Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Investor Presentation (January 2021)
47 slides from Bank Of Montreal's investor presentation, January 2021
Slide 1: Investor Presentation
Investor Presentation January 2021
Slide 2: Forward looking statements & non-GAAP measures
Forward looking statements & non-GAAP measures Caution Regarding Forward-Looking Statements As noted in the following Caution Regarding Forward-Looking Statements, all forward-looking statements and information, by their nature, are subject to inherent risks and uncertainties, both general and speci
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 $949 billion bank in North America in total assets $400 billion by assets1 for sustainable finance by 2025 Three operating groups Personal and BMO Wea
Slide 4: Our commitment to Sustainability
Our commitment to Sustainability Decent Work Promoting sustained growth and productive employment by creating and Economic opportunities for our employees, customers and communities, and by upholding Growth human rights across our value chain. At BMO, our Purpose to Championing equal opportunity and
Slide 5: Committed to Sustainable Performance
Committed to Sustainable Performance Ranked 15th overall, and 1st among all banks, by the Wall Street Named One of the World's Most Journal in its first ever ranking of Ethical Companies by the the most sustainably managed Ethisphere Institute for the third companies in the world year in a row 2020
Slide 6: Reasons to Invest in BMO
Reasons to Invest in BMO • Diversified businesses that continue to deliver • Well-capitalized with an attractive dividend yield resilient and robust earnings growth and long- term value for shareholders • Leading momentum in operating leverage and efficiency improvement through resource • Strong fou
Slide 7: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) EPS Growth 7% to 10% per year 8.99 9.43 7.71 Return on 8.17 8.66 15% or more 7.55 Equity Operating 2% or more Leverage Maintain strong capital ratios that exceed 2018 2019 20
Slide 8: Well-positioned for any environment with a proven strategy
Well-positioned for any 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, appropriately provisioned Delivering on expense management
Slide 9: 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 – • Leading adjusted1 expense growth, efficiency leverage – F20202 (%) F20202 (%) improvement and operating l
Slide 10: Strong balance sheet and capital position
Strong balance sheet and capital position CET1 ratio 11.9%, up 30bps Q/Q • CET1 ratio of 11.9%, up 30bps Q/Q; total capital ratio of 16.2% Customer Deposits2 ($B) • Sound leverage and liquidity ratios − Leverage Ratio 4.8%; Liquidity Coverage Ratio 131% • Prudent balance sheet management 387.1 449.1
Slide 11: Diversified business mix with strong, resilient profitability
Diversified business mix with strong, resilient profitability • Strong core profitability with Q4’20 and F2020 Diversified sources of revenue % of Operating Groups Net Revenue – F20202 adjusted pre-provision, pre-tax earnings (PPPT)1 up 7% − F2020 adjusted1 expenses well-managed, stable Y/Y Canadian
Slide 12: Canadian P&C - Strong flagship business
Canadian P&C - Strong flagship business Top tier3 financial performance • Flagship business contributing 34% of total #1 #2 bank net revenue1 and 39% of adjusted2 net Revenue Growth Adjusted2 pre-provision pre- income in F2020 7.1% 6.8% tax earnings growth 8.6% 10.3% 2.4% • Good expense discipline w
Slide 13: Advancing our digital experience in line with customer preferences
Advancing our digital experience in line with customer preferences Canadian Personal1 Digital Adoption Rate2 (%) Active Mobile Users2 (000s) Self-Serve Transaction 3 (%) +290bps +8% +470bps 58.8% 58.9% 1,958 1,990 56.0% 1,835 92.2% 92.0% 87.3% Q4 F’19 Q3 F’20 Q4 F’20 Q4 F’19 Q3 F’20 Q4 F’20 Q4 F’19
Slide 14: 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 lender1 in North America Commercial Banking Revenue as % of Total Bank Revenue – F2020 − In Canada: Top-tier commercial banking business, #2 market share for business loans up
