National Bank Of Canada · TSX:NA
National Bank Of Canada — Debt Investor Presentation (April 2020)
39 slides from National Bank Of Canada's debt investor presentation, Apr 30, 2020
Slide 1: Fixed Income Presentation
FIXED INCOME PRESENTATION As of April 30, 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: National Bank of Canada
OVERVIEW NATIONAL BANK OF CANADA
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: Overview – Q2|20 Results
OVERVIEW – Q2|20 RESULTS ▪ Revenue growth in all segments, ($MM, TEB) Q2 20 Q1 20(1) Q2 19 QoQ YoY led by Financial Markets and Revenues 2,112 2,010 1,850 5% 14% Wealth Management Operating Expenses 1,121 1,078 1,026 4% 9% Pre-tax / Pre-provisions 991 932 824 6% 20% ▪ Pre-tax pre-provision earnings
Slide 7: Personal and Commercial Banking
PERSONAL AND COMMERCIAL BANKING ▪ Revenue growth driven by solid ($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 volumes, unfavor
Slide 8: Wealth Management
WEALTH MANAGEMENT ($MM) Q2 20 Q1 20 Q2 19 QoQ YoY ▪ Solid revenue growth at 11% YoY Revenues 474 465 426 2% 11% - High transaction volumes at Fee-based 267 273 249 (2%) 7% National Bank Direct Brokerage and National Bank Independent Transaction & Others 97 73 69 33% 41% Network in context of crisis
Slide 9: Financial Markets
FINANCIAL MARKETS ▪ Strong quarter for Financial Markets with ($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 $396 million - Higher activity level in all business Corporate & Inv
Slide 10: US Specialty Finance & International
US SPECIALTY FINANCE & INTERNATIONAL ABA Bank ($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 Other 2 2 2 -
Slide 11: Provisions for Credit Losses
PROVISIONS FOR CREDIT LOSSES Provisions for credit losses Q2 20 ($MM) Total PCL: $113 $504 ▪ The deterioration in economic conditions caused by the COVID pandemic led to total PCLs of $504M in Q2, Impaired a >5 times increase QoQ $120 $391 POCI PCL on performing loans: Non- ($7) Retail ▪ Increased t
Slide 12: Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES Allowance for credit losses Q2 20 ($MM) Total Allowances: ▪ Total Allowances for Credit Losses increased by 57% QoQ from $769M to $1.21B ▪ Allowances for retail lending increased 30% reflecting our product and geographic mix, and allowances for non-retail lending increase
Slide 13: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total ACL consistent with portfolio positioning Performing ACL / LTM PCL on impaired loans Total ACL over total loans excluding FVTPL Q2 19 Q1 20 Q2 20 Q2 19 Q1 20 Q2 20 Total Bank 1.7x 1.8x 2.8x Total Bank 0.52% 0
Slide 14: Gross Impaired Loans and Formations
GROSS IMPAIRED LOANS(1) AND FORMATIONS(2) Gross Impaired Loans (GIL) ($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 15: 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 $504M (41 bps after-tax) ▪ RWA growth primarily driven by Credit Ris
Slide 16: Strong Capital and Liquidity Positions
STRONG CAPITAL AND LIQUIDITY POSITIONS Capital and capital ratios ▪ Our capital levels remain strong ($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 $13,366 Capit
Slide 17: Liquidity and Funding
NATIONAL BANK LIQUIDITY AND FUNDING
Slide 18: Overview of Selected Bank of Canada Measures
OVERVIEW OF SELECTED BANK OF CANADA MEASURES In the context of the COVID-19 pandemic, the Bank of Canada has taken various measures since March 2020, including: ▪ Added 6- and 12-month Term Repo operations (bi-weekly operations, March 12, 2020), later enhanced to permit up to 24-month funding (April
Slide 19: Funding Strategy
FUNDING STRATEGY The main objective of the funding strategy is to support the Bank's organic growth while also enabling it to survive potentially severe and prolonged crises and to meet its regulatory obligations and financial targets. The funding framework consists of 3 pillars: 1. Pursue a diversi
Slide 20: Diversified Deposit Strategy
DIVERSIFIED DEPOSIT STRATEGY Pursue a diversified deposit strategy to fund core banking activities through stable deposits coming from the networks of each of the Bank’s major business segments NBC TOTAL DEPOSITS ($BN) $159 NBC PERSONAL DEPOSITS ($BN) $64 $152 $61 $145 $60 $143 1Y CAGR = 16% $59 1Y
Slide 21: Sound Liquidity Risk Management
SOUND LIQUIDITY RISK MANAGEMENT Maintain a sound liquidity risk management through centralized expertise and management of liquidity metrics within predefined risk appetite, with 4 main principles: Efficient Risk & Reward Balance through a Risk Appetite Framework, Decision-making processes based on
Slide 22: Maturity Profile
