Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q2 2019 Earnings Presentation
34 slides from Bank Of Montreal's earnings presentation, June 2019
Slide 1: Investor Presentation June 2019
Investor Presentation June 2019
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 8th largest $830 billion bank in North America in total assets by assets1 An engaged and diverse team of employees Three operating groups Personal and BMO Wealth BMO Capital
Slide 4: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) 2-year CAGR 9% EPS Growth 7% to 10% per year 8.99 8.15 7.52 Return on 7.90 8.17 15% or more Equity 6.92 Operating 2% or more Leverage Maintain strong capital ratios that exce
Slide 5: Q2 2019 – Financial Highlights
Q2 2019 – Financial Highlights Adjusted1 net income up Y/Y driven by good growth in P&C businesses • Adjusted1 EPS $2.30, up 5% Y/Y (reported up 22%) Reported Adjusted1 ($MM) Q2 19 Q1 19 Q2 184 Q2 19 Q1 19 Q2 18 • Adjusted1 net income up 4% Y/Y 2 Net Revenue 5,652 5,591 5,248 5,652 5,591 5,248 – U.S
Slide 6: BMO's Strategic Footprint
BMO’s Strategic Footprint BMO’s strategic footprint spans strong regional economies. Our three operating groups – Personal and Commercial Banking, BMO Capital Markets and BMO Wealth Management – serve individuals, businesses, governments and corporate customers across Canada and the United States. O
Slide 7: Reasons to Invest in BMO
Reasons to Invest in BMO • Diversified businesses that continue to deliver • Well-capitalized with an attractive dividend yield robust earnings growth and long-term value for shareholders • Creating sustainable efficiency and reinvestment capacity through resource optimization, • Strong foundation b
Slide 8: Differentiating strengths driving competitive advantage
Well-established U.S. Presence Core Strengths Differentiating Digital Investment in Commercial and Wealth strengths and Innovation Management driving Integrated North American Platform competitive advantage Unique Creating Approach Sustainable to Cross-border Efficiency Banking
Slide 9: Diversified businesses delivering resilient and robust earnings
Diversified businesses delivering resilient and robust earnings Adjusted Net Income Driven by diversified sources of revenue by Operating Group – LTM1 % of Operating Groups Net Revenue - LTM Can P&C Canadian BMO Capital 40% P&C Markets 35% 20% BMO CM 18% Canadian Personal Banking U.S. P&C BMO WM 25%
Slide 10: U.S. operations well positioned to capture growth opportunities
U.S. operations well positioned to capture growth opportunities • The United States continues to be a strategically important market for BMO representing over 30% of total bank earnings 2019 Estimated Nominal GDP ($US Trillions) • Diversified businesses are delivering strong growth • U.S. segment ad
Slide 11: Large North American commercial banking business with advantaged market share
Large North American commercial banking business with advantaged market share Canadian P&C Commercial Loans and Acceptances Commercial Deposits – Canadian P&C ($B) – Canadian P&C ($B) • #2 market share in business lending1 ↑15% ↑7% • Top-tier in upper mid-market2 Y/Y Y/Y • #1 in Agriculture1 79.1 63
Slide 12: Strong Capital Position
Strong Capital Position Strong CET1 Capital Ratio -34 bps +27 bps -3 bps 11.3% 1.55% 9.75% Current OSFI expectation 1.75% Domestic Stability Buffer1 1.0% D-SIB Surcharge 11.4% 2.5% Capital Conservation Buffer 4.5% Minimum CET1 Q1'19 Internal Capital Generation Higher source currency RWA Other change
Slide 13: Creating sustainable efficiency: continuing good progress
Creating sustainable efficiency: continuing good progress Optimize Adjusted1 Efficiency Ratio Trend Enterprise Infrastructure 360 bps Deliver 65.5% 63.9% Strategic 62.7% 61.9% Initiatives 2015 2016 2017 2018 Enable Simplification • Expect to achieve efficiency of 58% or better by F2021 & Automation
Slide 14: Our Commitment to Sustainability
Our Commitment to Sustainability BMO’s sustainability principles—Social Change, Community Building, Financial Resilience and Environmental Impact—align to our strategic priorities because financial performance and corporate responsibility are inextricably connected. Our success depends on meeting ou
Slide 15: Driving Value with Sustainable Solutions
Driving Value with Sustainable Solutions Sustainable Finance BMO Capital Markets underwrote US$6.3B in sustainable bonds in F2018 (US$4.8B in green bonds; US$1.5B in sustainable development bonds) BMO Global Asset Management is a Green Bond Principles signatory and has developed a Green Bond Strateg
Slide 16: Operating Groups
O © Operating Groups
