National Bank Of Canada · TSX:NA
National Bank Of Canada — Q2 2003 Earnings Presentation
37 slides from National Bank Of Canada's earnings presentation, May 29, 2003
Slide 1: Analyst and Investor Presentation Q2 2003 Results
Analyst and Investor Presentation Q2 2003 Results Conference Call May 29, 2003 www.nbc.ca/investorrelations 1
Slide 2: Second Quarter Highlights
Second Quarter Highlights • Fundamentals continue to be strong: • EPS growth +18% • ROE at 14.8% • Tier One at 9.8% • P&C Bank turns in strong performance • Stable contribution from Wealth Management • Significant dividend increase +7.7% • from $0.26 to $0.28 per share • Strong underlying performanc
Slide 3: All 2003 performance objectives met or surpassed
All 2003 performance objectives met or surpassed 2003 Q2 03 YTD Growth in earnings 5% to 10% 18% 19.3% per share Return on common 14% to 16% 14.8% 16.3% shareholders' equity Tier 1 capital ratio 8.75% to 9.50% 9.8% 9.8% Dividend payout ratio 30% to 40% 33% 33% * Trailing 4 quarters, excluding impair
Slide 4: Quarterly snapshot
Quarterly snapshot in millions of dollars TEB Q2 03 Q1 03 Q2 02 Change Q2 03/Q2 02 Total Revenues $798 $860 $827 -4% Operating expenses 529 548 491 8% Provision for credit losses 41 41 130 -68% Net income 138 166 122 13% EPS $0.73 $0.88 $0.62 18% ROE 14.8% 17.6% 13.1% 4 4
Slide 5: Six month snapshot
Six month snapshot in millions of dollars TEB 2003 2002 Change Total Revenues $1,658 $1,633 2% Operating expenses 1077 992 9% Provision for credit losses 82 375 -78% Discontinued operations, after tax - 118 Net income 304 268 13% EPS $1.61 $1.35 19% ROE 16.3% 14.1% 5 5
Slide 6: Dividend per share and Dividend Payout
Dividend per share Q3 02 c rease 17% from in Dividend 0.28 0.26 0.26 Dividend increase of 7.7% from previous quarter 0.24 0.24 0.24 Increase of $0.02 from $0.26 to $0.28 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Dividend Payout Trailing 4 quarters, excluding impairment charge on investment 35.0% 34.2% 34.
Slide 7: Continued strong Capital ratios
Continued strong Capital ratios 14.28% 13.85% Share buyback status at April 30: 4.09% 4.03% • 7.5 M shares bought back on 9.1M program 1.11% 1.18% • Equals 82.2% or $240 M 1.28% 1.28% • Continued focus on tight balance sheet management Tier One Tier One • Q3 03 redemption of 10.19% 9.82% Preferred S
Slide 8: Economic and market environment Canada
Economic and market environment Canada Retail sales (March 2003 *) 6.2%* * Annualized growth past 12 months Manufacturers’ inventories (March 2003 *) -1.7%* Real Consumption (2002) 2.9% Real Investment (2002) -3.9% Source: National Bank Financial 8 8
Slide 9: Q2 Net Income: Personal and Commercial Banking
Personal and Q2 03 Net Income Commercial Banking Wealth Management $72 M Financial Markets Personal and Commercial Banking Wealth Management Financial Markets 9 9
Slide 10: Personal and Commercial Banking highlights
Personal and Commercial Banking highlights Continued focus to be relationship driven Marked improvements in spreads Innovative product launches: Fixed-rate mortgage with cash rebate Money-Saver Mortgage with interest rate of 0% for first 3 months of 5 year-term Popular 10 practical mortg
Slide 11: Personal and Commercial Banking Quarterly
Personal and Commercial Banking Quarterly in millions of dollars Drivers: +3.7% Volumes • Mortgage loans +2% 447 431 • Credit card receivables +12% • Personal loans +11% (excluding indirect loans) +3.3% 273 282 • Commercial loans and BAs -2% (excluding factoring) • Deposits +14.3% •Personal +3% -7.3