Slide 15: Leading track record in risk management
Leading track record in risk management • Long track record of outperforming peers on credit, with 20-year historical average loss rates well below peer banks • Loss rates in 2020 continue to trend in line with peers • PPPT earnings would cover PCL rate of ~200bps1, higher than any time in at least
Slide 16: Our loans are well-diversified by geography and industry
Our loans are well-diversified by geography and industry Loans by Geography3 2% Gross Loans & Acceptances Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q4 20) Canada Residential Mortgages 118 9 127 27% 35% U.S. 63% Consumer Instalment and Other Other 58 12 70 15% Personal Cards 7 1 8
Slide 17: Sectors Impacted by COVID-19 Pandemic
Sectors Impacted by COVID-19 Pandemic Gross Loans • Hotels: Well secured by real estate. Majority of & % of Total By Industry of Heightened Focus exposure is concentrated in Canada, focusing on Acceptances GL&A ($B, as at Q4 20) (GL&A) well-known banners with reasonable overall Hotels 4.2 0.9% loan-
Slide 18: 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 & ― 5.0% of Business and Government loans, below three (as at Q4 20) Government Loans Acceptances
Slide 19: Payment Deferrals
Payment Deferrals • Deferral programs and government support have helped consumers manage through the pandemic • Since March 2020, BMO has provided payment deferrals to over 256K retail accounts in Canada and the U.S. • New deferral requests continued to decline in Q4, since peaking in Q2’20 • Matur
Slide 20: Q4 F2020 Highlights
Q4 F2020 Highlights
Slide 21: F2020 - Financial Highlights
F2020 - Financial Highlights Good PPPT5 performance absorbed higher PCLs, with positive operating leverage • Adjusted1 EPS $7.71, down 18% Y/Y (reported down 13%) Reported Adjusted1 • Adjusted1 net income down 17% Y/Y (reported down 11%) ($MM) F2020 F2019 F2020 F2019 • Adjusted1 PPPT5 up 7% Y/Y (rep
Slide 22: Q4 F2020 - Financial Highlights
Q4 F2020 - Financial Highlights Good PPPT5 growth with positive operating leverage and income flat Y/Y • Adjusted1 EPS $2.41 (reported $2.37) Reported Adjusted1 ($MM) Q4 20 Q3 20 Q4 19 Q4 20 Q3 20 Q4 19 • Adjusted1 net income $1,610MM (reported $1,584MM) 2 Net Revenue 5,986 6,000 5,752 5,986 6,000 5
Slide 23: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Highlights (Adjusted1) F2020 Q4’20 • Highly engaged team focused on providing a personalized banking Net Income $2,030MM $648MM experience, anticipating customers’ needs and finding new ways to help Net Income Growth (Y/Y) (23)% (9)%
Slide 24: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strategic Priorities • Continue to improve customer loyalty by deepening primary relationships – In Personal Banking, deepen primary relationships, enhance digital capabilities and deliver a leading customer experience – In Commercial Banking, focus on maintain
Slide 25: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Highlights (Adjusted1) F2020 Q4’20 • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$980MM US$253MM commitment to the success of our customers and communities Net Income Growth (Y/Y) (21)% (17)% • Large-s
Slide 26: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strategic Priorities • Deliver a great experience for customers and employees, while adapting to the new operating environment, and continue to build a base of loyal customers and drive an inclusive and high-performance work culture • Leverage the full suite of pro
Slide 27: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Highlights (Adjusted1) F2020 Q4’20 • Planning and advice-based approach that integrates investment, Net Income $1,130MM $328MM insurance, specialized wealth management and core banking Net Income Growth (Y/Y) 1% 9% solutions, offered by a team of hig
Slide 28: BMO Wealth Management
