Bank Of Montreal · TSX:BMO
Bank Of Montreal — Q3 2023 Earnings Presentation
42 slides from Bank Of Montreal's earnings presentation, Aug 29, 2023
Slide 1: Investor Presentation Q3 23
BMO Financial Group Investor Presentation For the Quarter Ended July 31, 2023 August 29, 2023 Q3 23
Slide 2: Caution Regarding Forward-Looking Statements
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 securities regulators or the U.S. Securities and Ex
Slide 3: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q3 23
Slide 4: Well-positioned for continued growth
Well-positioned for continued growth Highlights Q3’23 YTD’23 • Canadian P&C business Reported Adjusted1 Reported Adjusted1 delivered continued strong PPPT2 performance Net Income $1.5B $2.0B $2.8B $6.5B • Good contribution from Bank Diluted EPS $1.97 $2.78 $3.60 $8.93 of the West, on track for conve
Slide 5: BMO U.S. – scale, growth further enhanced by Bank of the West
BMO U.S. – scale, growth further enhanced by Bank of the West Benefiting from the strength of BMO’s trillion-dollar balance sheet Top 10 Footprint in Top 5 4 million U.S. Bank1 32 States Commercial Lender in customers North America2 BMO U.S. Bank BMO U.S. Segment BMO Financial Group US$2633 billion
Slide 6: Highly diversified businesses delivering resilient performance
Highly diversified businesses delivering resilient performance Canadian Personal & Commercial U.S. Personal & Commercial Reported Revenue ($MM) Reported Revenue (teb2, US$MM) 2,785 1,914 1,864 2,529 2,547 2,629 2,546 779 763 750 777 738 Commercial 1,297 1,334 1,234 1,159 1,136 Commercial Personal &
Slide 7: Our Purpose
Our Purpose • Announced a strategic relationship with Immigrant Services Calgary to provide specialized guidance and Providing access to capital and resources to Canadian newcomers, with on-site support at the BMO branch located inside the Gateway valuable financial advice – Newcomer Centre investin
Slide 8: Financial Results
Financial Results For the Quarter Ended July 31, 2023 Tayfun Tuzun Chief Financial Officer Q3 23
Slide 9: Q3 F2023 - Financial Highlights
Q3 F2023 - Financial Highlights Good PPPT1 growth driven by Canadian P&C and Bank of the West • Adjusted2 EPS $2.78, down 10% Y/Y (reported $1.97, up 1%) Reported Adjusted2 • Adjusted2 net income down 4% Y/Y (reported up 7%) ($MM) Q3 23 Q2 23 Q3 22 Q3 23 Q2 23 Q3 22 – Bank of the West (BOTW) added $
Slide 10: Q3 F2023 – Bank of the West Contribution
Q3 F2023 – Bank of the West Contribution • Bank of the West4 (BOTW) contributed $1,051MM to Reported Adjusted1 revenue, $749MM to adjusted1 expenses (reported $1,338MM) and $167MM to adjusted1 net income BMO ex. BMO ex. ($MM) BOTW BMO BOTW BMO BOTW BOTW (reported net loss of $272MM) Gross Revenue 6,
Slide 11: Balance Sheet
Balance Sheet Diversified loan and deposit portfolio, stable balances Q/Q offset by weaker U.S. dollar • Average gross loans and acceptances up 22% Y/Y, or 21% Average Gross Loans and Acceptances ($B) excluding the impact of the stronger U.S. dollar due to: 646.1 644.0 – Business & government loans
Slide 12: Canadian and U.S. deposit trends
Canadian and U.S. deposit trends Canadian P&C and BMO Wealth Management deposits CDE$B, average balances 309 314 321 • Continued strong balance growth through strong customer 290 6% 6% acquisition, a comprehensive onboarding program, and new products 266 5% 3% and tools 238 2% 21% 20% 20% 4% 24% • C
Slide 13: Net Interest Margin
Net Interest Margin1 • Total Bank ex trading NIM benefitted from higher NII and lower low-yielding assets in BMO Capital Markets and Corporate Services • Canadian P&C NIM increased due to wider deposit margins and balance sheet mix • U.S. P&C NIM decreased due to lower deposit margins and balances a
Slide 14: Q3’23 Non-Interest Expense
Q3’23 Non-Interest Expense Improving underlying trends from dynamic expense management • Adjusted1 expenses up 33% Y/Y Y/Y Change in Non-Interest Expense ($MM) (reported up 46%) 46% Reported 33% Adjusted1 2% Reported – Acquisitions3 contributed 21% to 4% Adjusted1 the increase in adjusted1 expenses
Slide 15: Strong Q3’23 CET1 Ratio of 12.3%
