Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q4 2011 Earnings Presentation
38 slides from Bank Of Montreal's earnings presentation, Dec 6, 2011
Slide 1: Investor Presentation Q4 11
Investor Presentation Q4 11 December 6 y 2011 Risk Review • December 6 • 2011 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: Strategic Highlights Q4 11
Strategic Highlights Q4 11 Bill Downe President & Chief Executive Officer BMO Financial Group December Risk Review • December 6 y 20113 6 • 2011
Slide 4: 2011 A Year of Progress
2011 A Year of Progress Strategic Priorities Drive quality earnings growth across all North Relentless Customer Focus 1 American personal and commercial banking businesses, by focusing on industry-leading Remain focused on our strategy and our customer experience and enhancing operating customers
Slide 5: Financial Results
Financial Results Fourth quarter financial results contributed to strong 2011 performance C$ millions unless otherwise indicated Q4 11 F2011 Revenue 3,881 13,718 PCL 290 857 Q4 revenue growth 20% driven by acquisitions; over 80% of adjusted Expense 2,425 8,605 operating revenues and net income Net
Slide 6: Operating Group Performance
Operating Group Performance Annual Group Net Income * C$ millions unless otherwise indicated P & C Banking P & C Banking Private Client BMO Canada U.S. Group Capital Markets (US$) 10% 75% 13% 13% Y/Y Growth 1640 1,701 1,640 1701 1,495 1,643 394 528 466 816 920 223 460 518 359 205 F2010 F2011 F2010 F
Slide 7: North American Markets
North American Markets Canada U.S. IL, WI, MN, Western Central Atlantic KS, MO, IN GDP ($B) 584.5 931.8 99.0 1,816.7 Population (millions) 10.7 21.3 2.4 39.2 Unemployment Rate (%) 5.9 8.0 10.1 8.5 Avg. Annual Earnings ($) 46,850 44,000 41,450 43,500 Support from low interest rates, firm commodity
Slide 8: Financial Results Q4 11
Financial Results Q4 11 Tom Flynn Executive Vice President & Chief Financial Officer BMO Financial Group Risk ReviewDecember • 2011y 2011 8 • December 6 6th
Slide 9: Q4 2011 - Financial Highlights
Q4 2011 - Financial Highlights Q4 results reflect execution of strategy and benefits of diversification Common Net Operating Specific Equity Revenue EPS ROE Productivity Income Leverage PCL Ratio (Basel II) Reported $3,881MM $897MM $1.34 14.3% 62.5% 0.2% $210MM 9.6% Results Adjusted $3,610MM $850MM
Slide 10: F2011 - Financial Highlights
F2011 - Financial Highlights Good annual performance with double digit income growth overall and in all operating groups Common Net Operating Specific Equity Revenue EPS ROE Productivity Income Leverage PCL Ratio (Basel II) Reported $13,718MM $3,266MM $5.26 15.3% 62.7% (1.1)% $819MM 9.6% Results Adj
Slide 11: Revenue
Revenue Strong year over year revenue growth Total Bank Adjusted Revenue (C$MM) Net Interest Margin 6.3% 10.6% 5.9% 12.9% 11.8% Y/Y (bps) Growth 3,610 236 3,346 3,282 234 3,229 3,228 227 219 214 1,741 1,619 1,719 1,597 1,582 NIR 189 189 205 182 178 1,610 1,627 1,631 1,700 1,869 NII Q4 Q1 Q2 Q3 Q4 Q4
Slide 12: Non-Interest Expense
Non-Interest Expense Year over year growth largely reflects acquisitions Non-Interest Q/Q Y/Y Q4 10 Q3 11 Q4 11 Total Bank Adjusted Non-Interest Expense Expense ($MM) B/(W) B/(W) (C$MM) Reported 2,023 2,111 2,425 (15%) (20%) Adjusted 2,012 2,041 2,338 (15%) (16%) 2,338 Reported (ex M&I) 2,023 1,974
Slide 13: Good Contribution From Acquired M&I Business
Good Contribution From Acquired M&I Business Adjusted earnings of $148MM in Q4 ‘11 M&I Net Income Contribution Good performance in operating groups of $124MM, including P&C U.S. at $112MM and PCG at $10MM Adjusted (C$MM) Q2 11 Q3 11 Q4 11 F11 Operating group results reflect: P&C U.S. - 30 112 14
Slide 14: Impact of Credit Mark
Impact of Credit Mark Credit mark related accounting impacts in the quarter produced revenue of $271MM, PCL of $98MM and net income of $107MM Pre-Tax After-tax ($MM) ($MM) Net Interest Income a) Portion of credit mark amortized to NII as increased yield on the portfolio 161 99 b) Portion of credit
