National Bank Of Canada · TSX:NA
National Bank Of Canada — Debt Investor Presentation (October 2023)
52 slides from National Bank Of Canada's debt investor presentation, Oct 31, 2023
Slide 1: Fixed Income Presentation F2023
FIXED INCOME PRESENTATION F2023 As of October 31, 2023
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES Caution Regarding Forward-Looking Statements Certain statements in this document are forward-looking statements. All such statements are made in accordance with applicable securities legislation in Canada and the United States. The forward-
Slide 3: Overview: National Bank of Canada
OVERVIEW NATIONAL BANK OF CANADA
Slide 4: FY 2023 – Solid Foundations Driving Strong Returns
FY 2023 – SOLID FOUNDATIONS DRIVING STRONG RETURNS Organic growth across our business Achieved our F2023 adjusted PTPP(1) objective of segments and continued cost discipline mid to high single digit growth: 6.7% Achieved our adjusted ROE(2) target range of Superior ROE 15% - 20% again in F2023: 16.8
Slide 5: Q4 2023 – Strong Financial Performance
Q4 2023 – STRONG FINANCIAL PERFORMANCE Revenues ($MM; YoY) Reported: $2,594; 11% ▪ Strong business growth and continued cost discipline (1) Adjusted : $2,759; 14% - Adjusted PTPP up 19% YoY PTPP(2) ($MM; YoY) - Adjusted operating leverage of 4.3% Reported: $987; -% (1) Adjusted : $1,288; 19% ▪ Solid
Slide 6: Total Bank – FY 2023 Results
TOTAL BANK – FY 2023 RESULTS Total Bank Summary Results – FY 2023 ($MM) ▪ Adjusted revenues(1) and adjusted Adjusted Results (1) FY 23 FY 22 YoY PTPP(1)(2) up 7% YoY Revenues 10,658 9,934 7% Non-Interest Expenses 5,640 5,230 8% ▪ Adjusted diluted EPS(1) of $9.60 (2) Pre-Tax / Pre-Provisions 5,018 4,
Slide 7: Total Bank – Q4 2023 Results
TOTAL BANK – Q4 2023 RESULTS Total Bank Summary Results – Q4 2023 ($MM) Adjusted Results (1) Q4 23 Q3 23 Q4 22 QoQ YoY ▪ Adjusted revenues(1) up 14% YoY and Revenues 2,759 2,576 2,429 7% 14% adjusted PTPP(1)(2) up 19% YoY Non-Interest Expenses 1,471 1,392 1,346 6% 9% ▪ Adjusted diluted EPS(1) of $2.
Slide 8: Personal and Commercial Banking
PERSONAL AND COMMERCIAL BANKING P&C Summary Results – Q4 2023 ▪ Revenues up 8% YoY, mainly from NII ($MM) growth reflecting margin expansion and (1) balance sheet growth Adjusted Results Q4 23 Q3 23 Q4 22 QoQ YoY - Other income benefiting from favourable Revenues 1,152 1,140 1,071 1% 8% insurance ac
Slide 9: Wealth Management
WEALTH MANAGEMENT Wealth Management Summary Results – Q4 2023 ($MM) ▪ Revenues of $638MM, up 4% YoY Adjusted Results(1) Q4 23 Q3 23 Q4 22 QoQ YoY - Solid fee-based revenues up 7% YoY and 2% Revenues 638 629 613 1% 4% QoQ Fee-Based 371 364 347 2% 7% - NII growth of 1% YoY in Q4 contributing to NII Tr
Slide 10: Financial Markets
FINANCIAL MARKETS Financial Markets Summary Results – Q4 2023 (TEB, $MM) ▪ Strong quarter with revenues of $735MM Adjusted Results(1) Q4 23 Q3 23 Q4 22 QoQ YoY Revenues 735 560 563 31% 31% Global Markets 435 277 304 57% 43% ▪ Global Markets revenues of $435MM led by our C&IB 300 283 259 6% 16% Equit
Slide 11: USSF&I – Credigy
USSF&I – CREDIGY Credigy Summary Results – Q4 2023 ($MM) ▪ Net interest income up 13% QoQ, driven by pre-payment revenue and favourable impact of Q4 23 Q3 23 Q4 22 QoQ YoY over performance on fair value portfolios Revenues 126 112 88 13% 43% Net Interest Income 126 112 116 13% 9% Non-Interest Income
Slide 12: USSF&I – ABA
USSF&I – ABA ABA Summary Results – Q4 2023 ($MM) ▪ Solid growth in loans and deposits with client Q4 23 Q3 23 Q4 22 QoQ YoY base up 31% YoY Revenues 187 181 179 3% 4% Non-Interest Expenses 68 66 58 3% 17% ▪ Slower revenue growth, at 4% YoY, reflects Pre-Tax / Pre-Provisions 119 115 121 3% (2%) conti
