2017 Investor Day Balanced Growth. March 28 th, 2017

Transcription

1 2017 Investor Day Balanced Growth March 28 th, 2017

2 Advisory Forward-looking Statements From time to time, CWB makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about CWB s objectives and strategies, targeted and expected financial results and the outlook for CWB s businesses or for the Canadian economy. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate, may increase, may impact, goal, focus, potential, proposed and other similar expressions, or future or conditional verbs such as will, should, would and could. By their very nature, forward-looking statements involve numerous assumptions and are subject to inherent risks and uncertainties, which give rise to the possibility that management s predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that its assumptions may not be correct and that its strategic goals will not be achieved. A variety of factors, many of which are beyond CWB s control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in Canada, including the volatility and level of liquidity in financial markets, fluctuations in interest rates and currency values, the volatility and level of various commodity prices, changes in monetary policy, changes in economic and political conditions, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, changes in accounting standards and policies, the accuracy and completeness of information CWB receives about customers and counterparties, the ability to attract and retain key personnel, the ability to complete and integrate acquisitions, reliance on third parties to provide components of business infrastructure, changes in tax laws, technological developments, unexpected changes in consumer spending and saving habits, timely development and introduction of new products, and management s ability to anticipate and manage the risks associated with these factors. It is important to note that the preceding list is not exhaustive of possible factors. Additional information about these factors can be found in the Risk Management section of CWB s annual Management s Discussion and Analysis (MD&A). These and other factors should be considered carefully, and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause CWB s actual results to differ materially from the expectations expressed in such forward-looking statements. Unless required by securities law, CWB does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf. Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect CWB s businesses are material factors considered when setting organizational objectives and targets. In determining our expectations for economic growth, we primarily consider economic data and forecasts provided by the Canadian government and its agencies, as well as an average of certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. Where relevant, material economic assumptions underlying forward looking statements are disclosed. 2

3 Presentation Agenda Guest arrival and coffee reception 9:00 9:30 Matt Evans, Senior AVP Strategy & IR Introduction / Forward Looking Statements 9:30 9:35 Chris Fowler, President & CEO CWB s Balanced Growth Strategy 9:35 9:50 Lester Shore, VP & GM, CWB Optimum Mortgage Michael Dubowec, VP & COO, National Leasing Track Record / Competitive Advantages / Growth Outlook and Opportunities Track Record / Competitive Advantages / Growth Outlook and Opportunities :50 10:15 10:15 10:40 Break 10:40 10:50 Paul McLean, CEO, & Daryl MacLellan, President, CWB Maxium Financial Ed Khediguian, VP, CWB Franchise Finance Carolyn Graham, Executive VP & CFO Track Record / Competitive Advantages / Growth Outlook and Opportunities Track Record / Competitive Advantages / Growth Outlook and Opportunities Funding Diversification / Regulatory Capital Outlook and Potential A-IRB impact / Medium-term Performance Targets 10:50 11:10 11:10 11:30 11:30 11:45 Chris Fowler, President & CEO Balanced Growth / Capital Deployment / Closing Remarks 11:45 12:00 Lunch reception 12:00 1:00 3

4 Chris Fowler, President & CEO CWB s Balanced Growth Strategy Why is geographic and industry diversification right for CWB? How does diversification tie to capital management and profitability? How does diversification tie to CWB s differentiated, mid-market commercial banking focus and FinTech strategy? 4

5 CWB s Balanced Growth strategy STRONG GROWTH OF LOANS AND BRANCH- RAISED FUNDING OPTIMIZE CAPITAL MANAGEMENT FOR MAXIMUM PROFITABILITY Double-digit loan growth wherever prudent Growth of branch-raised notice and demand deposits exceeding growth rate of loans A-IRB transformation expected fiscal 2019 / 2020 ROE benefit INCREASE GEOGRAPHIC & INDUSTRY DIVERSIFICATION Maintain focus on mid-market commercial banking Maximize benefits of A-IRB transformation Reduce operational risk profile, complement with industry-leading growth Earn a premium price-to-earnings multiple BUSINESS TRANSFORMATION Maximize benefits of industry-leading technology Leverage the advantage of low bricks-and-mortar footprint Reimagine our job functions and teams Reimagine how we manage and motivate people 5

