ANALYST AND INVESTOR PRESENTATION Q2 … 1 ANALYST AND INVESTOR PRESENTATION Q2-2013 CONFERENCE CALL...
Transcript of ANALYST AND INVESTOR PRESENTATION Q2 … 1 ANALYST AND INVESTOR PRESENTATION Q2-2013 CONFERENCE CALL...
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ANALYST AND INVESTOR PRESENTATION Q2-2013 CONFERENCE CALL
Friday, May 24, 2013 - 11:00 am
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
From time to time, National Bank of Canada (the Bank) makes written and oral forward-looking statements, such as those contained in the Major Economic Trends and theOutlook for National Bank sections of the 2012 Annual Report, in other filings with Canadian securities regulators, and in other communications, for the purpose ofdescribing the economic environment in which the Bank will operate during fiscal 2013 and the objectives it has set for itself for that period. These forward-lookingstatements are made in accordance with current securities legislation. They include, among others, statements with respect to the economy—particularly the Canadian andU.S. economies—market changes, observations regarding the Bank's objectives and its strategies for achieving them, Bank projected financial returns and certain risks facedby the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as "outlook," "believe," "anticipate," "estimate,""project," "expect," "intend," "plan," and similar terms and expressions.
By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptionsabout the performance of the Canadian and U.S. economies in 2013 and how that will affect the Bank’s business are among the main factors considered in setting the Bank’sstrategic priorities and objectives and in determining its financial targets, including provisions for credit losses. In determining its expectations for economic growth, bothbroadly and in the financial services sector in particular, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and theiragencies.
There is a strong possibility that express or implied projections contained in these forward-looking statements will not materialize or will not be accurate. The Bankrecommends that readers not place undue reliance on these statements, as a number of factors, many of which are beyond the Bank's control, could cause actual futureresults, conditions, actions or events to differ significantly from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These factorsinclude credit risk, market risk, liquidity risk, operational risk, regulatory risk, reputation risk, and environmental risk (all of which are described in greater detail in the RiskManagement section that begins on page 57 of the 2012 Annual Report); the general economic environment and financial market conditions in Canada, the United Statesand certain other countries in which the Bank conducts business, including the effects of the debt crisis in certain European countries; the lowering of the U.S. long-termsovereign debt rating by Standard & Poor’s; the lowering of the sovereign debt rating of certain European countries and the impact of changes that affect the Bank’s creditratings; the situation with respect to the restructured notes of the master asset vehicle (MAV) conduits, in particular the realizable value of underlying assets; changes in theaccounting policies the Bank uses to report its financial condition, including uncertainties associated with assumptions and critical accounting estimates; tax laws in thecountries in which the Bank operates, primarily Canada and the United States; and changes to capital and liquidity guidelines and to the manner in which they are to bepresented and interpreted.
The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found in the Risk Management and Other Risk Factors sections of the2012 Annual Report. Investors and others who base themselves on the Bank's forward-looking statements should carefully consider the above factors as well as theuncertainties they represent and the risk they entail. The Bank also cautions readers not to place undue reliance on these forward-looking statements.
The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate forother purposes.
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HIGHLIGHTS
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 3
(1) Excluding specified items (see Appendix 1, page 20)(2) Net income before non-controlling interests(3) Trailing 4 quarters
Record financial results, excluding specified items Overall strong performance, demonstrating momentum and the broad diversification
of our revenue sources Quarterly dividend increase of $0.04 to $0.87 in Q3 2013
ADJUSTED RESULTS (1)Q2 13 Q1 13 Q2 12 QoQ YoY
Net Income(2) 369 361 347 2% 6%
Diluted EPS $2.08 $2.02 $1.95 3% 7%
Provision for Credit Losses 53 32 49 66% 8%
Return on Equity 20.5% 19.8% 21.5%
Common Equity Tier 1 Ratio
Under Basel III8.3% 7.9% 8.0%
Dividend Payout(3) 40.1% 39.7% 38.6%
Ghislain ParentChief Financial Officer and Executive Vice-President, Finance and Treasury
FINANCIAL REVIEW
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PERFORMANCE SNAPSHOT – Q2 2013
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 5
(1) Excluding specified items (see Appendix 1, page 20)
(millions of dollars)
ADJUSTED (1) Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 1,251 1,225 1,220 2% 3%
Expenses 769 747 752 3% 2%
Net Income 369 361 347 2% 6%
Diluted EPS $2.08 $2.02 $1.95 3% 7%
ROE 20.5% 19.8% 21.5%
REPORTED Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 1,386 1,235 1,499 12% (8%)
Expenses 815 753 793 8% 3%
Net Income 434 364 553 19% (22%)
Diluted EPS $2.49 $2.03 $3.22 23% (23%)
ROE 24.3% 20.0% 35.0%
PERFORMANCE SNAPSHOT – H1 2013
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 6
(1) Excluding specified items (see Appendix 1, page 20)
(millions of dollars)
ADJUSTED (1) 6M 13 6M 12 YoY
Revenues 2,476 2,458 1%
Expenses 1,516 1,503 1%
Net Income 730 700 4%
Diluted EPS $4.10 $3.95 4%
ROE 20.2% 21.8%
REPORTED 6M 13 6M 12 YoY
Revenues 2,621 2,742 (4%)
Expenses 1,568 1,552 1%
Net Income 798 904 (12%)
Diluted EPS $4.52 $5.21 (13%)
ROE 22.2% 28.5%
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INCOME STATEMENT OVERVIEW (Excluding specified items)
REVENUES Q2 13 (vs. Q2 12)
NET INCOME Q2 13 (vs. Q2 12)
T.E.B.
