Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Q4 2022 Earnings Presentation
45 slides from Bank Of Montreal's earnings presentation, Dec 1, 2022
Slide 1: Investor Presentation Q4 22
BMO Financial Group Investor Presentation For the Quarter Ended October 31, 2022 December 1, 2022 Q4 22
Slide 2: Caution Regarding Forward-Looking Statements
Caution Regarding Forward-Looking Statements As noted in the following Caution Regarding Forward-Looking Statements, all forward-looking statements and information, by their nature, are subject to inherent risks and uncertainties, both general and specific, which may cause actual results to differ m
Slide 3: Darryl White, Chief Executive Officer
Darryl White Chief Executive Officer Q4 22
Slide 4: Consistent strong performance
Consistent strong performance $9 billion1 $13.231 Positive Operating $85 billion (Reported $13.5 billion) (Reported $19.99) Leverage #3 Net Income1 – F2022 EPS1 – F2022 Market Capitalization4 All Bank PPPT Growth1,2 Operating Group Reported PPPT2 ($MM) • Consistent, strong pre- 1,643 3.5% CAGR5 Adju
Slide 5: Strong growth across our diversified businesses
Strong growth across our diversified businesses Canadian Personal & Commercial U.S. Personal & Commercial Reported F2022 • Robust loan growth and Reported F2022 • Strong loan growth and margin expansion margin expansion PPPT Growth2 15% PPPT Growth2 17% • Investing for growth, with • Continuing to s
Slide 6: Significant progress across our strategic priorities
Significant progress across our strategic priorities • Highest customer satisfaction ranking in retail banking advice in the J.D. Power 2022 World-class client loyalty and growth Canada Retail Banking Advice Satisfaction Study1 Strong powered by One Client leadership • Strong customer loyalty in Per
Slide 7: Financial Results
Financial Results For the Quarter Ended October 31, 2022 Tayfun Tuzun Chief Financial Officer Q4 22
Slide 8: F2022 - Financial Highlights
F2022 - Financial Highlights Good full year performance with consistent PPPT2 growth and positive operating leverage • Adjusted1 EPS $13.23, up 2% Y/Y (reported $19.99, up 73%) Reported Adjusted1 • Adjusted1 net income up 4% Y/Y (reported up 75%) ($MM) F2022 F2021 F2022 F2021 – Divestitures reduced
Slide 9: Q4 F2022 - Financial Highlights
Q4 F2022 - Financial Highlights Strong Y/Y PPPT2 growth in P&C businesses offsetting market sensitive businesses • Adjusted1 EPS $3.04, down 9% Y/Y (reported $6.51, up 101%) Reported Adjusted1 • Adjusted1 net income down 4% Y/Y (reported up 108%) ($MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 – Divestitu
Slide 10: Balance Sheet
Balance Sheet Strong loan and deposit growth • Average net loans and acceptances up 17% Y/Y, or 13% Average Net Loans and Acceptances ($B) excluding the impact of the stronger U.S. dollar due to: 553.3 – Business & government balances up 17% with strong growth 523.8 across all operating groups 474.7
Slide 11: Net Interest Margin
Net Interest Margin1 NII ($MM) and NIM ex Trading1 (%) Q/Q NIM ex. Trading1 (%) 1.85 1.86 1.70 1.79 1.66 Reported: 1.56 1.83 1.56 Reported: 1.85 0.05 Adjusted2: 1.86 1.68 1.73 45 122 350 38 351 Adjusted2: 1.83 539 564 407 -0.02 3,809 4,088 3,217 3,410 3,373 (672) Q4'21 Q1'22 Q2'22 Q3'22 Q4'22 Q3’22
Slide 12: Interest Rate Sensitivity
Interest Rate Sensitivity1 • Year 1 benefit to an incremental +100bps rate shock is lower • Term rates increased in Q4 and continue to be volatile, Q/Q reinvestment rates have reached the highest point in recent years – Year 1 benefit to an incremental +100bps rate shock includes the impact of the l
Slide 13: F2022 Non-Interest Expense
F2022 Non-Interest Expense Continued positive operating leverage and efficiency improvement • Adjusted1 and reported expenses up 4% Y/Y Change in Non-Interest Expense3 ($MM) Y/Y – Stronger U.S. dollar and higher 1% (4)% 16,194 Reported 3% performance-based compensation 15,822 2% 15,194 Adjusted1 Rep
Slide 14: Strong Q4'22 CET1 ratio of 16.7%
Strong Q4’22 CET1 ratio1 of 16.7% Common Equity Tier 1 Ratio1 +10 bps -26 bps -4 bps +27 bps -6 bps 16.7% +95 bps 15.8% 2 ~1.5% 2 ~0.7% 15.1% 15.2% Q3 2022 Management of Internal capital DRIP Legal Higher source Other Q4 2022 fair value changes generation provision currency RWA Basis points may not
