Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q2 2023 Earnings Presentation
45 slides from Bank Of Montreal's earnings presentation, May 24, 2023
Slide 1: Investor Presentation Q2 23
BMO Financial Group Investor Presentation For the Quarter Ended April 30, 2023 May 24, 2023 Q2 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 Ex
Slide 3: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q2 23
Slide 4: Well-positioned for continued growth
Well-positioned for continued growth Highlights Q2’23 YTD’23 1 1 Reported Adjusted Reported Adjusted • Successfully completed acquisition of Bank of the West (BOTW) Net Income $1.1B $2.2B $1.3B $4.5B • Canadian and U.S. P&C businesses Diluted EPS $1.30 $2.93 $1.62 $6.15 delivered continued good PPPT
Slide 5: Strong and stable balance sheet, capital and liquidity
Strong and stable balance sheet, capital and liquidity Balance Sheet (As At) Net Loans & Book Value Per Total Assets ($B) Deposits ($B) Acceptances ($B) Share ($) 1,251 875 645 $96.92 $89.17 1,042 714 950 657 516 $76.72 Other Deposits 457 Customer Deposits 628 512 474 Q2'21 Q2'22 Q2'23 Q2'21 Q2'22 Q
Slide 6: BMO U.S. – scale, growth further enhanced by Bank of the West
BMO U.S. – scale, growth further enhanced by Bank of the West Benefiting from the strength of BMO’s trillion-dollar balance sheet Top 10 Footprint in Top 5 4 million U.S. Bank1 32 States Commercial Lender in customers North America2 BMO U.S. Bank BMO U.S. Segment BMO Financial Group US$2653 billion
Slide 7: Highly diversified businesses delivering resilient performance
Highly diversified businesses delivering resilient performance Canadian Personal & Commercial U.S. Personal & Commercial Reported Revenue ($MM) Reported Revenue (teb1, US$MM) 1,914 2,547 2,629 2,546 2,529 2,385 763 750 777 738 1,297 1,334 731 1,147 1,234 1,159 895 914 829 871 1,654 1,766 1,797 1,852
Slide 8: Our Purpose comprises three bold commitments
Our Purpose comprises three bold commitments • Deployed more than US$5.5B in loans and investments to address key barriers confronting minority Providing access to capital and businesses, communities and families in the United States as part of BMO EmpowerTM, meeting our valuable financial advice –
Slide 9: Financial Results
Financial Results For the Quarter Ended April 30, 2023 Tayfun Tuzun Chief Financial Officer Q2 23
Slide 10: Q2 F2023 - Financial Highlights
Q2 F2023 - Financial Highlights Good underlying PPPT1 growth in P&C businesses and benefit of Bank of the West • Adjusted2 EPS $2.93, down 10% Y/Y (reported $1.30, down Reported Adjusted2 82%) ($MM) Q2 23 Q1 23 Q2 22 Q2 23 Q1 23 Q2 22 • Adjusted2 net income up 1% Y/Y (reported down 78%) Gross Revenu
Slide 11: Q2 F2023 – Bank of the West Contribution
Q2 F2023 – Bank of the West Contribution • Bank of the West4 (BOTW) Reported Adjusted1 contributed $1,072MM revenue, BMO ex. BMO ex. $755MM to adjusted1 expenses ($MM) BOTW BMO BOTW BMO BOTW BOTW (reported $1,581MM) and $230MM to adjusted1 net income Gross Revenue 7,368 1,072 8,440 7,375 1,072 8,447
Slide 12: Balance Sheet
Balance Sheet Strong Y/Y loan and deposit growth • Average gross loans and acceptances up 28% Y/Y, or 25% Average Gross Loans and Acceptances ($B) excluding the impact of the stronger U.S. dollar due to: 646.1 – BOTW added $45B to Business & Government loans and $34B 565.4 33.8 to consumer loans 504
Slide 13: Canadian and U.S. deposit trends
Canadian and U.S. deposit trends Canadian P&C and BMO Wealth Management deposits CDE$B, average balances • Continued strong balance growth reflective of stability in the 309 314 Canadian banking industry 266 290 5% 6% 238 3% • Continued customer balance shift to term deposits given the 2% 21% 20% 4%
Slide 14: Net Interest Margin
Net Interest Margin1 • Total Bank NIM benefitted from the impact of BOTW and net mark accretion • NIM decreased from lower net interest income in Corporate Services and continued competitive pressure in deposit pricing NII ($MM) and NIM ex. Trading % Q/Q NIM ex. Trading (%) 1.86 1.88 1.85 1.79 1.79
Slide 15: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to an incremental +100bps rate shock decreased Q/Q • Term rates decreased in Q2’23 and continue to be volatile, but are still higher than historical rates – Earnings sensitivity has decreased since Q1 pursuant to the close of the BOTW acquisition1 • Sustain
Slide 16: Q2'23 Non-Interest Expense