Strong Q3’23 CET1 Ratio1 of 12.3% Common Equity Tier 1 Ratio1 +5 bps -12 bps +10 bps -12 bps +20 bps -3 bps 12.3% 12.2% Q2’23 Internal capital DRIP Source currency AIR MILES Acquisition & Other Q3’23 generation RWA acquisition2 integration costs and tax-related charge3 • Q3’23 CET1 ratio1 of 12.3%,
Slide 16: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Record revenue and PPPT2 with good deposit and loan growth • Adjusted1 net income down 4% Y/Y (reported down 5%) Reported Adjusted1 • Adjusted1 PPPT2 up 10% Y/Y (reported up 9%) ($MM) Q3 23 Q2 23 Q3 22 Q3 23 Q2 23 Q3 22 • Revenue up 10% Y/Y Net Interest Income
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Solid performance including contribution from Bank of the West in evolving market conditions Figures that follow are in U.S. dollars: Reported Adjusted1 1 • Adjusted net income up $43MM or 10% Y/Y (reported (US$MM) 2 Q3 23 Q2 23 Q3 22 Q3 23 Q2 23 Q3 22 down $14MM o
Slide 18: BMO Wealth Management
BMO Wealth Management Good growth in client assets offset by term deposit migration • Adjusted1 and reported net income down 7% Y/Y Reported Adjusted1 • Wealth and Asset Management adjusted1 and ($MM) Q3 23 Q2 23 Q3 22 Q3 23 Q2 23 Q3 22 reported net income down 16% Y/Y Gross Revenue 1,422 1,960 1,70
Slide 19: BMO Capital Markets
BMO Capital Markets Solid revenue performance reflecting diversified businesses • Adjusted1 and reported net income up 18% Y/Y Reported Adjusted1 • Adjusted1 PPPT3 up 17% Y/Y (reported up 16%) ($MM)2 Q3 23 Q2 23 Q3 22 Q3 23 Q2 23 Q3 22 Global Markets 870 935 813 870 935 813 • Revenue2 up 17% Y/Y: I&
Slide 20: Corporate Services
Corporate Services • Adjusted1 net loss of $159MM and reported Reported Adjusted1 net loss of $650MM, compared with an adjusted1 net income of $7MM and reported ($MM) 2 Q3 23 Q2 23 Q2 22 Q3 23 Q2 23 Q3 22 net loss of $754MM in the prior year (152) (157) (908) (11) (150) 37 Revenue • Reported results
Slide 21: Risk Review
Risk Review For the Quarter Ended July 31, 2023 Piyush Agrawal Chief Risk Officer Q3 23
Slide 22: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q3’23 PCL ratio on Impaired Loans1 is 21 Q3’23 Q2’23 Q3’22 ($MM) bps, up 5 bps Q/Q $ bps $ bps $ bps Personal & Business Banking 174 33 163 32 94 19 PCL on Impaired Loans ($MM) Commercial Banking 35 13 10 4 10 4 Total Canadian P&C 209 26 173
Slide 23: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $159MM provision for credit losses on Q3’23 performing loans in the current quarter Loans (APL) and PCL on APL to Q2’23 Q3’23 Foreign Q3’23 primarily reflected portfolio credit migration Performing Loans (PCL) Performing APL1
Slide 24: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations Formations Gross Impaired Loans • Gross Impaired Loans (GIL) ratio3 44 bps, up 3 bps Q/Q By Industry ($MM, as at Q3’23) CA & CA & U.S. Total U.S. Total 2,000 Other Other1 Formations ($MM) 1,800 1,600 1,400 Consumer 206 78 284 495 343 838 917 1,200 1,000 843 800 49
Slide 25: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances (GL&A) • Portfolio is well diversified by geography and Canada & Total % of industry By Industry 3 U.S. Other1 BMO Total ($B, as at Q3’23) Canada & Other Countries Residential Mortgages 147.7 24.2 171.9 27% Consumer Instalment and Other Personal 70.4
Slide 26: Commercial Real Estate
Commercial Real Estate • Commercial Real Estate (CRE) portfolio at $66.7B represents CRE by Geography2 10% of total bank GL&A British Columbia 14% • Portfolio is well diversified across businesses, property types and geographies Quebec 7% Ontario 20% • Well managed with consistent and conservative C
Slide 27: Appendix
Appendix Risk Review August 29, 2023 27
Slide 28: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending • Total Canadian residential-secured lending portfolio at $196.2B, Residential-Secured Lending by Region ($196.2B) representing 30% of total loans $94.1 ─ LTV1 on uninsured of 51% 26% $38.7 ─ 90-day delinquency rate for RESL remains good at 14 bps; $31.0 26% loss
Slide 29: Canadian RESL Portfolio: Renewal profile in the next 12 months
