Bank Of Montreal · TSX:BMO
Bank Of Montreal — BMO Financial Group — Investor Presentation (January 2020)
42 slides from Bank Of Montreal's investor presentation, January 2020
Slide 1: Investor Presentation
Investor Presentation January 2020
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 sec
Slide 3: Who We Are
Who We Are Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America Mobilizing 8th largest $852 billion $400 billion bank in North America in total assets for sustainable finance by assets1 by 2025 Three operating groups Personal and BMO Wea
Slide 4: BMO's Strategic Footprint
BMO’s Strategic Footprint BMO’s strategic footprint spans strong regional economies. Our three operating groups – Personal and Commercial Banking, BMO Capital Markets and BMO Wealth Management – serve individuals, businesses, International Offices governments and corporate customers across Canada an
Slide 5: Strong financial performance and shareholder returns
Strong financial performance and shareholder returns Medium Term Financial Objectives (Adjusted basis) Earnings per Share ($) 2-year CAGR 8% EPS Growth 7% to 10% per year 9.43 8.99 Return on 15% or more Equity 8.15 8.66 Operating 8.17 2% or more 7.90 Leverage Maintain strong capital ratios that exce
Slide 6: Progress on our Commitments
Progress on our Commitments • 410 bps improvement since F2015 Efficiency Improvement • Efficiency target of 58% in F2021 • Top Digital Innovation Award1 for BMO QuickPay and Impact Innovation Award2 for online business banking platform Digital Innovation • Business and technology integrated through
Slide 7: F2019 - Financial Highlights
F2019 - Financial Highlights Good full year performance with momentum heading into 2020 • Adjusted1 EPS $9.43, up 5% Y/Y (reported up 6%) Reported Adjusted1 • Adjusted1 net income up 4% Y/Y (reported up 6%) ($MM) F2019 F2018 F2019 F2018 • Net revenue2 up 6% Y/Y, 5% CCY6 Net Revenue2 22,774 21,553 22
Slide 8: Q4 F2019 - Financial Highlights
Q4 F2019 - Financial Highlights Good momentum; adjusted1 EPS up 5%, PPPT5 up 11% with total bank and all Groups’ operating leverage positive • Adjusted1 EPS $2.43, up 5% Y/Y (reported $1.78, down Reported Adjusted1 31%) ($MM) Q4 19 Q3 19 Q4 18 Q4 19 Q3 19 Q4 18 • Adjusted1 net income up 5% Y/Y (repo
Slide 9: Reasons to Invest in BMO
Reasons to Invest in BMO • Diversified businesses that continue to deliver • Well-capitalized with an attractive dividend yield robust earnings growth and long-term value for shareholders • Creating sustainable efficiency and reinvestment capacity through resource optimization, • Strong foundation b
Slide 10: Diversified businesses delivering resilient and robust earnings
Diversified businesses delivering resilient and robust earnings Adjusted Net Income Driven by diversified sources of revenue by Operating Group – F20191 % of Operating Groups Net Revenue – F2019 Canadian BMO Capital P&C Markets 35% 20% Canadian Personal Banking Canadian Commercial Banking Adjusted N
Slide 11: Large North American commercial banking business with advantaged market share
Large North American commercial banking business with advantaged market share Canadian P&C Commercial Loans and Acceptances Commercial Deposits – Canadian P&C ($B) – Canadian P&C ($B) • #2 market share in business lending1 ↑15% ↑9% • Top-tier in upper mid-market2 Y/Y Y/Y • #1 in Agriculture1 80.1 65
Slide 12: U.S. Operations
U.S. Operations U.S. segment continuing to deliver strong results Figures that follow are on a U.S. dollar basis • U.S. P&C adjusted1 earnings up 11% • U.S. segment adjusted1 earnings up 23% in F2019 ‒ Good momentum in Personal Banking with strong deposit growth and enhanced profitability ‒ Contribu
Slide 13: Strong and Consistent Delivery Across our Businesses
Strong and Consistent Delivery Across our Businesses Canadian Personal & Commercial U.S. Personal & Commercial • Solid earnings growth with prudent risk • Increasing market share in core footprint and management new markets • Dominant position in commercial lending, • Continued strength in commercia
Slide 14: Strong Capital Position
Strong Capital Position CET1 Capital Ratio -16 bps +16 bps -1 bp 11.4% 1.4% 10% Q4’19 OSFI expectation 2.0% Domestic Stability Buffer1 1.0% D-SIB Surcharge 11.4% 2.5% Capital Conservation Buffer 4.5% Minimum CET1 Q3'19 Internal Capital Generation Higher source currency RWA Other Q4'19 • Quarterly co
