Declared ($ per share) 4.00 3.78 3.40 3.56 • Declared quarterly dividend: $1.00; up 8% Y/Y 3.24 2.94 3.08 • Dividend yield1 of 4.0% 2.71 2.80 2.80 2.80 2.80 2.82 2.26 • BMO has the longest-running dividend payout 1.85 7% record of any
Slide 8: Diversified by businesses, customer segments and geographies
Diversified by businesses, customer segments and geographies Adjusted Net Income by Canadian P&C Operating Group – F20181 • Full range of financial products and services to eight million customers • Helping customers make the right financial decisions as they bank across a network of 900 branches, c
Slide 9: BMO U.S. Operations
BMO U.S. Operations Strategic focus provides strong opportunities for continued growth • The U.S. continues to be a strategically important market for BMO, representing ~28% of the bank’s earnings; diversified businesses are delivering strong growth and improving efficiency – Total U.S. Segment adju
Slide 10: F2018 - Financial Highlights
F2018 - Financial Highlights Good full year performance with strong growth in the P&C businesses • Adjusted1 EPS $8.99, up 10% Y/Y (reported up 3%) Reported Adjusted1 ($MM) F2018 F2017 F2018 F2017 • Adjusted1 net income up 9% (reported up 2%) 2 Net Revenue 21,685 20,722 21,685 20,722 – U.S. Segment
Slide 11: Q4 2018 - Financial Highlights
Q4 2018 - Financial Highlights Adjusted1 net income up 17% Y/Y, with strong growth in P&C businesses Reported Adjusted1 • Adjusted1 EPS $2.32, up 19% Y/Y (reported up 42%) ($MM) Q4 18 Q3 18 Q4 17 Q4 18 Q3 18 Q4 17 • Adjusted1 net income up 17% (reported up 38%) Net Revenue 2 5,532 5,551 5,082 5,532
Slide 12: Strong Capital Position
Strong Capital Position Capital position strong with CET1 Ratio at 11.3% Common Equity Tier 1 Ratio +37 bps -23 bps -22 bps 11.4% -4 bps +1 bp 11.3% Q3 2018 Internal capital Higher source Acquisition Share Other Q4 2018 generation currency RWA repurchases Basis points may not add due to rounding. •
Slide 13: Operating Groups
Operating Groups
Slide 14: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Highly engaged team of dedicated employees focused on Capture key growth and loyalty opportunities by delivering providing a personalized banking experience, anticipating a leading digital experience and pe
Slide 15: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Net income up 8% Y/Y with continued momentum in commercial business • Adjusted1 and reported net income up 8% Y/Y Reported Adjusted1 • Revenue up 4% Y/Y ($MM) Q4 18 Q3 18 Q4 17 Q4 18 Q3 18 Q4 17 – Average loans up 4% Y/Y. Commercial2 up 12%; Revenue (teb) 1,968
Slide 16: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Rich Midwestern heritage dating back to 1847, with a We aim to grow our business and be a leader in our markets long-standing commitment to the success of our by creating a differentiated and intuitive partners
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Continued strong performance Figures that follow are in U.S. dollars Reported Adjusted1 • Adjusted1 net income up 31% Y/Y (reported up 33% Y/Y) (US$MM) Q4 18 Q3 18 Q4 17 Q4 18 Q3 18 Q4 17 • Revenue up 8% Y/Y Revenue (teb) 996 985 924 996 985 924 Total PCL 60 31 52
Slide 18: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Our Strategic Priorities • Planning and advice-based approach that integrates investment, Deliver on our clients’ current and evolving personal wealth, insurance, specialized wealth management and core banking insurance and institutional asset manage
Slide 19: BMO Wealth Management
BMO Wealth Management Good underlying net income growth Y/Y in Traditional Wealth • Adjusted1 net income up 21% Y/Y (reported up 25%) Reported Adjusted1 – Traditional Wealth down 2% Y/Y (reported flat); legal ($MM) Q4 18 Q3 18 Q4 17 Q4 18 Q3 18 Q4 17 provision, net of favourable U.S. tax item, had 8
Slide 20: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Our Strategic Priorities • Unified coverage and integrated distribution across our BMO Capital Markets' vision is to be a top 10 North American North American platform and complementary global investment bank, enabling clients to achieve their goals. W
Slide 21: BMO Capital Markets
BMO Capital Markets Solid performance, primarily driven by I&CB • Adjusted1 and reported net income lower than prior year Reported Adjusted1 reflecting current market conditions impacting Trading ($MM) Q4 18 Q3 18 Q4 17 Q4 18 Q3 18 Q4 17 Products as well as higher expenses Trading Products 629 638 6
Slide 22: Risk Overview
Risk Overview
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 • Diversify. Limit tail risk BMO Capital • Maintain strong capital and liquidity Markets Investment • Optimize risk return & Corporate • Prote
Slide 24: Provision for Credit Losses (PCL) on Impaired Loans
Provision for Credit Losses (PCL) on Impaired Loans Strong credit performance reflective of our consistent approach to effective risk management PCL on Impaired Loans as a % of Average Net Loans & Acceptances 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.53% 0.40% 0.38% 0.31% 0.20% 0.18% 0.00% '90 '91
Slide 25: 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 ($B, as at Q4 18) Residential Mortgages 108.0 11.6 119.6 29% 33% Canada Consumer Instalment and Other 53.2 10.0 63.2 16% 65% U.S. Personal Cards 7.
