Bank Of Montreal · TSX:BMO
Bank Of Montreal — Investor Presentation (October 2020)
47 slides from Bank Of Montreal's investor presentation, October 2020
Slide 1: Investor Presentation
Investor Presentation October 2020
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: Who We Are
Who We Are Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America Mobilizing 8th largest $974 billion $400 billion bank in North America in total assets for sustainable finance by assets by 2025 Three operating groups Personal and BMO Weal
Slide 4: Our commitment to Sustainability
Our commitment to Sustainability Decent Work Promoting sustained growth and productive employment by creating and Economic opportunities for our employees, customers and communities, and by upholding Growth human rights across our value chain. At BMO, our Purpose to Championing equal opportunity and
Slide 5: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) 2-year CAGR 8% EPS Growth 7% to 10% per year 9.43 8.99 Return on 15% or more Equity 8.15 8.66 Operating 8.17 2% or more 7.90 Leverage Maintain strong capital ratios that exce
Slide 6: Well-positioned for uncertain environment with a proven strategy, resilient earnings and balance sheet strength
Well-positioned for uncertain environment with a proven strategy, resilient earnings and balance sheet strength Proven strategy and resilient earnings power; strong operating momentum across businesses Superior credit risk management performance, prudently provisioned Delivering on expense managemen
Slide 7: Outperforming peers, clear operating momentum
Outperforming peers, clear operating momentum • Diversification driving financial strength and Peer leading financial performance2 resiliency #1 #2 Adjusted1 operating Adjusted1 PPPT3 growth – • Above average performance on adjusted1 leverage - LTM2 (%) LTM2 (%) PPPT3 growth, expense growth, efficie
Slide 8: Strong balance sheet and capital position
Strong balance sheet and capital position CET1 ratio 11.6%, up 60bps Q/Q • CET1 ratio of 11.6%, up 60bps Q/Q; total capital ratio of 15.8% • Sound leverage and liquidity ratios Q3'20 CET1 ratio LCR − Leverage Ratio 4.7%; Liquidity Coverage Ratio 147% BMO 11.6% 147% BNS 11.3% 141% • Prudent balance s
Slide 9: Diversified business mix with strong, resilient profitability
Diversified business mix with strong, resilient profitability Diversified sources of revenue • Significant business and geographic diversification % of Operating Groups Net Revenue – LTM3 contributes to resilience and growth • Strong core profitability with YTD PPPT1 of $7.0B, Canadian BMO Capital u
Slide 10: Canadian P&C - Strong flagship business
Canadian P&C - Strong flagship business Peer3 leading financial performance • Flagship business contributing 35% of total #1 #1 bank net revenue1 and 40% of adjusted2 net Revenue Growth Adjusted2 pre-provision pre- income LTM 7.1% tax earnings growth 5.9% 6.8% 7.7% 8.6% 10.3% • Good expense discipli
Slide 11: Progress on digital
Progress on digital Canadian Personal1 Digital Adoption Rate2 (%) Active Mobile Users2 (000s) Self-Serve Transaction 3 (%) +360bps +10% +480bps 58.5% 58.8% 55.3% 1,918 1,958 91.3% 91.8% 1,776 87.0% Q3 F’19 Q2 F’20 Q3 F’20 Q3 F’19 Q2 F’20 Q3 F’20 Q3 F’19 Q2 F’20 Q3 F’20 U.S. Personal1 Digital Adoptio
Slide 12: Proven strength in Commercial Banking with advantaged market share
Proven strength in Commercial Banking with advantaged market share • A relationship-based commercial bank; top 10 commercial lender3 in North America Commercial Banking Revenue as % of Total Bank Revenue (LTM) − In Canada: Top-tier commercial banking business, #2 market share for business loans up t
Slide 13: Leading track record in risk management
Leading track record in risk management • Long track record of outperforming peers on credit • PCL loss rates better than peer average over time • PPPT earnings would cover PCL rate of ~200bps1, higher than any time in at least 30 years, over five times average • Prudent underwriting, consistent app
Slide 14: Allowance for performing loans (APL) – prudently provisioned
Allowance for performing loans (APL) – prudently provisioned • Significant increase in the allowance for performing loans; Q3 provision equal to 25% of the Q2 APL Q3 Provision for Performing Loans / Q2 APL • Allowance reflects: SCOTIA 28% − Robust process that relies on a combination of BMO 25% econ
Slide 15: Our loans are well-diversified by geography and industry
Our loans are well-diversified by geography and industry Loans by Geography3 Gross Loans & Acceptances Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q3 20) 36% Canada Residential Mortgages 116 10 126 27% U.S. 62% Consumer Instalment and Other Other 57 12 69 15% Personal 2% Cards 7 1 8
Slide 16: Sectors Impacted by COVID-19 Pandemic