Q2’23 Non-Interest Expense Y/Y growth includes impact of BOTW and prior year investments to drive higher revenue growth • Adjusted1 expenses up 30% Y/Y Y/Y Change in Non-Interest Expense ($MM) (reported up 50%) 5,573 Reported – BOTW contributed 21% to the 5,332 3% 4,731 Adjusted1 4,441 2% 1% 1% incr
Slide 17: Strong Q2'23 CET1 ratio of 12.2%
Strong Q2’23 CET1 ratio1 of 12.2% Common Equity Tier 1 Ratio1 18.2% -680 bps 2 ~1.2% +29 bps +2 bps 12.2% +32 bps +12 bps +12 bps 17.0% Q1’23 Bank of the West Internal Capital DRIP Source Currency Basel III Other Q2’23 Acquisition3 Generation RWA Reforms • Q2’23 CET1 ratio1 of 12.2%, down from Q1’23
Slide 18: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Good Revenue and PPPT2 performance with positive operating leverage • Adjusted1 and reported net income down 8% Y/Y due to Reported Adjusted1 higher PCL ($MM) Q2 23 Q1 23 Q2 22 Q2 23 Q1 23 Q2 22 • Adjusted1 and reported PPPT2 up 7% Y/Y Net interest income 1,983
Slide 19: U.S. Personal & Commercial
U.S. Personal & Commercial Strong performance including the addition from Bank of the West Figures that follow are in U.S. dollars: Reported Adjusted1 • Adjusted1 net income up $173MM or 37% Y/Y (reported up $117MM (US$MM) 3 Q2’23 Q1’23 Q2’22 Q2’23 Q1’23 Q2’22 or 25%) Net interest income (teb) 1,589
Slide 20: BMO Wealth Management
BMO Wealth Management Good growth in client assets partly offset by weaker markets • Adjusted1 and reported net income down 10% Y/Y Reported Adjusted1 – BOTW contributed $26MM to adjusted1 net income ($MM) Q2 23 Q1 23 Q2 22 Q2 23 Q1 23 Q2 22 (reported $25MM) Gross Revenue 1,960 2,504 484 1,960 2,504
Slide 21: BMO Capital Markets
BMO Capital Markets Results mainly impacted by slower underwriting environment Reported Adjusted1 • Adjusted1 net income and PPPT3 down 14% and 16% Y/Y, 2 respectively (reported down 15% and 17%) ($MM) Q2 23 Q1 23 Q2 22 Q2 23 Q1 23 Q2 22 Global Markets 935 1,100 928 935 1,100 928 • Revenue2 relative
Slide 22: Corporate Services
Corporate Services • Adjusted1 net loss of $187MM and reported net loss Reported Adjusted1 of $1,255MM, compared with an adjusted1 net loss ($MM) 2 Q2 23 Q1 23 Q2 22 Q2 23 Q1 23 Q2 22 of $111MM and reported net income of $2,466MM in the prior year Revenue (157) (2,094) 3,496 (150) (77) (67) • Report
Slide 23: Bank of the West Purchase Accounting impacts
Bank of the West Purchase Accounting impacts • Bank of the West acquisition related valuation activities are largely complete • The rate mark hedge was effective in neutralizing the impact of interest rate changes on BMO’s capital requirements at closing and in managing BMO’s future P&L profile ($B)
Slide 24: Risk Review
Risk Review For the Quarter Ended April 30, 2023 Piyush Agrawal Chief Risk Officer Q2 23
Slide 25: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q2 23 PCL ratio on impaired Loans1 is 16 bps, up Q2 23 Q1 23 Q2 22 ($MM) 2 bps Q/Q $ bps $ bps $ bps ─ PCL on impaired loans for BOTW is $15MM. It Personal & Business Banking 163 32 135 26 79 17 includes $32MM PCL in Consumer, partially offs
Slide 26: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $780MM reported provision for performing Q2 23 loans includes: Loans (APL) and PCL on APL to Q1 23 Q2 23 Foreign Q2 23 Performing Loans (PCL) Performing ─ $705MM charge for the initial allowance on APL1 PCL2 exchange APL1 By O
Slide 27: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations Formations Gross Impaired Loans • Gross Impaired Loans (GIL) ratio3 41 bps, up By Industry 5 bp Q/Q and flat Y/Y ($MM, as at Q2 23) CA & CA & U.S. Total U.S. Total Other Other1 ─ GIL includes BOTW impaired balances of Consumer 228 90 318 489 341 830 $436MM Service
Slide 28: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances (GL&A) By Industry 3 Canada & U.S.4 Total % of • Portfolio is well diversified by geography and Other1 BMO Total industry ($B, as at Q2 23) • Total Gross Loans and Acceptances up 15% Residential Mortgages 143.8 22.9 166.7 26% Q/Q, with 14% contributi
Slide 29: Bank of the West Loan Portfolio Overview
Bank of the West Loan Portfolio Overview Gross Loans & Acceptances (GL&A) By Industry Gross Loans & Acceptances • BOTW portfolio adds $79B of GL&A, growing (C$B, as at Q2 23) and further diversifying our portfolio Consumer Instalment and Other Personal 20.9 • 43% Consumer; 57% Wholesale Residential
Slide 30: Commercial Real Estate Portfolio Overview
