National Bank Of Canada · TSX:NA
National Bank Of Canada — Q4 2002 Earnings Presentation
31 slides from National Bank Of Canada's earnings presentation, Dec 5, 2002
Slide 1: Investor Presentation: Q4 2002 Results Conference Call
Investor Presentation Q4 2002 Results Conference Call December 5th, 2002 www.nbc.ca/investorrelations 1
Slide 2: Yearly review: Delivering on strategic promises
Yearly review Delivering on strategic promises Action taken Q1 02 ü Sale of US Asset based lending operations ü Active loan book management ü Strong improvement in credit ratios ü Renewal of 10 year $1.1 B IBM IT outsourcing contract Q2 02 ü Announced first common share buyback ü Acquisition of Putn
Slide 3: Yearly review: Quarterly and yearly performance
Yearly review Quarterly Performance: Ø ROE (adjusted) 15.7% vs 11.9% in Q4 01 Ø 26% increase in Net income (adjusted): Ø +22% increase for Personal Banking and Wealth Management Ø +11% increase for Commercial Ø NBF Institutional performance strong, offset by lower trading revenues Yearly Performance
Slide 4: Distinguishing one-time items to better understand underlying trends
Financials Distinguishing one-time items to better understand underlying trends Cash Basis (Millions $) Q4 02 Q4 01 2002 2001 Reported Net Income $135 $147 $429 $582 Adjustments Net of Income Taxes Gain on sale of Merchant Card business - ($47) - ($47) Reevaluation of investments $1 - $113 - Fixed a
Slide 5: Financials: Quarterly adjusted results, cash basis
Financials Adjusted Cash Basis (Millions $) Q4 02 Q3 02 Q4 01 Evolution Y/Y Q/Q Revenues $817 $804 $799 2% 2% Net income $146 $141 $116 26% 4% EPS $0.77 $0.74 $0.56 38% 4% ROE 15.7% 15.0% 11.9% 5
Slide 6: Financials: Annual adjusted results, cash basis
Financials Adjusted Cash Basis (Millions $) 2002 2001 2000 Evolution 2002/2001 2001/2000 Revenues $3,253 $3,171 $3,036 3% 4% Net income $555 $580 $490 -4% 18% EPS $2.86 $2.87 $2.44 0% 18% ROE 14.7% 15.9% 14.7% Expense ratio 62.4% 62.7% 65.8% 6
Slide 7: Financials: EPS, revenues, net income, ROE, expense ratio
Financials Adjusted , Cash basis Earnings per Share Total Revenues and Net Income (Millions $) $4.00 Net Income CAGR 7.6% $3,700 $700 $3.50 CAGR : 11.0% $2.87 $2.86 $3,200 $600 $3.00 Total revenues $2.44 $2,700 CAGR : 8.8% $500 $2.50 $1.98 $2.08 $2,200 $400 $2.00 $1.50 $1,700 $300 $1.00 $1,200 $200
Slide 8: Steady growth of Common Share dividend
Financials Steady growth of Common Share dividend Per common share dividend Dividend Yield $1.00 5.00% $0.93 3.91% $0.90 4.00% CAGR 7.1% 3.38% $0.82 3.16% 2.86% 3.01% $0.80 3.00% $0.75 $0.70 $0.70 $0.66 2.00% $0.60 1.00% $0.50 0.00% 1998 1999 2000 2001 2002 1998 1999 2000 2001 2002 Yield calculation
Slide 9: Total Return Index Values
T otal Return Index Values 200 180 National Bank CAGR: +11% 160 Banks and Trusts 140 CAGR: +8% 120 100 80 60 1997/10 1998/10 1999/10 1999/10 2000/10 2001/10 2002/10 National Bank of Canada S&P/TSX Banks and Trusts S&P/TSX Composite 9
Slide 10: Capital Management
Capital Management 13.6% 13.1% Levels remain high even following 4.0% 3.5% completion of share buyback program, Putnam Lovell and 1.2% 1.1% Altamira acquisitions 0.8% 1.1% Tier 1 Tier 1 9.6% 9.6% 7.6% 7.4% 2002 2001 Common equity less goodwill Non-cum. Pref. shares Innovative instruments Tier 2 10
