Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q3 2022 Earnings Presentation
42 slides from Bank Of Montreal's earnings presentation, Aug 30, 2022
Slide 1: Investor Presentation Q3 22
BMO Financial Group Investor Presentation For the Quarter Ended July 31, 2022 August 30, 2022 Q3 22
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 22
Slide 4: Diversified businesses, consistent strategy, credit strength driving performance
Diversified businesses, consistent strategy, credit strength driving performance Adjusted1 Q3’22 YTD Highlights Net Income1 $2.1B $6.9B • Record revenue in Canadian and U.S. P&C driven Reported $1.4B $9.1B by robust balance growth, margin expansion, investments in talent and technology EPS1 $3.09 $1
Slide 5: Consistent progress across our strategic priorities
Consistent progress across our strategic priorities At BMO, we continue to build a high-performance, digitally-enabled, future-ready bank. Anchored in our Purpose, we are driven by our strategic priorities for growth, strengthened by our approach to sustainability, and guided by our values to build
Slide 6: Good performance across our diversified businesses
Good performance across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial Reported YTD • Strong loan growth and Reported YTD • Strong loan growth and margin expansion margin expansion PPPT Growth2 15% PPPT Growth2 12% • Strategically investing • Continuing to add c
Slide 7: Supporting a sustainable and inclusive future
Supporting a sustainable and inclusive future At BMO, we have a long-standing commitment to support a thriving economy, a sustainable future and an inclusive society, and we are acting with purpose in support of our customers, communities and employees For a Thriving • BMO’s Smart Money™ Account has
Slide 8: Financial Results Q3 22
Financial Results For the Quarter Ended July 31, 2022 Tayfun Tuzun Chief Financial Officer Q3 22
Slide 9: Q3 F2022 - Financial Highlights
Q3 F2022 - Financial Highlights Strong PPPT2 growth in P&C businesses offsetting lower Capital Markets revenue • Adjusted1 EPS $3.09, down 10% Y/Y (reported $1.95, down Reported Adjusted1 43%) ($MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 • Adjusted1 net income down 7% Y/Y (reported down 40%) Gross Reve
Slide 10: Balance Sheet
Balance Sheet Strong loan growth in the quarter • Average net loans and acceptances up 14% Y/Y Average Net Loans and Acceptances ($B) – Business & government balances up 17% or 20% excluding the impact of declining balances in the non-Canadian energy 502.4 523.8 portfolio and the deconsolidation of
Slide 11: Net Interest Margin
Net Interest Margin1 Reported and adjusted2 margin excluding trading1 up Q/Q • Excluding trading, on an adjusted2 basis, net interest margin1 was higher by 10 bps Q/Q primarily due to higher margins in the P&C businesses, due to wider deposit margins, reflecting the impact of the higher rate environ
Slide 12: Interest Rate Sensitivity
Interest Rate Sensitivity1 • Year 1 benefit to an incremental +100bps rate shock is • Term rates decreased from highest point in recent years lower Q/Q but still higher than historical rates – Year 1 benefit to +100bps rate shock is driven • Higher long-term reinvestment rates, if sustained, will be
Slide 13: Non-Interest Revenue
Non-Interest Revenue • Adjusted1 NIR, net of CCPB2, down 19% Y/Y (reported down 51%) Non-Interest Revenue, net of CCPB2 ($MM) – Primarily driven by divestitures, lower underwriting & advisory fees and lower securities gains reflecting the market environment, partially offset by higher card and depos
Slide 14: Non-Interest Expense
Non-Interest Expense Y/Y growth driven by targeted investments • Adjusted1 expenses up 3% Y/Y (reported up 5%) Y/Y Change in Non-Interest Expense3 ($MM) 3,859 Reported – Lower performance-based compensation 2.1% (3.8)% Reported 3,684 2.3% 3,761 Adjusted1 partially offset by severance costs 3.9% Adju
Slide 15: Strong Q3'22 CET1 ratio of 15.8%
