National Bank Of Canada · TSX:NA
National Bank Of Canada — Q4 2020 Earnings Presentation
37 slides from National Bank Of Canada's earnings presentation, Dec 2, 2020
Slide 1: Investor Presentation Fourth Quarter 2020
INVESTOR PRESENTATION Fourth Quarter 2020 December 2, 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. From time to time, representatives of the Bank may a
Slide 3: Overview
OVERVIEW Louis Vachon President & Chief Executive Officer
Slide 4: FY 2020 – Strong Performance in Challenging Times
FY 2020 – STRONG PERFORMANCE IN CHALLENGING TIMES PTPP(1)(2) Total PCL ▪ Strong business performance with PTPP up 9% YoY $3,803 MM $846 MM +9% YoY +144% YoY ▪ Positive operating leverage ▪ Proactive and prudent provisioning Net Income(2) EPS(2) $2,216 MM $6.06 ▪ Industry-leading ROE ▪ Robust balance
Slide 5: FY 2020 – Segment Highlights
FY 2020 – SEGMENT HIGHLIGHTS P&C Banking ▪ Strong growth in mortgages and deposits, offset by lower interest rates and client activity PTPP(1): $1,614 MM ▪ Market share gains in Quebec retail market and pick-up in commercial activity in Q4 flat YoY ▪ Strong commitment to our clients throughout the c
Slide 6: Maintaining Our Medium-Term Objectives
MAINTAINING OUR MEDIUM-TERM OBJECTIVES Strong Performance in a Challenging Year (Excluding Specified Items) FY 2020 Results Medium-Term Objectives Growth in Diluted EPS (4.7) % 5 - 10 % Return on Equity 15.8 % √ 15 - 20 % Dividend Payout Ratio 46.6 % √ 40 - 50 % CET1 Capital Ratio 11.8 % √ > 10.75 %
Slide 7: Risk Management
RISK MANAGEMENT William Bonnell Executive Vice-President Risk Management
Slide 8: Provisions for Credit Losses
PROVISIONS FOR CREDIT LOSSES PCL Q4 2020 Q4 PCL on Impaired Loans ($MM) ▪ $82M of Impaired PCLs reflecting stable Retail $90 $110 and lower Non-Retail provisions QoQ Q4 PCL on Performing Loans ▪ $20M. Key drivers: Increases in the weight in Non-Retail the pessimistic scenario and management Impaired
Slide 9: Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES ACL Q4 20 Total Allowances: ($MM) ▪ Continued to build allowances in Q4 ▪ Since Q1 2020, Total Allowances for Credit 75% increase in allowances since Q1 20 Losses increased from $769M to $1.34B ▪ 119% increase in allowances for non-retail $1,343 portfolios since Q1 and a
Slide 10: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total ACL Consistent with Portfolio Positioning Performing ACL / LTM PCL on Impaired Loans Total ACL / Total Loans excl. FVTPL Q4 20 Q3 20 Q4 19 Q4 20 Q3 20 Q4 19 Total Bank 2.8x 2.8x 1.8x Total Bank 0.85% 0.84% 0.
Slide 11: Gross Impaired Loans and Formations
GROSS IMPAIRED LOANS AND FORMATIONS Gross Impaired Loans(1) (GIL) ($MM) 48 49 49 ▪ Gross impaired loan ratio stable at 49bps 44 43 $817 ($817M) $780 $794 $684 $677 ▪ Net formations increased from last quarter reflecting: $462 $444 $467 - Higher formation in Commercial banking $387 $374 - Net repayme
Slide 12: Loans Under Deferrals Down to 1.3% of Canadian Portfolio
LOANS UNDER DEFERRALS DOWN TO 1.3% OF CANADIAN PORTFOLIO(1) Deferrals as at Q4 2020 Retail (As at October 31, 2020) ▪ New deferral requests down materially to ~1K Number of Value of As % of in Q4 vs 10K in Q3 and 75K in Q2(1) Loans Loans ($MM) Loans Balances RESL 2,865 $695 0.9% ▪ Value of retail lo
Slide 13: Retail Mortgage and HELOC Portfolio
RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province (As at October 31, 2020) ▪ Insured mortgages account for 38% of the 55% total RESL portfolio (71% in Alberta) Uninsured & HELOC Insured ▪ Distribution across product and geography remained stable 69% ▪ Uninsured mortgages and HELO
Slide 14: Financial Review
FINANCIAL REVIEW Ghislain Parent Chief Financial Officer and Executive Vice-President, Finance