6 Growing Geographic Diversification 45% 40% 35% 30% 25% 20% 15% E 10% 5% 0% British Columbia Alberta Ontario Other 6

7 Strategic Industry Diversification 35% 30% 25% 20% 15% 10% E 5% 0% General commercial loans, including Personal loans & mortgages, including Equipment financing and leasing, including Commercial mortgages Real estate project loans Oil & gas production loans 7

8 CWB s Targeted FinTech Strategy THUNDER BAY PHARMACIST / TORONTO HOTEL OPERATOR / FT. MAC MANUFACTURER CWB can achieve a market-leading position in low-footprint, full-service mid-market commercial banking Industry-leading technology infrastructure in place Flexible platform to add / build / adapt / partner No legacy bricks and mortar to rationalize 8

9 Very Strong Growth Potential Total Loans ($ millions) $40,000 $35,000 $30,000 $25,000 13% CAGR* $20,000 $15,000 $10,000 $5,000 $ E 2018E 2019E 2020E 2021E * Includes expected growth

10 $6 billion of loans in 2017 Yields ~5.5% Grows 15-20% per year Potential for $10-12 billion of loans in

11 Lester Shore Vice President & GM

12 CWB Optimum Mortgage HIGH-GROWTH MORTGAGE LENDER Launched in 2004 Primary focus on alternative mortgages 5-year portfolio CAGR: 19% PROVIDES BOTH INDUSTRY AND GEOGRAPHIC DIVERSIFICATION Purposeful expansion into Ontario beginning in % of overall portfolio now in Ontario Mortgage underwriting center added to Ontario this year STRONG PROFITABILITY ON THE BASIS OF ATTRACTIVE YIELDS AND VERY STRONG CREDIT QUALITY Strong returns on capital A-IRB models deployed in the business this year 12

13 High-growth Portfolio Total Optimum Mortgages ($ millions) $4,000 $3,000 $2,000 $1,000 $ E 2018E 2019E 2020E 2021E Conservative Market Mix Appraised Value % of Portfolio Weighted Average LTV <$300,000 33% 67% $300,000- $599,000 50% 70% $600,000-$999,000 14% 66% >$1,000,000 3% 59% 13

14 Strong Profitability Stable Yield and Strong Return on Capital 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% Solid Credit Quality Portfolio Yield Prime Rate Fiscal 2016 Provision for credit loss 4 basis points Net impaired mortgages 82 basis points Specific allowance to impaired total 9 basis points Coverage of the collective/specifics 22x 13 year cumulative total losses/total originations $5.8 million / $5.1 billion 14

15 Conservative Business Mix Beacon Score at origination (2016) Segment Aab bbb bbb bbb bbb bbb bbb bbb bb aa Self-employed Generally established credit, however, lack of confirmable income levels to meet A criteria GDS/TDS Salaried Generally meet A criteria for GDS/TDS, however, have weaker BEACON scores 15

16 Diverse Geographic Footprint BC 17% AB 24% SK 4% 3% MB 48% ON 4% Atlantic 16

17 Competitive Advantages AWARD WINNING PEOPLE AND SERVICE Award-winning unique culture that emphasizes innovation and creativity Voted #1 Alternative Lender with highest overall score by brokers in CMP Magazine s Brokers on Lenders survey in 2015 and 2016 Best service in the industry No voic policy Communication on deal status through milestone s Broker loyalty Partner Program Bonus based on efficiency levels (more profitable for both the broker and for us) Value-add training to help brokers grow their market share in alternative lending space PLATFORM AND TECHNOLOGY Industry leading turn-around times 17

18 Michael Dubowec Vice President & COO

19 National Leasing INDUSTRY LEADER IN SMALL-TICKET EQUIPMENT LEASING Acquired by CWB in 2010 Specific focus on the equipment dealer Roughly 8,000 dealer relationships NATIONALLY RECOGNIZED BRAND 40 years in business Established presence across Canada 40-YEAR HISTORY OF STRONG PERFORMANCE Proven management team Stable portfolio diversified by geography, industry and equipment type 5-year portfolio CAGR: 14% A-IRB models deployed in the business this year 19