Slide 15: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Continued strong PPPT1 growth and positive operating leverage • Adjusted2 and reported net income down 2% Y/Y Reported Adjusted2 • Adjusted2 and reported PPPT1 up 13% Y/Y ($MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 • Revenue up 11% Y/Y Net interest income 1,961 1
Slide 16: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Continued momentum with strong loan growth and margin expansion Figures that follow are in U.S. dollars: Reported Adjusted2 2 (US$MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 • Adjusted net income up 19% Y/Y (reported up 21%) 3 Net interest income (teb) 1,082 1,001 856
Slide 17: BMO Wealth Management
BMO Wealth Management Good growth in client assets offset by weaker global markets • Adjusted1 and reported net income down 14% Y/Y Reported Adjusted1 • Wealth and Asset Management2 adjusted1 and ($MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 reported net income down 24% Y/Y Gross Revenue 930 1,705 1,535
Slide 18: BMO Capital Markets
BMO Capital Markets Net Income up Q/Q reflecting improvement during challenging market conditions • Adjusted1 and reported net income down 33% Y/Y; Adjusted1 Reported Adjusted1 up 35% Q/Q (reported 36% Q/Q) ($MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 • Adjusted1 and reported PPPT3 down 29% Y/Y; Adjust
Slide 19: Corporate Services
Corporate Services • Adjusted1 net loss of $104MM and reported Reported Adjusted1 net income of $2,251MM, compared with an ($MM) Q4 22 Q3 22 Q4 21 Q4 22 Q3 22 Q4 21 adjusted1 net loss of $107MM and reported Revenue 4,003 (908) - (23) 37 - net loss of $159MM in the prior year Group teb offset1 (68) (
Slide 20: Risk Review
Risk Review For the Quarter Ended October 31, 2022 Piyush Agrawal Chief Risk Officer Q4 22
Slide 21: F2022 Risk Highlights
F2022 Risk Highlights Provision for Credit Losses (PCL) F2022 F2021 • PCL on impaired loans $502MM or 10 bps, down 1 bp Y/Y by Operating Group 1 1 ($MM) $ bps $ bps • PCL on performing loans $(189)MM, compared with Personal & Business Banking 369 19 382 22 $(505)MM Y/Y • Gross Impaired Loans $1,991M
Slide 22: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q4 22 Q3 22 Q4 21 • Q4 22 PCL ratio on Impaired Loans1 is 14 bps, ($MM) $ bps $ bps $ bps up 6 bps Q/Q Personal & Business Banking 117 23 94 19 77 17 PCL on Impaired Loans ($MM) Commercial Banking 25 10 10 4 12 6 Total Canadian P&C 142 19 104
Slide 23: Allowance and Provision on Performing Loans
Allowance and Provision on Performing Loans Allowance on Performing • The $34 million provision for credit losses on APL to performing loans in the current quarter Loans (APL) and PCL on Q4 22 Q3 22 Q4 22 Q4 22 Performing reflected a deteriorating economic outlook Performing Loans (PCL) Foreign APL1
Slide 24: Gross Impaired Loans and Formations
Gross Impaired Loans and Formations Formations Gross Impaired Loans • Gross Impaired Loans (GIL) ratio3 35 bps, By Industry down 1 bp Q/Q ($MM, as at Q4 22) Canada Canada U.S. Total U.S. Total & Other1 1,200 & Other 1,000 Formations ($MM) Consumer 177 23 200 391 216 607 800 Service Industries 17 33
Slide 25: Loan Portfolio Overview
Loan Portfolio Overview Gross Loans & Acceptances Canada & % of By Industry 3 U.S. Total • Portfolio is well diversified by geography and Other1 Total ($B, as at Q4 22) industry Residential Mortgages 139.4 9.5 148.9 26% • Business & Government loans up 7% Q/Q or up Consumer Instalment and Other Pers
Slide 26: 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 • The impact of higher interest rates on payments is primarily realized upon renewal for both fixed and variable rate products • Variable rate products with fixed paym
Slide 27: Appendix
Appendix
Slide 28: Our Purpose
Our Purpose • Deployed more than US$5.5B in loans and investments as part of BMO EmpowerTM, a five-year, US$5B commitment to advance an inclusive economic recovery in the United States by addressing key barriers Increasing support for small faced by U.S. minority businesses, communities and families
Slide 29: Advancing our Digital First strategy
Advancing our Digital First strategy Accelerated engagement Driving loyalty, growth and efficiency North America Active Digital Users (000)1 BMO’s Canadian mobile banking app recognized as the overall leader in the Q4’22 Forrester Digital Experience ReviewTM: Canadian Mobile Banking Apps. +6% BMO’s
Slide 30: Canadian Residential-Secured Lending
