Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q1 2016 Earnings Presentation
38 slides from Bank Of Montreal's earnings presentation, April 2016
Slide 1: Investor Presentation Q1 2016
Investor Presentation April 2016 Q1 16 Investor Presentation Q1 2016 1
Slide 2: Forward looking statements & non-GAAP measures
Forward looking statements & non-GAAP measures Caution Regarding Forward-Looking Statements certain key factors and risks that may affect Bank of Montreal’s future results. When relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and Bank of Montreal’s
Slide 3: BMO Financial Group: Who we are
BMO Financial Group 8th largest bank in North America1 with an attractive and diversified business mix Who we are Q1 2016 Results * Adjusted2 Reported Net Revenue ($B)3 4.8 4.7 • Established in 1817, Canada’s first bank Net Income ($B) 1.2 1.1 • In Canada: a full service, universal bank across EPS (
Slide 4: Reasons to Invest
Reasons to Invest Clear opportunities for growth across a • Strong capital position with an attractive diversified North American footprint: dividend yield • Large North American commercial banking • Focus on efficiency through technology business with advantaged market share innovation, simplifying
Slide 5: Investor Presentation Q1 2016
Investor Presentation Q1 2016 5
Slide 6: BMO's Strategic Footprint
BMO’s Strategic Footprint Our three operating groups serve individuals, businesses, governments and corporate customers across Canada and the United States with a focus in six U.S. Midwest states – Illinois, Indiana, Wisconsin, Minnesota, Missouri and Kansas. Our significant presence in North Americ
Slide 7: A diversified business mix with ~80% of earnings from retail businesses
A diversified business mix with ~80% of earnings from retail businesses Adjusted Net Income by Canadian P&C Operating Group – LTM1,2 • Full range of financial products and services to over 8 million customers • Over 900 branches and 3,400 ABMs • Strong commercial banking business, reflected in our n
Slide 8: A large North American commercial banking business with advantaged market share
A large North American commercial banking business with advantaged market share Canadian P&C Commercial Loans and Acceptances – Canadian P&C ($B) • Good commercial lending growth2, up 9% Y/Y with growth across a number of industry sectors +9% • Strong competitive position, ranked 2nd in Canadian mar
Slide 9: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Dividends Declared ($ per share) 15-year CAGR +8% • Annual common dividend of $3.361 per share • Dividend yield: 4.47%2 • BMO has the longest running dividend payout 2.94 3.08 3.24 2.71 2.80 2.80 2.80 2.80 2.82 record of any company in Canada, at
Slide 10: Capital & Risk Weighted Assets
Capital & Risk Weighted Assets CET1 Ratio strong at 10.1% • Common Equity Tier 1 Ratio of 10.1%, ~60 bps lower than Q4’15 Common Equity Tier 1 Ratio (%) – BMO Transportation Finance acquisition impact of ~60 bps, in line with expectations – Higher CET1 capital mainly from AOCI1 and retained earnings
Slide 11: Digital technology is transforming our business
Digital technology is transforming our business Extended technology capabilities delivering against a clear set of goals: • More personalized, intuitive applications • A more unified customer experience across channels and geographies • Faster delivery to market • Enhanced risk management • Digitiza
Slide 12: Q1 2016 - Financial Highlights
Q1 2016 - Financial Highlights Good operating results with adjusted net income of $1.2B, EPS up 14% Y/Y • Adjusted EPS of $1.75 up 14% Y/Y Adjusted ($MM)3 Q1 15 Q4 15 Q1 16 • Adjusted net income up 13% Y/Y Net Revenue4 4,308 4,719 4,793 • Net revenue up 11% Y/Y or 6% in constant currency1 PCL 163 12
Slide 13: Operating Groups
Operating Groups Investor Presentation Q1 2016 13
