Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Investor Presentation (September 2021)
50 slides from Bank Of Montreal's investor presentation, September 2021
Slide 1: Investor Presentation
Investor Presentation September 2021
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 secu
Slide 3: About Us
About Us Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America 8th largest $971 billion 12+ million bank in North America in total assets customers globally by assets1 Operating Groups Personal & Commercial Banking BMO Wealth Management B
Slide 4: Our Purpose
Our Purpose For a sustainable future For a thriving economy For an inclusive society Declared Climate Ambition, a BMO announced a 10-year, $12B BMO was named to Canada’s Best focused commitment to drive commitment to finance affordable 50 Corporate Citizens Ranking by economic transformation toward
Slide 5: Reasons to Invest in BMO
Reasons to Invest in BMO • Diversified businesses that continue to deliver • Well-capitalized with an attractive dividend yield resilient and robust earnings growth and long- term value for shareholders • Leading momentum in operating leverage and efficiency improvement through resource • Strong fou
Slide 6: Strong financial performance
Strong financial performance Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) 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 2020 Capital regulatory re
Slide 7: Advancing our digital experience in-line with customer preferences
Advancing our digital experience in-line with customer preferences Strong digital foundation in place Accelerated Digital Engagement Delivering speed, efficiency and scale • Top tier digital sales volumes Digital adoption, % 1 3 • Personalized, data-driven experiences, driving customer acquisition e
Slide 8: Continued operating momentum across our businesses
Continued operating momentum across our businesses • Advantaged and diversified business mix Top tier financial performance4 positioned for resilience and growth • Leading adjusted1 PPPT2 growth and efficiency3 #1 #1 improvement, better than average net revenue3 Adjusted1 PPPT2 growth – Adjusted1 ef
Slide 9: Diversified business mix with strong, resilient revenue
Diversified business mix with strong, resilient revenue Diversified by business Diversified by geography % of Operating Groups Net Revenue – LTM1 % of Net Revenue by Geography – LTM1 Other Canadian BMO Capital 6% P&C Markets 33% Canadian 24% Personal Banking Canadian Commercial Banking Global Market
Slide 10: Canadian P&C - Strong flagship business
Canadian P&C - Strong flagship business • Flagship business contributing 33% of total bank Strong financial performance vs peers revenue1,2 and 36% of adjusted2 net income YTD #1 Adjusted1 efficiency #1 Adjusted1 PPPT3 growth – • Top-tier performance and growing market share in YTD4 (%) improvement
Slide 11: BMO Wealth Management - Strong & stable growth engine
BMO Wealth Management - Strong & stable growth engine Strong Momentum • Well-diversified competitive businesses, contributing Adjusted2 ROE (%) Adjusted2 efficiency4 (bps) ~22% of BMO’s net revenue mix over the last 12 69.5 months 730bps 25.0 460bps 17.7 64.9 • Repositioned the business to accelerat
Slide 12: U.S. segment continuing to deliver strong results
U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis • U.S. segment adjusted1 PPPT1 up 34% YTD; contributed 39% of total bank adjusted1 earnings YTD • Average assets of ~$300B with over 50% of revenue from outside of core footprint3 states • Adjusted1 effi
Slide 13: 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 — In Canada: Top-tier commercial banking business, #2 market Commercial Banking Revenue as % share for business loans up to $25 million2 of Total Bank
Slide 14: Net Interest Margin and Interest Rate Sensitivity
Net Interest Margin and Interest Rate Sensitivity Total bank NII & NIM ex trading • Term rates increased in Q3, but remain below averages of 1.67 recent years 1.60 1.64 1.65 1.53 • If term rates remain low, NIM could continue to be 595 512 478 449 386 pressured as higher rate fixed investments roll