BMO Wealth Management Strategic Priorities • Deliver a differentiated client experience, providing outstanding support and working together to plan, grow, protect and transition their wealth with confidence • Extend our advantage as a solutions provider, delivering innovative asset management and in
Slide 29: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Highlights (Adjusted1) F2020 Q4’20 Net Income $1,116MM $387MM • A valued financial partner to our clients; leveraging our people, innovative solutions and capital to help them overcome their Net Income Growth (Y/Y) (0%) 38% challenges and achieve their
Slide 30: BMO Capital Markets
BMO Capital Markets Strategic Priorities • Continue to invest where BMO Capital Markets has the strengths and capabilities to deliver value-added solutions and meet client needs • Build on a foundation to work smarter and simplify how BMO Capital Markets does business, to enhance efficiency and retu
Slide 31: U.S. Operations
U.S. Operations U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis • U.S. P&C Q4’20 adjusted3 PPPT up 3% • U.S. segment contributing ~1/3 total bank earnings ‒ Delivered positive adjusted3 operating leverage of 3.5%; adjusted3 efficiency ratio of 55.0% m
Slide 32: Risk Overview
Risk Overview
Slide 33: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q4 20 Q3 20 Q4 19 ($MM) $ bps $ bps $ bps Annualized PCL (bps) Total Canadian P&C 180 29 257 41 134 22 94 89 Total U.S. P&C 53 18 109 35 66 22 BMO Wealth Management 0 0 1 1 1 2 31 38 23 BMO Capital Markets 105 66 79 45 7 20 35 38 30 21 29 Corp
Slide 34: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations Formations Gross Impaired Loans • GIL ratio 79 bps, down 16 bps Q/Q By Industry ($MM, as at Q4 20) Formations ($MM) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 105 40 145 414 335 749 Service Industries 30 41 71 137 382 519 1,760 1,396 Oil &
Slide 35: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($153.7B) • Total Canadian residential-secured lending HELOC $69.6 portfolio at $153.7B, representing 33% of Uninsured Mortgages $30.2 total loans Insured Mortgages 24% ─ LTV1 on uninsured of 51% $23.8 25% ─ 90-day delinquenc
Slide 36: Economic and Housing Market Overview
Economic and Housing Market Overview
Slide 37: Economic outlook and indicators
Economic outlook and indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 2020E2 2021E2 2022E2 2020E2 2021E2 2022E2 2020E2 2021E2 2022E2 GDP Growth (5.5) 5.0 4.5 (3.5) 4.5 3.5 (6.8) 5.5 3.0 Inflation 0.8 1.7 1.9 1.2 2.0 2.1 0.3 0.7 1.0 Interest Rate (3mth Tbills) 0.45 0.10 0.10 0.35
Slide 38: Canada's housing market is strong
Canada’s housing market is strong • National existing home sales rebounded to record highs in recent months after plunging in the shutdowns. Record-low mortgage rates and shifts in demand arising from remote working have supported the market • Benchmark prices are up more than 10% in the past year,
Slide 39: Structure of the Canadian residential mortgage market with comparisons to the United States
Structure of the Canadian residential mortgage market with comparisons to the United States • Conservative lending practices, strong underwriting and documentation discipline have led to low delinquency rates — Over the last 30 years, Canada’s 90-day residential mortgage delinquency rate has never e
Slide 40: Liquidity & Wholesale Funding Mix
Liquidity & Wholesale Funding Mix
Slide 41: Liquidity and Funding Strategy
Liquidity and Funding Strategy Cash and Securities to Total Assets Ratio (%) • BMO's Cash and Securities to Total Assets Ratio reflects a strong and stable liquidity position Customer Deposits1 ($B) • BMO’s large base of customer deposits, along with our strong capital base, reduces reliance on whol
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 October 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 tota
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 CHRISTINE VIAU BILL ANDERSON SUKHWINDER (SUKHI) SINGH Head, Investor Relations Director, Investor Relations Director, Investor Relations 416.867.6956 416.867.7834 416.867.4734 christine.via
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