Slide 26: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q4 18 Q3 18 Q4 171 • Q4’18 PCL ratio on Impaired Loans at 18 bps, ($MM) flat Q/Q Consumer – Canadian P&C 99 96 98 • Allowance for Credit Losses on Performing Commercial – Canadian P&C 19 24 32 Loans decreased PCL by $2 million Total Canadian P
Slide 27: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations By Industry Formations Gross Impaired Loans • GIL ratio 48 bps, down 5 bps Q/Q ($MM, as at Q4 18) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 203 75 278 426 470 896 Service Industries 5 18 23 57 180 237 Agriculture 7 22 29 55 154 209 Transp
Slide 28: APPENDIX
APPENDIX
Slide 29: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 2017 2018E2 2019E2 2020E2 2017 2018E2 2019E2 2020E2 2017 2018E2 2019E2 2020E2 GDP Growth 3.0 2.1 1.8 1.7 2.2 2.9 2.5 1.7 2.4 1.9 1.6 1.7 Inflation 1.6 2.2 1.8 2.1 2.1 2.4 2.1 2.0 1.5 1.7 1.9 2.0 Interest Rate
Slide 30: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($139.7B) • Underweight exposure to uninsured real-estate secured loans $61.6 representing a modest 23% of total loans, below peer average of 31%, with strong credit quality 23% • Canadian P&C consumer lending contributes <15
Slide 31: Canada’s housing market is stable
Canada’s housing market is stable • Rising interest rates, tougher mortgage rules and provincial policy measures have slowed the housing market • The high-priced detached property markets in Toronto and Vancouver have taken the brunt of the impact, though the condo market remains healthy due to stea
Slide 32: Structure of the Canadian residential mortgage market with comparisons to the United States
Structure of the Canadian residential mortgage market with comparisons to the United States • Conservative lending practices, strong underwriting and documentation discipline have led to low delinquency rates — Over the last 30 years, Canada’s 90-day residential mortgage delinquency rate has never e
Slide 33: Oil and Gas Portfolio
Oil and Gas Portfolio Oil & Gas Drawn Exposure ($B) • $9.2B drawn exposure % of Total Loans • WCS drawn exposure: – 15% of total Oil & Gas; 0.4% of total loans – 78% investment grade • Of the total Exploration & Development 9.2 drawn exposure, approximately two-thirds is 2.3% borrowing base lending
Slide 34: Canadian Personal and Commercial Banking - Balances
Canadian Personal and Commercial Banking - Balances Average Gross Loans & Acceptances ($B) Average Deposits ($B) 219.1 224.8 227.0 159.8 162.5 154.3 99.7 100.0 100.3 99.5 101.0 98.1 45.3 45.7 45.5 8.9 8.9 8.6 64.7 70.9 72.4 56.2 60.3 61.5 Q4'17 Q3'18 Q4'18 Q4'17 Q3'18 Q4'18 Commercial Loans & Accept
Slide 35: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Average Gross Loans & Acceptances (US$B) Average Deposits (US$B) 84.71 86.71 78.81 5.2 5.2 5.2 11.5 73.7 11.5 Personal 70.5 Loans 65.0 9.5 6.0 5.8 5.5 3.5 3.6 25.7 3.2 1.5 1.3 23.6 1.7 22.1 Commercial 57.2 59.1 Loans 53.7 46.8 48.0 42.9 Q4'17 Q3'18 Q4'18
Slide 36: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk August 1, 2018 to October 31, 2018 (pre-tax basis and in millions of Canadian dollars) 70 60 50 40 30 20 10 0 (10) (20) (30) Daily Revenue Total Trading VaR Investor Presentation December 2018 36
Slide 37: Sustainability Principles
Sustainability Principles BMO is dedicated to pursuing growth in a responsible and sustainable manner. Our sustainability principles sit alongside our strategic priorities and represent the inextricable connection between financial performance and corporate responsibility. Our success as a business
Slide 38: 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 • BMO Capital Markets has underwritten over US$6.3B in sustainable bonds in F2018 including, US$4.8B in Responsible investment green bonds and US$1.5B in sustainable
Slide 39: 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 40: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com JILL HOMENUK CHRISTINE VIAU Head, Investor Relations Director, Investor Relations 416.867.4770 416.867.6956 jill.homenuk@bmo.com christine.viau@bmo.com
Bank of Montreal — Investor Presentation (December 2018) on 6ix