Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q2 2022 Earnings Presentation
37 slides from Bank Of Montreal's earnings presentation, May 25, 2022
Slide 1: Investor Presentation Q2 22
BMO Financial Group Investor Presentation For the Quarter Ended April 30, 2022 May 25, 2022 Q2 22
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: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q2 22
Slide 4: Targeted investments driving operating momentum
Targeted investments driving operating momentum Adjusted1 Q2’22 YTD Financial Highlights Net Income1 $2.2B $4.8B • Investments in technology and talent delivering strong and diversified revenue growth Reported $4.8B $7.7B • Accelerating Personal & Commercial loan growth, EPS1 $3.23 $7.12 Canada up 1
Slide 5: Good performance across our diversified businesses
Good performance across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial Reported YTD Reported YTD • Market share gains in • Strong commercial loan key categories growth PPPT Growth1,2 15% PPPT Growth1,2,3 9% • Continued efficiency • Continuing to add improvement
Slide 6: Our Strategy
Our Strategy About Us Helping customers since 8th largest 12+ million bank in North America 1817 by assets1 customers globally Our Purpose Our Strategic Priorities Medium Term Objectives2 Boldly Grow the Good World-class client loyalty and growth EPS growth 7% – 10% in business and life Winning cult
Slide 7: Advancing our Digital First strategy
Advancing our Digital First strategy Accelerated engagement Driving loyalty, growth and efficiency North America Active Digital Users (000)1 Ranked first in the Insider Intelligence Canada Mobile Banking Emerging +6% Features Benchmark 2022. The ranking reflected the strength of select emerging feat
Slide 8: Supporting a Sustainable and Inclusive Future
Supporting a Sustainable and Inclusive Future At BMO, we have a long-standing commitment to support a thriving economy, a sustainable future and an inclusive society, and we are acting with purpose in support of our customers, communities and employees • Announced a $5B commitment to support women b
Slide 9: Financial Results
Financial Results For the Quarter Ended April 30, 2022 Tayfun Tuzun Chief Financial Officer Q2 22
Slide 10: Q2 F2022 - Financial Highlights
Q2 F2022 - Financial Highlights Good PPPT growth Y/Y and positive operating leverage • Adjusted1 EPS $3.23, up 3% Y/Y (reported $7.13, up Reported Adjusted1 274%) ($MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 • Adjusted1 net income up 4% Y/Y (reported up 265%) Gross Revenue 9,318 7,723 6,076 5,755 7,190
Slide 11: Balance Sheet
Balance Sheet Good loan growth in the quarter • Average net loans and acceptances up 9% Y/Y Average Net Loans and Acceptances ($B) – Business & government balances up 10% or 13% excluding the impact of declining balances in the non-Canadian energy 489.6 502.4 459.1 portfolio and the deconsolidation
Slide 12: Net Interest Margin
Net Interest Margin1 Reported and adjusted1 margin excluding trading up Q/Q • Excluding trading, on an adjusted2 basis, net interest margin was higher by 5 bps Q/Q primarily due to lower excess liquidity levels and lower low-yielding assets in BMO Capital Markets • Lower margin in Canadian P&C as hi
Slide 13: Interest Rate Sensitivity
Interest Rate Sensitivity1 • Bank continues to be well positioned to benefit from • Term rates increased in Q2; reinvestment rates have rising rates reached the highest point in recent years • Year 1 benefit to a +100bps rate shock driven • Higher long-term reinvestment rates, if sustained, will be
Slide 14: Non-Interest Revenue
Non-Interest Revenue • Adjusted1 NIR, net of CCPB1, down 3% Y/Y (reported2 up 114%) Non-Interest Revenue, net of CCPB1,2 ($MM) – Excluding trading, NIR net of CCPB1, down 9% primarily driven by divestitures and lower underwriting & advisory fees • Adjusted1 NIR, net of CCPB1, down 11% Q/Q (reported2
Slide 15: Non-Interest Expense
Non-Interest Expense Y/Y growth driven by targeted investments and performance Y/Y Change in Non-Interest Expense3 ($MM) • Adjusted1 efficiency ratio 55.6%2 (reported 0.9% (4.6)% 36.7%) 3.3% 4,449 3,713 Reported • Adjusted1 operating leverage2 of 1.8% Reported 4,409 1.3% 3,631 1.0% 3,650 Adjusted1 (
Slide 16: Strong Q2'22 CET1 ratio of 16.0%, up from Q1'22
Strong Q2’22 CET1 ratio1 of 16.0%, up from Q1’22 Common Equity Tier 1 Ratio +35 bps +9 bps -15 bps -8 bps 16.0% +77 bps 2 0.9% +92 bps 14.1% 15.1% Q1 2022 Common share Management of Internal capital DRIP Higher source Other Q2 2022 issuance fair value changes generation currency RWA Basis points may
Slide 17: Bank of the West acquisition update
Bank of the West acquisition update1 Progress Next Steps • Hosted several listening sessions with community • Continuing to work with regulators in normal course organizations in both BMO’s and BOTW’s markets of application process • Finalized closing requirements with associated plan • Continue dia
Slide 18: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Continued strong revenue and PPPT performance • Adjusted1 and reported net income up 21% Y/Y Reported Adjusted1 ($MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 • Adjusted1 and reported PPPT1 up 11% Y/Y Net interest income 1,763 1,787 1,581 1,763 1,787 1,581 • Revenue