Canadian Residential-Secured Lending • Total Canadian residential-secured lending (RESL) portfolio at Residential-Secured Lending by Region ($186.7B) $186.7B, representing 33% of total loans $87.8 HELOC – LTV1 on uninsured of 48% Uninsured Mortgages $37.4 Insured Mortgages 27% – 90-day delinquency r
Slide 31: Trading-related Net Revenues and Value at Risk
Trading-related Net Revenues and Value at Risk Aug 2, 2022 to Oct 31, 2022 (pre-tax basis and in millions of Canadian dollars) 40 30 20 10 0 (10) (20) (30) (40) (50) Daily Revenue Total Trading VaR Risk Review December 1, 2022 31
Slide 32: Canadian Personal & Commercial Banking – Balances
Canadian Personal & Commercial Banking – Balances1 Average Gross Loans & Acceptances ($B) Average Deposits ($B) 304.2 295.2 246.8 253.1 232.4 271.1 121.4 125.0 115.8 168.1 173.8 6.2 158.8 6.1 5.5 57.6 59.1 53.1 9.7 10.1 8.5 88.2 100.5 103.7 79.3 73.5 78.7 Q4'21 Q3'22 Q4'22 Q4'21 Q3'22 Q4'22 2 Commer
Slide 33: U.S. Personal & Commercial Banking – Balances
U.S. Personal & Commercial Banking – Balances Figures on this slide are in U.S. dollars1 Average Gross Loans & Acceptances (US$B) Average Deposits (US$B) 113.8 111.8 110.1 103.2 106.6 93.3 11.2 11.1 11.0 4.2 4.4 48.0 48.5 48.1 4.3 87.9 91.0 78.0 65.8 63.3 62.1 Q4'21 Q3'22 Q4'22 Q4'21 Q3'22 Q4'22 2 C
Slide 34: Bank of the West acquisition update
Bank of the West acquisition update1 Progress Next Steps • Announced Community Benefits Plan than • Continue to work with regulators in normal outlines over $40B commitment to local U.S. course of application process communities • Expected to close by the end of the first • Finalized future state op
Slide 35: 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 36: 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 37: Glossary (1/2)
Glossary (1/2) Assets under Administration and Assets under Management refers to assets administered or managed by a financial institution that are beneficially owned by clients and therefore not reported on the balance sheet of the administering or managing financial institution. Average Earning As
Slide 38: Glossary (2/2)
Glossary (2/2) Other non-interest-bearing Liabilities includes balances such as Derivative Instruments and Acceptances. Operating Leverage is the difference between revenue and non-interest expense growth rates. Adjusted operating leverage is the difference between adjusted revenue and adjusted non-
Slide 39: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures Results and measures in this document are presented on a GAAP basis. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual consolidated financial statements prepared in accordance with International Financi
Slide 40: Non-GAAP and Other Financial Measures
Non-GAAP and Other Financial Measures7 (Canadian $ in millions, except as noted) Q4 22 Q3 22 Q4 21 F2022 F2021 (1) Reported net income included the impact of divestitures related to the sale of our EMEA Asset Reported Results Management business and our Private Banking business in Hong Kong and Sing
Slide 41: 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) Q4-2022 Reported net income (loss) 917 660 1,577 298 357 2,251 4,483 2,306 Acqu
Slide 42: Net Revenue, Efficiency Ratio and Operating Leverage
Net Revenue, Efficiency Ratio and Operating Leverage (Canadian $ in millions, except as noted) Q4 22 Q3 22 Q4 21 F2022 F2021 F2020 F2019 F2018 Reported Revenue 10,570 6,099 6,573 33,710 27,186 25,186 25,483 22,905 Insurance claims, commissions and changes in policy benefit liabilities (CCPB) (369) 4
Slide 43: Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation
Pre-Provision, Pre-Tax Earnings (PPPT) Reconciliation (Canadian $ in millions, except as noted) Q4 22 Q3 22 Q4 21 F2022 F2021 F2020 F2019 F2018 Total Bank - Reported • Pre-Provision, Pre-Tax Earnings Net income before taxes 5,937 1,691 2,799 17,886 10,258 6,348 7,272 7,414 Provisions for credit loss
Slide 44: Adjusting Items
Adjusting Items Adjusting items1 - Pre-tax (Canadian $ in millions, except as noted) Q4 22 Q3 22 Q4 21 F2022 F2021 F2020 F2019 F2018 Adjusting Items Impacting Revenue (Pre-tax) Impact of Divestitures — — — (21) 29 — — — Management of fair value changes on the purchase of Bank of the West 4,541 (945)
Slide 45: Investor Relations
BMO Financial Group Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com BILL ANDERSON PERRY CHEN‐SEE Director, Investor Relations Director, Investor Relations 416.867.7834 416.359.8074 bill2.anderson@bmo.com Perry.chensee@bmo.com