Slide 13: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio(1) 0.68% ▪ Strong CET1 ratio of 13.5% - Solid organic capital generation of 40 bps (0.28%) (0.35%) - Strong business growth contributing to an 13.49% (0.04%) (0.03%) 13.47% increase of 35 bps in RWA (excluding FX) (2) Q3 23 Net income - Dividends RWA Specified Othe
Slide 14: Credit Risk Overview
CREDIT RISK OVERVIEW
Slide 15: Provisions for Credit Losses (PCL)
PROVISIONS FOR CREDIT LOSSES (PCL) FY 2023 Full Year PCL PCL ▪ Total PCL of $397M (18 bps) ($MM) POCI (1) ▪ Impaired (excl. POCI)(2): 11 bps Performing Impaired (excl. POCI) 40 ▪ Performing: 8 bps Total (bps) 175 20 21 17 16 16 Q4 Total PCL 20 $115 ▪ $115M (21 bps), reflecting resilient portfolio mi
Slide 16: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total Allowances Cover 8.7X NCOs Performing ACL / LTM PCL on Impaired Loans Total ACL / LTM Net Charge-Offs (Excluding POCI) 8.4x 8.6x 8.7x 7.9x 7.8x 7.1x 6.4x 6.2x 5.9x 4.8x 4.5x 4.4x 1.8x 2.6x Q1 20 Q4 21 Q4 22 Q
Slide 17: Gross Impaired Loans and Formations (excluding POCI)
GROSS IMPAIRED LOANS AND FORMATIONS (excluding POCI) Gross Impaired Loans (GIL) Excluding POCI Loans(1) ▪ Gross impaired loans (excl. POCI) of $1,024M, ($MM) 45 115 increase of 4 bps QoQ at 45 bps 41 $1,165 39 38 38 $1,024 95 ▪ GIL excl. USSF&I(2): 31 bps (+1 bp YoY) $965 $912 $812 $793 $814 $233 ▪
Slide 18: Liquidity and Funding Overview
LIQUIDITY AND FUNDING OVERVIEW
Slide 19: Funding Strategy
FUNDING STRATEGY The main objective of the funding strategy is to support the Bank's organic growth while also enabling it to survive potentially severe and prolonged crises and to meet its regulatory obligations and financial targets. The funding framework consists of 3 pillars: 1. Pursue a diversi
Slide 20: Diversified Deposit Strategy
DIVERSIFIED DEPOSIT STRATEGY Pursue a diversified deposit strategy to fund core banking activities through stable deposits coming from the networks of each of the Bank’s major business segments Deposits (Ex. Wholesale Funding)(1) ($B) Total Deposits: 1Y CAGR = 6% Personal Deposits: 1Y CAGR = 12% ▪ R
Slide 21: Diversified Funding Profile
DIVERSIFIED FUNDING PROFILE Balance Sheet Overview ($B, as at October 31st, 2023) $424 $424 Other Assets 30 Other Liabilities 27 Cash & Reverse Repos 46 Unsecured Funding 44 Wholesale Secured Funding (2) 52 Funding Cash and 23% Securities 40% Securities Banker's Acceptances 7 122 Business & Governme
Slide 22: Sound Liquidity Risk Management
SOUND LIQUIDITY RISK MANAGEMENT Maintain a sound liquidity risk management through centralized expertise and management of liquidity metrics within predefined risk appetite, with 4 main principles: • Efficient Risk & Reward Balance through a Risk Appetite Framework; • Decision-making processes based
Slide 23: Maturity Profile
MATURITY PROFILE Maintain active access to various markets to ensure diversification of institutional funding in terms of source, geographic location, currency, instrument and maturity, whether secured or unsecured. Term Funding (C$ millions) Term Funding 14,000 12,000 Covered 10,000 bonds 20% 8,000
Slide 24: 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 25: TLAC Ratios
TLAC RATIOS(1) All Canadian D-SIBs are now required to maintain a TLAC risk-weighted ratio of at least 21.5%. In addition, all D-SIBs are expected to hold buffers above the minimum TLAC Ratio, including the Domestic Stability Buffer (“DSB”, adjusted by OSFI on June 20, 2023, to 3.50% of total RWA (e
Slide 26: Environment, Social and Governance (ESG) Highlights
Environment, Social and Governance (ESG) Highlights
Slide 27: NBC ESG Highlights
NBC ESG HIGHLIGHTS Supporting sustainable development is an intrinsic part of our One Mission. Environmental, social and governance considerations play a key role in our business and operational decisions. The ESG principles that our Board of Directors have adopted demonstrate our commitment to sust
