Corporate Presentation. 3rd Quarter 2016

Transcription

1 Corporate Presentation 3rd Quarter 2016

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 expectations for economic growth, CWB primarily considers 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 Corporate Overview 3

4 CWB Group Strategic direction focused on growing CWB franchise with a group of companies that provide complementary services to core business banking clients Banking Trust Services CWB Wealth Management Business Personal Alternative mortgage lending Commercial equipment leasing Corporate Personal Mutual fund services Discretionary investment management Canadian Western Bank Optimum Mortgage Canadian Direct Financial National Leasing CWB Maxium CWB Franchise Finance Canadian Western Trust Canadian Western Financial Adroit Investment Management McLean & Partners Wealth Management 2 Locations 2 Locations 42 Branches July 31, 2016 Total Assets ~ $25.2 billion Market Capitalization (TSX:CWB) ~ $2.2 billion Number of Consecutive Profitable Quarters 113 Credit Ratings (DBRS) Stable Trend Long-term Debt/Senior Deposits: Short-term Debt: Subordinated Debentures: Preferred Shares: A (low) R-1 (low) BBB (high) Pfd-3 4

5 CWB Group Executive Committee CHRIS FOWLER President & CEO CAROLYN GRAHAM Executive VP & CFO Finance and Tax, Treasury, Investor Relations, Communications, Legal, Internal Audit BOGIE OZDEMIR Executive VP & CRO Group Risk Management, Credit Risk Management, Credit Analytics, Regulatory Compliance STEPHEN MURPHY Executive VP Branch Banking Operations, Equipment Financing Group, Optimum Mortgage GLEN EASTWOOD Executive VP DARRELL JONES Executive VP & CIO KELLY BLACKETT Executive VP Business Transformation, Wealth Management, Trust Services Information Services, Infrastructure Planning Human Resources, Corporate Communications 5

6 Strategic Direction Balanced Growth 6

7 Recent Performance Highlights ACQUISITIONS OF CWB MAXIUM FINANCIAL and CWB FRANCHISE FINANCE CWB Maxium Financial acquired on March 1, 2016 CWB Franchise Finance portfolio acquired July 1, 2016 Both provide specialized financing solutions primarily outside of western Canada and support CWB s commercial banking focus In combination, acquisitions are expected to be slightly accretive to adjusted cash earnings per share in 2016, with accelerating contributions thereafter Both will contribute to further geographic and business diversification VERY STRONG LOAN GROWTH Loan growth of 14% from Q and 2% from prior quarter BC and Ontario combined account for three quarters of growth from last year Trend of higher relative contributions from non-oil producing provinces expected to continue STRONG DEPOSIT GROWTH Continuing to build funding sources Growth of 10% in total branch-raised deposits from Q3 2015, and 8% growth in branch-raised demand and notice deposits CONSISTENT PTPP EARNINGS GROWTH Pre-tax, pre-provision earnings growth of 6% from Q

8 Commercial Banking Focus 8

9 Business Footprint Locations and Loans by Province (*) Grande Prairie Medicine Hat St. Albert Lethbridge Sherwood Park Edmonton (5) Leduc Red Deer Calgary (5) Winnipeg (2) Banking Branches Western Canada CWB Maxium Financial Richmond Hill, ON CWB Franchise Finance Toronto, ON Montreal, QC Equipment Leasing Centre Winnipeg, MB (Headquarters) Satellite offices across Canada Trust Services Offices Vancouver, BC Edmonton, AB Prince George Kamloops Kelowna (2) Cranbrook Vancouver (4) Coquitlam Langley Abbotsford Surrey (2) Courtenay Nanaimo Richmond Victoria Saskatoon (2) Yorkton Regina Lloydminster * Based on location of security Wealth Management Offices Edmonton, AB Calgary, AB 9

10 Composition of Loans by Lending Sector As at July 31, 2016 ($ millions excluding the allowance for credit losses) Q Q Change $ Change % Commercial mortgages $ 4,006 $ 3,775 $ General commercial loans 4,689 3, Equipment financing and leasing 3,724 3, Personal loans & mortgages 3,776 3, Real estate project loans 4,296 3,173 1, Corporate lending (1) 1,106 1,264 (158) (13) Oil & gas production loans (53) (17) Total loans outstanding $ 21,854 $ 19,153 $ 2,701 14% (1) Corporate lending represents a diversified portfolio that is centrally sourced and administered through a designated lending group located in Edmonton. These loans include participation in select syndications that are structured and led primarily by the major Canadian banks, but exclude participation in various other syndicated facilities sourced through relationships developed at CWB branches. 10