Slide 15: Continuous path to building a strong, more competitive bank
Continuous path to building a strong, more competitive bank ROE1 (%) Adjusted1,2 efficiency (bps) CET1 (%) 16.7 13.4 61.4 13.7 300bps 520bps 200bps 56.2 11.4 F2019 YTD '21 F2019 YTD '21 F2019 YTD '21 • Targeted actions to allocate capital and resources to areas expected to generate strong returns •
Slide 16: Strong balance sheet and capital position
Strong balance sheet and capital position • CET1 Ratio of 13.4%, up 40bps Q/Q; Total Capital Credit Ratings Ratio of 17.4% Moody’s S&P DBRS Fitch • Sound leverage and liquidity ratios Long term deposits / Aa2 A+ AA AA − Leverage Ratio 5.0% legacy senior debt1 − Liquidity Coverage Ratio 125% Senior d
Slide 17: Leading track record in risk management
Leading track record in risk management • Long track record of outperforming peers on credit, with 30-year historical average loss rates well below peer banks • Prudent underwriting, consistent approach, unparalleled expertise and industry knowledge, effectiveness of work-out process. Deep expertise
Slide 18: Q3 F2021 Highlights
Q3 F2021 Highlights
Slide 19: Q3 F2021 - Financial Highlights
Q3 F2021 - Financial Highlights Strong results with PPPT3 up 12% Y/Y and positive operating leverage • Adjusted1 EPS $3.44, up 86% Y/Y (reported $3.41, up 89%) Reported Adjusted1 Q3 21 Q2 21 Q3 20 Q3 21 Q2 21 Q3 20 • Adjusted1 net income $2,292MM (reported $2,275MM) ($MM) Net interest income 3,521 3
Slide 20: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Q3’21 Highlights (Adjusted1) • Highly engaged team focused on providing a personalized banking Net Income $815MM experience, anticipating customers’ needs and finding new ways to help Net Income Growth (Y/Y) 155% • Top-tier commercia
Slide 21: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strategic Priorities • Continue to improve customer loyalty by deepening primary relationships, provide necessary support to customers and employees in the new operating environment, and drive an inclusive and high-performance work culture • Leverage the full s
Slide 22: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Q3’21 Highlights (Adjusted1) • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$453MM commitment to the success of our customers and communities Net Income Growth (Y/Y) 127% • Large-scale, diversified nati
Slide 23: 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 – In Personal Banking, continue to drive new customer acquisition, maintain robust deposi
Slide 24: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Q3’21 Highlights (Adjusted1) • Planning and advice-based approach that integrates investment, Net Income $406MM insurance, specialized wealth management and core banking Net Income Growth (Y/Y) 16% solutions, offered by a team of highly skilled profe
Slide 25: 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 26: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Q3’21 Highlights (Adjusted1) • A valued financial partner to our clients; leveraging our people, Net Income $564MM innovative solutions and capital to help them overcome their Net Income Growth (Y/Y) 30% challenges and achieve their goals Revenue Growt
Slide 27: BMO Capital Markets
BMO Capital Markets Strategic Priorities • Continue to invest where BMO Capital Markets has the strengths and capabilities to deliver value-added solutions and meet client needs • Build on a foundation to work smarter and simplify how BMO Capital Markets does business, to enhance efficiency and retu
Slide 28: Risk Overview
Risk Overview
Slide 29: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q3’21 Q2’21 Q3’20 ($MM) $ bps $ bps $ bps PCL in bps Total Canadian P&C 101 15 154 24 257 41 94 89 Total U.S. P&C (9) (3) 6 2 109 35 37 BMO Wealth Management 0 (1) 1 2 1 1 19 13 35 38 29 6 BMO Capital Markets (19) (13) (6) (4) 79 45 14 5 -6 Co
Slide 30: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing Loans (APL) and PCL on APL to • The APL decreased $126MM to $2,703MM, Q3 21 driven by a reduction in PCL on performing loans Performing Loans (PCL) Q2 21 Q3 21 Q3 21 Performing Foreign By Operating Group APL1 PCL APL1 Loans Exchange