Slide 12: Personal and Commercial Banking 6 Months
Personal and Commercial Banking 6 Months in millions of dollars +5.1% 915 871 +1.5% 547 555 +23.5% -8% 163 113 132 104 Revenues Expenses Expected Net income losses 2002 2003 12 12
Slide 13: Q2 Net Income: Wealth Management
Personal and Q2 03 Net Income Commercial Banking Wealth Management $17 M Financial Markets Personal and Commercial Banking Wealth Management Financial Markets 13 13
Slide 14: Wealth Management highlights
Wealth Management highlights NB Discount Brokerage and Altamira – Dalbar winners again! Delivery of Wealth Management strategic plan on track and remains priority Currently executing strategy to lower breakeven point at NBF Full-fledged brokerage: addressing cost structure to better weather
Slide 15: Wealth Management Quarterly
Wealth Management Quarterly in millions of dollars -1.9% 157 154 -3.8% 131 126 17 17 Revenues Expenses Net Income Q2 02 Q2 03 15 15
Slide 16: Wealth Management 6 Months
Wealth Management 6 Months in millions of dollars -0.3% 317 316 +0.8% 255 257 -10% 40 36 Revenues Expenses Net Income 2002 2003 16 16
Slide 17: Assets under Management growth
Assets under Management growth In billions of dollars As at April 30 % th rate: 7.6 Grow 69.8 64.9 6.7 6.2 7.0 3.4 32.7 32.9 22.6 23.2 Q2 02 Q2 03 Deposits Full brokerage Mutual funds Others Others include Altamira, Discount Brokerage and Trust Services 17 17
Slide 18: Asset Management trends
Asset Management trends High capacity to weather unfavourable environment When markets turnaround, Altamira’s direct link to clients is a great model to be in: Not just a Mutual Fund company Multi-product offer Integration on track: Fund management review on target for completion Impor
Slide 19: Q2 Net Income: Financial Markets
Personal and Q2 03 Net Income Commercial Banking $37 M Wealth Management Financial Markets Personal and Commercial Banking Wealth Management Financial Markets 19 19
Slide 20: Financial Markets highlights
Financial Markets highlights NBF and NBF/Putnam Lovell Research rewarded NBF Analyst ranked #1 overall in Starmine survey Wall Street Journal names Putnam Lovell NBF Analyst among "Best on the Street" The upgrade of the National Bank Financial website continues with the launch of a new versi
Slide 21: Financial Markets Quarterly
Financial Markets Quarterly in millions of dollars -19% 230 187 +17% 117 100 -53% 78 +50% 37 8 12 Revenues Expenses Expected Net Income losses Q2 02 Q2 03 21 21
Slide 22: Financial Markets 6 Months
Financial Markets 6 Months in millions of dollars -0.7% 427 424 +27% 245 193 -25% 135 101 +4.8% 21 22 Revenues Expenses Expected Net Income losses 2002 2003 22 22
Slide 23: Treasury and Capital Market Activity
Treasury and Capital Market Activity in millions of dollars 61.9 60.0 50.7 43.9 28.6 25.7 19.7 -9.4 Trading Capital Investment ALM Revenues Market Gains Fees Q2 02 Q2 03 23 23
Slide 24: Business Line Breakdown
Business Line Breakdown Revenues Earnings Mix reflects market conditions 24% 22% 56% 54% 20% 24% Personal and Commercial Banking Personal and Commercial Banking Wealth Management Wealth Management Financial Markets Financial Markets 24 24
Slide 25: Business Line Expense Ratio
Business Line Expense Ratio 83.4% 81.8% 63.3% 63.1% 62.6% 43.5% Personal and Wealth Financial Markets Commercial Management Banking Q2 02 Q2 03 25 25
Slide 26: Risk Management
Risk Management Another high quality quarter Provisioning levels remain stable Lower net impairment levels for : Individuals and small businesses Commercial 26 26
