Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q1 2023 Earnings Presentation
42 slides from Bank Of Montreal's earnings presentation, Feb 28, 2023
Slide 1: Investor Presentation Q1 23
BMO Financial Group Investor Presentation For the Quarter Ended January 31, 2023 February 28, 2023 Q1 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 Q1 23
Slide 4: Well-positioned for continued growth
Well-positioned for continued growth First Quarter Highlights Q1’23 1 • P&C businesses delivering continued strong Reported Adjusted PPPT2 performance, significantly improving momentum in BMO Capital Markets Net Income $0.25B $2.3B • Q1 operating leverage impacted by prior year’s Diluted EPS $0.30 $
Slide 5: Bank of the West meaningfully increases scale and reach
Bank of the West meaningfully increases scale and reach Doubled U.S. footprint with strong position in attractive markets Footprint in 2021 Nominal GDP (US$TN) $23.3 32 States 1.7x $19.0 $3.4 $2.0 National Digital Platforms Canada California 32 State Footprint Total United States Customers in all 50
Slide 6: U.S. Segment: strong performance positioned for accelerated growth
U.S. Segment: strong performance positioned for accelerated growth Proven track record of successful integrations BMO U.S. Segment ($US) BMO Consolidated ($C) 45% PPPT2 $7.7B Adjusted1 $4,958 $7.4B Reported $14.2B 60% from organic growth 35% 45% 27% $3,270 27% Reported % PPPT2 20% 25% / 75% Contribu
Slide 7: Strong growth across our diversified businesses
Strong growth across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial Reported Reported Q1’23 Q1’23 • Strong loan and deposit • Good loan growth and PPPT Y/Y Growth1 9% growth and margin PPPT Y/Y Growth1 12% margin expansion expansion • Continuing to strengthen •
Slide 8: Our Purpose comprises three bold commitments
Our Purpose comprises three bold commitments • Since inception, deployed more than US$5.5B in loans and investments as part of BMO EMpowerTM, a five-year commitment to advance an inclusive economic recovery in the United States, and announced Providing access to capital and valuable financial advice
Slide 9: Financial Results
Financial Results For the Quarter Ended January 31, 2023 Tayfun Tuzun Chief Financial Officer Q1 23
Slide 10: Q1 F2023 - Financial Highlights
Q1 F2023 - Financial Highlights Strong PPPT2 growth in P&C businesses offset by lower Y/Y revenue in market sensitive businesses • Adjusted1 EPS $3.22, down 17% Y/Y (reported $0.30, Reported Adjusted1 down 93%) ($MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1 22 • Adjusted1 net income down 12% Y/Y (reported d
Slide 11: Balance Sheet
Balance Sheet Strong Y/Y loan and deposit growth • Average net loans and acceptances up 15% Y/Y, or 13% Average Net Loans and Acceptances ($B) excluding the impact of the stronger U.S. dollar due to: 553.3 562.8 – Business & government balances up 15% with strong growth 489.6 across all operating gr
Slide 12: Net Interest Margin
Net Interest Margin1 • Total Bank NIM benefitted from wider deposit margins in the P&C businesses • NIM decreased from: 1) temporary Items including higher cash balances and deposit interest expense in BMO Capital Markets, 2) higher liquidity requirements; and 3) other lower net interest income and
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to an incremental +100bps rate shock is • Term rates decreased in Q1’23 and continue to be volatile, but modestly higher Q/Q are still higher than historical rates – Realized deposit betas were in line with our assumptions in • Higher long-term reinvestment
Slide 14: Q1'23 Non-Interest Expense
Q1’23 Non-Interest Expense Y /Y growth includes impact from prior year investments to drive higher revenue growth • Adjusted1 expenses up 9% Y/Y (reported Y/Y Change in Non-Interest Expense ($MM) up 15%) 4,421 Reported – Stronger U.S. dollar and higher 2% 4,172 Adjusted1 1% 1% 3,962 performance-base
