National Bank Of Canada · TSX:NA
National Bank Of Canada — Q3 2023 Earnings Presentation
34 slides from National Bank Of Canada's earnings presentation, Aug 30, 2023
Slide 1: Investor Presentation Third Quarter 2023
INVESTOR PRESENTATION Third Quarter 2023 August 30, 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 made in this document are forward-looking statements. In addition, representatives of the Bank may make forward-looking statements orally to analysts, investors, the media and o
Slide 3: Overview
OVERVIEW Laurent Ferreira President & Chief Executive Officer
Slide 4: Q3 2023 – Solid Results Amidst Continued Uncertainty
Q3 2023 – SOLID RESULTS AMIDST CONTINUED UNCERTAINTY Revenues ($MM; YoY) Reported: $2,515; +4.2% ▪ Diversified business mix and defensive posture providing resilience and (1) Adjusted : $2,576; +3.7% strong returns PTPP(2) ($MM; YoY) Reported: $1,098; (0.9%) ▪ Continued growth on both sides of the b
Slide 5: Q3 2023 – Diversified Business Mix Providing Resilience
Q3 2023 – DIVERSIFIED BUSINESS MIX PROVIDING RESILIENCE P&C Banking ▪ Revenues up 9% YoY on margin expansion and balance sheet growth Revenues: +9% YoY ▪ NIM up 17 bps YoY and stable QoQ PTPP(1): +9% YoY ▪ Personal: Loans up 2% YoY and 1% QoQ(2) ▪ Commercial: Loans up 9% YoY and 1% QoQ(2) Wealth Man
Slide 6: Financial Review
FINANCIAL REVIEW Marie Chantal Gingras Chief Financial Officer and Executive Vice-President, Finance
Slide 7: Q3 2023 – Maintaining Cost Discipline
Q3 2023 – MAINTAINING COST DISCIPLINE Q3 2023 Performance (YoY) ▪ Adjusted revenues up 3.7% YoY Reported Adjusted(1) - Continued NII growth in P&C Banking (+13% YoY) and Revenue growth 4.2% 3.7% Wealth Management (+19% YoY) Expense growth 8.6% 6.7% - Strong quarter for C&IB with revenues up 17% YoY
Slide 8: Maintaining Strong NII and NIM
MAINTAINING STRONG NII AND NIM(1) Net Interest Income, non-trading - Adjusted(2) ($MM) ▪ NII (non-trading) up 17% YoY - Primarily driven by high interest rates and strong balance 1,388 sheet growth 1,373 1,256 1,280 1,186 - P&C: up 13% YoY: deposit margin expansion and balance sheet growth - WM: up
Slide 9: Continued Growth on Both Sides of the Balance Sheet
CONTINUED GROWTH ON BOTH SIDES OF THE BALANCE SHEET Loans and BA’s(1) ($B) ▪ Total loans of $219B(1), up 9% YoY and 2% QoQ 219.4 - Personal banking: +2% YoY; +1% QoQ 210.4 215.8 200.9 206.7 - Commercial banking: +7% YoY; +1% QoQ - Corporate banking: +25% YoY; +1% QoQ - ABA: +24% YoY; +2% QoQ - Credi
Slide 10: Diversified Funding Profile & Sound Liquidity Metrics
DIVERSIFIED FUNDING PROFILE & SOUND LIQUIDITY METRICS Balance Sheet Overview ($B, as at July 31, 2023) Balance sheet reflects our diversified business model $426 $426 Other Assets 27 Other Liabilities 26 ▪ Core banking activities well funded through Unsecured Funding 36 Cash & Reverse Repos 52 Whole
Slide 11: Strong Capital Position
STRONG CAPITAL POSITION CET1 Ratio(1) 0.63% ▪ Strong CET1 ratio of 13.5%, up 15 bps QoQ 0.07% 0.03% (0.29%) - Solid organic capital generation (34 bps) (0.29%) 13.49% 13.34% ▪ Credit risk RWA, excluding FX, up $1,045MM - Balance sheet growth offset by change in mix - Increase in counterparty credit
Slide 12: Risk Management
RISK MANAGEMENT William Bonnell Executive Vice-President Risk Management
Slide 13: Provisions for Credit Losses (PCL)
