National Bank Of Canada · TSX:NA
National Bank Of Canada — Q2 2020 Earnings Presentation
32 slides from National Bank Of Canada's earnings presentation, May 26, 2020
Slide 1: Investor Presentation Q2|20
INVESTOR PRESENTATION Q2|20 May 26, 2020
Slide 2: Caution Regarding Forward-Looking Statements
CAUTION REGARDING FORWARD-LOOKING STATEMENTS From time to time, the Bank makes written and oral forward-looking statements such as those contained in this document, in other filings with Canadian securities regulators, and in other communications. All such statements are made in accordance with appl
Slide 3: Overview
OVERVIEW Louis Vachon President & Chief Executive Officer
Slide 4: People First - Our Response to COVID-19
PEOPLE FIRST - OUR RESPONSE TO COVID-19 Our Employees Our Retail Clients Our Business Clients Our Communities ▪ Prioritizing health & safety ▪ Offering uninterrupted ▪ Extending balance sheet: ▪ $1 million to food banks, service with ~75% of ~$3.8B in incremental vulnerable groups and the ▪ Successf
Slide 5: Overview - Q2|20 Results
OVERVIEW - Q2|20 RESULTS ▪ We entered the COVID-19 crisis on solid footings: PTPP(1) Total PCL - Strong balance sheet $991 MM $504 MM +20% YoY >5X QoQ - Strong credit quality - Defensive positioning ▪ Our business is holding up well: - Revenue growth in all business segments Net Income EPS $379 MM $
Slide 6: Segment Highlights - Q2|20
SEGMENT HIGHLIGHTS - Q2|20 ▪ Supporting our clients with payment deferrals and extending balance sheet for businesses P&C Banking PTPP: $389 MM ▪ Strong interest income driven by solid volumes on both sides of the balance sheet +3% YoY ▪ Lower consumer activity in context of crisis impacted non-inte
Slide 7: Risk Management
RISK MANAGEMENT William Bonnell Executive Vice-President Risk Management
Slide 8: Provisions for Credit Losses
PROVISIONS FOR CREDIT LOSSES Provisions for credit losses Q2 20 ($MM) Total PCL: ▪ The deterioration in economic conditions caused by the COVID pandemic led to total PCLs of $504M in Q2, $113 $504 a >5 times increase QoQ Impaired PCL on performing loans: $391 $120 ▪ Increased to $391M (99bps) - key
Slide 9: Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES Allowance for credit losses Q2 20 ($MM) Total Allowances: ▪ Total Allowances for Credit Losses increased by 57% QoQ from $769M to $1.21B ▪ Allowances for retail lending increased 30% reflecting our product and geographic mix, and allowances for non-retail lending increase
Slide 10: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total ACL consistent with portfolio positioning Performing ACL / LTM PCL on impaired loans Total ACL over total loans excluding FVTPL Q2 19 Q1 20 Q2 20 Q2 19 Q1 20 Q2 20 Total Bank 1.7x 1.8x 2.8x Total Bank 0.52% 0
Slide 11: Gross Impaired Loans and Formations
GROSS IMPAIRED LOANS(1) AND FORMATIONS(2) Gross Impaired Loans (GIL) ($MM) ▪ Gross impaired loan ratio increased 5bps to 48bps ($780M) due primarily to new formations in Commercial and FM ▪ The Commercial and FM formations were across a few provinces and several different sectors Net Formations by B
Slide 12: Limited Exposure to COVID-19 Most Impacted Industries
LIMITED EXPOSURE TO COVID-19 MOST IMPACTED INDUSTRIES 12
Slide 13: Oil & Gas and Pipelines Sector
OIL & GAS AND PIPELINES SECTOR O&G producers & services exposure (Gross loans in $MM and % of total loans) ▪ O&G producers & services exposure $3,956 significantly reduced 3.7% - 28% reduction in outstanding loans: down from $4B in Q1/15 to $2.9B in Q2/20 $2,863 - Reduction as a % of total loans: do
Slide 14: COVID-19: Supporting Our Clients Through Payment Deferrals
COVID-19: SUPPORTING OUR CLIENTS THROUGH PAYMENT DEFERRALS Number of loans subject Value of loans subject As % of loan Deferrals / accomodations by product to deferrals to deferrals ($MM) balances Retail Mortgages(1) 38,682 $ 8,624 (2) 12 % Personal loans 26,627 $ 464 6% Student loans(3) 39,308 $ 29
Slide 15: Retail Mortgage and HELOC Portfolio
RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province (as at April 30, 2020) ▪ Insured mortgages account for 39% of the total RESL portfolio (69% in Alberta) ▪ Distribution across product and geography remained stable ▪ Uninsured mortgages and HELOC in GTA and GVA represent 10% and 2
Slide 16: Financial Review
FINANCIAL REVIEW Ghislain Parent Chief Financial Officer and Executive Vice-President, Finance
Slide 17: Strong Capital Position
STRONG CAPITAL POSITION CET1 ratio ▪ Strong CET1 ratio of 11.4%(1) 0.52% ▪ Strong pre-tax pre-provision earnings from underlying businesses (0.41%) 0.11% 11.65% 0.23% 11.39% ▪ Prudent approach to provisioning (0.71%) - Total PCL of $504M (41 bps after-tax) ▪ RWA growth primarily driven by Credit Ris