Slide 14: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Strong commercial banking business, reflected by BMO’s Our strategy is focused on capturing key growth and number two ranking in Canadian market share for loyalty opportunities while capitalizing on the shi
Slide 15: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Adjusted net income growth of 5% Y/Y and positive operating leverage of 1.5% • Adjusted net income of $530MM with PPPT1 growth of 8% Adjusted ($MM)2 Q1 15 Q4 15 Q1 16 • Revenue up 6% Y/Y with higher balances and non-interest Revenue (teb) 1,628 1,710 1,725 reve
Slide 16: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Our Strategic Priorities • Rich heritage of more than 160 years in the U.S. We aim to grow our business and be a leader in our Midwest, with a deep commitment to our communities markets by creating a differentiated, intuitive customer an
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strong growth with adjusted net income up 29% or 11% in USD Adjusted (US$MM)1 Q1 15 Q4 15 Q1 16 • Adjusted net income of $264MM, up 29% Y/Y. Figures that follow are in U.S. dollars Revenue (teb) 722 724 828 • Adjusted net income up 11% Y/Y PCL 33 33 47 • BMO Transp
Slide 18: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Our Strategic Priorities • Planning and advice-based approach that integrates Our aim is to be the wealth management solutions investment, insurance, specialized wealth management and provider that defines great client experience. Our strategy core b
Slide 19: BMO Wealth Management
BMO Wealth Management Solid underlying results in a challenging market • Adjusted net income impacted by market conditions Adjusted1 ($MM) Q1 15 Q4 15 Q1 16 – Traditional Wealth net income flat Y/Y; down Q/Q as Net Revenue2 1,035 1,192 1,071 the prior quarter benefited from gain on sale PCL 2 1 2 –
Slide 20: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Our Strategic Priorities • Unified coverage approach and integrated distribution BMO Capital Markets’ aim is to be the lead investment creates an exceptional client experience across our North bank that enables our clients to achieve their ambitions. A
Slide 21: BMO Capital Markets
BMO Capital Markets Good results given market environment • Adjusted net income up 18% Y/Y from below-trend results a Adjusted ($MM)2 Q1 15 Q4 15 Q1 16 year ago Trading Products 570 564 589 • Revenue up 11% Y/Y Revenue – Up 6% in constant currency1 as higher merger and I&CB Revenue 350 372 431 acqui
Slide 22: Risk Overview
Risk Overview Investor Presentation Q1 2016 22
Slide 23: Risk Management
Risk Management We have a disciplined and integrated approach to risk Our Approach to Risk Management Diversified Sources of Revenue1 • Understand and manage BMO Capital • Protect our reputation Markets • Diversify. Limit tail risk Canadian P&C Investment • Maintain strong capital and liquidity & Co
Slide 24: Our loans are well diversified by geography and industry
Our loans are well diversified by geography and industry Gross Loans & Acceptances Loans by Geography3 Canada & By Industry U.S. Total % of Total 3% Other1 (C$B) Residential Mortgages 97.6 9.4 107.0 30% Personal Lending 49.4 16.5 65.9 18% 33% Other Cards 7.3 0.6 7.9 2% U.S. 64% Total Consumer 154.3
Slide 25: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • PCL ratio at 21 bps, up from prior quarter which Q1 15 Q4 15 Q1 161 (C$MM) included U.S. loan sale Consumer – Canadian P&C 104 95 113 Commercial – Canadian P&C 28 17 27 Quarterly Specific PCL (C$MM) Total Canadian P&C 132 112 140 Consumer –
Slide 26: Historical specific PCL as a percentage of average net loans and acceptances
Historical specific PCL as a percentage of average net loans and acceptances 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.41% 0.40% 0.30% 0.20% 0.24% 0.21% 0.00% '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16Q1 BMO BMO (exclude M&I PCI) Cdn