Commercial Real Estate Portfolio Overview • Commercial Real Estate (CRE) portfolio at $67B represents 10% of CRE by Geography1 total bank GL&A Canada 50% ─ Portfolio is well diversified across businesses, property types and geographies BRITISH COLUMBIA 13% ─ Loan-to-Value (LTV)3 coverage of 60% to 6
Slide 31: Canadian RESL Portfolio: Renewal profile in the next 12 months
Canadian RESL Portfolio: Renewal profile in the next 12 months RESL renewal risk is reduced by borrower capacity, equity and quality • The impact of higher interest rates on payments is primarily realized upon renewal for both fixed and variable rate products • Variable rate products with fixed paym
Slide 32: Appendix
Appendix Risk Review May 24, 2023 32
Slide 33: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending • Total Canadian residential-secured lending portfolio at $191.9B, Residential-Secured Lending by Region ($191.9B) representing 30% of total loans $91.3 ─ LTV1 on uninsured of 52% 26% $38.0 ─ 90-day delinquency rate for RESL remains low at 14 bps; loss 26% $30.5
Slide 34: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk Feb 1, 2023 to April 28, 2023 (pre-tax basis and in millions of Canadian dollars) 80 60 40 20 0 (20) (40) (60) Daily Revenue Total Trading VaR Risk Review May 24, 2023 34
Slide 35: Advancing our Digital First strategy
Advancing our Digital First strategy Continuing to deliver on our Driving digital engagement Recognized for industry leadership Digital First agenda • Launched the NewStart® Pre-Arrival Active Digital Users, Retail (000)1 • Awarded two 2023 Celent Model Bank Account Opening program, an industry +6%
Slide 36: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 268.3 310.0 312.7 261.3 237.6 284.7 128.1 129.3 118.5 181.3 187.6 161.6 6.2 6.4 5.8 59.3 58.7 55.3 10.6 10.8 8.9 96.2 105.9 107.5 76.0 80.0 80.7 Q2'22 Q1'23 Q2'23 Q2'22 Q1'23 Q2'23 1 Comme
Slide 37: U.S. Personal & Commercial – Balances
U.S. Personal & Commercial – Balances Figures on this slide are in U.S. dollars1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 159.8 163.1 23.0 25.9 14.9 113.9 110.6 108.0 100.8 48.2 32.4 15.3 15.1 49.0 47.6 29.2 85.7 92.7 89.5 64.9 63.0 59.8 Q2'22 Avg Q1'23 Avg Q2'23 Avg Q2'22 Avg Q1
Slide 38: Asset Yields and Liability Costs
Asset Yields1 and Liability Costs2 Average Earning Assets ($B) and Yield1 (%) Average Liabilities ($B) and Costs2 (%) 4.85% Yield on Total 2.65% 3.08% Cost on Total 4.18% 2.02% 3.54% Average 0.68% 1.13% Liabilities 2.39% 2.87% Earning Assets 1,165 1,194 1,079 1,101 1,022 1,004 1,054 949 973 979 3.37
Slide 39: Q2 F2023 – Bank of the West Contribution to U.S. Segment
Q2 F2023 – Bank of the West Contribution to U.S. Segment U.S. Segment Reported U.S. Segment Adjusted1 BMO ex. BMO ex. (US$MM) BOTW BMO BOTW BMO BOTW BOTW Revenue 1,874 790 2,664 1,879 790 2,669 Expenses 1,127 1,162 2,289 1,121 556 1,677 2 PPPT 747 (372) 375 758 234 992 Total PCL 43 535 578 43 18 61
Slide 40: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance with International Financi
Slide 41: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures8 (Canadian $ in millions, except as noted) Q2 23 Q1 23 Q2 22 YTD 23 YTD 22 (1) Reported net income included the impact of divestitures of our EMEA and U.S. Asset Reported Results Management business. Q2-2022 included a gain of $6 million ($8 million pre-tax) rel
Slide 42: Summary of Reported and Adjusted Results by Operating Group
Summary of Reported and Adjusted Results by Operating Group (Canadian $ in millions unless otherwise stated) Q2 23 Q1 23 Q4 22 Q3 22 Q2 22 YTD 23 YTD 22 Canadian P&C Reported Net Income 861 980 917 965 940 1,841 1,944 Acquisition and integration costs 2 — — — — 2 — Amortization of acquisition-relate
Slide 43: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage (Canadian $ in millions unless otherwise stated) Q2 23 Q1 23 Q4 22 Q3 22 Q2 22 YTD 23 YTD 22 Total Bank Total revenue 8,440 6,470 10,570 6,099 9,318 14,910 17,041 Reported Insurance claims, commissions and changes in policy benefit liabilities (CC
Slide 44: Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation
Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation (Canadian $ in millions unless otherwise stated) Q2 23 Q1 23 Q4 22 Q3 22 Q2 22 YTD 23 YTD 22 Total Bank Reported Income before taxes 1,253 639 5,937 1,691 6,363 1,892 10,258 Total provision for (recovery of) credit losses 1,023 217 226 136 50 1,2
Slide 45: 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