Slide 11: Share buyback status: Completed
Capital Management Share buyback status: Completed 9.5 $306.0 $28.6 1.0 $92.5 2.9 Q4 02 Q3 02 Q2 02 5.6 $184.9 In millions In millions $ of shares 11
Slide 12: Personal Banking and Wealth Management Sectoral Results
Personal Banking and Wealth Management Sectoral Results Adjusted For the period ending October 31 in millions of dollars Q4 02 vs Q4 01 2002 vs 2001 $ % $ % Revenues 496 22 5 1,936 25 1 Non interest expenses 374 9 2 1,443 23 2 Expected loan losses 25 2 (7) 97 1 (1) Net income 62 11 22 253 9 4 12
Slide 13: Personal Banking
Personal Banking Sectoral Results Adjusted For the period ending October 31 in millions of dollars Q4 02 vs Q4 01 2002 vs 2001 $ % $ % Revenues 353 11 3 1,381 28 2 Non interest expenses 249 5 2 966 10 1 Expected loan losses 23 3 (12) 94 2 (2) Net income 51 7 16 205 19 10 Very strong performance desp
Slide 14: Wealth Management
Wealth Management Sectoral Results Adjusted For the period ending October 31 in millions of dollars Q4 02 vs Q4 01 2002 vs 2001 $ % $ % Revenues 143 11 8 555 2 - Non interest expenses 125 4 3 477 13 3 Expected loan losses 2 1 100 3 1 50 Net income 11 4 57 48 10 (17) Quarterly results reflect Altamir
Slide 15: Continuing Assets under Management growth
Personal Banking and Wealth Management Continuing Assets under Management growth As at October 31 Growth rate: 12.6% in billions of dollars 68.6 Growth 4.3 60.8 rates: 9.3 + 8.9% Altamira 8.6 Other Full Brokerage 32.3 + 6.2% 30.4 Deposits 22.6 +3.4% 21.8 2001 2002 15 Other includes Mutual Funds, Dis
Slide 16: Commercial
Commercial Sectoral Results Adjusted For the period ending October 31 in millions of dollars Q4 02 vs Q4 01 2002 vs 2001 $ % $ % Revenues 106 5 (5) 425 7 (2) Non interest expenses 37 3 (8) 153 1 1 Expected loan losses 20 6 (23) 83 5 (6) Net income 31 3 11 119 stable stable Positive migration in expe
Slide 17: Financial Markets
Financial Markets Sectoral Results Adjusted For the period ending October 31 in millions of dollars Q4 02 vs Q4 01 2002 vs 2001 $ % $ % Revenues 207 13 7 861 126 17 Non interest expenses 124 28 29 431 65 18 Expected loan losses 7 3 (30) 31 1 (3) Net income 48 6 (11) 250 46 23 Strong Asset Liability
Slide 18: Treasury and Capital Market activities
Financial Markets Treasury and Capital Market activities Adjusted For the year ending October 31 in millions of dollars 271.5 200.9 192.0 164.8 2001 110.8 2002 71.1 57.3 * 39.1 Trading Capital Investment ALM Revenues Market Fees Gains * Excluding investment reevaluation 18
Slide 19: Financial Markets composition as at October 2002
Financial Markets Merchant As at October 31 2002 Banking & other investment securities Fixed Income 7% 10% Institutional Equities 6% Market Makers 3% Treasury 34% Corporate & Investment Banking 40% 19
Slide 20: Composition of Earnings Contribution
Financials Composition of Earnings Contribution Adjusted For the year ending October 31 2002 22% 32% 20% 8% 18% Personal Banking Wealth Management Commercial Capital Markets Treasury 20
Slide 21: Risk Management: Continued improvement in credit portfolio