Personal and Commercial Banking
Financial Markets
Wealth Management
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 7
(millions of dollars) Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 1,251 1,225 1,220 2% 3%
P&C Banking 632 642 622 (2%) 2%
Wealth Management 289 276 277 5% 4%
Financial Markets 363 303 322 20% 13%
Other Segment (33) 4 (1)
Net Income 369 361 347 2% 6%
P&C Banking 166 178 163 (7%) 2%
Wealth Management 58 56 47 4% 23%
Financial Markets 143 115 116 24% 23%
Other Segment 2 12 21
28%
23%
49%(51%)
(26%)
(23%)
39%
16%
45%(36%)
(14%)
(50%)
NON INTEREST EXPENSE (Excluding specified items)
Q2 2013 operating leverage is slightly positive, excluding specified items; expecting slightly positive operating leverage in FY 2013
458 454 469 454 459
145 146 144 148 161
149 144 157
145 149
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Salaries and staff benefits Technology and professional fees Other expenses
752 744 770 747 769
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 8
(millions of dollars) Q2 13 Q1 13 Q2 12 QoQ YoY
Salaries and Staff Benefits 459 454 458 1%
Technology and Professional Fees 161 148 145 9% 11%
Other Expenses 149 145 149 3%
Non Interest Expense 769 747 752 3% 2%
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43.7 43.9 44.1 45.2 46.1
20.2 21.7 22.4 22.0 23.0
5.5 7.4 7.6 8.3
9.0
16.7 16.8 17.7 17.3
17.9
April 2012 July 2012 October 2012 January 2013 April 2013
Personal and Wealth Management Commercial Corporate Securitization
86.289.8 91.7 92.8
96.1
46.0 48.3 49.4 50.0 50.6
24.3 24.9 24.9 25.7 26.0
7.9 7.9 7.8 7.8 7.9 5.5 6.2 6.7
7.1 7.2
April 2012 July 2012 October 2012 January 2013 April 2013
Personal Commercial Wealth Management Corporate
90.5 88.8 87.4
83.8
91.6
BALANCE SHEET OVERVIEW (Banking book)
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 9
LENDING – LOANS AND BAs (MONTH END BALANCE) FUNDING – DEPOSITS AND BAs (MONTH END BALANCE)
(billions of dollars)
YoY growth:Personal and Wealth Management +9%Commercial and Corporate +11%Total +9%
YoY growth:Personal and Wealth Management +5%Commercial and Corporate +25%Securitization +7%Total +11%
STRONG CAPITAL POSITION
COMMON EQUITY TIER 1 UNDER BASEL III EVOLUTION (QoQ)
Common Equity Tier 1 ratio is 8.3% in Q2 13 Includes 12 bps from ABCP gains Risk-weighted assets at $60B A.C.M. 18.3x as at April 30, 2013
TOTAL RISK-WEIGHTED ASSETS UNDER BASEL III
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 10
7.57% 7.57%
7.96% 8.02% 7.99% 7.99% 7.99%8.26%
0.39% 0.06% 0.06%
0.27%
0.09%
Common Equity Tier 1
Q1 2013
(incl. CVA charge)
Net Income (net of
dividends)
OCI Elements Others Change inRWA
Common Equity Tier 1
Q2 2013
(incl. CVA charge)
Delay ofCVA Charge
Common Equity Tier 1
Q2 2013
(excl. CVA charge)
48,294 50,298 51,246 48,055 48,180
7,813 7,903 8,057
8,082 8,266
3,476 3,281 2,887 3,251 3,594
59,583 61,482 62,192
59,388 60,040
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Total Credit Risk Operational Risk Market Risk RWA
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RISK MANAGEMENT
William BonnellExecutive Vice-President, Risk Management
(67%)(7%)
(26%)
Personal Banking and Wealth Management
Corporate Banking
Commercial Banking
67%8%
25%
GLOBAL CREDIT PORTFOLIO As at April 30, 2013 vs. (April 30, 2012)
PER BUSINESS SEGMENT
PER INDUSTRYRETAIL PORTFOLIO
COMPOSITION
Global Credit Portfolio mix remained stable Well-diversified across industrial sectors
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 12
9%
11%
4%
14%
9%13%
3%
4%
4%
12%
9%
8%
Agriculture and Forestry Mining, Oil and Gas
Construction Real Estate
Manufacturing Wholesale and Retail
Transportation Finance and Insurance
Communications Other Services
Government and Public Services Other