Slide 27: Provision for credit losses
Provision for credit losses in millions of dollars 2003 Guidance remains at: 45 to 55 bps of loans and BAs 130 160 62 53 41 41 Q2 02 (30) Q3 02 Q4 02 Q1 03 Q2 03 Regular General provision 27 27
Slide 28: Impaired loans
Impaired loans In millions of dollars Q2 03 Q1 03 Gross impaired loans $467 $461 Gross impaired loans as a % of tangible capital & reserves 13.3% 12.7% Net impaired loans Individuals and small businesses 40 42 Commercial Canada 116 119 Corporate 33 19 Real Estate 36 45 Treasury 0 3 Other 1 2 Sub-tot
Slide 29: Credit Portfolio
Credit Portfolio Private Risk $467 M Millions $ $(179) M Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Gross Net 29 29
Slide 30: Telecom Exposure
Telecom Exposure As at March 31, 2003 in millions of dollars Outstanding Invest. Non-Invest. % of loans Loans and BAs grade grade Total and BAs Telecommunications Wireless $25 $30 $55 0.12 Wireline 7 42 49 0.11 Total 32 72 104 0.23 Cable 56 80 136 0.30 TOTAL 88 152 240 0.53 Versus Q4 02 78 200 278 0
Slide 31: Electric Power and Power Generation Exposure
Electric Power and Power Generation Exposure As at March 31, 2003 in millions of dollars Outstanding Invest. Non-Invest. Loans % of loans grade grade and BAs and BAs Loans and BAs Regulated Utilities $11 $0 $11 0.02 Generation Proj. with PPAs * 54 83 137 0.30 Other Generation Projects 16 18 34 0.07
Slide 32: Aerospace Exposure
Aerospace Exposure As at April 30, 2003 Net in millions of dollars Net loans % Invest. % Non-Invest. % of loans Impaired Outstanding and BAs grade grade and BAs loans and BAs Aircraft manufacturing $118 47 53 0.30 - Air Transportation 70 - 100 0.18 8.5 Services 38 46 54 0.10 - TOTAL Aerospace 226 32
Slide 33: Automotive Exposure
Automotive Exposure As at March 31, 2003 Net in millions of dollars Loans % Invest. % Non-Invest. % of loans Impaired Outstanding and BAs grade grade and BAs loans and BAs Automotive motor vehicle - - - - - Automotive parts $117 100 0.30 2 Versus Q4 02 151 - 100 0.31 33 33
Slide 34: Impaired loan formation
Impaired loan formation In millions of dollars Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Personal and Commercial * 22.7 26.6 (0.9) 33.5 5.1 Corporate 146.8 1.6 18.7 (6.3) 31.3 Other 12.5 5.3 (0.5) 1.7 0.5 182 33.5 17.3 28.9 36.9 * Includes Real Estate Formations include new accounts, disbursements, principal re
Slide 35: Risk Management: VaR Global Trading
Risk Management VaR - Global Trading - Q1 2003 to Q2 2003 (Maximum 1-day loss at 99%) 7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 1- 4- 15 29 13 27 10 24 7- 21 7- 21 18 No Ap Fe M -N -N -D -D -J -J -F -M -A ar an an r- 0 b- eb v- pr ov ov ec ec ar -0 02 03 -0 -0 -0 -0 -0 -0 -0 -0 -0 3
Slide 36: Strategic guidelines intact
Strategic guidelines intact: • Continued focus on generating maximum shareholder value • Outlook cautious due to uncertain economic activity • Recent events have near term negative impacts on Canadian economy • some sectors will be impacted by a relatively stronger Canadian dollar • SARS repercussio
Slide 37: Forward looking statements and contacts
This presentation may contain certain forward looking statements about the operations, objectives and strategies of the National Bank of Canada. Such statements are subject to risk and uncertainties. Actual results may differ materially due to a variety of factors, including legislative or regulator
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