National Bank Of Canada · TSX:NA
National Bank Of Canada — Debt Investor Presentation (October 2021)
51 slides from National Bank Of Canada's debt investor presentation, Oct 31, 2021
Slide 1: Fixed Income Presentation F2021
FIXED INCOME PRESENTATION F2021 As of October 31, 2021
Slide 2: Forward-Looking Statements and Non-GAAP Financial Measures
FORWARD-LOOKING STATEMENTS AND NON-GAAP FINANCIAL MEASURES Caution Regarding Forward-Looking Statements From time to time, the Bank makes written forward-looking statements such as those contained in this document, in other filings with Canadian securities regulators, and in other communications. In
Slide 3: Overview National Bank of Canada
OVERVIEW NATIONAL BANK OF CANADA
Slide 4: FY 2021 – Strong Performance Across the Bank
FY 2021 – STRONG PERFORMANCE ACROSS THE BANK Revenues ▪ Strong performance in F2021 Reported: $8,927 MM ; +13% - Revenues up 11%(1) Adjusted(1): $9,116 MM ; +11% - PTPP up 12%(1)(2) PTPP(2) - Positive operating leverage Reported: $4,074 MM ; +20% Adjusted(1): $4,272 MM ; +12% ▪ Industry-leading ROE
Slide 5: FY 2021 Total Bank Results
FY 2021 TOTAL BANK RESULTS Total Bank Summary Results - FY 2021 ($MM, TEB) ▪ Strong business performance with (1) Adjusted Results FY 21 FY 20 YoY revenues up 11%(1) and PTPP up 12%(1)(2) Revenues 9,116 8,216 11% Non-Interest Expenses 4,844 4,413 10% ▪ Positive operating leverage (2) Pre-Tax / Pre-P
Slide 6: FY 2021 – Solid Organic Growth in All Segments
FY 2021 – SOLID ORGANIC GROWTH IN ALL SEGMENTS P&C Banking ▪ Strong growth on both sides of the balance sheet Revenues: +7% YoY ▪ Commercial loans up 18%(3) and retail mortgage loans up 11%(3) PTPP(1): +10% YoY ▪ Continued momentum in client activity Wealth Management ▪ Outstanding year for Wealth M
Slide 7: Personal and Commercial Banking
PERSONAL AND COMMERCIAL BANKING P&C Summary Results – FY 2021 ($MM) ▪ Strong growth on both sides of the balance FY 21 FY 20 YoY sheet Revenues 3,686 3,457 7% Personal 2,228 2,148 4% ▪ Continued momentum in client activity across Commercial 1,458 1,309 11% the franchise with other income up 9% Non-I
Slide 8: Wealth Management
WEALTH MANAGEMENT Wealth Management Summary Results – FY 2021 ($MM) FY 21 FY 20 YoY ▪ Outstanding year for Wealth, with PTPP up 22% Revenues 2,169 1,859 17% Fee-Based 1,316 1,087 21% ▪ Strong revenue growth of 17% Transaction & Others 405 330 23% Net Interest Income 448 442 1% ▪ AUA up 28% and AUM u
Slide 9: Financial Markets
FINANCIAL MARKETS Financial Markets Summary Results – FY 2021 ($MM, TEB) FY 21 FY 20 YoY ▪ Solid performance for FM after record revenues in Revenues 2,146 2,054 4% previous year Global Markets 1,170 1,268 (8%) C&IB 976 786 24% ▪ Revenues up 4% Non-Interest Expenses 880 812 8% - C&IB: Strong perform
Slide 10: US Specialty Finance & International
US SPECIALTY FINANCE & INTERNATIONAL USSF&I Summary Results – FY 2021 ABA Bank ($MM) ABA Bank Summary Results FY 21 FY 20 YoY ▪ Continued growth with revenues up 24%, loans Revenues 510 410 24% up 31% and deposits up 34% Non-Interest Expenses 173 171 1% Pre-Tax / Pre-Provisions 337 239 41% ▪ Solid c
Slide 11: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio(1) 0.46% 0.06% (0.17%) ▪ Strong CET1 ratio of 12.4%(2) while (0.11%) 12.43% generating robust organic growth throughout 12.19% the year ▪ RWA growth in Q4 primarily driven by loan growth across all segments Q3 21 Net Income Ex. Flinks RWA (Ex. FX) Acquisition of Fl
Slide 12: Strong Capital and Liquidity Positions