Strong Q3’22 CET1 ratio1 of 15.8% Common Equity Tier 1 Ratio1 +31 bps +10 bps -20 bps -46 bps 16.0% +1 bp 15.8% 2 0.7% 15.1% Q2 2022 Internal capital DRIP Management of Higher source Other Q3 2022 generation fair value changes currency RWA Basis points may not add due to rounding. • Q3’22 CET1 ratio
Slide 16: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Continued strong performance with double-digit PPPT1 growth and positive operating leverage • Adjusted2 and reported net income up 17% Y/Y Reported Adjusted2 ($MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 • Adjusted2 and reported PPPT1 up 15% Y/Y Net interest income
Slide 17: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strong PPPT1 growth Y/Y and positive operating leverage3 Figures that follow are in U.S. dollars Reported Adjusted2 • Adjusted2 net income down 1% Y/Y (reported stable) (US$MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 3 • Adjusted2 PPPT1 up 16% Y/Y (reported up 18%) Net
Slide 18: BMO Wealth Management
BMO Wealth Management NIAT up Q/Q, down from strong results a year ago • Adjusted1 net income down 15% Y/Y (reported down 14%) Reported Adjusted1 ($MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 • Traditional Wealth adjusted1 net income down 13% Y/Y (reported down 12%) Gross Revenue 1,705 484 2,427 1,705 4
Slide 19: BMO Capital Markets
BMO Capital Markets Results impacted by current challenging market conditions • Adjusted1 net income down 52% Y/Y (reported down 53%) Reported Adjusted1 • Adjusted1 PPPT5 down 47% Y/Y (reported down 48%) ($MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 Global Markets 813 928 881 813 928 881 • Revenue down
Slide 20: Corporate Services
Corporate Services • Adjusted1 net income of $7MM and reported net Reported Adjusted1 loss of $754MM, compared with an adjusted1 and ($MM) Q3 22 Q2 22 Q3 21 Q3 22 Q2 22 Q3 21 reported net loss of $35MM in the prior year Revenue (908) 3,496 35 37 (67) 35 • Reported results included the impact of the
Slide 21: Risk Review Q3 22
Risk Review For the Quarter Ended July 31, 2022 Patrick Cronin Chief Risk Officer Q3 22
Slide 22: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group • Q3 22 PCL ratio on Impaired Loans1 is 8 bps, Q3 22 Q2 22 Q3 21 ($MM) down 2 bps Q/Q $ bps $ bps $ bps Personal & Business Banking 94 19 79 17 100 22 PCL on Impaired Loans ($MM) Commercial 10 4 7 3 1 0 120 104 Total Canadian P&C 104 14 86 12
Slide 23: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $32 million provision for credit losses on Loans (APL) and PCL on APL to performing loans in the current quarter Q3 22 Performing Loans (PCL) Q2 22 Q3 22 Q3 22 Performing reflected a deteriorating economic outlook Foreign By O
Slide 24: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations • Gross Impaired Loans (GIL) ratio3 36 bps, Formations Gross Impaired Loans down 5 bps Q/Q By Industry ($MM, as at Q3 22) Formations ($MM) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 154 23 177 368 219 587 Service Industries 21 49 70 238 262 500
Slide 25: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances Canada & % of • Portfolio is well diversified by geography and By Industry3 U.S. Total Other1 Total industry ($B, as at Q3 22) Residential Mortgages 135.5 8.6 144.1 27% Consumer Instalment and Other Personal 70.0 14.3 84.3 15% • Business & Government
Slide 26: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk May 2, 2022 to July 29, 2022 (pre-tax basis and in millions of Canadian dollars) 50 40 30 20 10 0 (10) (20) (30) (40) Daily Revenue Total Trading VaR Risk Review August 30, 2022 26
Slide 27: Appendix
Appendix
Slide 28: Advancing our Digital First strategy
Advancing our Digital First strategy Accelerated engagement Driving loyalty, growth and efficiency North America Launched Savings Amplifier in Canada - a digital-first product that rewards Active Digital Users (000)1 customers for savings 5% Continued to drive real financial progress for customers v
Slide 29: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 246.8 295.2 237.6 284.7 227.0 264.6 118.5 121.4 113.3 161.6 168.1 156.0 5.8 6.1 5.2 55.3 57.5 51.5 8.9 9.7 8.1 86.4 96.2 100.5 71.0 76.0 78.7 Q3'21 Q2'22 Q3'22 Q3'21 Q2'22 Q3'22 2 Commerci