Slide 15: Balanced Approach Between Cost Management and Investments
BALANCED APPROACH BETWEEN COST MANAGEMENT AND INVESTMENTS Revenue Growth: ▪ Resilient business mix supporting strong revenue and PTPP growth in FY 2020 7.2%(1) FY 2020 ▪ Expense growth reflecting higher compensation from revenue growth, brand and technology investments, and COVID-related costs Expen
Slide 16: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio 0.43% ▪ Strong CET1 ratio of 11.8%(2) 0.04% 0.01% (0.08%) 11.78% (0.05%) 0.00% ▪ Total PCL of $110M (8 bps after-tax) 11.43% ▪ Flat RWA growth QoQ - growth in Credit Risk RWA offset by a reduction in Market Risk RWA ▪ Growth in Credit Risk RWA primarily driven by:
Slide 17: Strong Capital and Liquidity Positions
STRONG CAPITAL AND LIQUIDITY POSITIONS Capital and Capital Ratios ($MM) ▪ Our capital levels remain strong Q4 20 Q3 20 Q2 20 Capital ▪ Total capital ratio of 16% CET1 $11,167 $10,840 $10,568 ▪ Strong liquidity coverage ratio of 161% Tier 1 $14,112 $13,290 $13,368 Total $15,167 $14,336 $14,370 Capita
Slide 18: Appendices
APPENDICES
Slide 19: Appendix 1 | FY 2020 Total Bank Results
APPENDIX 1 │ FY 2020 TOTAL BANK RESULTS Total Bank Summary Results - FY 2020 ($MM, TEB) ▪ Strong business performance with (1) (1) FY 20 FY 19 YoY revenues up 7% and PTPP up 9% Revenues 8,216 7,666 7% Non-Interest Expenses 4,413 4,178 6% ▪ Positive operating leverage Pre-Tax / Pre-Provisions 3,803 3
Slide 20: Appendix 2 | FY 2020 Segment Results
APPENDIX 2 │ FY 2020 SEGMENT RESULTS P&C Banking Wealth Management ($MM) ($MM) FY 20 FY 19 YoY FY 20 FY 19 YoY Revenues 3,463 3,451 - Revenues 1,855 1,743 6% Personal 2,154 2,163 - Fee-Based 1,087 1,013 7% Commercial 1,309 1,288 2% Transaction & Others 326 275 19% Non-Interest Expenses Net Interest
Slide 21: Appendix 3 | Total Bank – Q4 20 Results
APPENDIX 3 │ TOTAL BANK – Q4 20 RESULTS Total Bank Summary Results - Q4 2020 ($MM, TEB) ▪ Revenues up 3% YoY and PTPP up 1% (1) (1) YoY Q4 20 Q3 20 Q4 19 QoQ YoY - Expenses up 5% YoY on higher corporate Revenues 2,073 2,021 2,008 3% 3% expenses Non-Interest Expenses 1,140 1,074 1,084 6% 5% Pre-Tax /
Slide 22: Appendix 4 | Personal and Commercial Banking
APPENDIX 4 │ PERSONAL AND COMMERCIAL BANKING P&C Summary Results - Q4 2020 ($MM) ▪ Revenues up 1% YoY: - Strong mortgage and deposit growth Q4 20 Q3 20 Q4 19 QoQ YoY Revenues 883 852 875 4% 1% - Partly offset by lower margin from low interest rate environment and lower client Personal 547 536 545 2%
Slide 23: Appendix 5 | Wealth Management
APPENDIX 5 │ WEALTH MANAGEMENT Wealth Management Summary Results - Q4 2020 ($MM) ▪ Revenues up 4% YoY - Strong net sales and favorable markets Q4 20 Q3 20 Q4 19 QoQ YoY Revenues 466 450 446 4% 4% - Lower net interest income as strong deposits were more than offset by lower interest rates Fee-Based 2
Slide 24: Appendix 6 | Financial Markets
APPENDIX 6 │ FINANCIAL MARKETS Financial Markets Summary Results - Q4 2020 ($MM, TEB) ▪ Solid performance in Global Markets, against strong Q4/19 Q4 20 Q3 20 Q4 19 QoQ YoY - Continued momentum in fixed income trading Revenues 495 503 495 (2%) - - Partly offset by a reduction in opportunities in Glob
Slide 25: Appendix 7 | US Specialty Finance & International
APPENDIX 7 │ US SPECIALTY FINANCE & INTERNATIONAL USSF&I Summary Results - Q4 2020 USSF&I ($MM) ▪ Strong performance with net income up 36% YoY Q4 20 Q3 20 Q4 19 QoQ YoY Revenues 232 210 192 10% 21% ▪ Well positioned to continue delivering strong Credigy 122 104 95 17% 28% growth ABA 111 105 90 6% 2
Slide 26: Appendix 8 | Other