STRONG CAPITAL AND LIQUIDITY POSITIONS Capital and Capital Ratios(1) ($MM) ▪ ▪Our Our capital capital levels levels remain remain strong strong Q4 21 Q3 21 Q2 21 ▪ ▪Total Total capital capital ratio ratio of of 16%15.9% Capital $12,973 CET1 $12,574 $11,997 ▪ ▪Strong Strong liquidity liquidity ratios
Slide 13: Credit Risk Overview
CREDIT RISK OVERVIEW
Slide 14: Provisions for Credit Losses
PROVISIONS FOR CREDIT LOSSES Q4 Total PCL PCL Q4 2021 ▪ PCL recovery of $41M (-9bps), reflecting ($MM) continued strong portfolio performance 27 POCI 173 19 Performing Impaired 20 Q4 PCL on Impaired Loans Total (bps) 1 ▪ $19M (4bps), new cyclical low 123 -10 -9 0 $110 ▪ Recoveries in Commercial offs
Slide 15: Prudent Provisioning in Uncertain Economic Environment
PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total Allowances Cover 7.9X NCOs Performing ACL / LTM PCL on Impaired Loans Total ACL / LTM Net Charge-Offs 7.9x 4.8x 6.4x 6.6x 3.8x 5.9x 5.4x 3.3x 4.7x 2.8x 2.8x 3.0x 4.1x 2.8x 2.6x 1.8x Q1 20 Q2 20 Q3 20 Q4 20 Q1
Slide 16: Gross Impaired Loans and Formations
GROSS IMPAIRED LOANS AND FORMATIONS Gross Impaired Loans(1) (GIL) ($MM) 49 45 50 ▪ Gross impaired loans of 36bps ($662M), a 42 decline of 3bps QoQ and 13bps YoY $1 000M 39 36 40 $817 $757 $731 $ 800M $699 30 $662 ▪ Continued low net formations 20 $ 600M $467 $463 $470 $450 $406 10 $ 400M 0 $ 200M $2
Slide 17: Liquidity and Funding Overview
LIQUIDITY AND FUNDING OVERVIEW
Slide 18: Funding Strategy
FUNDING STRATEGY The main objective of the funding strategy is to support the Bank's organic growth while also enabling it to survive potentially severe and prolonged crises and to meet its regulatory obligations and financial targets. The funding framework consists of 3 pillars: 1. Pursue a diversi
Slide 19: Diversified Deposit Strategy
DIVERSIFIED DEPOSIT STRATEGY Pursue a diversified deposit strategy to fund core banking activities through stable deposits coming from the networks of each of the Bank’s major business segments NBC TOTAL DEPOSITS ($BN) NBC PERSONAL DEPOSITS ($BN) $70 $196 $69 $191 $69 $69 $186 $185 $67 $177 1Y CAGR
Slide 20: Sound Liquidity Risk Management
SOUND LIQUIDITY RISK MANAGEMENT Maintain a sound liquidity risk management through centralized expertise and management of liquidity metrics within predefined risk appetite, with 4 main principles: Efficient Risk & Reward Balance through a Risk Appetite Framework, Decision-making processes based on
Slide 21: Maturity Profile
MATURITY PROFILE Maintain active access to various markets to ensure diversification of institutional funding in terms of source, geographic location, currency, instrument and maturity, whether secured or unsecured. Term Funding (C$ millions) Term Funding Covered bonds 18% Senior Debt 31% Mortgage S
Slide 22: 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 23: 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 17, 2021, to 2.50% of total RWA ef
Slide 24: Environment, Social and Governance (ESG) Highlights
Environment, Social and Governance (ESG) Highlights
Slide 25: NBC ESG Highlights
NBC ESG HIGHLIGHTS Supporting sustainable development is an intrinsic part of our mission. Environmental, social and governance considerations play a key role in our business and operational decisions. At National Bank, we want to have a positive impact on people’s lives. The principles that our Boa
Slide 26: NBC ESG Highlights
NBC ESG HIGHLIGHTS • Board-level: ESG responsibilities integrated in the mandates of the Audit Committee, Risk Management Committee, Human Resources Committee and Conduct Review and Corporate Governance Committee Oversight • Executive-level: ESG committee responsible for corporate strategy regarding
