Bank Of Montreal · TSX:BMO
Bank Of Montreal — Investor Presentation (April 2018)
39 slides from Bank Of Montreal's investor presentation, April 2018
Slide 1: Investor Presentation April 2018
Investor Presentation April 2018 Investor Presentation April 2018 1
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 Q1’18 Results * Adjusted2 Reported Net Revenue ($B)3 5.3 5.3 • Established in 1817, Canada’s first bank Net Income ($B) 1.4 1.0 • In Canada: a full service, universal bank across EPS ($)
Slide 4: 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 5: Diversified by businesses, customer segments and geographies
Diversified by businesses, customer segments and geographies Adjusted Net Income by Canadian P&C Operating Group – LTM1 • Full range of financial products and services to eight million customers • Advice available from our employees at their place of business, in over 900 branches, on their mobile d
Slide 6: Reasons to Invest
Reasons to Invest • Strong, diversified businesses that continue to • Well-capitalized with an attractive dividend yield deliver robust earnings growth and long-term value for shareholders: • Efficiency-focused, enabled by technology innovation, simplification, process enhancement – Large North Amer
Slide 7: Our priorities are clear
Our priorities are clear Our strategic framework outlines the basic principles that sustain our growth Our Strategic Priorities Sustainability Principles The clearly defined statements of purpose that guide the The guidelines we follow as a responsibly managed bank consider bank’s long-term decision
Slide 8: Unified, Simplifying and Accelerating
Unified, Simplifying and Accelerating • Thinking like a customer to deliver fast, simple, intuitive banking however they choose to Customer interact with us Experience • Using advanced analytics to personalize customer experiences and strengthen relationships, while keeping their information secure
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 ~25% of the bank’s earnings in Q1’18; diversified businesses are delivering strong growth and improving efficiency – Total U.S. Seg
Slide 10: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Dividends Declared ($ per share) F2017 15-year CAGR ~8% • Quarterly dividend of $0.93 per share, up 6% from prior year 1 3.72 • Dividend yield of 3.8%1 3.24 3.40 3.56 2.94 3.08 • BMO has the longest running dividend payout 2.71 2.80 2.80 2.80 2.80
Slide 11: Q1 2018 - Financial Highlights
Q1 2018 - Financial Highlights Good performance with strong operating revenue growth in P&C businesses • Reported EPS $1.43 and net income $973MM Reported Adjusted1 – Includes $425MM charge for revaluation of U.S. net deferred tax ($MM) Q1 18 Q4 17 Q1 17 Q1 18 Q4 17 Q1 17 asset given U.S. tax reform
Slide 12: Strong Capital Position
Strong Capital Position Well capitalized with CET1 Ratio at 11.1% Common Equity Tier 1 Ratio +28 bps +2 bps -11 bps -17 bps 11.4% -24 bps 11.1% 2017 Q4 Internal capital Other Share U.S. net DTA Higher source 2018 Q1 generation1 repurchases revaluation currency RWA Basis points may not add due to rou
Slide 13: Operating Groups
Operating Groups Investor Presentation April 2018 13
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 Continued good operating performance and revenue growth • Net income of $647MM down (13)% Y/Y Reported Adjusted1 – Negative impact of 22% from net gains3 in Q1’18 and Q1’17 ($MM) Q1 183 Q4 17 Q1 173 Q1 183 Q4 17 Q1 173 • Revenue down 2% Y/Y – 8% net negative im
Slide 16: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Rich heritage of 170 years in the U.S. Midwest, with a We aim to grow our business and be a leader in our markets deep commitment to our communities and helping our by creating a differentiated and intuitive pa
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strong net income and revenue growth with positive operating leverage • Reported net income of $310MM, up 24% Y/Y Reported Adjusted1 • Adjusted1 net income of $321MM, up 23% Y/Y (US$MM) Q1 18 Q4 17 Q1 17 Q1 18 Q4 17 Q1 17 Figures that follow are in U.S. dollars Rev
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 business growth • Reported net income $266MM Reported Adjusted1 • Adjusted1 net income $276MM, down 3% Y/Y ($MM) Q1 18 Q4 174 Q1 17 Q1 18 Q4 174 Q1 17 – Traditional Wealth up 8% Y/Y (reported up 12%) from business growth and improved equity markets Net Revenue2 1,244 1,111
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 the lead North American North American platform and complementary global investment bank enabling clients to achieve their goals. We
Slide 21: BMO Capital Markets
BMO Capital Markets With less constructive markets and lower client activity, net income down from strong Q1’17 • Adjusted1 and reported net income down from strong Reported Adjusted1 performance in prior year reflecting market conditions ($MM) Q1 18 Q4 17 Q1 17 Q1 18 Q4 17 Q1 17 • Revenue down 11%