MATURITY PROFILE Maintain active access to various markets to ensure diversification of institutional funding in terms of source, geographic location, currency, instrument and maturity, whether secured or unsecured. Term Funding (C$ millions) Term Funding Canada Currency Principal (in millions) Teno
Slide 23: Diversified Funding Platforms
DIVERSIFIED FUNDING PLATFORMS Maintain active access to various markets to ensure diversification of institutional funding in terms of source, geographic location, currency, instrument and maturity, whether secured or unsecured Unsecured Wholesale Funding Platforms Securitization and Covered Bond Pr
Slide 24: TLAC Ratios
TLAC RATIOS The Bank does not anticipate any challenges in fully meeting the minimum TLAC requirements by November 1, 2021. ▪ Q220 NBC TLAC RWA Ratio = 21.7% ▪ Q220 NBC TLAC Leverage Ratio = 6.6% ▪ NBC will comply with both TLAC regulatory requirements by Q1 2022 Starting Q1 2022, all Canadian D-SIB
Slide 25: NBC Sustainability Bond Framework and Reporting
NBC SUSTAINABILITY BOND FRAMEWORK AND REPORTING February 2018, NBC published its Sustainability Bond Framework and obtained Second Party Opinion from VigeoEiris: https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/nbc-sustainability-bond-framework.pdf
Slide 26: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK For the purpose of issuing Sustainability Bonds, NBC has developed its framework, which addresses the four core components of the ICMA Sustainability Bond Guidelines and its recommendations on the use of external reviews and impact reporting: 1. Use of proceeds 2. P
Slide 27: Appendices
NATIONAL BANK APPENDICES
Slide 28: Appendix 1 │ Total Loan Portfolio Overview
APPENDIX 1 │TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category As at % of Total ▪ Secured lending accounts for 93% of ($B) April 30, 2020 Retail loans Retail - Secured - Mortgage & HELOC 77.4 47% ▪ Indirect auto loans in the retail portfolio (1) - Secured - Other 8.8 5% represents
Slide 29: Appendix 2 │ Regional Distribution of Canadian Loans
APPENDIX 2 │ 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 30: Appendix 3 │ Retail Mortgage and HELOC Portfolio
APPENDIX 3 │ 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 repres
Slide 31: Appendix 4 │ Limited Exposure to COVID-19 Most Impacted Industries
APPENDIX 4 │ LIMITED EXPOSURE TO COVID-19 MOST IMPACTED INDUSTRIES Q2|20 Fixed Income Presentation 31
Slide 32: Appendix 5 │ Oil & Gas and Pipelines Sector
APPENDIX 5 │ 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 $2,863 - Reduction as a % of to
Slide 33: Appendix 6 │ COVID-19: Supporting Our Clients Through Payment Deferrals
APPENDIX 6 │ COVID-19: SUPPORTING OUR CLIENTS THROUGH PAYMENT DEFERRALS Number of loans subject Value of loans subject As % of loan Deferrals / accomodations by product to deferrals to deferrals ($MM) balances Retail Mortgages(1) 38,682 $ 8,624 (2) 12 % Personal loans 26,627 $ 464 6% Student loans(3
Slide 34: Appendix 7 │ RWA Growth
APPENDIX 7 │ 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 $86,206 securitized portfolio - Loan migration ▪ FX impact ma
Slide 35: Appendix 8 │ NBC Credit Ratings
APPENDIX 8 │ NBC CREDIT RATINGS Long-Term Non Covered Counterparty Short-term Bail-inable Senior Debt(2) Outlook Credit Rating Bonds risk(3) Senior Debt(1) Agency S&P A-1 A BBB+ Stable ---- ---- Moody’s P-1 Aa3 A3 Stable Aaa Aa3 DBRS R-1 (mid) AA (low) A (high) Stable AAA ---- Fitch F1+ AA- A+ Negat
Slide 36: Appendix 9 │ Legislative Covered Bond Programme
APPENDIX 9 │ LEGISLATIVE COVERED BOND PROGRAMME Programme size ▪ CAD$ 15,000,000,000 Outstanding benchmark covered bonds ▪ €1B 1.5% 03/21; €1B 0.5% 01/22; £250M 3M£LIBOR+37 09/21; €750M 0.0% 09/23; €750M 0.750% 03/25; €750M 0.250% 07/23; €750M 0.375% 01/24 and USD1,000M 2.05% 06/22 Ratings ▪ Aaa / A
Slide 37: Appendix 10 │ Other Heading of Segment Results
APPENDIX 10 │ OTHER HEADING OF SEGMENT RESULTS 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 In
Slide 38: Disclaimer
DISCLAIMER This Document has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy. Any such offer would be made only after a prospective participant had com
Slide 39: Questions?
QUESTIONS? Mr. Jean Dagenais, Senior Vice-President, Finance Jean.Dagenais@nbc.ca Mr. Jean-Sébastien Gagné, Treasurer JeanSebastien.Gagne@nbc.ca Additional information can be found via these web links: https://www.nbc.ca/investor-relations.html https://www.nbc.ca/capital-debt-information.html
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