Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q4 2023 Earnings Presentation
44 slides from Bank Of Montreal's earnings presentation, Dec 1, 2023
Slide 1: Investor Presentation Q4 23
BMO Financial Group Investor Presentation For the Quarter Ended October 31, 2023 December 1, 2023 Q4 23
Slide 2: Caution Regarding Forward-Looking Statements
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 securities regulators or the U.S. Securities and E
Slide 3: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q4 23
Slide 4: Significant progress in a challenging environment
Significant progress in a challenging environment F2023 Net Income EPS PPPT2 Growth Total Assets Adjusted1 $8.7B Adjusted1 $11.73 Adjusted1 5% $1.3T Reported1 $4.4B Reported1 $5.68 Reported1 (56%) Efficiency Ratio3 ROE ROTCE4 CET15 Adjusted1 59.8% Adjusted1 12.3% Adjusted1 15.8% 12.5% Reported1 72.5
Slide 5: Successful Conversion of Bank of the West
Successful Conversion of Bank of the West Positioned for growth in our new home markets 2 Million 300+ 500+ Customers welcomed Systems converted Branches rebranded 90%+ 2.7 Million Active Digital users re-enrolled in the first week Accounts converted yore fertee AIM than the al two largest banks. Co
Slide 6: Dynamic actions to drive long-term performance
Dynamic actions to drive long-term performance Strong foundation from executed initiatives… …driving benefits for near- and long-term performance Exceeding cost synergy expectations, with run rate Completed Bank of the West conversion benefits of >US$800MM Marketing campaign in play across our expan
Slide 7: Our Purpose
Our Purpose For a Thriving Economy • Launched BMO EMpower™ 2.0, pledging more than US$40 billion to support organizations in communities Providing access to capital and across the United States focused on advancing home ownership, growing small businesses, strengthening valuable financial advice – i
Slide 8: Committed to our strategic priorities and financial objectives
Committed to our strategic priorities and financial objectives Strategic priorities Medium-term objectives (adjusted)1,2 Strong Strategic Fit World-class loyalty and growth powered by One Client leadership EPS growth of 7-10% Winning culture driven by alignment, empowerment and recognition Return on
Slide 9: Financial Results
Financial Results For the Quarter Ended October 31, 2023 Tayfun Tuzun Chief Financial Officer Q4 23
Slide 10: Bank of the West: Positioned for growth post-conversion
Bank of the West: Positioned for growth post-conversion Franchise strength Scale benefits Areas of opportunity In-year cost savings (US$) • Core performance in line with expectations $550MM US$800MM run rate cost synergies Total BMO • Strong capital position Executing revenue synergy opportunities >
Slide 11: F2023 - Financial Highlights
F2023 - Financial Highlights Good PPPT1 performance in an evolving environment, positioned for continued growth • Adjusted2 EPS $11.73, down 11% Y/Y (reported $5.68, Reported Adjusted2 down 72%) ($MM) F2023 F2022 F2023 F2022 • Adjusted2 net income down 4% Y/Y (reported down 68%) Gross Revenue 31,199
Slide 12: Q4 F2023 - Financial Highlights
Q4 F2023 - Financial Highlights Strong PPPT1 growth driven by Canadian P&C, BMO Capital Markets and Bank of the West • Adjusted2 EPS $2.81, down 8% Y/Y (reported $2.06, Reported Adjusted2 down 68%) ($MM) Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 • Adjusted2 net income up 1% Y/Y (reported down 64%) Gross R
Slide 13: Balance Sheet
Balance Sheet Diversified loan and deposit portfolio, with higher balances Q/Q Average Gross Loans and Acceptances ($B) • Average gross loans and acceptances up 18% Y/Y due to: – 16% growth in Business & government loans driven by Bank 656.8 644.0 of the West and good growth in Canadian P&C, BMO Cap
Slide 14: Net Interest Margin
Net Interest Margin1 • Total bank ex trading NIM was relatively stable, down 2 bps reflecting continued deposit pricing pressure including rotation to term deposits • Higher NIM in U.S. P&C, primarily reflecting a one-time conversion adjustment, offset in Corporate Services NII ($MM) and NIM ex. Tra
Slide 15: F2023 Non-Interest Expense
F2023 Non-Interest Expense Dynamic expense management leading to improving trends Y/Y Change in Non-Interest Expense ($MM) • Adjusted1 expenses up 24% Y/Y 31% Reported (reported up 31%) 24% Adjusted1 0% Reported – Acquisitions3 contributed 15% to the 4% Adjusted1 increase in adjusted1 expenses 21,21