11 Composition of Deposits 11

12 Funding Sources Deposits (1) (1) Branch-raised deposits include deposits raised through CWB s trust businesses, Canadian Western Trust and Valiant Trust. (2) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. 12

13 Financial Performance Credit * Canadian Bank Avg. (6) as referenced within this presentation is calculated based on information contained in the publicly available company reports of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). Demonstrated history of low credit losses 13

14 Financial Performance Credit CWB has taken a proactive approach to resolve positions within the oil and gas portfolio, and will continue to conservatively manage exposures in view of the difficult operating environment No new oil and gas impairments this quarter Credit quality outside of the oil and gas portfolio is stable Expect periodic increases in the balance of impaired loans going forward, partially due the extended period of economic weakness within Alberta (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. 14

15 Financial Performance Credit (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. The year-to-date provision for credit losses was 43 basis points as a percentage of average loans, compared to 16 basis points in the same period last year Increased provisions for credit losses within the oil and gas portfolio have resulted from the impact of persistently low and volatile energy commodity prices on producer cash flows, as well as the influence of regulatory factors on the liquidity of assets securing these exposures Annual provision expected to fall between 35 and 45 basis points as a percentage of average loans 15

16 Financial Performance Capital & Leverage Regulatory Capital Ratios (Standardized approach for calculating risk-weighted assets) Q Regulatory Minimum Common equity Tier 1 capital (CET1) 9.0% 7.0 % Tier 1 capital 10.8% 8.5 % Total capital 12.9% 10.5 % Basel III Leverage Ratio 8.4% 3.0% * Canadian Bank Avg. (6) as referenced within this presentation is calculated based on information contained in the publicly available company reports of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). 16

17 Financial Performance Capital & Leverage Capital Ratios and Risk-Weighted Assets (RWA) * Standardized Advanced Internal Rating Based (AIRB) Average CWB Variance CWB LB BMO BNS CM NA RY TD (AIRB banks) (from Average) Common Equity Tier 1 Ratio (Basel III) (1) 8.5% 7.6% 10.7% 10.3% 10.8% 9.9% 10.6% 9.9% 10.4% -187 bp Risk weightings by category (2) Residential mortgages 36.3% 17.4% 7.8% 11.6% 6.1% 11.2% 6.2% 9.3% 8.7% 27.6% Other retail loans (3) 76.1% 65.1% 25.0% 41.5% 30.9% 38.0% 22.6% 45.5% 33.9% 42.2% Business loans (4) 100.0% 99.6% 40.8% 61.3% 39.0% 48.6% 53.7% 44.3% 47.9% 52.1% Pro forma CWB and LB assuming 20% reduction in RWA from AIRB 10.7% 9.5% 10.7% 10.3% 10.8% 9.9% 10.6% 9.9% 10.4% 29 bp Pro forma six largest banks assuming 20% increase in RWA from standardized 8.5% 7.6% 8.9% 8.6% 9.0% 8.2% 8.8% 8.2% 8.6% -11 bp (1) "Common Equity Tier 1 Ratio (Basel III)" based on Oct 31, 2015 company reports of Canada's eight publicly traded Schedule 1 banks. (2) "Risk weightings by category" based on Oct 31, 2015 company reports of Canada's eight publicly traded Schedule 1 banks. (3) Other retail includes personal loans, credit cards and small business loans treated as retail. (4) Business includes corporate, commercial, medium-sized enterprises and non-bank financial institutions. Provision for Credit Losses (measured as a % of average loans) 10 YR Average CWB 0.20% 0.16% 0.15% 0.15% 0.21% 0.19% 0.19% 0.19% 0.15% 0.17% 0.18% Canadian Bank Average (6)* 0.20% 0.27% 0.46% 0.86% 0.53% 0.40% 0.37% 0.31% 0.30% 0.28% 0.40% Variance 0.00% -0.11% -0.31% -0.71% -0.32% -0.21% -0.18% -0.12% -0.15% -0.11% -0.22% * All comparative information as referenced within this presentation is calculated based on information contained in the publicly available company reports for fiscal 2015 of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). 17