(9%)
(5%)
(4%)
(14%)(10%)
(15%)
(4%)
(10%)
(10%)
(4%)
(10%)
(5%)
18%
21%
24%
37%
Uninsured MortgagesOtherHELOCInsured Mortgages
(23%)
(37%)
(23%)
(17%)
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SPECIFIC PROVISION FOR CREDIT LOSSES(1)
(1) Excluding specified items
(millions of dollars)
RISK PROVISIONING
Q2 2013: $53M or 24 bps
YTD 2013: $85M or 19 bps
Next 2 quarters target: 20-30 bps
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 13
PCLs (in bps) Q2 13 Q1 13 Q4 12 Q3 12 Q2 12
Personal Banking 32 28 27 29 31
Commercial Banking 21 14 19 3 24
Wealth Management - 5 5 5 5
Financial Markets 6 (77) - 20 -
TOTAL 24 14 21 19 24
34 34 33 35 39
14
212 9
13
1
11
1
3
(13)
1
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Personal Banking Commercial Banking Wealth Management Financial Markets
49
40 46
53
32
IMPAIRED LOANS AND FORMATION
(millions of dollars)
IMPAIRED LOANS IMPAIRED LOANS FORMATION(2)
(1) Allowance on credit facilities secured by ABCP(2) Formations include new accounts, disbursements, principal repayments, and exchange rate fluctuation
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 14
368 373 387 354 346
130 158
179 165 146
(239)(211)
(190) (202)(220)
7.12% 7.21% 7.45%6.56% 6.09%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Gross Impaired Loans
Impaired Loans before collective allowance for unimpaired loans
Impaired Loans, net of individual and collective allowances
Gross Impaired Loans / Common equity minus goodwill plus reserves
Q2 13 Q1 13 Q4 12 Q3 12 Q2 12
Retail 20 22 21 18 13
Commercial (13) 34 30 (19) 6
Corporate Banking 7 (56) (2) 57 (14)
Wealth Management 1 1 - - -
Total 15 1 49 56 5
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Jean DagenaisSenior Vice-PresidentFinance, Taxation and Investor Relations
BUSINESS SEGMENT REVIEW
PERSONAL AND COMMERCIAL BANKING
P&C MARGINS EVOLUTION(1)
HIGHLIGHTS Revenues up 2% YoY due to strong volume
growth in loans and BA’s (+10%) partially offset
by decrease in margins
Moderate decline in margin since previous
quarter
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 16
(millions of dollars) Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 632 642 622 (2%) 2%
Personal Banking 295 300 286 (2%) 3%
Commercial Banking 229 234 225 (2%) 2%
Credit Card 80 79 78 1% 3%
Insurance 28 29 33 (3%) (15%)
Operating Expenses 354 355 352 - 1%
Provisions for Credit Losses 52 44 48 18% 8%
Net Income 166 178 163 (7%) 2%
Key Metrics (in millions)
Loans & BAs (avg vol.) 75,793 74,321 68,936 2% 10%
Deposits (avg vol.) 39,631 39,554 37,635 - 5%
Efficiency Ratio (%) 56.0% 55.3% 56.6%
2.43% 2.39%2.34% 2.31% 2.30%
1.66% 1.63% 1.61% 1.59% 1.58%
1.22% 1.22% 1.20% 1.20% 1.17%
1.80% 1.78% 1.78% 1.78% 1.78%
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
N.I.M. Loans Deposits Prime / BAs
(1) Note: NIM calculation is based on Earning Assets
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WEALTH MANAGEMENT(1)
(1) Excluding specified items
HIGHLIGHTS
Net income up 23% YoY mainly due to good fee-based momentum especially in our full-service brokerage division
Good expense control
Stronger net sales of mutual funds in our branch network
AUM is up 15% mainly due to stronger net sales of mutual funds in our branch network and continued momentum at Private Wealth 1859
AUA growth of 8% thanks to good on boarding of new clients in our Correspondent Network division
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 17
(millions of dollars) Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 289 276 277 5% 4%
Fee-based 137 133 132 3% 4%
Transaction & Others 86 76 84 13% 2%
Net Interest Income 66 67 61 (1%) 8%
Operating Expenses 209 199 213 5% (2%)
Provision for Credit Losses 0 1 1