APPENDIX 8 │ OTHER Other Segment Summary Results - Q4 2020 ($MM, TEB) ▪ Higher non-interest expenses YoY: Adjusted Results Q4 20 (1) Q3 20 Q4 19 (1) - Incremental expenses for health and Revenues (3) 6 - safety measures in context of pandemic Non-Interest Expenses 130 58 75 - Year-end compensation a
Slide 27: Appendix 9 | Total Loan Portfolio Overview
APPENDIX 9 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category ($B) ▪ Secured lending accounts for 94% As at of Retail loans October 31, 2020 % of Total Retail ▪ Indirect auto loans represent 1.8% of total Secured - Mortgage & HELOC 81.5 49% loans ($3.0B) Secured - Other (1) 9.1 5
Slide 28: Appendix 10 | Regional Distribution of Canadian Loans
APPENDIX 10 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Prudent Positioning (As at October 31, 2020) Within the Canadian loan portfolio: Maritimes (2) ▪ Limited exposure to unsecured consumer Oil and loans (3.6%) (1) Quebec Ontario Regions BC/MB Territories Total Retail ▪ Modest exposure to unsecured
Slide 29: Appendix 11 | Limited Exposure to COVID-19 Most Impacted Industries
APPENDIX 11 │ LIMITED EXPOSURE TO COVID-19 MOST IMPACTED INDUSTRIES ▪ Limited exposure to COVID-19 most impacted industries (down 3.5% QoQ) Gross Loans % of ($MM) Book Non-Food / Non-Pharmacy Retailers Essential Services Retailers $408 0.2% n Increase of 8% QoQ / Majority of exposure is secured / No
Slide 30: Appendix 12 | Oil & Gas and Pipelines Sector
APPENDIX 12 │ OIL & GAS AND PIPELINES SECTOR O&G Producers and Services Exposure Gross Loans in $MM and % of Total Loans ▪ O&G producers and services exposure $3,956 significantly reduced - 37% reduction in outstanding loans: down from $4B in Q1/15 to $2.5B in Q4/20 (vs $2,506 $2.8B in Q3/20) - Redu
Slide 31: Appendix 13 | Commercial Real Estate Portfolio
APPENDIX 13 │ COMMERCIAL REAL ESTATE PORTFOLIO (As at October 31, 2020) Total CRE Portfolio of $11.3B Total CRE Portfolio Commercial Banking share $11.3B (6.8% of total loans) $9.2B (5.6% of total loans) ▪ Corporate Banking accounts for 19% of portfolio, primarily public REITs, well diversified acro
Slide 32: Appendix 14 | Daily Trading and Underwriting Revenues vs. VaR
APPENDIX 14 │ DAILY TRADING AND UNDERWRITING REVENUES VS. VAR ($MM) 25 20 15 10 5 0 August-2020 September-2020 October-2020 (5) (10) (15) (20) Trading P&L Trading VaR 32
Slide 33: Appendix 15 | Trading VaR Trend
APPENDIX 15 │ TRADING VaR TREND ($MM) 33
Slide 34: Appendix 16 | Loan & Deposit Overview
APPENDIX 16 │ LOAN & DEPOSIT OVERVIEW Loans and BA’s(1) Deposits(2) ($B) ($B) 162.7 161.8 164.7 176.3 153.3 156.2 168.5 158.9 152.0 145.3 64.2 61.3 60.7 57.2 58.9 102.3 108.8 90.6 95.0 85.3 96.1 97.2 98.5 100.5 104.1 60.1 61.4 63.9 66.2 67.5 Q4 19 Q1 20 Q2 20 Q3 20 Q4 20 Q4 19 Q1 20 Q2 20 Q3 20 Q4 2
Slide 35: Appendix 17 | Range of Macroeconomic Scenarios - IFRS9
APPENDIX 17 │ RANGE OF MACROECONOMIC SCENARIOS - IFRS9 Canada Real GDP NBC Macroeconomic Forecast: Q4 vs. Q3 ($ Trillions) (Full Calendar Years) 2.25 Base Scenario C2020 C2021 C2022 2.15 Real GDP (Annual Average % Change) As at July 31 (7.1%) 4.9% 3.0% 2.05 As at October 31 (5.7%) 4.1% 2.7% 1.95 Une
Slide 36: Appendix 18 | Specified Items
APPENDIX 18 │ SPECIFIED ITEMS ($MM, except EPS) Q4 20 (1) Q4 19 (2) Income Non- Income Net Net Before controlling EPS Before EPS Income Income Taxes interest Taxes Charge related to Maple (11) (8) (0.02 $) Impairment losses on premises and (71) (52) - (0.15 $) equipment and on intangible assets Seve
Slide 37: Investor Relations Contact Information
Investor Relations Contact Information W: www.nbc.ca/investorrelations investorrelations@nbc.ca 1-866-517-5455 Linda Boulanger, Senior 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-
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