PROVISIONS FOR CREDIT LOSSES (PCL) PCL ($MM) Q3 Total PCL POCI 185 Performing 40 ▪ PCL of $111M (20 bps), reflecting resilient Impaired (excl. POCI) 20 portfolio mix and prudent provisioning. 17 16 16 11 20 135 $111 Q3 PCL on Impaired Loans (excl. POCI) $87 0 ▪ Provision of $85M (15 bps) $38 $86 $85
Slide 14: Allowance for Credit Losses (ACL)
ALLOWANCE FOR CREDIT LOSSES (ACL) ACL ($MM) Total Allowances + 5% ▪ Increased by 5% ($62M) QoQ $1,297 ▪ 1.7x pre-pandemic level $1,235 $1,131 $1,182 ▪ Maintaining prudent level of allowances in light $1,093 Impaired (1) of continued uncertainties Impaired (1) Impaired (1) $375 Impaired (1) $318 $337
Slide 15: 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 $912M, $1,150 ($MM) 41 110 39 increase of 3 bps QoQ at 41 bps 38 38 90 ▪ $912 Net formations of $153M, increase of $88M QoQ $950 30 $812 $793 $814 $216 ▪ Ret
Slide 16: Retail Mortgage and HELOC Portfolio
RETAIL MORTGAGE AND HELOC PORTFOLIO Canadian Distribution by Province ▪ Uninsured mortgages and HELOC in GTA and (As at July 31, 2023) GVA represent 12% and 2% of the total RESL 55% portfolio and have an average LTV(1) of 51% ▪ Uninsured mortgages and HELOC for condos represents 9% of the total RESL
Slide 17: Retail Mortgages Rate Type and Maturity Profile
RETAIL MORTGAGES RATE TYPE AND MATURITY PROFILE (As at July 31, 2023) Canadian Mortgages Distribution by Rate Type ▪ 29% of mortgage portfolio is variable rate ▪ For variable rates, the monthly payments are adjusted to Variable reflect rate increases, allowing borrowers to progressively Rate adapt t
Slide 18: Appendices
APPENDICES
Slide 19: Appendix 1 – Total Bank – Q3 2023 Results
APPENDIX 1 │ TOTAL BANK – Q3 2023 RESULTS Total Bank Summary Results – Q3 2023 ($MM, TEB) Adjusted Results (1) Q3 23 Q2 23 Q3 22 QoQ YoY ▪ Adjusted diluted EPS(1) of $2.21 Revenues 2,576 2,611 2,484 (1%) 4% Non-Interest Expenses 1,392 1,374 1,305 1% 7% ▪ Loans up 10% and deposits up 9% YoY (2) Pre-T
Slide 20: Appendix 2 – Personal and Commercial Banking
APPENDIX 2 │ PERSONAL AND COMMERCIAL BANKING P&C Summary Results – Q3 2023 ($MM) ▪ Revenues up 9% YoY, mainly from margin expansion and balance sheet growth Q3 23 Q2 23 Q3 22 QoQ YoY - NIM up 17 bps YoY reflecting higher deposit Revenues 1,140 1,100 1,043 4% 9% margin, offset by lower loan spreads;
Slide 21: Appendix 3 – Wealth Management
APPENDIX 3 │ WEALTH MANAGEMENT Wealth Management Summary Results – Q3 2023 ($MM) ▪ Revenues up 6% YoY Q3 23 Q2 23 Q3 22 QoQ YoY Revenues 629 617 591 2% 6% - NII up 19% YoY, supported by higher rates Fee-Based 364 350 351 4% 4% and a strong deposit base Transaction & Others 73 77 79 (5%) (8%) - AUA u
Slide 22: Appendix 4 – Financial Markets
APPENDIX 4 │ FINANCIAL MARKETS Financial Markets Summary Results – Q3 2023 (TEB, $MM) ▪ C&IB up 17% YoY: Strong performance led by Q3 23 Q2 23 Q3 22 QoQ YoY solid Corporate Banking results Revenues 560 672 611 (17%) (8%) ▪ Global Markets revenues down YoY Global Markets 277 385 369 (28%) (25%) C&IB
Slide 23: Appendix 5 – USSF&I - ABA
APPENDIX 5 │ USSF&I - ABA ABA Summary Results – Q3 2023 ($MM) ▪ Strong growth on both sides of the balance sheet ▪ Slower revenue growth reflecting lower deposit margin due to higher rates and migration towards term deposits ▪ Expenses relatively stable QoQ - Maintaining a low efficiency ratio ▪ Con
Slide 24: Appendix 6 – USSF&I - Credigy