Slide 17: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Q2’19 Highlights (Adjusted1) • Highly engaged team focused on providing a personalized banking Net Income $615 million experience, anticipating customers’ needs and finding new ways to help Net Income Growth (Y/Y) 5% • Top-tier comme
Slide 18: Canadian Personal & Commercial Banking – Strategic Priorities
Canadian Personal & Commercial Banking Strategic Priorities Capture key growth and loyalty opportunities by delivering a leading digital experience and personalized advice • Continue to improve customer loyalty by deepening primary relationships – In Commercial Banking, target opportunities through
Slide 19: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Q2’19 Highlights (Adjusted1) • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$314 million commitment to the success of our customers and communities • Large-scale, diversified national commercial busines
Slide 20: U.S. Personal & Commercial Banking – Strategic Priorities
U.S. Personal & Commercial Banking Strategic Priorities We aim to grow our business and be a leader in our markets by creating a differentiated and intuitive partnership with our customers to address all of their financial needs • Continue to strengthen our competitive position by investing in key c
Slide 21: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Q2’19 Highlights (Adjusted1) • Planning and advice-based approach that integrates investment, insurance, specialized wealth management and core banking Net Income $315 million solutions, offered by a team of highly skilled professionals Net Income Gr
Slide 22: BMO Wealth Management – Strategic Priorities
BMO Wealth Management Strategic Priorities Deliver on our clients’ current and evolving personal wealth, insurance and institutional asset management needs through an exceptional client experience, a focus on innovation and productivity and collaboration across BMO • Provide outstanding support and
Slide 23: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Q2’19 Highlights (Adjusted1,2) Net Income $253 million • Unified coverage and integrated distribution across our North American platform and complementary global footprint, delivering Net Income Growth (11)% a seamless and exceptional client experience
Slide 24: BMO Capital Markets – Strategic Priorities
BMO Capital Markets Strategic Priorities BMO Capital Markets' vision is to be a top 10 North American investment bank, enabling clients to achieve their goals. We offer an integrated platform, differentiated by innovative ideas and unified coverage • Maintain leading market share in Canada by streng
Slide 25: Risk Overview
O © Risk Overview
Slide 26: Our loans are well-diversified by geography and industry
Our loans are well-diversified by geography and industry Gross Loans & Acceptances Loans by Geography3 Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q2 19) Residential Mortgages 108.9 11.9 120.8 28% 35% Canada Consumer Instalment and Other 54.0 10.4 64.4 15% 63% U.S. Personal Cards 7.
Slide 27: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($141.2B) • Total Canadian residential-secured lending HELOC portfolio at $141.2B, representing 32% of total $62.6 loans, below peer average of approximately 46% Uninsured Mortgages Insured Mortgages 24% $27.3 ─ LTV1 on unins
Slide 28: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q2 19 Q1 19 Q2 18 ($MM) PCL (bps) Total Canadian P&C 122 114 131 Total U.S. P&C 18 15 66 19 18 17 Wealth Management (1) 2 1 16 Capital Markets 12 1 (16) 18 18 18 13 Corporate Services (1) (5) (10) 14 PCL on Impaired Loans 150 127 172 PCL on Pe
Slide 29: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations Formations Gross Impaired Loans • GIL ratio 53 bps, up 5 bps Q/Q but By Industry ($MM, as at Q2 19) down 3 bps Y/Y Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 262 51 313 496 439 935 Formations ($MM) Agriculture 7 37 44 58 229 287 Service In
Slide 30: Economic Overview
© © Economic Overview
Slide 31: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 20182 2019E2 2020E2 20182 2019E2 2020E2 20182 2019E2 2020E2 GDP Growth 1.9 1.4 1.7 2.9 2.5 1.7 1.9 1.2 1.2 Inflation 2.3 2.0 2.1 2.4 1.9 2.2 1.8 1.6 2.1 Interest Rate (3mth Tbills) 1.37 1.65 1.65 1.97 2.40 2.3
Slide 32: Canada's housing market is stable
Canada’s housing market is stable • Rising interest rates, new mortgage rules and provincial policy measures have slowed the housing market, but recent signs of stability suggest the market has digested the policy changes • The Toronto condo market remains healthy due to steady demand from internati
Slide 33: 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 34: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com JILL HOMENUK CHRISTINE VIAU Head, Investor Relations Director, Investor Relations 416.867.4770 416.867.6956 jill.homenuk@bmo.com christine.viau@bmo.com