Slide 22: Risk Overview
Risk Overview Investor Presentation April 2018 22
Slide 23: Risk Management
Risk Management We have a disciplined and integrated approach to risk Our Approach to Risk Management Diversified Sources of Revenue1 • Understand and manage BMO Capital • Protect our reputation Markets • Diversify. Limit tail risk Canadian P&C Investment • Maintain strong capital and liquidity & Co
Slide 24: Our loans are well diversified by geography and industry
Our loans are well diversified by geography and industry Loans by Geography3 Gross Loans & Acceptances Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q1 18) Residential Mortgages 106.4 10.7 117.2 32% 30% Canada Consumer Instalment and Other 67% U.S. 51.9 9.2 61.1 16% Personal Other Car
Slide 25: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q1 18 Q4 17 Q1 17 • Q1’18 PCL ratio on Impaired Loans at 19 bps, ($MM) down 3 bps Q/Q Consumer – Canadian P&C 91 98 94 • Allowance for Credit Losses on Performing Loans Commercial – Canadian P&C 6 32 19 declined, reducing PCL by $33 million, w
Slide 26: 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 0.53% 0.39% 0.31% 0.19% 1) BMO F2016 and F2017 PCL on impaired loans and average net loans
Slide 27: Canadian Residential Mortgages
Canadian Residential Mortgages • Total Canadian residential mortgage portfolio at $106.4B, Residential Mortgages by Region ($B) $106.4 representing 28% of total loans, lowest of the peer group ─ 68% of the portfolio has an effective remaining Uninsured amortization of 25 years or less Insured ─ Less
Slide 28: Canada's housing market remains resilient
Canada’s housing market remains resilient • Steady immigration, young buyers, low mortgage rates and foreign wealth continue to support home sales • Previous actions by the Ontario Government have cooled the earlier hot housing market in the Toronto region. Tougher mortgage underwriting rules that t
Slide 29: Structure of the Canadian residential mortgage market with comparisons to the U.S.
Structure of the Canadian residential mortgage market with comparisons to the U.S. • Conservative lending practices, strong underwriting and documentation discipline have led to low delinquency rates — Over the last 30 years, Canada’s 90-day residential mortgage delinquency rate has never exceeded 0
Slide 30: Recent mortgage policy developments in Canada
Recent mortgage policy developments in Canada October 2017 – Revisions to OSFI Guideline B-20 - Residential Mortgage Underwriting Practices and Procedures (effective January 1, 2018) • Strengthens expectations in a number of key areas in the residential mortgage underwriting process including: — Req
Slide 31: Appendix
Appendix Investor Presentation April 2018 31
Slide 32: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 2016 2017E2 2018E2 2019E2 2016 2017E2 2018E2 2019E2 2016 2017E2 2018E2 2019E2 GDP Growth 1.4 3.0 2.0 1.8 1.5 2.3 2.8 2.5 1.8 2.3 2.3 1.8 Inflation 1.4 1.6 2.2 2.1 1.3 2.1 2.6 2.1 0.2 1.5 1.4 1.8 Interest Rate
Slide 33: Canadian Personal and Commercial Banking - Balances
Canadian Personal and Commercial Banking - Balances Average Gross Loans & Acceptances ($B) Average Deposits ($B) 212.8 219.1 220.2 154.3 157.6 150.1 100.3 100.3 98.4 95.0 98.1 98.4 44.9 45.5 45.4 8.6 8.6 8.8 60.9 64.7 65.7 55.1 56.2 59.2 Q1'17 Q4'17 Q1'18 Q1'17 Q4'17 Q1'18 Commercial Loans & Accepta
Slide 34: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Average Gross Loans & Acceptances (US$B) Average Deposits (US$B) 76.0* 78.8* 80.1* 5.2 5.2 5.3 9.5 11.3 67.6 9.7 Personal 67.1 65.0 5.6 5.7 Loans 5.5 3.2 3.2 3.8 1.7 1.5 23.3 1.7 24.7 22.1 Commercial 50.0 53.6 53.2 Loans 42.4 42.9 44.3 Q1'17 Q4'17 Q1'18
Slide 35: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations Formations Gross Impaired Loans • GIL ratio 57 bps, down 2 bp Q/Q By Industry ($MM, as at Q1 18) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 213 83 296 475 480 955 Agriculture 6 4 10 51 158 209 Service Industries 3 65 68 56 224 280 Transpor
Slide 36: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk November 1, 2017 to January 31, 2018 (pre-tax basis and in millions of Canadian dollars) 35 30 25 20 15 10 5 0 (5) (10) Daily Revenue Total Trading VaR Investor Presentation April 2018 36
Slide 37: 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 has two impact investing funds – the BMO Women in Leadership Fund, which focuses on gender Responsible Investment diversity, and the BMO Fossil Fuel Free Fund
Slide 38: 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 39: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com Jill Homenuk Christine Viau Head of Investor Relations Director, Investor Relations 416.867.4770 416.867.6956 jill.homenuk@bmo.com christine.viau@bmo.com Investor Presentation April 2018 39
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