Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q1 2022 Earnings Presentation
38 slides from Bank Of Montreal's earnings presentation, Mar 1, 2022
Slide 1: Investor Presentation Q1 22
BMO Financial Group Investor Presentation For the Quarter Ended January 31, 2022 March 1, 2022 Q1 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 Q1 22
Slide 4: Targeted investments driving strong operating momentum
Targeted investments driving strong operating momentum Q1’22 First Quarter Highlights Adjusted1 Net Income1 $2.6B • Investments in sales capacity, digital capabilities and Reported $2.9B marketing delivering strong and diversified revenue growth EPS1 $3.89 • Accelerating commercial loan growth; aver
Slide 5: Strong performance across our diversified businesses
Strong performance across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial Adjusted1 Q1’22 Adjusted1 Q1’22 • Strong loan growth • Strong commercial PPPT Growth1,2 19% PPPT Growth1,2 12% across Personal and loan growth Reported 19% Business Banking and Reported1 13
Slide 6: Advancing our Digital First strategy
Advancing our Digital First strategy Accelerated engagement Driving loyalty, growth and efficiency North America BMO Business Xpress, industry- Active Digital Users (000)1 Launched BMO Global Money leading digital platform driving client Transfer for 24/7 international growth, surpassing $2B in +6%
Slide 7: U.S. segment continuing to deliver strong results
U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis1 • U.S. segment adjusted1 PPPT up 7% (reported1 up 66%) in Q1’22; contributed 39% of adjusted1 earnings (reported1 50%) ― Adjusted1 ROE 18.3% (reported1 26.6%) ― Adjusted1 efficiency ratio 53.9%1 (report
Slide 8: Bank of the West acquisition update
Bank of the West acquisition update Progress to Date Next Steps • Established a joint Integration Management Office • Define Legal Day 1 requirements and Integration with executive management oversight. Resources Roadmap include experienced professionals with deep subject • Continue community outrea
Slide 9: 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 • Mobilized over $1.1B towards a 10-year, $12B
Slide 10: 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 11: Financial Results
Financial Results For the Quarter Ended January 31, 2022 Tayfun Tuzun Chief Financial Officer Q1 22
Slide 12: Q1 F2022 - Financial Highlights
Q1 F2022 - Financial Highlights Continued strong performance with double digit PPPT1 growth Y/Y and Q/Q • Adjusted1 EPS $3.89, up 27% Y/Y (reported $4.43, up 46%) Reported Adjusted1 • Adjusted1 net income up 27% Y/Y (reported up 45% ) ($MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 – Divestitures reduced
Slide 13: 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 14: 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 recorded at amortized cost is recorded in net interest income • Adjusted1 results exclude these impacts • In Q1, h
Slide 15: Balance Sheet
Balance Sheet Higher loans and deposits in the quarter • Average net loans and acceptances up 7% Y/Y Average Net Loans and Acceptances ($B) – Business & government balances up 5% or 8% excluding the 474.7 489.6 impact of declining balances in the non-Canadian energy 458.3 portfolio and the deconsoli
Slide 16: Net Interest Margin
Net Interest Margin1 Adjusted margin excluding trading higher Q/Q • Excluding trading, on an adjusted2 basis, net interest margin was higher by 2bps • Higher loan margins in Canadian P&C primarily due to higher prepayment fees • Higher loan margins in U.S. P&C, in part due to growth in higher spread
Slide 17: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to a +100bps rate shock driven • Term rates increased in Q1, moving reinvestment rates approximately 2/3 by short rates closer to average rates of recent years • Higher Year 2 benefit to rising rates (+100bps) of • If higher term rates are sustained, this w
Slide 18: Non-Interest Revenue
Non-Interest Revenue • Adjusted1 NIR net of CCPB1 up 12% Y/Y (reported1 up 30%) Non-Interest Revenue, net of CCPB1 – Excluding trading, NIR net of CCPB1 up 10% driven by underwriting & advisory fees, card fees, and securities gains partially offset by 3,057 3,135 2,875 divestitures 2,796 2,720 • Adj
Slide 19: Non-Interest Expense
Non-Interest Expense Y/Y growth driven by performance and targeted investments • Adjusted1 efficiency ratio 53.8% (reported1,2 50.3%) Y/Y Change in Non-Interest Expense3 ($MM) ~1% 3,846 Reported ~1% • Adjusted1 operating leverage2 of 4.8% 3,772 ~3% ~1% 3,829 Adjusted1 Reported 3,613 ~4% 3,740 (repor
Slide 20: Strong Q1'22 CET1 ratio of 14.1%, up from Q4'21
Strong Q1’22 CET1 ratio1 of 14.1%, up from Q4’21 Common Equity Tier 1 Ratio +13 bps -42 bps +29 bps +51 bps -5 bps -2 bps 14.1% 13.7% Q4 2021 Internal capital Sale of EMEA Asset Management of Higher source ECL provisioning Other Q1 2022 generation Management fair value changes currency RWA adjustmen