20 High-growth Portfolio Total Leases (including securitized portfolios) ($ millions) $3,000 $2,000 $1,000 $ E 2018E 2019E 2020E 2021E Current Market Mix Transaction Size % of Portfolio (Total Leases) <$50,000 80% $50,000- $100,000 13% $100,000-$250,000 6% >$250,000 1% 20

21 Diversified Business Mix Top 10 Asset Classes as at January 31, 2017 ($ millions) $400 $350 $300 $250 $200 $150 $100 $50 $0 21

22 Strong Profitability Yields Highly Accretive to CWB s Net Interest Margin 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% Portfolio Yield CWB Average Yield 22

23 Diverse Geographic Footprint 60 Sales Managers 360 Employees BC 4 Sales Managers 8% 15% 11% AB 7 Sales Managers SK 4 Sales Managers Center for Excellence 290 Employees 8% MB 5 Sales Managers 32% 19% ON 16 Sales Managers QC 12 Sales Managers 7% Atlantic 12 Sales Managers 23

24 Competitive Advantages AWARD-WINNING PEOPLE AND SERVICE Unique culture that emphasizes innovation and creativity (1) Experienced executive management team each with decades of industry experience Sales representation in every major Canadian city Industry-specific credit teams 50 person in-house IT team Dedicated innovation team focused on FinTech and market trends PLATFORM AND TECHNOLOGY Brand new, leading-edge proprietary software system (FELIX) designed and built inhouse Proprietary small-ticket auto-scoring systems supporting leading turn-around times Award-winning quoting and portfolio management tools (National Leasing Interactive) for vendors (2) Live credit monitoring supporting pre-approval programs and turn-around times (1) Canada s Top Employer Award Best Small and Medium Employers in Canada (10th year running) Award presented by Aon Hewitt Spirit of Winnipeg Award for Wellness and Culture presented by Winnipeg Chamber of Commerce Canada's 10 Most Admired Corporate Cultures presented by Waterstone (2) Equipment Leasing and Finance Association's Operations and Technology Excellence Award 24

25 Strategic Growth Opportunities FOCUS RESOURCES ON POSITIVE LEASING TRENDS IN CORE MARKETS Construction, Medical, Manufacturing, Agriculture, Trucks/trailers NEW PRODUCTS AND SERVICES TARGETED AT DEMOGRAPHIC AND FINTECH TRENDS Automated application submissions Expanded auto approval limits Self-serve account management NEW PRODUCTS AND SERVICES TO MEET CHANGING EQUIPMENT DEALER DEMANDS Floorplan financing programs National Leasing Interactive Version 2.0 LEVERAGE 40 YEARS OF DATA SOURCED FROM 40 YEARS OF GROWTH Big Data and predictive analytics initiatives CAPTURE SYNERGIES WITH CWB S OTHER LEASING OPERATIONS 25

26 CWB s Investor Day Webcast will resume at 10:50am ET 26

27 Paul McLean CEO Daryl MacLellan President

28 CWB Maxium Financial ACQUIRED BY CWB IN 2016 HEALTH CARE Acquisition, practice and equipment financing for health care professionals including pharmacists, dentists and veterinarians Average transaction size of $1.5MM DIVERSIFIED PROGRAMS Financing for middle market originators in various asset classes (automotive, medical, equipment, water heaters) Widely diversified by underlying transactions with risk further mitigated by on-going monitoring, a funded reserve and our ability to step in and service the portfolio Average program size of $25MM while individual underlying transactions average $15K CONDOMINIUM/STRATA FINANCING Financing for repairs and maintenance with super priority rights under the various provincial condo corp/strata acts Average transaction size of $500K 28

29 CWB Maxium Financial GOLF Financing for various equipment leases and selected mortgages Average transaction size of $100K for equipment and $1.5MM for mortgages COMMERCIAL FINANCE Financing of traditional equipment leases and loans to private small and medium sized companies Average transaction size of $150K STRUCTURED FINANCE Financing tailored for a specific project or expected cash flows which predominantly relies on the underlying transaction being financed with risk mitigants such as lower advance rates, funded reserves and covenants Example would include solar transactions where structured with specific reserves (debt service reserve, maintenance reserve, capital reserve) as well as minimum debt service coverage and a tail (government contract extends beyond the financing period as a cushion against unexpected events) Average transaction size of $5MM 29