Slide 28: NBC ESG Highlights
NBC ESG HIGHLIGHTS • Board-level: ESG responsibilities integrated in the mandates of the Board and all its Committees. • Executive-level: ESG committee responsible for corporate strategy regarding ESG matters includes key functional representatives (Risk, Legal, Public Affairs, Compliance, etc.) and
Slide 29: NBC Environment Highlights
NBC Environment Highlights Environment Social Governance > Set path to achieve net-zero greenhouse gas (GHG) emissions for our operating and financing activities by 2050, with interim targets. o Interim reduction target of 25% for GHG emissions from our activities by the end of 2025 (compared to 201
Slide 30: NBC Social Highlights
NBC Social Highlights Environment Social Governance Employees > People are the key to our success. That’s why the Bank maintains an ongoing dialogue with its employees. > Culture is a key differentiator with a focus on entrepreneurship, collaboration, agility and accountability. > Promoting employee
Slide 31: NBC Governance Highlights
NBC Governance Highlights Environment Social Governance > Publication of the Corporate Social Responsibility Statement, ESG Report, Inclusion and Diversity Booklet and TCFD Report. > The mandates of the Board of Directors and all its committees include ESG-related responsibilities. > Executive varia
Slide 32: Mission of Organizations We Support
Mission of organizations we support United Nations Environment Programme – Finance Initiative (UNEP FI) is a partnership between United Nations Environment and the global financial sector created in the wake of the 1992 Earth Summit with a mission to promote sustainable finance. More than 250 financ
Slide 33: Mission of Organizations We Support
Mission of organizations we support The Financial Stability Board’s Task Force on Climate-related Financial Disclosures will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders.
Slide 34: Sustainability Bond Framework
Sustainability Bond Framework
Slide 35: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK December 2022, NBC revised its Sustainability Bond Framework and obtained Second Party Opinion from Moody’s: https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/2022/na-sustainability-bond-framework-2022.pdf https:/
Slide 36: 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 37: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds and evaluation Social proceeds Reporting Governance Eligible Categories Eligibility Criteria > Generation, transmission and distribution of energy from renewable sources, including investments for acquisition, operatio
Slide 38: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds and evaluation Social proceeds Reporting Governance Eligible Categories Eligibility Criteria (continued) > Projects intended for target** population that enhance access to essential services by enabling the provision o
Slide 39: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds and evaluation Social proceeds Reporting Governance NBC has published a Sustainability Bond report on its website: ✓ Within 1 year of the issuance of the Sustainability Bonds; and ✓ Will update its Sustainability Bond
Slide 40: Appendix
APPENDIX
Slide 41: Total Loan Portfolio Overview
APPENDIX 1 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category(1) ($B) ▪ Secured lending accounts for 95% As at of Retail loans October 31, 2023 % of Total Retail ▪ Indirect auto loans represent 2.3% of total loans Secured - Mortgage & HELOC 99.9 44% ($5.1B) (2) Secured - Other 14
Slide 42: Regional Distribution of Canadian Loans