Slide 21: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Continued strong performance with double-digit PPPT 1 and positive operating leverage 2 • Adjusted1 and reported net income1 up 34% Y/Y Reported Adjusted1 • Adjusted1 and reported PPPT1 up 19% Y/Y ($MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 • Revenue up 15% Y/Y N
Slide 22: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strong results with double digit PPPT1 growth and continued positive operating leverage Figures that follow are in U.S. dollars1,3 Reported Adjusted1 1 (US$MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 • Adjusted net income up 18% Y/Y (reported up 19%) Net interest incom
Slide 23: BMO Wealth Management
BMO Wealth Management Good underlying performance in Traditional Wealth • Adjusted1 net income down 8% Y/Y (reported down 6%) Reported Adjusted1 – Divestures2 reduced adjusted net income growth by 3% ($MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 (reported by 1%) Gross Revenue 1,405 1,535 1,977 1,405 1,5
Slide 24: BMO Capital Markets
BMO Capital Markets Record net income, PPPT1 and revenue performance • Adjusted1 and reported net income up 47% Y/Y Reported Adjusted1 • Adjusted1 PPPT1 up 30% Y/Y (reported1 up 31%) ($MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 • Revenue up 23% Y/Y with record performance in both Global Markets 1,171 7
Slide 25: Corporate Services
Corporate Services • Adjusted1 net loss of $130MM and reported net income Reported Adjusted1 of $228MM, compared with an adjusted1 and reported ($MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 net loss of $126MM in the prior year Revenue 523 0 (8) (10) 0 (8) • Reported results in the current quarter includ
Slide 26: Risk Review
Risk Review For the Quarter Ended January 31, 2022 Patrick Cronin Chief Risk Officer Q1 22
Slide 27: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q1 22 Q4 21 Q1 21 • Q1 22 PCL ratio on Impaired Loans1 is 7 bps, ($MM) unchanged Q/Q $ bps $ bps $ bps Personal & Business Banking 79 17 77 17 95 22 PCL on Impaired Loans ($MM) Commercial 21 9 12 6 54 26 Total Canadian P&C 100 15 89 13 149 24
Slide 28: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $185MM recovery of credit losses on Loans (APL) and PCL on APL to performing loans reflected reduced uncertainty Q1 22 Performing Loans (PCL) Q4 21 Q1 22 Q1 22 Performing Foreign on future credit conditions and positive credit
Slide 29: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio3 44 bps, Formations Gross Impaired Loans down 2 bps Q/Q By Industry ($MM, as at Q1 22) Canada & Canada & Formations ($MM) U.S. Total U.S. Total Other Other1 Consumer 160 10 170 381 244 625 Service Industries 30 30 60 228 205 433
Slide 30: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances Canada & By Industry3 U.S. Total % of Total Other1 ($B, as at Q1 22) • Portfolio is well diversified by geography Residential Mortgages 129.5 7.9 137.4 28% and industry Consumer Instalment and Other 65.4 13.7 79.1 16% • Business & Government loans up
Slide 31: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk Nov 2, 2021 to Jan 31, 2022 (pre-tax basis and in millions of Canadian dollars) 60 50 40 30 20 10 0 (10) (20) (30) (40) Daily Revenue Total Trading VaR Risk Review March 1, 2022 31
Slide 32: Appendix
Appendix
Slide 33: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances2 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 232.4 236.4 271.1 277.1 220.0 253.8 115.8 117.2 108.3 158.8 160.9 154.5 5.5 5.7 4.9 53.1 54.1 49.3 8.5 8.9 8.3 83.0 88.2 91.2 73.5 75.5 65.4 Q1'21 Q4'21 Q1'22 Q1'21 Q4'21 Q1'22 Commercial
Slide 34: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars2 Average Gross Loans & Acceptances (US$B) Average Deposits (US$B) 113.8 115.3 108.1 98.5 91.4 93.3 11.0 10.2 11.0 4.1 48.0 48.4 4.7 4.3 47.9 76.5 78.0 83.4 60.3 65.8 66.9 Q1'21 Q4'21 Q1'22 Q1'21 Q4'21 Q1'22 Comme
Slide 35: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($173.0B) • Total Canadian residential-secured lending HELOC $79.7 portfolio at $173.0B, representing 35% of Uninsured Mortgages total loans $34.7 Insured Mortgages 27% ─ LTV1 on uninsured of 49% 26% ─ 90-day delinquency rate
Slide 36: U.S. Personal & Commercial Banking (CDE)
U.S. Personal & Commercial Banking (CDE) Reported Adjusted1 (CDE $MM) Q1 22 Q4 21 Q1 21 Q1 22 Q4 21 Q1 21 1 Net interest income (teb) 1,156 1,074 1,091 1,156 1,074 1,091 Non-interest revenue 363 308 319 363 308 319 1 Revenue (teb) 1,519 1,382 1,410 1,519 1,382 1,410 Expenses 712 747 689 710 738 680
Slide 37: Adjusting Items
Adjusting Items Adjusting items1 - Pre-tax ($MM) Q1 22 Q4 21 Q1 21 Adjusting Items Impacting Revenue (Pre-tax) Impact of divestitures (29) - - Management of fair value changes on the purchase of Bank of the West 562 - - Impact of Adjusting Items on Revenue (Pre-tax) 533 - - Adjusting Items Impacting
Slide 38: 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