30 High-growth Portfolio Total Loans ($ millions) $2,500 $2,000 $1,500 $1,000 $500 $ E 2018E 2019E 2020E 2021E Diversified and Profitable Market Mix Transaction Size ($ Thousands) % of Originations Weighted Average Yield <$500 13% 5.9% $500 - $1,500 15% 5.6% $1,501 - $3,000 15% 5.6% $3,001 - $5,000 9% 5.9% >$5,000 48% 5.9% 30

31 Strategic Business Mix Targeted Originations 35% 30% 25% 20% 15% 10% 5% 0% Health Care Diversified Programs Structured Finance Commercial Golf Condo/Strata 31

32 Diverse Geographic Footprint BC 4% 11% 1% 2% 3% AB 79% Atlantic SK MB ON 32

33 Competitive Advantages LONG-STANDING RELATIONSHIPS Cultivated by investing time face to face with our clients at their places of business Gives us the ability to fully understand our clients borrowing needs and the risks involved, and to provide structured loan solutions that reflect those unique requirements DEEP INDUSTRY EXPERTISE Paramount to our business We develop an internal expertise for every industry we finance Our sales, credit and leadership teams work closely together and know our clients industries Our expert understanding enables us to accommodate the natural patterns inherent in various industries SPEED AND FLEXIBILITY Our unique structuring and financing capabilities help us say yes to more deals, quickly Using a single set of criteria to approve financing for every industry would miss the full capabilities of our clients business We find solutions by listening to our clients and working to leverage the experience and assets they bring to the deal 33

34 Strategic Growth Opportunities FULL COMMERCIAL BANKING CAPABILITIES Anticipate offering CWB banking services to commercial clients through FinTech-driven banking platform outside of CWB s branch footprint SUCCESSION FINANCING Large expected generational wealth transfer in the middle market with few financing alternatives other than an outright sale Strong cash flows, low transition risk Represents excellent opportunity to gain new commercial banking clients Average transaction size expected to be $3MM FINANCIAL ADVISOR Acquisition financing for established financial advisors to acquire an existing book of business from another advisor (typically due to retirement) Similar attributes to healthcare with stable cash flows and the expectation that the existing business can support the acquisition (without the need to rely on the acquired portfolio) Average transaction size expected to be $750K 34

35 Ed Khediguian Vice President

36 CWB Franchise Finance ACQUIRED BY CWB IN 2016 HOTEL FINANCE CWB s focus is around quality multi-unit hotel owner-operators across markets and segments, as well as single assets of high quality operators in large markets Tier 1 (70 out of 210 multi-unit hotel owners) large multi-unit hotel owner/operators and all their assets across all markets and life cycles Tier 2 (85 out of 210 multi-unit hotel owners) smaller but still multi-unit owner/operators in Tier 1 and 2 market economies on branded only basis Single assets of quality in high barrier to entry locations in Tier 1 markets RESTAURANT FINANCE Franchisee financing for multi-unit experienced restaurant owners/operators within approved brands Large systems where standalone franchisee financing can be programmatic and franchisee financing for smaller systems where we also have franchisor level corporate lending exposure Corporate lending to franchisor/corporate store systems for high growth or mature brands where the focus is on the intellectual property and system Early growth concepts: new trends, higher growth, less competition, higher yield 36

37 High-growth Potential Total Loans ($ millions) $1,500 $1,000 $500 Acquired by CWB $0 Originations by Segment and Lending Spread Hotel 43% 54% 62% 58% 67% Restaurant 57% 46% 38% 42% 33% Lending Spread 5.06% 4.39% 3.73% 4.10% 3.70% 37

38 Diverse Geographic Footprint $14.5B Target Market 10-15% Market Share Goal BC 6% AB 17% SK 3% 6% MB 28% ON 31% QC 9% Atlantic 38

39 Competitive Advantages STRONG CREDIT TRACK RECORD No losses taken in the hotel sector across 14 years and $2.2B of originations; average of 17 basis points on the restaurant side MANAGEMENT EXPERIENCE, DEEP INDUSTRY EXPERTISE, LONG-STANDING RELATIONSHIPS Deep domain experience across the team; average in position tenure of 9 years: Restaurant: Unique pool of resources focused in the industry, non-existent elsewhere Hotel: recruited from advisory firms with valuation and brand experience/expertise Entrenched participant in industry events, conferences Strong relationships with brand level executives both at the C-suite as well as the development level SPECIALIZED APPROACH TO THE MARKET Restaurant: Direct lending program vs. a centralized program rolled out to branches Hotel: only dedicated Canadian platform focused nationally on hotel lending Ability to differentiate quality borrowers, brands, and market segments to provide a more competitive structure while mitigating risk and pricing appropriately 39