Sectors Impacted by COVID-19 Pandemic Gross Loans & % of Total • Hotels ~90% secured with real estate; By Industry of Heightened Focus further supported with specific recourse Acceptances GL&A ($B, as at Q3 20) (GL&A) arrangements to ownership groups. Hotels 4.2 0.9% Formations since Q1 very low wit
Slide 17: Oil and Gas portfolio
Oil and Gas portfolio Well-reserved; high quality portfolio with proven history of strong credit performance over time • O&G portfolio is not outsized: Oil and Gas % Of Business and Of Total Gross Loans & ― $14B in loans, down $1B Q/Q (as at Q3 20) Government Loans Acceptances ― 5.3% of Business and
Slide 18: Payment Deferrals
Payment Deferrals Q3’20 Q2’201 • Since March 13th BMO has provided Accounts Balances* % of Accounts Balances* % of payment deferral assistance to over 250K Canada2 (000s) (C$B) Portfolio (000s) (C$B) Portfolio retail clients in Canada and the U.S.; deferral Mortgages (incl. amortizing HELOCs) 52.3 1
Slide 19: Key Takeaways
Key Takeaways Proven strategy and resilient earnings power; strong operating momentum across businesses Superior credit risk management performance, prudently provisioned Delivering on expense management and efficiency commitments Strong balance sheet and capital position; maintaining flexibility to
Slide 20: Q3 F2020 Highlights
Q3 F2020 Highlights
Slide 21: Q3 F2020 - Financial Highlights
Q3 F2020 - Financial Highlights Strong PPPT4 earnings and operating leverage2 absorbed higher provisions • Adjusted1 EPS $1.85 (reported $1.81) Reported Adjusted1 • Adjusted1 net income $1,259MM (reported $1,232MM) ($MM) Q3 20 Q2 20 Q3 19 Q3 20 Q2 20 Q3 19 • Adjusted1 PPPT4 $2,593MM, up 12% Y/Y, 11%
Slide 22: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Q3’20 Highlights (Adjusted1) • Highly engaged team focused on providing a personalized banking Net Income $320MM experience, anticipating customers’ needs and finding new ways to help Net Income Growth (51)% • Top-tier commercial ban
Slide 23: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strategic Priorities • Continue to improve customer loyalty by deepening primary relationships – In Personal Banking, deliver a leading customer experience by leveraging new digital channels and enhancing existing networks – In Commercial Banking, focus on main
Slide 24: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Q3’20 Highlights (Adjusted1) • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$199MM commitment to the success of our customers and communities • Large-scale, diversified national commercial business, sup
Slide 25: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strategic Priorities • Continue to strengthen our competitive position by investing in key capabilities, such as digital and talent, while leveraging BMO’s full suite of products, solutions and capabilities, and our unique cross-border advantage to deliver a great
Slide 26: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Q3’20 Highlights (Adjusted1) • Planning and advice-based approach that integrates investment, Net Income $349MM insurance, specialized wealth management and core banking Net Income Growth 36% solutions, offered by a team of highly skilled professiona
Slide 27: BMO Wealth Management
BMO Wealth Management Strategic Priorities • Deliver a differentiated client experience, providing outstanding support and working together to grow, protect and transition their wealth with confidence • Extend our advantage as a solutions provider, delivering innovative asset management and insuranc
Slide 28: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Q3’20 Highlights (Adjusted1) Net Income $435MM • Unified coverage and integrated distribution across our North American platform and complementary global footprint, delivering Net Income Growth 36% a seamless and exceptional client experience Revenue G
Slide 29: BMO Capital Markets
BMO Capital Markets Strategic Priorities • Continue to earn leading market share in Canada by strengthening our client relationships and driving incremental market share growth • Continue to leverage our key strategic investment to accelerate growth from our U.S. platform, and selectively expand our
Slide 30: U.S. Operations
U.S. Operations U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis • U.S. P&C Q3’20 adjusted1 PPPT up 12% • U.S. segment targeting 1/3 total bank earnings ‒ Delivered positive operating leverage of 8.9%; new low efficiency ratio of 52.8% exceeds Investor
Slide 31: Risk Overview
Risk Overview
Slide 32: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q3 20 Q2 20 Q3 19 ($MM) $ bps $ bps $ bps PCL (bps) Total Canadian P&C 257 41 212 34 174 29 94 89 Total U.S. P&C 109 35 124 38 61 21 BMO Wealth Management 1 1 3 4 0 (1) 28 31 BMO Capital Markets 79 45 73 41 7 5 23 35 38 Corporate Services 0 n.