Slide 15: Strong Q1'23 CET1 ratio of 18.2%
Strong Q1’23 CET1 ratio1 of 18.2% Common Equity Tier 1 Ratio1 +64 bps +10 bps -40 bps -10 bps 18.2% +28 bps +92 bps 2 ~1.2% 16.7% 2 ~1.5% 17.0% 15.2% Q4 2022 Common Internal capital Lower source DRIP Management of CRD / surtax Q1 2023 3 shares issued generation currency RWA fair value changes Basis
Slide 16: Bank of the West financial update
Bank of the West financial update Transaction Assumptions at Announcement Updated Expectations • F2024 Adjusted2 EPS: ~8% ex. purchase accounting impacts • F2024 Adjusted2 EPS: ~7% ex. purchase accounting impacts Accretion1 • (~10% including purchase accounting) (purchase accounting impacts to be fi
Slide 17: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Continued strong revenue and PPPT2 growth reflecting higher volumes and margin expansion • Adjusted1 and reported net income down 2% Y/Y due to Reported Adjusted1 higher PCL ($MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1 22 • Adjusted1 and reported PPPT2 up 9% Y/Y Net
Slide 18: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Performance reflects double-digit PPPT2 growth and continued positive operating leverage Reported Adjusted1 Figures that follow are in U.S. dollars: 1 (US$MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1 22 • Adjusted and reported net income down 3% Y/Y due to higher PCL Net i
Slide 19: BMO Wealth Management
BMO Wealth Management Good growth in client assets more than offset by weaker global markets Reported Adjusted1 • Adjusted1 and reported net income down 12% Y/Y ($MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1 22 • Wealth and Asset Management adjusted1 and reported net income down 20% Y/Y Gross Revenue 2,504
Slide 20: BMO Capital Markets
BMO Capital Markets Improved revenue and PPPT2 performance; down Y/Y from particularly strong Q1’22 • Adjusted1 net income down 28% Y/Y (reported down Reported Adjusted1 29%); adjusted1 and reported up 41% Q/Q • Adjusted1 and reported PPPT2 down 30% Y/Y; up 43% ($MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1
Slide 21: Corporate Services
Corporate Services • Adjusted1 net loss of $195MM and reported net loss Reported Adjusted1 of $2,211MM for the quarter, compared with an adjusted1 net loss of $130MM and reported net ($MM) Q1 23 Q4 22 Q1 22 Q1 23 Q4 22 Q1 22 income of $228MM in the prior year Revenue (2,094) 4,003 523 (77) (23) (10)
Slide 22: Risk Review
Risk Review For the Quarter Ended January 31, 2023 Piyush Agrawal Chief Risk Officer Q1 23
Slide 23: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q1’23 PCL ratio on Impaired Loans1 is 14 bps, Q1 23 Q4 22 Q1 22 flat Q/Q ($MM) $ Bps $ bps $ bps PCL on Impaired Loans ($MM) Personal & Business Banking 135 26 117 23 79 17 Commercial Banking 19 7 25 10 21 9 Total Canadian P&C 154 20 142 19
Slide 24: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $21 million provision for credit losses on Loans (APL) and PCL on Q1 23 APL to performing loans in the current quarter Performing Loans (PCL) Q4 22 Q1 23 Foreign Q1 23 Performing reflected increased uncertainty in credit By Op
Slide 25: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio3 36 bps, up Formations Gross Impaired Loans 1,200 1 bp Q/Q By Industry ($MM, as at Q1 23) Formations ($MM) 1,000 Canada & Canada & U.S. Total U.S. Total 800 Other Other1 521 600 462 499 Consumer 222 24 246 457 188 645 333 341 400
Slide 26: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances Canada & % of • Portfolio is well diversified by geography and By Industry 3 U.S. Total industry Other1 Total ($B, as at Q1 23) Residential Mortgages 141.8 9.5 151.3 27% Consumer Instalment and Other Personal 70.4 13.8 84.2 15% Canada & Other Countri
Slide 27: 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 28: Appendix
Appendix
Slide 29: Canadian Residential-Secured Lending (RESL)