Slide 27: NBC Environment Highlights
NBC Environment Highlights Environment Social Governance > The Bank aims to reach net-zero GHG emissions for its activities by 2050, which is in line with the most ambitious goal of the Paris Agreement, limiting global warming to 1.5° C > Interim target to reduce GHG emissions resulting from our own
Slide 28: NBC Social Highlights
NBC Social Highlights Environment Social Governance Supporting our clients and employees in times of uncertainty > Temporary relief measures for our individual and business clients during the COVID-19 pandemic > Measures implemented to protect the health of our employees > Over $2.5 million given to
Slide 29: NBC Governance Highlights
NBC Governance Highlights Environment Social Governance > Mandates of the Conduct Review and Corporate Governance Committee, the Audit Committee, the Human Resources Committee and the Risk Management Committee include ESG-related responsibilities > Succession planning for directors based on the Boar
Slide 30: 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 31: Mission of Organizations We Support
Mission of organizations we support The FSB Task Force on Climate-related Financial Disclosures (TCFD) will develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders. The Task Force w
Slide 32: Sustainability Bond Framework
Sustainability Bond Framework
Slide 33: NBC Sustainability Bond Framework
NBC SUSTAINABILITY BOND FRAMEWORK November 2020, NBC revised its Sustainability Bond Framework and obtained Second Party Opinion from VigeoEiris: https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/2020/nbc-sustainability-bond-framework-2020.pdf htt
Slide 34: 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 35: NBC Sustainability Bond Framework: Use of Proceeds
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds and evaluation Social proceeds Reporting Governance Eligible Categories Eligibility Criteria Eligible types of renewable energy: o Wind, Solar, Geothermal with direct emissions < 100gCO2/kWh, Tidal o Hydropower: small
Slide 36: NBC Sustainability Bond Framework: Selection and Management
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds and evaluation Social Reporting Governance proceeds Project Selection and Evaluation Process Management of Proceeds ✓ NBC’s business unit officers are responsible for ✓ NBC has established a Sustainability Bond Registe
Slide 37: NBC Sustainability Bond Framework: Reporting
NBC SUSTAINABILITY BOND FRAMEWORK Project selection Management of Use of proceeds Social Reporting Governance and evaluation proceeds 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 38: NBC Sustainability Bond Framework: Second Party Opinion
NBC SUSTAINABILITY BOND FRAMEWORK On November 2020, Vigeo Eiris issued a Second Party Opinion on the Bank’s Framework (excerpts only): Framework Link: https://www.nbc.ca/content/dam/bnc/a-propos-de-nous/relations-investisseurs/fonds-propres-et-dette/2020/nbc-sustainability-bond-framework-2020.pdf SP
Slide 39: Appendix
APPENDIX
Slide 40: Total Loan Portfolio Overview
APPENDIX 1 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category ($B) ▪ Secured lending accounts for 95% As at of Retail loans October 31, 2021 % of Total Retail ▪ Indirect auto loans represent 1.7% of total Secured - Mortgage & HELOC 89.0 49% loans ($3.1B) Secured - Other (1) 10.9