Slide 15: Capital & Risk Weighted Assets
Capital & Risk Weighted Assets Capital position strong Basel II Tier 1 Capital & Basel II F2010 F2011 Common Shareholders’ Equity Common Equity Ratio (%)1 10.3 9.6 Tier 1 Capital Ratio (%) 13.5 12.0 24.3 25.1 Total Capital Ratio (%) 15.9 14.9 21.7 21.5 21.9 RWA ($B) 161 209 Ratios remain strong po
Slide 16: Operating Groups – Q4'11 Quick Facts
Operating Groups – Q4’11 Quick Facts P&C Canada P&C U.S. Revenue growth of 1.1% Y/Y Revenue more than doubled Y/Y; reflecting acquisitions Net income growth of 1.5% Y/Y Adjusted net income of U.S. $171MM, up $122MM Y/Y; Volume growth across most products Y/Y up $11MM or 25% excluding M&I
Slide 17: Diversified Business Mix
Diversified Business Mix Over 80% of adjusted revenue and net income from retail businesses Q4 11 Adjusted Revenue by Q4 11 Adjusted Net Income by Operating Group (C$MM) - $3,735MM* Operating Group1 (C$MM) - $899MM* P&C PCG P&C PCG (Personal & (Wealth (Personal & (Wealth Commercial) Management) Comm
Slide 18: Personal & Commercial Banking - Canada
Personal & Commercial Banking - Canada Volume growth moderated by lower net interest margins and planned higher initiative spend As Reported Q/Q Y/Y F2011 net income of $1.7B, up 10% on an actual Q4 10 Q3 11 Q4 11 ($MM) B/(W) B/(W) loss basis, and 4% on a reported basis. Personal Revenue 961 951 958
Slide 19: Personal & Commercial Banking - U.S.
Personal & Commercial Banking - U.S. Revenue and NI more than doubled Y/Y reflecting good contribution from acquired business (Amounts in US$MM) As Reported Q/Q Y/Y Q4 10 Q3 11 Q4 11 (US$MM) B/(W) B/(W) F2011 adjusted net income of $394MM, up 77% Revenue 363 509 787 54% +100% Expenses 264 310 476 (5
Slide 20: Private Client Group
Private Client Group Year over year net income growth of 13%; earnings ex Insurance strong at 20% As Reported Q/Q Y/Y Q4 10 Q3 11 Q4 11 F2011 net income of $518MM, up 13%; ex ($MM) B/(W) B/(W) Insurance businesses, up 31% Revenue 593 617 699 13% 18% Expenses 417 461 514 (12)% (23)% Net Income 129 12
Slide 21: BMO Capital Markets
BMO Capital Markets Q4 results impacted by market environment As Reported Q/Q Y/Y Q4 10 Q3 11 Q4 11 F2011 net income of $920MM, up 13%; ($MM) B/(W) B/(W) with strong ROE of 20.4% Trading Products 500 508 442 (13)% (12)% Revenue Q4 Highlights Investment & Corp 336 329 263 (20)% (22)% Banking Revenue
Slide 22: Corporate Services
Corporate Services Improvement in adjusted net income Y/Y mainly due to PCLs Adjusted As Reported Q4 10 Q3 11 Q4 11 Q4 10 Q3 11 Q4 11 ($MM) ($MM) Revenue (teb)1 (96) (189) (125) Revenue (teb)1 (96) (197) 146 PCL2 – Specific 22 (47) (57) PCL2 – Specific 22 (47) (39) – General -- -- -- – General -- --
Slide 23: Transition to IFRS
Transition to IFRS Impact on Common Shareholders’ Equity as of Nov 1, 2010, the transition date1 Shareholders’ Equity Shareholders’ Equity F2010 reported CDN GAAP opening balance under IFRS ↓ 1,219 ↓ 188 ↓ 104 ↓ 88 $MM 20,281 21,880 Pension Asset Consolidation Other Securitization $1,599MM reduction
Slide 24: Transition to IFRS – Balance Sheet and Income Statement
Transition to IFRS – Balance Sheet and Income Statement Reconciliation of Total Assets as of Nov 1, 2010, the transition date F2010 reported Opening balance CDN GAAP under IFRS Consolidation $MM Pension Ç 4,118 Ç 885 È 1,496 Ç 22,101 Reinsurance Asset and Other Securitization 437,248 411,640 25,608M
Slide 25: Group Net Income - Annual
Group Net Income - Annual Net Income, Reported B/(W) F2010 F2011 ($MM) $ % P&C Canada 1,640 1,701 61 3.7 P&C U.S. 214 355 141 65.8 Total P&C 1,854 2,056 202 10.9 PCG 460 518 58 12.7 BMO Capital Markets 816 920 104 12.8 Corporate Services (320) (228) 92 28.8 Total Bank 2,810 3,266 456 16.2 Net Income
Slide 26: Select Balance Sheet Information
Select Balance Sheet Information Average Net Loans & Acceptances Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Increase year over year in loans of $33.8B ($B) primarily due to acquired M&I business of Consumer Installment & other personal 50.6 51.5 51.8 54.5 59.3 US$29.8B. Excluding acquired businesses: Non-resid