Slide 31: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio 51 bps, down 14 bps Q/Q Formations Gross Impaired Loans By Industry ($MM, as at Q3 21) Formations ($MM) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 149 23 172 400 283 683 Service Industries 72 31 103 210 245 455
Slide 32: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances • Portfolio is well diversified by geography Canada & By Industry U.S. Total % of Total and industry Other1 ($B, as at Q3 21) Residential Mortgages 126.4 8.0 134.4 28% • Business & Government loans up 2% Q/Q Consumer Instalment and Other or up 1% exc
Slide 33: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending Residential-Secured Lending by Region ($166.6B) • Total Canadian residential-secured lending HELOC $76.1 portfolio at $166.6B, representing 35% of total Uninsured Mortgages loans (peer average ~48%) $33.1 Insured Mortgages 25% ─ LTV1 on uninsured of 48% 25% ─ 90-
Slide 34: Oil and Gas Industry Overview
Oil and Gas Industry Overview Industry by Sub-sector Industry by Risk Rating 11% 54% 24% $8.9 B $8.9 B 3% 58% 7% 43% Exploration & Development Manufacturing & Refining Investment Grade Sub-Investment Grade Impaired Pipelines Services • The Oil and Gas Portfolio is geographically well diversified; 54
Slide 35: Sectors Impacted by COVID-19 Pandemic
Sectors Impacted by COVID-19 Pandemic Gross Loans & % of Total By Industry of Heightened Focus Acceptances GL&A • Sectors highly impacted by COVID-19 make up less ($B, as at Q3 21) than 5% of the portfolio (GL&A) Hotels 4.5 1.0% • Portfolio is diversified and well-secured by real estate Restaurants
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 2020 2021E2 2022E2 2020 2021E2 2022E2 2020 2021E2 2022E2 GDP Growth (5.3) 5.0 4.5 (3.4) 5.8 3.5 (6.5) 4.5 4.5 Inflation 0.7 3.0 2.9 1.2 4.5 4.0 0.3 1.9 1.4 Interest Rate (3mth Tbills) 0.44 0.15 0.25 0.37 0.05
Slide 38: Canada's housing market is strong
Canada’s housing market is strong • National existing home sales have pulled back in the summer from record highs in March but remain well above normal levels. Record-low mortgage rates and shifts in demand arising from remote working have supported the market • Benchmark prices have accelerated 22%
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: Environmental, Social and Governance
Environmental, Social and Governance
Slide 41: Our Commitment to Sustainability
Our Commitment to Sustainability BMO has designed products and services tailored to underrepresented segments including women and Indigenous communities. At BMO, our Purpose to Boldly Grow the Good, in BMO promotes economic growth by creating fair employment opportunities in our own operations and i
Slide 42: Progress against Our Purpose commitments
Progress against Our Purpose commitments Since the beginning, BMO has been guided by a sense of purpose: to be a champion of progress and a catalyst for change. Grounded in BMO’s values of integrity, empathy, diversity and responsibility, our Purpose to Boldly Grow the Good in business and life driv
Slide 43: BMO's Net Zero Ambition
BMO’s Net Zero Ambition Be our Clients’ Lead Partner in the Transition to a Net Zero World Commitment Capabilities Client Partnership Convening for Climate Action Building on our Purpose BMO Climate Institute We are committed to helping As a global leader, BMO will commitment to a sustainable provid
Slide 44: Liquidity & Wholesale Funding Mix
Liquidity & Wholesale Funding Mix
Slide 45: 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 46: 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 47: 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 Profile as at July 31, 2021 — Risk-based TLAC ratio of 24% (Minimum 21.5% of RWA TLAC ratio plus a Domestic Stability Buffer of 2.50% of total RWA) 1 — Mi
Slide 48: 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 49: 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 50: Investor Relations
Investor Relations Contact Information http://www.bmo.com/investorrelations E-mail: investor.relations@bmo.com
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