Canadian RESL Portfolio: Renewal profile in the next 12 months RESL renewal risk is reduced by borrower capacity, equity and quality • The impact of higher interest rates on payments is primarily realized upon renewal for both fixed and variable rate products • Variable rate products with fixed paym
Slide 30: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk May 1, 2023 to July 31, 2023 (pre-tax basis and in millions of Canadian dollars) 40 30 20 10 0 (10) (20) (30) (40) (50) Daily Revenue Total Trading VaR Risk Review August 29, 2023 30
Slide 31: Advancing our Digital First strategy
Advancing our Digital First strategy Continuing to deliver on our Driving digital engagement Recognized for industry leadership Digital First agenda Active Digital Users, Retail (000)1 • Enhanced the BMO Business Express • Named Overall Leader in the 2023 +7% (BBX) experience in Canada, Javelin Cana
Slide 32: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances Average Gross Loans & Acceptances ($B) Average Deposits ($B) 268.3 276.6 312.7 316.2 246.8 295.2 129.3 131.6 121.4 187.6 191.1 168.1 6.4 6.4 6.1 58.7 58.7 57.6 10.8 11.6 9.7 100.5 107.5 107.9 78.7 80.7 85.5 Q3'22 Q2'23 Q3'23 Q3'22 Q2'23 Q3'23 1 Comme
Slide 33: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 159.8 157.6 163.1 157.6 37.9 38.8 74.1 103.2 111.8 73.0 15.3 48.5 121.9 118.8 87.9 89.0 84.6 63.3 Q3'22 Q2'23 Q3'23 Q3'22 Q2'23 Q3'23 Commercial Perso
Slide 34: Asset Yields and Liabilities Costs
Asset Yields1 and Liabilities Costs2 Average Earning Assets ($B) and Yield1 (%) Average Liabilities ($B) and Costs2 (%) 4.85% 5.06% Yield on Total 2.65% 3.08% 3.30% Cost on Total 4.18% 2.02% 2.87% 3.54% Average 1.13% Liabilities Earning Assets 1,165 1,161 1,194 1,191 1,079 1,101 1,022 1,054 973 1,00
Slide 35: Interest Rate Sensitivity
Interest Rate Sensitivity • Year 1 benefit to an incremental +100bps rate shock increased • Term rates increased in Q3’23 and continue to be volatile, Q/Q reinvestment rates have reached the highest point in recent years – July 31, 2023 risk metrics reflect relatively neutral positioning • Year 2 be
Slide 36: Q3 F2023 – Bank of the West Contribution to U.S. Segment
Q3 F2023 – Bank of the West Contribution to U.S. Segment U.S. Segment Reported U.S. Segment Adjusted1 BMO ex. BMO ex. (US$MM) BOTW BMO BOTW BMO BOTW BOTW Revenue 2,010 787 2,797 2,012 787 2,799 Expenses 1,190 1,006 2,196 1,189 561 1,750 2 PPPT 820 (219) 601 823 226 1,049 Total PCL 91 74 165 91 74 16
Slide 37: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance with International Financi
Slide 38: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures8 (1) Reported net income included the impact of divestitures of our EMEA and U.S. Asset (Canadian $ in millions, except as noted) Q3 23 Q2 23 Q3 22 YTD 23 YTD 22 Management business. Q3-2022 included expenses of $6 million ($7 million pre-tax). Q2-2022 Reported
Slide 39: Summary of Reported and Adjusted Results by Operating Group
Summary of Reported and Adjusted Results by Operating Group (Canadian $ in millions unless otherwise stated) Q3 23 Q2 23 Q1 23 Q4 22 Q3 22 YTD 23 YTD 22 Canadian P&C Reported Net Income 915 861 980 917 965 2,756 2,909 Acquisition and integration costs 6 2 — — — 8 — Amortization of acquisition-relate
Slide 40: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage Canadian $ in millions unless otherwise stated) Q3 23 Q2 23 Q1 23 Q4 22 Q3 22 YTD 23 YTD 22 Total Bank Total revenue 7,929 8,440 6,470 10,570 6,099 22,839 23,140 Reported Insurance claims, commissions and changes in policy benefit liabilities (CCP
Slide 41: Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation
Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation (Canadian $ in millions unless otherwise stated) Q3 23 Q2 23 Q1 23 Q4 22 Q3 22 YTD 23 YTD 22 Total Bank Reported Income before taxes 1,795 1,253 639 5,937 1,691 3,687 11,949 Total provision for (recovery of) credit losses 492 1,023 217 226 136 1,
Slide 42: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON PERRY CHEN‐SEE Director, Investor Relations Director, Investor Relations 416.867.7834 416.359.8074 bill2.anderson@bmo.com Perry.chensee@bmo.com