Risk Management Continued improvement in credit portfolio Private risk 1000 800 Millions $ 600 $479 M 400 200 0 -200 $(161) M Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Gross Net 21
Slide 22: Risk Management: Impaired loans
Risk Management Millions $ Q4 02 Q3 02 Q4 01 Gross impaired loans $479 $615 $932 Gross impaired loans as a % of tangible capital & reserves 14.1% 15.7% 22.5% Net impaired loans Individuals and small businesses 62 66 211 Commercial Canada 99 123 211 Corporate 36 49 15 Real Estate 44 37 32 Treasury -
Slide 23: Risk Management: Provisions and 2003 guidance
Risk Management Millions $ 490 Teleglobe 120 Revision of estimate Regular 185 General provision 215 2003 guidance: 45 to 55 bps as a % of loans and BAs (30) 2002 results 23
Slide 24: Risk Management: Loans outstanding by category
Risk Management As at October 31, 2002 Corporate Personal loans 15% Outstanding * 15% $6 B $4.6 B Change (27)% Change 5% Credit cards 3% $1.3 B Change 10% Commercial mid- market 22% $10.1 B Change (3)% SME Mortgages 6% 39% $2.4 B $17 B Change 1% Change 2% * Adjusted for the securitization and exclud
Slide 25: Business & Government loan diversification
Risk Management Business & Government loan diversification As at October 31, 2002 Outstanding * Oil and Gas Agriculture 5% Manufacturing (1) 10% 28% Other Services 16% Construction & Real Estate Government Communi. 10% 11% Trade Transp. 14% 6% (1) No sector exceeds 10%.The 5 major exposures are: For
Slide 26: Risk Management: Telecommunications exposure
Risk Management As at October 31, 2002 in millions of dollars Outstanding Loans and BA’s Net Impaired Invest. Non-Invest. % of loans loans grade grade Total and BAs and BAs Telecommunications Cable $40 $86 $126 0.30 - Wireless 27 68 95 0.23 7 Wireline 12 45 57 0.14 9 TOTAL 78 200 278 0.67 16 Ø Decre
Slide 27: Electric Power and Power Generation
Risk Management Electric Power and Power Generation As at October 31, 2002 in millions of dollars Loans and BAs Outstanding Invest. Non-Invest. Loans % of loans grade grade and BAs and BAs Regulated Utilities $2 $0 $2 0.00 Generation Proj. with PPAs * 67 111 178 0.43 Other Generation Projects 10 19
Slide 28: Risk Management: Impaired loan formations
Risk Management Millions $ Q1 02 Q2 02 Q3 02 Q4 02 TOTAL Retail 11.6 12.2 1.3 6.8 31.9 Commercial 35.1 0.6 18.2 (18.1) 35.8 Corporate 9.9 146.9 1.6 18.7 177.1 Real Estate Canada 13,2 9.9 7.1 10.4 40.6 United States (3.2) 0.0 0.0 0.0 (3.2) Treasury 0 (0.1) 0.0 0.0 (0.1) Other 13.0 (2.3) 4.3 (0.2) 14.
Slide 29: Objectives Fiscal 2002
2002 Objectives Fiscal 2002 Growth in earnings per share: Reported 4% to 6% (3)% (1) Adjusted (2) stable Return on common shareholders’ equity Reported 15% to 17% 14.3% (1) Adjusted (2) 14.7% Expense ratio (2003 target) (2) 61% 62.4% Tier 1 capital ratio 7.75% - 8.75% 9.6% (1) Excluding investment r
Slide 30: Looking ahead to 2003 and beyond
Looking ahead to 2003 and beyond Medium term 2003 objectives Growth in earnings per share 5% to 10 % >8% Return on common shareholders’ equity 14% to 16% 15% to 17% Tier 1 capital ratio 8.75% to 9.50% 8.25% to 9.00% Dividend payout ratio 30% to 40% 30
Slide 31: Question and Answer Session
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
National Bank of Canada — Q4 2002 Earnings Presentation on 6ix