Slide 16: Strong Q4'23 CET1 Ratio of 12.5%
Strong Q4’23 CET1 Ratio1 of 12.5% Common Equity Tier 1 Ratio1,2 +11 bps -11 bps +21 bps -1 bp -5 bps 12.5% 12.3% Q3’23 Internal capital DRIP Acquisition and Source currency Other Q4’23 generation integration costs3 RWA • Q4’23 CET1 ratio1 of 12.5%, up from Q3’23 – Internal capital generation – DRIP
Slide 17: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Record PPPT2 performance and strong volume growth • Adjusted1 and reported net income up 5% Y/Y Reported Adjusted1 • Adjusted1 and reported PPPT2 up 13% Y/Y ($MM) Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 Net interest income 2,166 2,129 1,961 2,166 2,129 1,961 • Reve
Slide 18: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Results reflect muted U.S. banking environment, offset by contribution from Bank of the West Amounts that follow are in U.S. dollars: Reported Adjusted1 1 (US$MM)3 Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 • Adjusted net income up $54MM or 11% Y/Y (reported down $2MM or
Slide 19: BMO Wealth Management
BMO Wealth Management Good growth in client assets offset by deposit migration and higher expenses Reported Adjusted1 • Adjusted1 and reported net income down 12% Y/Y ($MM) Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 • Wealth and Asset Management adjusted1 net income Gross Revenue 1,508 1,422 930 1,508 1,42
Slide 20: BMO Capital Markets
BMO Capital Markets Strong revenue2 and PPPT3 performance reflect improved market conditions • Adjusted1 net income up 36% Y/Y (reported up 37%) Reported Adjusted1 • Adjusted1 PPPT3 up 39% Y/Y (reported up 40%) ($MM)2 Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 • Revenue2 up 19% Y/Y: Global Markets 951 870
Slide 21: Corporate Services
Corporate Services • Adjusted1 net loss of $311MM and reported net loss of Reported Adjusted1 $757MM, compared with adjusted1 net loss of $104MM ($MM)2 Q4 23 Q3 23 Q4 22 Q4 23 Q3 23 Q4 22 and reported net income of $2,251MM in the prior year Revenue (141) (152) 4,003 (127) (11) (23) • Reported resul
Slide 22: Risk Review
Risk Review For the Quarter Ended October 31, 2023 Piyush Agrawal Chief Risk Officer Q4 23
Slide 23: F2023 Risk Highlights
F2023 Risk Highlights Provision for Credit Losses • F2023 PCL on impaired loans $1.2B or 19 bps, up 9 bps Y/Y reflecting (PCL) by Operating Group F2023 F2022 normalizing credit conditions ($MM) • F2023 total adjusted5 PCL $1.5B or 24 bps; total reported PCL $2.2B or $ Bps1,2 $ Bps1,2 35 bps Personal
Slide 24: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q4’23 PCL ratio on impaired loans1 is 25 bps, Q4 23 Q3 23 Q4 22 ($MM) up 4 bps Q/Q $ bps1,2 $ bps1,2 $ bps1,2 Personal & Business Banking 206 38 174 33 117 23 PCL on Impaired Loans ($MM) Commercial Banking 42 16 35 13 25 10 Total Canadian P&
Slide 25: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans • Q4’23 PCL on performing loans of $38MM, Allowance on Performing Q4 23 primarily reflecting portfolio credit migration, Loans (APL) and PCL on APL to Q3 23 Q4 23 Foreign Q4 23 largely offset by an improvement in the Performing Loans (PCL) Performing APL1
Slide 26: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross impaired loans (GIL) ratio3 59 bps, up 15 bps Q/Q Formations Gross Impaired Loans mainly due to higher B&G GIL By Industry • GIL ratio is in line with pre-pandemic levels ($MM, as at Q4 23) CA & CA & U.S. Total U.S. Total Other Other1 Formations ($MM) 1,76
Slide 27: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances • Portfolio is well diversified by geography and Canada & Total % of industry By Industry U.S. Other1 BMO Total ($B, as at Q4 23) • Total Gross Loans & Acceptances up 4% Q/Q or 1% Residential Mortgages 150.6 26.7 177.3 26% excluding impact of the str
Slide 28: Canadian Mortgage Portfolio: Renewal profile
Canadian Mortgage Portfolio: Renewal profile • The impact of higher interest rates on payments is primarily realized upon renewal for both fixed-rate and variable-rate mortgages • Variable-rate mortgages with fixed payments are impacted through an extension of amortization until renewal. At renewal,
Slide 29: Appendix
Appendix BMO
Slide 30: Commercial Real Estate
Commercial Real Estate • Commercial Real Estate (CRE) portfolio at $69.8B represents 10% CRE by Geography2 of Total bank Gross Loans & Acceptances (GL&A ) British Columbia 13% • CRE GL&A up 5% Q/Q or 2% excluding impact of the stronger U.S. Quebec 7% dollar Ontario 19% Alberta 5% • Portfolio is well