Slide 15: Creating sustainable efficiency: continuing good progress
Creating sustainable efficiency: continuing good progress • Target to achieve efficiency of 58% or better by F2021 Adjusted1 Efficiency Ratio Trend • Q4’19 Adjusted1 efficiency ratio: 60.0% 410 • Several bank-wide initiatives underway, including a bps restructuring charge announced in Q4 ’19, to acc
Slide 16: Our Commitment to Sustainability
Our Commitment to Sustainability Decent Work Promoting sustained growth and productive employment by creating and Economic opportunities for our employees, customers and communities, and by upholding Growth human rights across our value chain. At BMO, our Purpose to Championing equal opportunity and
Slide 17: Driving Value with Sustainable Solutions
Driving Value with Sustainable Solutions Sustainable Finance BMO announced a commitment to mobilize $400B in sustainable finance by 2025 and in 2019 established a sustainable bond program in support of this commitment. BMO Capital Markets underwrote $9.4B in sustainable bonds in fiscal 2019. For 30+
Slide 18: Operating Groups
Operating Groups
Slide 19: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strengths and Value Drivers Highlights (Adjusted1) F2019 Q4’19 • Highly engaged team focused on providing a personalized banking Net Income $2,628MM $716MM experience, anticipating customers’ needs and finding new ways to help Net Income Growth 3% 6% • Top-tier
Slide 20: Canadian Personal & Commercial Banking
Canadian Personal & Commercial Banking Strategic Priorities • Continue to improve customer loyalty by deepening primary relationships – In Personal Banking, deliver a leading customer experience by leveraging new digital channels and enhancing existing networks – In Commercial Banking, focus on main
Slide 21: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strengths and Value Drivers Highlights (Adjusted1) F2019 Q4’19 • Rich Midwestern heritage dating back to 1847, with a long-standing Net Income US$1,244MM US$305MM commitment to the success of our customers and communities • Large-scale, diversified national commerc
Slide 22: U.S. Personal & Commercial Banking
U.S. Personal & Commercial Banking Strategic Priorities • Continue to strengthen our competitive position by investing in key capabilities, such as digital and talent, while leveraging BMO’s full suite of products, solutions and capabilities, and our unique cross-border advantage to deliver a great
Slide 23: BMO Wealth Management
BMO Wealth Management Strengths and Value Drivers Highlights (Adjusted1) F2019 Q4’19 • Planning and advice-based approach that integrates investment, Net Income $1,122MM $301MM insurance, specialized wealth management and core banking Net Income Growth 1% 31% solutions, offered by a team of highly s
Slide 24: BMO Wealth Management
BMO Wealth Management Strategic Priorities • Deliver a differentiated client experience, providing outstanding support and working together to grow, protect and transition their wealth with confidence • Extend our advantage as a solutions provider, delivering innovative asset management and insuranc
Slide 25: BMO Capital Markets
BMO Capital Markets Strengths and Value Drivers Highlights (Adjusted1) F2019 Q4’19 Net Income $1,113MM $280MM • Unified coverage and integrated distribution across our North American platform and complementary global footprint, delivering Net Income Growth (5%) (9%) a seamless and exceptional client
Slide 26: BMO Capital Markets
BMO Capital Markets Strategic Priorities • Continue to earn leading market share in Canada by strengthening our client relationships and driving incremental market share growth • Continue to leverage our key strategic investment to accelerate growth from our U.S. platform, and selectively expand our
Slide 27: Risk Overview
Risk Overview
Slide 28: Our loans are well-diversified by geography and industry
Our loans are well-diversified by geography and industry Gross Loans & Acceptances Loans by Geography3 Canada & By Industry U.S. Total % of Total Other1 ($B, as at Q4 19) Residential Mortgages 112.5 11.2 123.7 27% 35% Canada Consumer Instalment and Other 55.9 11.8 67.7 15% 63% U.S. Personal Cards 8.