18 Financial Performance Regulatory Capital WHAT IF? (Advanced Internal Ratings Based (AIRB) Approach for calculating risk-weighted assets): FY 2015 (Actual) CWB Basel III Pro Forma Capital Ratios (based on specified % change in risk-weighted assets) -40% -30% -20% Basel III Change Change Change CET1 capital ratio 8.5% 14.2% +571 bps 12.2% +368 bps 10.7% +216 bps Tier 1 capital ratio 9.7% 16.2% +651 bps 13.9% +419 bps 12.2% +246 bps Total capital ratio 12.7% 21.2% +847 bps 18.1% +545 bps 15.9% +318 bps Risk-weighted assets $19,198,092 $11,518,855 ($7,679,237) $13,438,664 ($5,759,428) $15,358,474 ($3,839,618) CWB Pro Forma Financial Metrics (based on maintaining the Basel III CET1 ratio and Tier 1 ratio at the same level via the purchase of common and preferred shares) FY 2015 (Actual) Change Change Change Avg. # of common shares, diluted 80,582 54,277 (26,305) 60,805 (19,777) 67,332 (13,250) # of preferred shares 5,000 1,323 (3,677) 2,244 (2,756) 3,166 (1,834) CET1 capital ratio 8.5% 8.5% - 8.5% - 8.5% - Tier 1 capital ratio 9.7% 9.7% - 9.7% - 9.7% - Total capital ratio 12.7% 14.7% +197 bps 14.0% +126 bps 13.4% +73 bps Leverage ratio 7.9x 21.2x x 18.2x x 15.9x +8.0 x Shareholders net income from continuing operations $213,564 $199,510 ($14,054) $203,002 ($10,562) $206,493 ($7,071) Preferred dividends ($5,500) ($1,455) $4,045 ($2,469) $3,031 ($3,482) $2,018 Net income available to common shareholders from continuing operations $208,064 $198,055 ($10,009) $200,533 ($7,531) $203,011 ($5,053) Return on common shareholders equity 12.4% 19.4% +701 bps 16.9% +454 bps 15.1% +267 bps Diluted earnings per common share (EPS) $2.59 $3.65 +$1.06 $3.30 +$0.71 $3.02 +$0.42 Share price at 13.0x diluted EPS $33.70 $ $13.74 $ $9.18 $ $5.50 Dividend payout ratio (FY 2015 div. of $0.86) 33% 24% -(974 bps) 26% -(723 bps) 29% -(478 bps) Book value per common share $22.18 $ ($3.38) $ ($2.71) $ ($2.18) Average common shareholders' equity $1,678,047 $1,020,432 ($657,615) $1,183,615 ($494,432) $1,346,799 ($331,248) Tangible common equity $1,636,718 $979,103 ($657,615) $1,142,286 ($494,432) $1,305,470 ($331,248) Tier 1 capital $1,866,873 $1,117,329 ($749,544) $1,303,550 ($563,323) $1,489,772 ($377,101) Total capital $2,439,022 $1,689,478 ($749,544) $1,875,699 ($563,323) $2,061,921 ($377,101) Total exposures $23,669,095 $23,669,095 - $23,669,095 - $23,669,095 - Assumed price of common shares purchased $25.00 $ $ $ Assumed price of preferred shares purchased $25.00 $ $ $

19 Complementary Lines of Business 19

20 Lines of Business Total Revenues (teb) Strategic goal to grow non-interest income to encompass a greater proportion of total revenues through growth in banking and leasing fee income, wealth management and trust services organic growth (breadth and depth of both existing and new client relationships) complementary acquisitions 20

21 Lines of Business Equipment Leasing Industry leader in small and mid-ticket equipment leasing Proven management team and ~350 employees Long history of strong performance (approaching 42 years in business) Approximately 78,000 active leases providing diversification by geography, industry and equipment type Established presence across Canada Synergies with existing banking/lending operations (funding, growth, technology) 21

22 Lines of Business Specialized Financing Specialized financing solutions are primarily provided in the areas of health care, golf, transportation, real estate, and general corporate financing Provides loans, equipment leases and structured financing solutions to more than 35,000 clients, mainly in Ontario Proven management team Long history of strong performance Securitized assets that were originated prior to March 1, 2016 were not included in the transaction 22

23 Lines of Business Alternative Mortgages Broker-driven origination model providing alternative and higher-ratio insured residential mortgages across Western Canada and selected regions of Ontario As at July 31, 2016, alternative mortgages represented ~92% of Optimum s portfolio and carry a weighted average loan-to-value at initiation of ~69% Solid source of loan growth and profitability (blend of fee-based income and interest revenues) Considerable future growth opportunities 23

24 Lines of Business Wealth Management Specialized discretionary wealth and portfolio management Complementary business line with good potential for growth Synergies with banking and fiduciary trust operations Relatively stable source of fee-based income with low capital investment * $1,901 $1,796 $1,883 $1,879 * CWB Wealth Management also contributed $9M to assets under management at July 31,

25 Lines of Business Trust Services Trust offices in Vancouver and Calgary Trust assets under administration over $10 billion; lower cost deposits of more than $1 billion * * CWT revenues include contributions of Optimum Mortgage 25