APPENDIX 2 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Prudent Positioning (As at October 31, 2023) Within the Canadian loan portfolio: Maritimes (2) ▪ Limited exposure to unsecured consumer loans Oil and (2.8%) Quebec Ontario Regions (1) BC/MB Territories Total Retail ▪ Modest exposure to unsecured c
Slide 43: Retail Mortgage and HELOC Portfolio
APPENDIX 3 | RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province ▪ Uninsured mortgages and HELOC in GTA and (As at October 31, 2023) GVA represent 12% and 2% of the total RESL 55% portfolio and have an average LTV(1) of 50% ▪ Uninsured mortgages and HELOC for condos represent 9% of
Slide 44: Retail Mortgages Rate Type and Maturity Profile
APPENDIX 4 | RETAIL MORTGAGES RATE TYPE AND MATURITY PROFILE (As at October 31, 2023) Canadian Mortgages Distribution by Rate Type ▪ Half of our Canadian Mortgage portfolio has already been repriced, absorbing the impact of rate increases Variable ▪ 28% of mortgage portfolio is variable rate and the
Slide 45: Real Estate and Construction Real Estate
APPENDIX 5 │ REAL ESTATE AND CONSTRUCTION REAL ESTATE Total Portfolio by Sector ($26.0B) Corporate Banking (10%) ▪ Primarily diversified Canadian REIT Short Term Construction (20%) ▪ Mainly residential construction ▪ No US exposure Commercial Banking CRE (70%) ▪ 58% of 5-year growth coming from Resi
Slide 46: NBC Credit Ratings
APPENDIX 6 │ NBC CREDIT RATINGS Long-Term Non Covered Counterparty Short-term Bail-inable Senior Debt(2) Outlook Credit Rating Bonds risk(3) Senior Debt(1) Agency S&P A-1 A BBB+ Stable ---- ---- Moody’s P-1 Aa3 A3 Positive Aaa Aa3 DBRS R-1 (high) AA AA (low) Stable AAA ---- Fitch F1+ AA- A+ Stable A
Slide 47: Legislative Covered Bond Programme
APPENDIX 7 │ LEGISLATIVE COVERED BOND PROGRAMME Programme size ▪ CAD$ 20,000,000,000 Outstanding benchmark covered bonds ▪ €750M 0.0% 09/23; €750M 0.750% 03/25; €750M 0.250% 07/23; €750M 0.375% 01/24; €500M 0.01% 03/28; €750M 0.01% 09/26; €1B 0.125% 01/27; $US1.25B 2.900% 04/27; £750M SONIA+100 05/2
Slide 48: Other Segment Summary Results
APPENDIX 8 │ OTHER Other Segment Summary Results – Q4 2023 ($MM) Adjusted Results(1) Q4 23 Q3 23 Q4 22 ▪ Adjusted PTPP(1)(2) of $(130)MM vs. $(164)MM Revenues (79) (45) (85) in prior year Non-Interest Expenses 51 32 79 (2) (130) (77) (164) - Expenses down YoY mainly reflecting lower Pre-Tax / Pre-Pr
Slide 49: Reconciliation of Non-GAAP Financial Measures
APPENDIX 9 │ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($MM, except EPS) Q4 23 Q4 22 Non- Non- Total (7) Income Net Diluted Total (7) Income Net Diluted Interest PTPP PCL Interest PTPP PCL Revenues taxes Income EPS Revenues taxes Income EPS Segment Expenses Expenses (1) Adjusted Results 2,759 1,
Slide 50: Reconciliation of Non-GAAP Financial Measures (Cont'd)
APPENDIX 9 │ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (CONT’D) ($MM, except EPS) FY 2023 FY 2022 Non- Non- Total (8) Income Net Diluted Total (8) Income Net Diluted Interest PTPP PCL Interest PTPP PCL Revenues taxes Income EPS Revenues taxes Income EPS Segment Expenses Expenses Adjusted Results
Slide 51: Disclaimer
DISCLAIMER This document has been prepared solely for informational purpose and is not an offer to sell or a solicitation of an offer to buy any security of the Bank or to participate in any trading strategy. Any such offer, if and when made, will be made only by the Bank in and on the basis of, an
Slide 52: Questions?
QUESTIONS? Mr. Jean-Sébastien Gagné, Senior Vice-President, Financial Performance and Planning and Treasurer JeanSebastien.Gagne@nbc.ca Mr. Arslan Benbakouche, Senior Manager, Investor Relations & Strategy Arslan.Benbakouche@nbc.ca Mrs. Mélanie Viguié-Bilodeau, Director, Term Funding, Treasury Melan
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