Slide 31: Canadian Residential Secured Lending Portfolio Overview
Canadian Residential Secured Lending Portfolio Overview • Total Canadian residential-secured lending portfolio at $199.3B, Residential-Secured Lending by Region ($199.3B) representing 30% of total loans HELOC $96.0 Uninsured Mortgages $39.2 ─ LTV1 on uninsured of 50% Insured Mortgages 26% ─ 90-day d
Slide 32: Trading-Related Net Revenue and Value-at-Risk
Trading-Related Net Revenue and Value-at-Risk August 1, 2023 to October 31, 2023 (pre-tax basis and in millions of Canadian dollars) 40 30 20 10 0 (10) (20) (30) (40) Daily Revenue Total Trading VaR Risk Review December 1, 2023 32
Slide 33: Advancing our Digital First strategy
Advancing our Digital First strategy Continuing to deliver on our Driving digital engagement Recognized for industry leadership Digital First agenda Active Digital Users, Retail (000)1 • Drove a successful conversion of the +8% • Ranked first in customer satisfaction Bank of the West customer accoun
Slide 34: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances Average Gross Loans & Acceptances ($B) Average Deposits ($B) 316.2 321.0 283.9 304.2 276.6 253.1 125.0 131.6 134.8 191.1 194.8 6.2 6.4 6.5 173.8 59.1 58.7 58.7 10.1 11.6 12.1 103.7 107.9 109.0 79.3 85.5 89.1 Q4'22 Q3'23 Q4'23 1 Q4'22 Q3'23 Q4'23 Comm
Slide 35: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Amounts on this slide are in U.S. dollars1 Average Gross Loans & Acceptances (US$B) Average Deposits (US$B) 157.6 157.3 157.6 158.0 38.8 40.0 106.6 110.1 73.0 74.5 15.6 48.0 118.8 117.3 91.0 84.6 83.5 62.1 Q4'22 Q3'23 Q4'23 Q4'22 Q3'23 Q4'23 2 Commercial
Slide 36: Canadian and U.S. deposit trends
Canadian and U.S. deposit trends Canadian P&C and BMO Wealth Management deposits CDE$B, average balances 328 321 309 314 • Continued strong balance growth through customer acquisition, a 290 7% 266 5% 6% 6% comprehensive onboarding program and new products and tools 3% 238 2% 21% 20% 20% 20% • Conti
Slide 37: Asset Yields and Liabilities Costs
Asset Yields1 and Liabilities Costs2 Average Earning Assets ($B) and Yield1 (%) Average Liabilities ($B) and Costs2 (%) 5.06% 5.26% Yield on Total 2.65% 3.08% 3.30% 3.49% Cost on Total 4.18% 4.85% 2.02% 3.54% Average Liabilities Earning Assets 1,194 1,191 1,211 1,079 1,165 1,161 1,178 1,101 1,022 1,
Slide 38: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to an incremental +100bps rate shock decreased • Term rates increased in Q4’23 to historical highs and continue modestly Q/Q, reflecting a relatively neutral positioning to be volatile • Year 2 benefit to rising rates (+100bps) of approximately • Sustained
Slide 39: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures Results and measures in this document are presented on a generally accepted accounting principles (GAAP) basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepar
Slide 40: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures8 (Canadian $ in millions, except as noted) Q4 23 Q3 23 Q2 23 F2023 F2022 (1) Reported net income in fiscal 2022 included the impact of divestitures related to the sale of our EMEA Reported Net interest income and U.S. Asset Management businesses, recorded in Cor
Slide 41: Summary of Reported and Adjusted Results by Operating Group
Summary of Reported and Adjusted Results by Operating Group (Canadian $ in millions unless otherwise stated) Q4 23 Q3 23 Q2 23 Q1 23 Q4 22 F2023 F2022 Canadian P&C Reported Net Income 962 915 861 980 917 3,718 3,826 Acquisition and integration costs 1 6 2 — — 9 — Amortization of acquisition-related
Slide 42: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage Canadian $ in millions unless otherwise stated) Q4 23 Q3 23 Q2 23 Q1 23 Q4 22 F2023 F2022 Total Bank Total revenue 8,360 7,929 8,440 6,470 10,570 31,199 33,710 Reported Insurance claims, commissions and changes in policy benefit liabilities (CCPB)
Slide 43: Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation
Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation (Canadian $ in millions unless otherwise stated) Q4 23 Q3 23 Q2 23 Q1 23 Q4 22 F2023 F2022 Total Bank Reported Income before taxes 2,063 1,839 1,304 657 5,937 5,863 17,886 Total provision for (recovery of) credit losses 446 492 1,023 217 226 2,17
Slide 44: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON PERRY CHEN‐SEE Director, Investor Relations Director, Investor Relations 416.867.7834 416.359.8074 bill2.anderson@bmo.com perry.chensee@bmo.com