26 Financial Performance 26

27 Medium-term Performance Target Ranges Medium-term Target Range Annual adjusted cash earnings per common share growth (1)(2) 7 12% Annual return on common shareholders' equity (3) 12 15% Operating leverage (4) Common equity Tier 1 capital ratio under the Standardized approach (5) Positive Strong Common share dividend payout ratio (6) ~ 30% (1) Performance for adjusted cash earnings per common share is the current year results over the same period in the prior year. (2) Adjusted cash earnings per common share is calculated as diluted earnings per common share excluding the acquisition-related amortization of intangible assets and the contingent consideration fair value changes, net of tax, which represent charges that are not considered to be indicative of ongoing business performance. (3) Adjusted return on common shareholders equity is calculated as annualized common shareholders net income excluding the acquisition-related amortization of intangible assets and the contingent consideration fair value changes, net of tax,, divided by average common shareholders equity. (4) Operating leverage is calculated as total revenue (teb) growth over the past twelve months less non-interest expense growth over the past twelve months, excluding the pre-tax amortization of acquisitionrelated intangible assets, over the past twelve months. (5) Common equity Tier 1 capital ratio is calculated in accordance with Basel III guidelines issued by the Office of the Superintendent of Financial Institutions Canada (OSFI). (6) Common share dividend payout ratio is calculated as common share dividends declared during the past twelve months divided by common shareholders net income from Continuing Operations earned over the same period. Based on expectations for: moderate economic growth in Canada over the three- to five-year forecast horizon; ongoing strong loan growth at levels relatively consistent with recent performance; further optimization of CWB s funding mix; stable credit quality; effective expense management in consideration of revenue growth opportunities; and, prudent capital management. 27

28 Financial Performance History Historical Growth (five-year increments) Year Total Assets (millions) % Assets Growth Net Income Before Taxes (thousands) % Net Income Growth Before Taxes Net Income After Taxes (thousands) 1995 $1,331 - $11,147 - $10, $3, % $35, % $29, $5,705 87% $81, % $54, $12, % $211, % $163, $22,839 80% $291,864 38% $214,965 (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. 28

29 Financial Performance Q ($ thousands) Q Q Change Pre-tax, pre-provision earnings $ 82,152 $ 77,598 6% Common shareholders net income* 45,582 51,170 (11)% Diluted earnings per share* (14)% Adjusted cash earnings per share* (8)% *Lower common shareholders net income, diluted and adjusted cash earnings per share primarily reflects the impact of provisions for credit losses on oil and has production loans 29

30 Financial Performance YTD 2016 ($ thousands) YTD 2016 YTD 2015 Change Pre-tax, pre-provision earnings $ 248,101 $ 234,384 6% Common shareholders net income* 129, ,095 (16)% Diluted earnings per share* (18)% Adjusted cash earnings per share* (15)% *Lower common shareholders net income, diluted and adjusted cash earnings per share primarily reflects the impact of provisions for credit losses on oil and has production loans 30

31 Quarterly Loan Growth (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. 31

32 Financial Performance Margin 32

33 Financial Performance Efficiency * Canadian Bank Avg. (6) as referenced within this presentation is calculated based on information contained in the publicly available company reports of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). (1) Represents Continuing Operations (2) As of Q1 2016, Efficiency Ratio calculated as non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets, as a percentage of total revenues (teb), excluding the non-tax deductible change in fair value of contingent consideration. Strong efficiency relative to the six largest Canadian banks demonstrated ability to effectively control costs while supporting sustained growth 33

34 Shareholder Return Intrinsic Value (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly compared. 34

35 Financial Performance Dividends Dividend Payout Ratios * Fiscal 2013 ~ 30% Fiscal 2014 ~ 29% Fiscal 2015 ~ 33% Medium-term Target range ~ 30% * Dividend payout ratios represent common share dividends (including shares issued under CWB s dividend reinvestment plan (DRIP)) measured as a percentage of net income available to common shareholders. 35

36 Appendix 36

37 Provincial Economies Economic strength in Western Canada Economic strength in Western Canada 37

38 Additional Information Shares Outstanding (July 31, 2016) 88.1 million common shares (TSX:CWB) 5.0 million preferred shares Series B (TSX:CWB:PR:B) 5.6 million preferred shares Series C (TSX:CWB:PR:C) Employee Share Purchase Plan (ESPP) Approximately 94% employee participation Investor Inquiries Canadian Western Bank Place Suite Jasper Avenue Edmonton, Alberta T5J 3X6 Tel: Toll-free: InvestorRelations@cwbank.com cwb.com 38