Slide 29: Canadian Residential-Secured Lending (RESL)
Canadian Residential-Secured Lending (RESL) Residential-Secured Lending by Region ($146.3B) • Total Canadian residential-secured lending $65.6 portfolio at $146.3B, representing 32% of total HELOC loans below peer average of approximately 46% Uninsured Mortgages $28.4 24% − LTV1 on uninsured of 51%
Slide 30: Provision for Credit Losses (PCL)
Provision for Credit Losses (PCL) PCL By Operating Group Q4 19 Q3 19 Q4 18 ($MM) PCL in bps1 28 Total Canadian P&C 134 174 118 23 Total U.S. P&C 66 61 61 18 16 22 21 BMO Wealth Management 1 - 2 13 14 BMO Capital Markets 32 7 (3) 12 Corporate Services (2) 1 (1) Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 PCL on Im
Slide 31: Gross Impaired Loans (GIL) and Formations
Gross Impaired Loans (GIL) and Formations Formations Gross Impaired Loans • GIL ratio 58 bps, up 3 bps Q/Q By Industry ($MM, as at Q4 19) Canada & Canada & U.S. Total U.S. Total Other Other1 Consumer 213 46 259 497 385 882 Formations ($MM) Oil & Gas 24 158 182 33 371 404 741 679 799 Service Industri
Slide 32: Economic and Housing Overview
Economic and Housing Overview
Slide 33: Economic Outlook and Indicators
Economic Outlook and Indicators1 Canada United States Eurozone Economic Indicators (%)1, 2 20182 2019E2 2020E2 20182 2019E2 2020E2 20182 2019E2 2020E2 GDP Growth 2.0 1.7 1.8 2.9 2.3 1.8 1.9 1.2 1.1 Inflation 2.3 2.0 1.9 2.4 1.8 2.2 1.8 1.2 1.2 Interest Rate (3mth Tbills) 1.37 1.65 1.70 1.97 2.10 1.6
Slide 34: Canada's housing market is stable
Canada’s housing market is stable • Lower mortgage rates and rapid population growth led to a strong rebound in Canadian existing home sales in 2019 • We expect real estate activity across the country to increase more moderately in 2020 • The Toronto market is firming due to steady demand from inter
Slide 35: 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 36: Liquidity & Wholesale Funding Mix
Liquidity & Wholesale Funding Mix
Slide 37: Liquidity and Funding Strategy
Liquidity and Funding Strategy Cash and Securities to Total Assets Ratio (%) • BMO's Cash and Securities to Total Assets 29.9 29.3 28.2 28.3 28.9 Ratio reflects a strong and stable liquidity position Q4'18 Q1'19 Q2'19 Q3'19 Q4'19 Customer Deposits1 ($B) 329.2 341.7 351.3 • BMO’s large base of custom
Slide 38: 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 39: 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 Funding Profile as at October 31, 2019 — Risk-based TLAC ratio of 23.5% (Minimum 21.5% of RWA TLAC ratio plus a Domestic Stability Buffer 40.0% 35.9% of 2
Slide 40: 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 41: 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$8B) • SEC Registered U.S. Shelf (US$25B) • Note Issuance Programme (US$20B) • Fortified Trust (C$5B) • Global Registered Cover
Slide 42: Investor Relations
Investor Relations Contact Information bmo.com/investorrelations E-mail: investor.relations@bmo.com JILL HOMENUK TOM LITTLE Head, Investor Relations Director, Investor Relations 416.867.4770 416.867.7834 jill.homenuk@bmo.com tom.little@bmo.com
BMO Financial Group — Investor Presentation (January 2020) on 6ix