Slide 18: RWA Growth
RWA GROWTH Risk-weighted assets ($MM) ▪ Higher RWA on higher Credit Risk primarily driven by: $313 $1,026 - Business lending from incremental $5,486 draws and new loans $92,755 ($276) - Maturity of a Series of the credit card $86,206 securitized portfolio - Loan migration ▪ FX impact mainly from US$
Slide 19: Strong Capital and Liquidity Positions
STRONG CAPITAL AND LIQUIDITY POSITIONS Capital and capital ratios ▪ Our capital levels remain strong ($MM) Q2 20 Q1 20 Q4 19 ▪ Total capital ratio of 15.5% Capital CET1 $10,568 $10,046 $9,692 ▪ Strong liquidity coverage ratio of 149% Tier 1 $13,368 $12,846 $12,492 Total $14,370 $13,755 $13,366 Capit
Slide 20: Appendices
NATIONAL BANK APPENDICES
Slide 21: Appendix 1 | Overview - Q2|20 Results
APPENDIX 1 │ OVERVIEW – Q2|20 RESULTS ▪ Revenue growth in all segments, ($MM, TEB) Q2 20 Q1 20(1) Q2 19 QoQ YoY led by Financial Markets and Revenues 2,112 2,010 1,850 5% 14% Wealth Management Operating Expenses 1,121 1,078 1,026 4% 9% Pre-tax / Pre-provisions 991 932 824 6% 20% ▪ Pre-tax pre-provis
Slide 22: Appendix 2 | Personal and Commercial Banking
APPENDIX 2 │ PERSONAL AND COMMERCIAL BANKING ▪ Revenue growth driven by solid ($MM) Q2 20 Q1 20 Q2 19 QoQ YoY volume on both sides of the balance Revenues 848 880 834 (4%) 2% sheet Personal 524 547 527 (4%) (1%) - Lower non-interest income due to Commercial 324 333 307 (3%) 6% lower credit cards vol
Slide 23: Appendix 3 | Wealth Management
APPENDIX 3 │ WEALTH MANAGEMENT ($MM) Q2 20 Q1 20 Q2 19 QoQ YoY ▪ Solid revenue growth at 11% YoY Revenues 474 465 426 2% 11% - High transaction volumes at Fee-based 267 273 249 (2%) 7% National Bank Direct Brokerage and National Bank Independent Transaction & Others 97 73 69 33% 41% Network in conte
Slide 24: Appendix 4 | Financial Markets
APPENDIX 4 │ FINANCIAL MARKETS ▪ Strong quarter for Financial Markets with ($MM, TEB) Q2 20 Q1 20 Q2 19 QoQ YoY revenues up 48% Revenues 598 458 405 31% 48% ▪ Record quarter for Global Markets with Global Markets 396 289 216 37% 83% revenues of $396 million - Higher activity level in all business Co
Slide 25: Appendix 5 | US Specialty Finance & International
APPENDIX 5 │ US SPECIALTY FINANCE & INTERNATIONAL ABA Bank ($MM) Q2 20 Q1 20 Q2 19 QoQ YoY ▪ Cambodia: Revenues 183 195 178 (6%) 3% - Limited health impacts with no COVID-19 related Credigy 82 98 107 (16%) (23%) casualties to date ABA 99 95 69 4% 43% - Slowing economic growth with manufacturing and
Slide 26: Appendix 6 | Other
APPENDIX 6 │ OTHER Q1 20(1) ▪ Incremental expenses of $17M for ($MM, TEB) Q2 20 Q2 19 health and safety measures in the Revenues 9 12 7 context of the pandemic Operating Expenses 82 51 45 Pre-tax / Pre-provisions (73) (39) (38) Provision 5 - - for Credit Losses Pre-tax Income (78) (39) (38) Net Inco
Slide 27: Appendix 7 | Total Loan Portfolio Overview
APPENDIX 7 │TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category As at ▪ Secured lending accounts for 93% of % of Total Retail loans ($B) April 30, 2020 Retail - Secured - Mortgage & HELOC 77.4 47% ▪ Indirect auto loans in the retail portfolio represents 1.7% of total loans ($2.8B) -
Slide 28: Appendix 8 | Regional Distribution of Canadian Loans
APPENDIX 8 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Oil Maritimes(2) Within the Canadian Quebec Ontario BC/MB and TOTAL Regions (1) loan portfolio: As at April 30, 2020 Territories Retail ▪ Limited exposure to Secured - Mortgage & HELOC 26.7% 13.0% 4.7% 3.5% 1.1% 49.0% unsecured consumer Secured lo
Slide 29: Appendix 9 | Daily Trading and Underwriting Revenues vs. VaR
APPENDIX 9 │ DAILY TRADING AND UNDERWRITING REVENUES VS. VAR ($MM) Feb-2020 March 2020 April 2020 29
Slide 30: Appendix 10 | Trading VaR Trend
APPENDIX 10 │ TRADING VaR TREND ($MM) 30
Slide 31: Appendix 11 | Loan & Deposit Overview
APPENDIX 11 │ LOAN & DEPOSIT OVERVIEW ($B) Loans & BA's Deposits 162.7 152.0 158.9 148.7 151.3 153.3 156.2 143.1 145.3 136.7 56.5 57.2 58.9 64.2 55.4 90.6 95.0 78.5 84.1 85.3 93.3 94.9 96.1 97.2 98.5 58.2 59.0 60.1 61.4 63.9 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Q2 19 Q3 19 Q4 19 Q1 20 Q2 20 Retail Business
Slide 32: Investor Relations Contact Information
INVESTOR RELATIONS CONTACT INFORMATION W: www.nbc.ca/investorrelations investorrelations@nbc.ca 1-866-517-5455 Linda Boulanger, Vice President 514-394-0296 | linda.boulanger@bnc.ca Marianne Ratté, Senior Director 514-412-5437 | marianne.ratte@bnc.ca Arslan Benbakouche, Senior Manager 514-412-802
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