Slide 19: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Good results with continued PPPT growth Y/Y Figures that follow are in U.S. dollars1,3 Reported Adjusted1 • Adjusted1 net income up 7% Y/Y (reported up 8%) (US$MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 Net interest income (teb)1,2 900 910 843 900 910 843 • Adjusted1
Slide 20: BMO Wealth Management
BMO Wealth Management Good underlying performance in Traditional Wealth • Adjusted1 net income down 4% Y/Y (reported down 2%) Reported Adjusted1 • Adjusted1 Traditional Wealth net income down 9% Y/Y ($MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 (reported down 7%) Gross Revenue 484 1,405 1,114 484 1,405
Slide 21: BMO Capital Markets
BMO Capital Markets Continued solid revenue performance reflecting diversified businesses • Adjusted1 and reported net income down 20% Y/Y Reported Adjusted1 • Adjusted1 and reported PPPT1 down 9% Y/Y ($MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 • Revenue up 2% Y/Y Global Markets 928 1,171 919 928 1,17
Slide 22: Corporate Services
Corporate Services • Adjusted1 net loss of $111MM and reported net Reported Adjusted1 income of $2,466MM, compared with an ($MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 adjusted1 net loss of $120MM and a reported net loss of $892MM in the prior year Revenue 3,496 523 (2) (67) (10) (31) 2 Group teb offse
Slide 23: Risk Review
Risk Review For the Quarter Ended April 30, 2022 Patrick Cronin Chief Risk Officer Q2 22
Slide 24: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q2 22 PCL ratio on Impaired Loans1 is 10 bps, Q2 22 Q1 22 Q2 21 ($MM) up 3 bps Q/Q $ bps $ bps $ bps Personal & Business Banking 79 17 79 17 110 26 PCL on Impaired Loans ($MM) Commercial 7 3 21 9 44 21 Total Canadian P&C 86 12 100 15 154 24
Slide 25: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $70MM recovery of credit losses on Loans (APL) and PCL on APL to performing loans reflected reduced uncertainty Q2 22 Performing Loans (PCL) Q1 22 Q2 22 Q2 22 Performing as a result of the improving pandemic Foreign By Operati
Slide 26: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio3 41 bps, Formations Gross Impaired Loans By Industry down 3 bps Q/Q ($MM, as at Q2 22) Canada & Canada & U.S. Total U.S. Total Formations ($MM) Other Other1 Consumer 139 21 160 370 230 600 Wholesale Trade 2 2 4 27 41 68 Service I
Slide 27: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances • Portfolio is well diversified by geography and Canada & % of By Industry3 U.S. Total Other1 Total industry ($B, as at Q2 22) Residential Mortgages 131.6 8.1 139.7 27% • Business & Government loans up 5% Q/Q, or Consumer Instalment and Other 67.8 14
Slide 28: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk Feb 1, 2022 to April 29, 2022 (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 May 25, 2022 28
Slide 29: Appendix
Appendix
Slide 30: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances2 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 284.7 236.4 237.6 277.1 222.8 257.9 117.2 118.5 110.2 160.9 161.6 154.6 5.7 5.8 5.0 54.1 55.3 50.0 8.9 8.9 7.8 85.0 91.2 96.2 75.5 76.0 68.2 Q2'21 Q1'22 Q2'22 Q2'21 Q1'22 Q2'22 Commercial
Slide 31: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars2 Gross Loans & Acceptances (US$B) Deposits (US$B) 115.3 113.9 110.0 98.5 100.8 93.4 11.0 11.0 10.6 4.1 48.4 4.1 48.2 49.0 4.5 78.3 83.4 85.7 61.8 66.9 64.9 Q2'21 Q1'22 Q2'22 Q2'21 Q1'22 Q2'22 Avg. Avg. Avg. Avg.
Slide 32: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending • Total Canadian residential-secured lending portfolio at Residential-Secured Lending by Region ($176.7B) $176.7B, representing 34% of total loans HELOC $81.7 Uninsured Mortgages $35.7 ─ LTV1 on uninsured of 47% Insured Mortgages 27% ─ 90-day delinquency rate for
Slide 33: Fair value impacts on the purchase of Bank of the West
Fair value impacts on the purchase of Bank of the West Overview of actions to mitigate exposure to capital ratios at closing • Purchase accounting requires us to fair value Bank of the West assets and liabilities in determining goodwill • Since fair values are sensitive to interest rates, changes in
Slide 34: 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 • Interest on Treasuries and other balance sheet instruments recorded at amortized cost is recorded in net interest income (NII) • Adjusted
Slide 35: U.S. Personal & Commercial Banking (CDE)
U.S. Personal & Commercial Banking (CDE) Reported Adjusted1 (CDE $MM) Q2 22 Q1 22 Q2 21 Q2 22 Q1 22 Q2 21 Net interest income (teb)1,2 1,141 1,156 1,055 1,141 1,156 1,055 Non-interest revenue 313 363 311 313 363 311 1,2 Revenue (teb) 1,454 1,519 1,366 1,454 1,519 1,366 Expenses 725 712 684 724 710 6
Slide 36: Adjusting Items
Adjusting Items Adjusting items1 - Pre-tax ($MM) Q2 22 Q1 22 Q2 21 YTD F22 YTD F21 Adjusting Items Impacting Revenue (Pre-tax) Impact of Divestitures 8 (29) 29 (21) 29 Management of fair value changes on the purchase of Bank of the West 3,555 562 - 4,117 - Impact of Adjusting Items on Revenue (Pre-t
Slide 37: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON SUKHWINDER SINGH Director, Investor Relations Director, Investor Relations 416.867.7834 416.867.4734 bill2.anderson@bmo.com Sukhwinder.singh@bmo.com