Slide 27: Oil and Gas and Alberta Portfolios
Oil and Gas and Alberta Portfolios Oil and Gas Balances – By Sector (C$B) Oil and Gas – Corporate/Commercial $0.9 • Oil and Gas loans of $7.4B; 2% of total bank loans 12% with >50% investment grade $1.4 Exposure in Alberta 19% • Alberta consumer represents ~6% of total bank loans of which over 80% i
Slide 28: Canadian Residential Mortgages
Canadian Residential Mortgages • Total Canadian residential mortgage portfolio at $97.6B or 43% of Canadian gross loans and acceptances – 59% of the portfolio is insured – Loan-to-value (LTV)1 on the uninsured portfolio is 57%2 – 71% of the portfolio has an effective remaining amortization of 25 yea
Slide 29: Appendix
Appendix Investor Presentation Q1 2016 29
Slide 30: Economic Outlook and Indicators
Economic Outlook and Indicators Canada United States Eurozone Economic Indicators (%)1 2015 2016E 2017E 2015 2016E 2017E 2015 2016E 2017E GDP Growth 1.2 1.8 2.1 2.4 2.1 2.3 1.5 1.4 1.6 Inflation 1.1 1.6 1.9 0.1 1.6 2.4 0.0 0.4 1.4 Interest Rate (3mth Tbills) 0.53 0.46 0.64 0.05 0.46 1.02 (0.02) (0.2
Slide 31: Canada's Housing Market
Canada’s Housing Market • Sales remain steady across most regions, but low oil prices have impacted sales in energy-producing provinces • Most regions are expected to see modestly rising prices, while the oil-producing provinces face further moderate declines • Rapid price gains in Toronto and Vanco
Slide 32: Canada's housing market remains resilient
Canada’s housing market remains resilient • Steady immigration, young buyers, low mortgage rates and foreign wealth continue to drive home sales • Mortgage delinquencies remain near record lows, though have turned up in Alberta • House prices are accelerating in Toronto and Vancouver, but falling in
Slide 33: Canadian Personal and Commercial Banking - Balances
Canadian Personal and Commercial Banking - Balances Average Loans & Acceptances ($B) Average Deposits ($B) 198.3 201.7 192.7 92.2 93.3 139.5 89.2 131.4 135.4 43.6 43.9 83.3 85.3 87.6 43.6 8.7 8.6 8.7 51.2 53.9 55.8 51.9 48.1 50.1 Q1'15 Q4'15 Q1'16 Q1'15 Q4'15 Q1'16 Residential Mortgages Consumer Loa
Slide 34: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Average Loans & Acceptances (US$B) Average Deposits (US$B) 72.1* 65.6* 66.7* 5.4 5.3 Personal 5.0 10.3 Loans 11.2 10.6 5.1 5.0 63.5 64.9 4.9 6.4 61.7 6.9 6.8 2.3 3.0 2.5 26.0 24.6 26.0 Commercial Loans 42.6 34.6 36.5 37.1 37.5 38.9 Q1'15 Q4'15 Q1'16 Q1'1
Slide 35: Corporate Governance
Corporate Governance • Code of Conduct based on BMO’s values, provides ethical guidance and expectations of behaviour for all directors, officers and employees • Governance practices reflect emerging best practices and BMO meets or exceeds legal, regulatory, TSX and NYSE requirements • Director inde
Slide 36: Sustainability at BMO
Sustainability at BMO Operating our business responsibly and considering the social and environmental impacts of our activities Sustainability • Attained and maintained Carbon Neutrality across the enterprise since 2010 Initiatives • Achieved ISO 14001 certification for Environmental Management Syst
Slide 37: Adjusting Items
Adjusting Items Adjusting1,2,3 items – Pre-tax ($MM) Q1 15 Q4 15 Q1 16 Amortization of acquisition-related intangible assets (40) (43) (43) Acquisition integration costs (13) (20) (22) Cumulative accounting adjustment - - (85) Adjusting items included in reported pre-tax income (53) (63) (150) Adjus
Slide 38: Investor Relations
Investor Relations Contact Information Fax: 416.867.3367 bmo.com/investorrelations E-mail: investor.relations@bmo.com LISA HOFSTATTER CHRISTINE VIAU Managing Director, Investor Relations Director, Investor Relations 416.867.7019 416.867.6956 lisa.hofstatter@bmo.com christine.viau@bmo.com Investor Pr