Slide 30: 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 (US$B) Average Deposits (US$B) 113.9 111.8 111.7 100.8 103.2 91.8 11.1 11.0 4.1 4.2 10.8 49.0 48.0 48.5 4.4 85.7 87.9 76.6 63.7 64.9 63.3 Q3'21 Q2'22 Q3'22 Q3'21 Q2'22 Q3'22 Com
Slide 31: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending • Total Canadian residential-secured lending portfolio at $182.1B2, representing 34% of total loans Residential-Secured Lending by Region ($182.1B) HELOC ─ LTV1 on uninsured of 46% Uninsured Mortgages $84.9 ─ 90-day delinquency rate for RESL remains good at 11 bp
Slide 32: 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 • Impact of higher interest rates on payments is primarily realized upon renewal for both fixed and variable rate products • Variable rate products with fixed payments
Slide 33: Bank of the West acquisition update
Bank of the West acquisition update1 Progress Next Steps • Participated in joint public meeting with the Fed • Continue to execute efforts for closing readiness and OCC including completion of event management plan • Finalized future state operating model • Finalize detailed integration plan and mil
Slide 34: Fair value impacts on the purchase of Bank of the West
Fair value impacts on the purchase of Bank of the West Overview of actions to mitigate exposure to capital ratios at closing • Purchase accounting requires us to fair value Bank of the West assets and liabilities in determining goodwill • Since fair values are sensitive to interest rates, changes in
Slide 35: Adjusting items related to management of fair value changes
Adjusting items related to management of fair value changes • IFRS requires mark-to-market gains/losses on the swaps to be recorded as trading income in the P&L • Net interest on Treasuries and other balance sheet instruments recorded at amortized cost is recorded in net interest income (NII) • Adju
Slide 36: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures Results and measures in both Management’s Discussion and Analysis (MD&A) and this document are presented on an IFRS basis. We use the terms IFRS and Generally Accepted Accounting Principles (GAAP) interchangeably. We use a number of financial measures to assess
Slide 37: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures6 (Canadian $ in millions, except as noted) Q3 22 Q2 22 Q3 21 YTD F22 YTD F21 1 Reported net income included the impact of divestitures related to the sale of our Reported Results EMEA Asset Management business and our Private Banking business in Hong Kong and Si
Slide 38: Summary of Reported and Adjusted Results by Operating Group
Summary of Reported and Adjusted Results by Operating Group BMO Wealth BMO Capital Corporate U.S. Segment (Canadian $ in millions) Canadian P&C U.S. P&C Total P&C Management Markets Services Total Bank (US $ in millions) Q3-2022 Reported net income (loss) 965 568 1,533 324 262 (754) 1,365 (28) Acqui
Slide 39: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage (Canadian $ in millions) Q3 22 Q2 22 Q3 21 YTD F22 YTD F21 Reported Revenue 6,099 9,318 7,562 23,140 20,613 CCPB 413 (808) 984 (314) 1,302 Revenue, net of CCPB 5,686 10,126 6,578 23,454 19,311 Non-interest expense 3,859 3,713 3,684 11,418 11,706 E
Slide 40: Pre-Provision, Pre-Tax Earnings Reconciliation
Pre-Provision, Pre-Tax Earnings Reconciliation • Pre-Provision, Pre-Tax Earnings (PPPT) is calculated as income before income taxes and provision/(recovery) for credit losses. We use PPPT on both a reported and adjusted basis to assess our ability to generate sustained earnings growth excluding cred
Slide 41: Adjusting Items
Adjusting Items Adjusting items1 - Pre-tax ($MM) Q3 22 Q2 22 Q3 21 YTD F22 YTD F21 Adjusting Items Impacting Revenue (Pre-tax) Impact of Divestitures - 8 - (21) 29 Management of fair value changes on the purchase of Bank of the West (945) 3,555 - 3,172 - Impact of Adjusting Items on Revenue (Pre-tax
Slide 42: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON SUKHWINDER SINGH Director, Investor Relations Director, Investor Relations 416.867.7834 416.867.4734 bill2.anderson@bmo.com Sukhwinder.singh@bmo.com