Slide 41: Regional Distribution of Canadian Loans
APPENDIX 2 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Prudent Positioning (As at October 31, 2021) Within the Canadian loan portfolio: Maritimes (2) ▪ Limited exposure to unsecured consumer Oil (1) and loans (3.1%) Quebec Ontario Regions BC/MB Territories Total Retail ▪ Modest exposure to unsecured c
Slide 42: Retail Mortgage and HELOC Portfolio
APPENDIX 3 │ RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province (As at October 31, 2021) ▪ Insured mortgages account for 33% of the total RESL portfolio 54% ▪ Distribution across product and geography remained stable ▪ Uninsured mortgages and HELOC in GTA and 72% Uninsured & HELOC
Slide 43: Commercial Real Estate Portfolio
APPENDIX 4 │ COMMERCIAL REAL ESTATE PORTFOLIO (As at October 31, 2021) Total CRE Portfolio Commercial Banking share Total CRE Portfolio of $14.4B $14.4B (7.8% of total loans) $12.8B (7.0% of total loans) ▪ Corporate Banking accounts for 11% of portfolio, primarily public REITs, well diversified acro
Slide 44: Limited Exposure to COVID-19 Most Impacted Industries
APPENDIX 5 │ LIMITED EXPOSURE TO COVID-19 MOST IMPACTED INDUSTRIES ▪ Exposure to COVID-19 key impacted sectors remains modest at 3.1% of total gross loans Gross Loans % of ($MM) Book Non-Food / Non-Pharmacy Retailers Car Dealerships $551 0.3% nIncrease of 4% QoQ / Typically secured by real estate /
Slide 45: Oil & Gas and Pipelines Sector
APPENDIX 6 │ OIL & GAS AND PIPELINES SECTOR O&G Producers and Services Exposure Gross Loans in $MM and % of Total Loans ▪ O&G producers and services exposure $3,956 significantly reduced - 54% reduction in outstanding loans: down from $4B in Q1/15 to $1.8B in Q4/21 (vs $1.9B in Q3/21) - Reduction as
Slide 46: NBC Credit Ratings
APPENDIX 7 │ NBC CREDIT RATINGS Long-Term Non Covered Counterparty Short-term Bail-inable Senior Debt(2) Outlook Credit Rating Bonds risk(3) Senior Debt(1) Agency S&P A-1 A BBB+ Stable ---- ---- Moody’s P-1 Aa3 A3 Stable Aaa Aa3 DBRS R-1 (mid) AA (low) A (high) Positive AAA ---- Fitch F1+ AA- A+ Sta
Slide 47: Legislative Covered Bond Programme
APPENDIX 8 │ LEGISLATIVE COVERED BOND PROGRAMME Programme size ▪ CAD$ 20,000,000,000 Outstanding benchmark covered bonds ▪ €1B 0.5% 01/22; €750M 0.0% 09/23; €750M 0.750% 03/25; €750M 0.250% 07/23; €750M 0.375% 01/24, USD1,000M 2.05% 06/22, €500M 0.01% 03/28 and €750M 0.01% 09/26. Ratings ▪ Aaa / AAA
Slide 48: Other Segment
APPENDIX 9 │ OTHER Other Segment Summary Results – FY 2021 ($MM, TEB) ▪ Higher revenues YoY: Adjusted Results (1) FY 21 FY 20 - Gain on remeasurement of Flinks and gains Revenues 114 26 on investments reflecting favorable markets; partly offset by FV measurement of interest in Non-Interest Expenses
Slide 49: Reconciliation of Non-GAAP Financial Measures
APPENDIX 10 │ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($MM, except EPS) (2) FY 2021 Non- Income Non- Total Net Diluted Interest Before controlling Revenues Income EPS Expenses Taxes interest Adjusted Results(1) 9,116 4,844 4,270 3,184 - 8.98 $ Taxable equivalent (189) - (189) - - - Impairment
Slide 50: 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 51: Questions?
QUESTIONS? Mr. Jean Dagenais, Senior Vice-President, Finance Jean.Dagenais@nbc.ca Mr. Jean-Sébastien Gagné, Treasurer JeanSebastien.Gagne@nbc.ca Additional information can be found via these web links: https://www.nbc.ca/investor-relations.html https://www.nbc.ca/capital-debt-information.html
National Bank of Canada — Debt Investor Presentation (October 2021) on 6ix