Net Income 58 56 47 4% 23%
Key metrics (billions of dollars)
Loans & BAs (avg vol.) 7.8 7.8 7.8
Deposits (avg vol.) 21.7 20.5 19.7 6% 10%
Asset Under Administration 207 205 191 1% 8%
Asset Under Management
Fiera Capital 65 57 29 13%
Asset Under Management 39 37 34 5% 15%
Efficiency Ratio (%) 72.3% 72.1% 76.9%
FINANCIAL MARKETS(1)
HIGHLIGHTS
Revenues up 13% YoY Higher trading revenues driven by
client activities Strong performance in fixed income
and derivatives
Operating leverage of 12% (YoY)
TRADING REVENUES ($M)
(1) Excluding specified items
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 18
(millions of dollars) Q2 13 Q1 13 Q2 12 QoQ YoY
Revenues 363 303 322 20% 13%
Trading 164 127 117 29% 40%
Banking Services 64 54 47 19% 36%
Financial Market Fees 69 60 75 15% (8%)
Gains on AFS Securities 1 4 8
Other 65 58 75 12% (13%)
Operating Expenses 167 159 165 5% 1%
Provisions for Credit Losses 1 (13) 0
Net Income 143 115 116 24% 23%
Other Metrics
CVA / DVA(millions of dollars)
(2.7) 1.9 2.2
Proprietary Trading(millions of dollars)
4.1 8.4 3.7
Efficiency Ratio (%) 46.0% 52.5% 51.2%
54 71
61 50
73
45
45 68
59
67 18
20
16
18
24
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Equity Fixed income Commodity and Foreign exchange
136
117
145
164
127
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APPENDIX
APPENDIX 1 │ DETAIL OF SPECIFIED ITEMS(1)
Triggers could also be breached if realized losses in the CDX credit indices above exceeded 12% (currently at 1.11%)
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 20
(millions of dollars) Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
Natcan / Fiera Transaction 227 (1) 1 (1) (2) Acquisition of WW & HSBC (8) (8) (14) (6) (7) Acquisition of TMX - - - (1) - Severance Pay (15) - (65) - - MAV and Other Notes 34 5 111 12 137 Leases Termination - - (4) - - Write-off of Intangible Assets - - (18) - (39) Income Before Income Taxes 238 (4) 11 4 89 Income Taxes (32) - (3) (1) (24)
Income Taxe Recovery - 30 - Net Income 206 26 8 3 65
Total EPS Items 1.27 0.16 0.04 0.01 0.41
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APPENDIX 2 │ INCOME STATEMENT FY2013(1)
(1) Excluding specified items
(millions of dollars) - net income growth (%)T.E.B.
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 21
6M 13 6M 12 YoY 6M 13 6M 12 YoY 6M 13 6M 12 YoY
Revenues 1,274 1,248 2% 565 539 5% 666 659 1%
Operating Expenses 709 702 1% 408 411 (1%) 326 336 (3%)
PCLs 96 93 3% 1 1 - (12) - -
Net Income 344 332 4% 114 93 23% 258 237 9%
Wealth Management Financial MarketsPersonal & Commercial
(millions of dollars)
APPENDIX 3 │ Daily Trading Revenues vs VAR
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 22
(15.0)
(10.0)
(5.0)
0.0
5.0
10.0
15.0
1-Feb 8-Feb 15-Feb 25-Feb 4-Mar 11-Mar 18-Mar 25-Mar 2-Apr 9-Apr 16-Apr 23-Apr 30-Apr
Milli
ons
Daily Trading Revenues vs VAR (Trading -Global) - Q2 2013
(CAD millions)
NBC Global Trading P/L VaR (Trading -Global)
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APPENDIX 4 │ VaR TREND
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 23
-6.1
-6.7
-5.2
-7.4
-8.3
Q2 12 Q3 12 Q4 12 Q1 13 Q2 13
$ millions
Trading VaR Quarterly Average
APPENDIX 5 │ TRADING P&L RESULTS
Q2 2013 RESULTS CONFERENCE CALL – May 24, 2013 I 24
0
2
4
6
8
10
12
14
(1) - 1 2 3 4 5 6 7 8 9 10 11 12 13
# days
$ millions
Trading P&L distribution - Q2 2013
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INVESTOR RELATIONSFinancial analysts and investors who want to obtain financial information on the Bank are asked to contact the Investor Relations Department.
600 De La Gauchetière Street West, 7th Floor, Montreal, Quebec H3B 4L2Toll-free: 1-866-517-5455Fax: 514-394-6196E-mail: [email protected]: www.nbc.ca/investorrelations