Slide 33: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations By Industry Formations Gross Impaired Loans • GIL ratio 95 bps, up 21 bps Q/Q ($MM, as at Q3 20) Canada & Canada & Formations ($MM) U.S. Total U.S. Total Other Other1 Consumer 211 28 239 514 349 863 Oil & Gas 1 301 302 96 665 761 1,760 Service Industries 57
Slide 34: Loan portfolio growth
Loan portfolio growth Change in Business and Government Loans1 Change in Consumer Loans1 Q1’20 vs Q3’20 ($B) Q1’20 vs Q3’20 ($B) 2 3 • Increase in Business & Government loans is primarily due to the new borrower relationships and loans under government relief programs which is partially offset by lo
Slide 35: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($150.6B) • Total Canadian residential-secured lending HELOC $68.0 portfolio at $150.6B, representing 32% of total Uninsured Mortgages loans, lower than peer average of 46% Insured Mortgages $29.6 24% ─ LTV1 on uninsured of 5
Slide 36: Economic and Housing Market Overview
Economic and Housing Market Overview
Slide 37: Economic outlook and indicators
Economic outlook and indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 2019 2020E2 2021E2 2019 2020E2 2021E2 2019 2020E2 2021E2 GDP Growth 1.7 (5.6) 6.0 2.3 (4.0) 4.0 1.3 (7.0) 6.0 Inflation 1.9 0.6 1.4 1.8 1.2 2.0 1.2 0.3 0.9 Interest Rate (3mth Tbills) 1.65 0.45 0.15 2.10 0.40
Slide 38: Canada’s housing market is strong
Canada’s housing market is strong • National existing home sales rebounded to record highs in recent months after plunging in the shutdowns. Record-low mortgage rates have supported the market • Benchmark prices are up strongly in the past year, with demand surpassing supply • While home sales are l
Slide 39: Structure of the Canadian residential mortgage market with comparisons to the United States
Structure of the Canadian residential mortgage market with comparisons to the United States • Conservative lending practices, strong underwriting and documentation discipline have led to low delinquency rates — Over the last 30 years, Canada’s 90-day residential mortgage delinquency rate has never e
Slide 40: Liquidity & Wholesale Funding Mix
Liquidity & Wholesale Funding Mix
Slide 41: Liquidity and Funding Strategy
Liquidity and Funding Strategy Cash and Securities to Total Assets Ratio (%) • BMO's Cash and Securities to Total Assets Ratio reflects a strong and stable liquidity position 32.1 30.0 29.7 28.3 28.9 Q3'19 Q4'19 Q1'20 Q2'20 Q3'20 Customer Deposits1 ($B) • BMO’s large base of customer deposits, along
Slide 42: Canadian Bail-in Regime
Canadian Bail-in Regime • Canadian bail-in regime effective since September 23, 2018 (implementation date) Canadian Approach • Bail-in eligible senior unsecured debt that is issued after the implementation date will be subject to conversion in a resolution scenario Statutory / Contractual Subordinat
Slide 43: Manageable TLAC Requirements and no incremental funding
Manageable TLAC Requirements and no incremental funding • Canadian D-SIBs will be required to meet a Supervisory Target ratio by November 1, 2021 Funding Profile as at July 31, 2020 — Risk-based TLAC ratio of 22.5% (Minimum 21.5% of RWA TLAC ratio plus a Domestic Stability Buffer of 1.00% of total R
Slide 44: Diversified Wholesale Term Funding Program
Diversified Wholesale Term Funding Program • BMO's wholesale funding principles seek to match the term of assets with the term of funding. Loans for example are funded with customer deposits and capital, with any difference funded with longer-term wholesale funding • BMO has a well diversified whole
Slide 45: Diversified Wholesale Funding Platform
Diversified Wholesale Funding Platform • Programs provide BMO with diversification and cost effective funding Canada1 U.S.1 Europe, Australia & Asia1 • Canadian MTN Shelf (C$10B) • SEC Registered U.S. Shelf (US$25B) • Note Issuance Programme (US$20B) • Fortified Trust (C$5B) • Global Registered Cove
Slide 46: Credit ratings
Credit ratings Moody’s S&P DBRS Fitch Long term deposits / Aa2 A+ AA AA legacy senior debt1 Senior debt2 A2 A- AA (low) AA- Outlook Stable Stable Stable Negative 1 Long term deposits / legacy senior debt includes: (a) Senior debt issued prior to September 23, 2018; and (b) Senior debt issued on or a
Slide 47: Investor Relations
Investor Relations Contact Information http://www.bmo.com/investorrelations E-mail: investor.relations@bmo.com JILL HOMENUK BILL ANDERSON Head, Investor Relations Director, Investor Relations 416.867.4770 416.867.7834 jill.homenuk@bmo.com bill2.Anderson@bmo.com
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