40 Strategic Growth Opportunities FULL COMMERCIAL BANKING CAPABILITIES Anticipate offering CWB banking services to commercial clients through FinTech-driven banking platform outside of CWB s branch footprint SIZE OF ADDRESSABLE MARKET AND CWB S TARGET MARKET SHARE Hotel sector represents $9.5B addressable market for CWB s targeted Strikezone The goal is to build the current portfolio to $ B within that Strikezone (or 15-20% share of addressable market) Targeted Strikezone within total restaurant sector represents approximately $5B The goal is to build the current portfolio up to $500MM (or 10% share of servable market) FUTURE OPPORTUNITY TO EXPAND INTO OTHER FRANCHISE-BASED SEGMENTS Auto-after market, Auto-dealerships, Retail, Health/Fitness FUTURE OPPORTUNITY TO EXPAND INTO CASH FLOW-BASED CORORATE LENDING PROGRAMS Identify industry, generate the research and data that identifies risks and opportunities, establish risk appetite control/strikezone policy and lending guidelines, identify Tiers 1,2,3, staff up on expertise and provide a true mid-market commercial lending business 40

41 Carolyn Graham, EVP & CFO CWB s Balanced Growth Strategy Impact of funding diversification on profitability Regulatory capital outlook: A-IRB timing and impact Medium-term performance targets 41

42 Optimized Funding 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Branch demand & notice deposits Branch term deposits Capital markets Broker deposits E 42

43 Capital Management CWB A-IRB Project Anticipated A-IRB designation Basel 3.5, New Standardized and output floors effective? Fiscal 2016 Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020 Fiscal

44 Medium-term Performance Targets ANNUAL ADJUSTED EARNINGS PER SHARE GROWTH ANNUAL RETURN ON COMMON SHAREHOLDERS EQUITY OPERATING LEVERAGE COMMON EQUITY TIER 1 CAPITAL RATIO COMMON EQUITY DIVIDEND PAYOUT RATIO 7 12% 12 15% Positive Strong ~ 30% 44

45 Chris Fowler, President & CEO CWB s Balanced Growth Strategy Why is geographic and industry diversification right for CWB? Medium-term capital deployment opportunities What could CWB look like in 2021? 45

46 $6 billion of loans in 2017 Yields ~5.5% Grows 15-20% per year Potential for $10-12 billion of loans in

47 CWB s Targeted FinTech Strategy THUNDER BAY PHARMACIST / TORONTO HOTEL OPERATOR / FT. MAC MANUFACTURER CWB can achieve a market-leading position in low-footprint, full-service mid-market commercial banking Industry-leading technology infrastructure in place Flexible platform to add / build / adapt / partner No legacy bricks and mortar to rationalize 47

48 Very Strong Growth Potential Total Loans ($ millions) $40,000 $35,000 $30,000 $25,000 13% CAGR* $20,000 $15,000 $10,000 $5,000 $ E 2018E 2019E 2020E 2021E * Includes expected growth

49 CWB s Balanced Growth strategy STRONG GROWTH OF LOANS AND BRANCH- RAISED FUNDING OPTIMIZE CAPITAL MANAGEMENT FOR MAXIMUM PROFITABILITY Double-digit loan growth wherever prudent Growth of branch-raised notice and demand deposits exceeding growth rate of loans A-IRB transformation expected fiscal 2019 / 2020 ROE benefit INCREASE GEOGRAPHIC & INDUSTRY DIVERSIFICATION Maintain focus on mid-market commercial banking Maximize benefits of A-IRB transformation Reduce operational risk profile, complement with industry-leading growth Earn a premium price-to-earnings multiple BUSINESS TRANSFORMATION Maximize benefits of industry-leading technology Leverage the advantage of low bricks-and-mortar footprint Reimagine our job functions and teams Reimagine how we manage and motivate people 49

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