Slide 27: Personal & Commercial Banking Canada – Product Balances & Market Share
Personal & Commercial Banking Canada – Product Balances & Market Share Personal Y/Y total personal lending balances up 5.3% and personal deposit balances up 1.9% Deposit share declined Y/Y, but was stable Q/Q; Lending market share declined Y/Y and Q/Q Market Share (%) 1 Q4 10 Q1 11 Q2 11 Q3 11 Q
Slide 28: Personal & Commercial Banking U.S. – Product Balances
Personal & Commercial Banking U.S. – Product Balances All amounts in U.S. $B Mortgages ($B) - As At Home Equity ($B) - As At Personal (Y/Y) Mortgages increased $5.3B with $5.6B from M&I, which was primarily offset by amortization/run off of outstandings in the existing portfolio and new originatio
Slide 29: Adjusting Items
Adjusting Items Adjusted results reflect the following items Adjusting items – pre-tax Annual Annual Q4 10 Q3 11 Q4 11 ($MM) F2010 F2011 Net interest income Hedge of foreign currency risk on the purchase of M&I - (9) - - (20) Recognition of a portion of the credit mark on the acquired M&I loan por
Slide 30: Risk Review Q4 11
Risk Review Q4 11 Surjit Rajpal Executive Vice President & Chief Risk Officer BMO Financial Group December Risk Review • December 6 y 201130 6 • 2011
Slide 31: Loan Portfolio – Well Diversified by Segment and Business
Loan Portfolio – Well Diversified by Segment and Business Canadian and US portfolios well diversified. The M&I acquired loan portfolio contributes ~14% of total loans P&C business represents the majority of loans X Retail portfolios are predominantly secured – 87% in Canada and 96% in the US C
Slide 32: US Loan Portfolio
US Loan Portfolio Total US Loans Outstanding US$61.3 billion 29% of Consolidated Loans Consumer (US$23.2B) Total US portfolio is US$61.3B, including the 1st Mortgage M&I acquired loan portfolio (US$29.5B) 36% Portfolio composition is ~37% Consumer loans, ~47% C&I and ~16% CRE/Investor Owned Mort
Slide 33: European Exposure
European Exposure Country1 Repo Style Lending2 Securities2 Derivatives4 (C$ MM) Transactions3 Total Exposure Bank Corporate Sovereign5 Total Bank Corporate Sovereign5 Total Total Bank Corporate Sovereign5 Total GIIPS (2%) 77 50 0 127 0 28 10 38 0 38 0 0 38 203 Eurozone (50%) (excluding GIIPS) 553 54
Slide 34: Impaired Loans and Formations
Impaired Loans and Formations Fiscal 2011 formations are down to $1,225MM from $1,525MM in Fiscal 2010 Q4 '11 formations higher quarter over quarter at $543MM¹ (Q3 '11: $252MM) X Acquired portfolios contributed ~$185MM. Of this, ~$81MM has 80% FDIC loss coverage X US formations are $374MM (Q3 '1
Slide 35: Provision for Credit Losses
Provision for Credit Losses Fiscal 2011 specific provisions are down to $819MM Business Segment from $1,049MM in Fiscal 2010 (By Business Line Segment) Q4 ‘10 Q3 ‘11 Q4 ‘11 Q4 '11 Specific provisions at $210MM are up from last (C$ MM) quarter (Q3 '11: $174MM) Consumer – P&C Canada 119 135 130 X
Slide 36: Specific Provision Segmentation
Specific Provision Segmentation 1 Canadian provisions modestly higher at $102MM (Q3 '11: $94MM, Q4 '10: $98MM) with the Personal Lending and Cards’ sectors the largest contributors. Commercial provisions well diversified US provisions higher at $108MM (Q3 '11: $80MM, Q4 '10: $156MM). The Consume
Slide 37: Trading & Underwriting Net Revenues vs. Market Value Exposure
Trading & Underwriting Net Revenues vs. Market Value Exposure October 31 October 26 $56.2 MM August 2, 2011 to October 31, 2011 (Presented on a Pre-Tax Basis) $56.9 MM 50 October 13 $34.7 MM 30 10 04-Oct-11 11-Oct-11 17-Oct-11 21-Oct-11 27-Oct-11 06-Sep-11 12-Sep-11 16-Sep-11 22-Sep-11 28-Sep-11 02-
Slide 38: Investor Relations Contact Information
Investor Relations Contact Information www.bmo.com/investorrelations E-mail: investor.relations@bmo.com Fax: 416.867.3367 VIKI LAZARIS MICHAEL CHASE ANDREW CHIN Senior Vice President Director Senior Manager 416.867.6656 416.867.5452 416.867.7019 viki.lazaris@bmo.com michael.chase@bmo.com andrew.chin