APPENDIX 6 │ USSF&I - CREDIGY Credigy Summary Results – Q3 2023 ($MM) ▪ Assets up 3% QoQ, primarily driven by new Q3 23 Q2 23 Q3 22 QoQ YoY portfolio purchases Revenues 112 108 105 4% 7% Net Interest Income 112 110 113 2% (1%) ▪ Revenues up 7% YoY Non-Interest Income - (2) (8) - NII stable reflectin
Slide 25: Appendix 7 – Other
APPENDIX 7 │ OTHER Other Segment Summary Results – Q3 2023 ($MM) Adjusted Results(1) Q3 23 Q2 23 Q3 22 ▪ Revenues for the Other segment of $(45)MM Revenues (45) (63) (34) Non-Interest Expenses 32 20 54 ▪ Expenses down YoY mainly reflecting lower (2) Pre-Tax / Pre-Provisions (77) (83) (88) variable c
Slide 26: Appendix 8 – Balance Sheet - P&C
APPENDIX 8 │ BALANCE SHEET - P&C Average Loans and BA’s Average Deposits ($B) ($B) 146.5 148.1 141.5 86.9 83.0 84.0 52.1 52.9 48.3 44.3 46.6 2.2 2.2 2.4 44.6 10.8 11.2 11.5 80.2 80.9 81.4 38.4 39.7 40.2 Q3 22 Q2 23 Q3 23 Q3 22 Q2 23 Q3 23 Mortgage loans Personal loans Credit cards Commercial Persona
Slide 27: Appendix 9 – Total Loan Portfolio Overview
APPENDIX 9 │ TOTAL LOAN PORTFOLIO OVERVIEW Loan Distribution by Borrower Category(1) ($B) ▪ Secured lending accounts for 95% As at of Retail loans July 31, 2023 % of Total Retail ▪ Indirect auto loans represent 2.1% of total loans Secured - Mortgage & HELOC 98.5 45% ($4.5B) Secured - Other (2) 13.9
Slide 28: Appendix 10 – Regional Distribution of Canadian Loans
APPENDIX 10 │ REGIONAL DISTRIBUTION OF CANADIAN LOANS Prudent Positioning (As at July 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 con
Slide 29: Appendix 11 – Prudent Provisioning in Uncertain Economic Environment
APPENDIX 11 │ PRUDENT PROVISIONING IN UNCERTAIN ECONOMIC ENVIRONMENT Strong Performing ACL Coverage Total Allowances Cover 7.8X NCOs Performing ACL / LTM PCL on Impaired Loans Total ACL / LTM Net Charge-Offs 9.7x 8.4x 8.6x 7.8x 7.1x 6.6x 6.7x 6.4x 5.9x 6.2x 4.5x 3.8x 1.8x 2.6x Q1 20 Q3 21 Q3 22 Q4 2
Slide 30: Appendix 12 – Real Estate and Construction Real Estate
APPENDIX 12 │ REAL ESTATE AND CONSTRUCTION REAL ESTATE Total Portfolio by Sector ($24.9B) Corporate Banking (11%) ▪ Primarily diversified Canadian REIT Short Term Construction (21%) ▪ Mainly residential construction (~ 65%) and contractors ▪ No US exposure Commercial Banking CRE (68%) ▪ 57% of 5-yea
Slide 31: Appendix 13 – Daily Trading and Underwriting Revenues vs. VaR
APPENDIX 13 │ DAILY TRADING AND UNDERWRITING REVENUES VS. VAR ($MM) 25 20 15 10 5 0 May, 2023 June, 2023 July, 2023 (5) (10) (15) Trading P&L Trading VaR 31
Slide 32: Appendix 14 – Range of Macroeconomic Scenarios – IFRS 9
APPENDIX 14 │ RANGE OF MACROECONOMIC SCENARIOS – IFRS 9 Canada Real GDP NBC Macroeconomic Forecast: Q3/23 vs. Q2/23 ($ Trillions) (Full Calendar Years) 2.30 Base Scenario C2023 C2024 Real GDP (Annual Average % Change) As at Apr. 28, 2023 0.9 % 0.5 % 2.20 As at July 31, 2023 1.4 % 0.0 % Unemployment
Slide 33: Appendix 15 – Reconciliation of Non-GAAP Financial Measures
APPENDIX 15 │ RECONCILIATION OF NON-GAAP FINANCIAL MEASURES ($MM, except EPS) Q3 23 Q2 23 Non- Non- Total Income Net Diluted Total Income Diluted Interest PTPP(4) PCL Interest PTPP(4) PCL Net Income Revenues taxes Income EPS Revenues taxes EPS Expenses Expenses (1) Adjusted Results 2,576 1,392 1,184
Slide 34: Investor Relations Contact Information
Investor Relations Contact Information W: www.nbc.ca/investorrelations investorrelations@nbc.ca 1-866-517-5455
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