Canadian Residential-Secured Lending (RESL) • Total Canadian residential-secured lending portfolio at $189.7B, Residential-Secured Lending by Region ($189.7B) representing 34% of total loans HELOC $89.8 ─ LTV1 on uninsured of 51% Uninsured Mortgages Insured Mortgages $37.7 ─ 90-day delinquency rate
Slide 30: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk Nov 1, 2022 to Jan 31, 2023 (pre-tax basis and in millions of Canadian dollars) 50 40 30 20 10 0 (10) (20) (30) (40) (50) (60) Daily Revenue Total Trading VaR Risk Review February 28, 2023 30
Slide 31: Advancing our Digital First strategy
Advancing our Digital First strategy Continuing to deliver on our Driving digital engagement Recognized for industry leadership Digital First agenda • Credit View empowers U.S. customers to Active Digital Users, Retail (000)1 • BMO’s Canadian mobile banking app see and improve their credit score rec
Slide 32: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 261.3 304.2 310.0 253.1 236.4 277.1 125.0 128.1 117.2 173.8 181.3 160.9 6.2 6.2 5.7 59.1 59.3 54.1 10.1 10.6 8.9 91.2 103.7 105.9 75.5 79.3 80.0 Q1'22 Q4'22 Q1'23 Q1'22 Q4'22 Q1'23 2 Comme
Slide 33: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars1 Gross Loans & Acceptances ($B) Deposits ($B) 106.6 108.0 115.3 110.1 110.6 98.5 11.2 10.7 11.0 4.4 4.6 4.0 48.4 48.0 47.6 91.0 92.7 83.5 66.9 62.1 63.0 Q1'22 Avg Q4'22 Avg Q1'23 Avg Q1'22 Avg Q4'22 Avg Q1'23 Avg
Slide 34: Asset Yields and Liability Costs
Asset Yields1 and Liability Costs2 Average Earning Assets ($B) and Yield1 (%) Average Liabilities ($B) and Costs2 (%) 4.18% Yield on Total 3.54% 2.02% 2.65% Cost on Total 2.87% Average 0.68% 1.13% Liabilities 2.12% 2.39% 0.47% Earning Assets 1,079 1,004 1,054 1,101 1,022 997 979 973 949 973 4.52% 5.
Slide 35: Adjusting items related to management of fair value changes
Adjusting items related to management of fair value changes • IFRS requires mark-to-market gains/losses on the swaps to be recorded as trading income in the P&L • Net interest on Treasuries and other balance sheet instruments recorded at amortized cost is recorded in net interest income (NII) • Adju
Slide 36: 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 37: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures7 (Canadian $ in millions, except as noted) Q1 23 Q4 22 Q1 22 (1) Reported net income included the impact of divestitures related to the sale of our Reported Results EMEA Asset Management business. Q4-2022 net income included a $8 million ($6 Net interest income
Slide 38: Summary of Reported and Adjusted Results by Operating Group
Summary of Reported and Adjusted Results by Operating Group (Canadian $ in millions unless otherwise stated) Q1 23 Q4 22 Q3 22 Q2 22 Q1 22 Canadian P&C Reported Net Income 980 917 965 940 1,004 Amortization of acquisition-related intangible assets — — — 1 — Adjusted Net Income 980 917 965 941 1,004
Slide 39: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage (Canadian $ in millions unless otherwise stated) Q1 23 Q4 22 Q3 22 Q2 22 Q1 22 Total Bank Total revenue 6,470 10,570 6,099 9,318 7,723 Reported Insurance claims, commissions and changes in policy benefit liabilities (CCPB) 1,193 (369) 413 (808) 81
Slide 40: Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation
Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation (Canadian $ in millions unless otherwise stated) Q1 23 Q4 22 Q3 22 Q2 22 Q1 22 Total Bank Reported Income before taxes 639 5,937 1,691 6,363 3,895 Total provision for (recovery of) credit losses 217 226 136 50 (99) Reported Pre-Provision, Pre-Tax
Slide 41: Summary of Reported and Adjusted Results (BMO and U.S. Segment)
Summary of Reported and Adjusted Results (BMO and U.S. Segment) BMO U.S. Segment ($US) Total BMO ($C) ($ in millions unless otherwise stated) F2010 F2014 F2017 F2022 F2010 F2014 F2017 F2022 Total revenue 2,532 4,728 5,368 13,064 13,264 18,223 22,107 33,710 Insurance claims, commissions and changes i
Slide 42: 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