Provision for Credit Losses (PCL) trend is positive despite the slight increase in Q4

Transcription

1 Risk Review Fourth Quarter M.G. Maila EVP & Head of Corporate Risk Management Quarterly Investor Presentation November 25, QUARTERLY PCL Provision for Credit Losses (PCL) trend is positive despite the slight increase in Q Q1/01 Q3/01 Q1/02 Q3/02 Q1/03 Q3/ Specific PCL ANNUAL PCL General PCL Provision for Credit Losses () Portfolio Segment Q4 F F2002 Consumer Commercial Corporate U.S and International (11) Specific PCL Specific PCL as a % of Avg Net Loans 25 bps 30 bps 56 bps and Acceptances (incl. Reverse Repos) Specific PCL General PCL 1

2 Q4 FORMATIONS Communications * BY SECTOR Services Electric Power Generation Formations of Loans (GIL s) are up this quarter due primarily to the deterioration in the U.S. electric power generation sector Wholesale 606 Manufacturing Financial Institutions * Includes numerous sectors, none of which exceeds 7% of the total gross formations. 24% BY GEOGRAPHY 6%.41% % % % % % % % % U.S. 70% Q4 '01 Q1 '02 Q2 '02 Q3 '02 Q4 '02 Q1 '03 Q2 '03 Q3 '03 Q4 '03 Formations () Formations as a % of Loans and Acceptances (including Reverse Repos) 2 F FORMATIONS BY SECTOR Communications Services Electric Power Generation For the year however, formations of new GIL s are down $642 million or 33% and are at their lowest level since F2000 Wholesale Mining Forest Products Manufacturing 2,041 1,945 * Includes numerous sectors, none of which exceeds 5% of the total gross formations. BY GEOGRAPHY 1,084 1, % 1.28% 1,303 28% 11%.74%.77%.88% U.S. 61% Formations () Formations as a % of Loans and Acceptances (including Reverse Repos) 3

3 Moreover, the Portfolio continues to be managed proactively, resulting in a relatively high level of repayments as well as significant sales activity this quarter and for the year Q4 Repayments Sales * Reductions** Reductions in GIL's 337 1,156 Write-Offs Reductions in GIL Balances 522 1,722 * Sales of impaired loans and assets related to restructured loans are net of $25 million in write-offs. ** Includes loans returned to performing status and foreign exchange rate changes. 4 Context for F2004 PCL Guidance of $500 million or less Exposure to Sectors of concern in the commercial/corporate portfolios is manageable as at October 31, Loans & BA's of which and consumer portfolio delinquencies are stable or declining 0.50% 0.40% Consumer Portfolio Delinquency Ratio (%)* Cattle Farming and 1, Related Sectors () Electric Power Generation Forest Products Auto Manufacturing and Supply 0.30% 0.20% 0.10% 0.00% Q Q Q Q Q1 Q2 Q3 Consumer Portfolio U.S. Q4 * % of portfolio which is 90 days or more past due 5

4 Appendix 7. Loan Portfolio Distribution Consumer/Commercial/Corporate 8. Cattle Farming and Related Sectors () 9. Electric Power Generation 10. Forest Products 11. Automotive Manufacturing and Supply 12. Specific Provisions for Credit Losses as a % of Average Net Loans and Acceptances (including Reverse Repos) BMO versus Canadian Competitors (1990-) 13. Major Equity Investment Portfolios 14. Structural Balance Sheet: Market Value Exposure and Earnings Volatility 15. Trading and Underwriting Daily P&L versus Value at Risk 16. Frequency Distribution of Daily Trading and Underwriting P&L 6 Loan Portfolio Distribution Consumer/Commercial/ Corporate Segments Loans and Acceptances* As at October 31, (C$ Billion) Portfolio Segment U.S. Consumer Residential Mortgages % Personal Loans % Cards % Consumer % Commercial % Corporate 6 20 ** % % * Excludes Reverse Repos ** Includes Harris Nesbitt mid-market portfolio of $7 billion 7

5 Cattle Farming and Related Sectors () Loans & BA's as at October 31, Net Performing Portfolio "Non- "Investment Investment Grade" Grade" Livestock, Field Crop and Horticultural Feedlots and Cow/Calf Operations Related Sectors ,447* * Represents 1.1% of the total loan portfolio (excluding reverse repos). (Exposure to Cattle Farming and Related Sectors is included as part of the Wholesale Trade (Food and Beverage), Manufacturing () and Agriculture categories in the Supplementary Financial Package. Refer to pages 26, 29 and 30.) 8 Loans & Acceptances by Geography Electric Power Generation 16% 36% Loans & BA's as at October 31, Performing Portfolio Net "Investment Grade" "Non- Investment Grade" US 48% Portfolio Migration (%) 70% 60% 50% 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Performing - "Investment Grade" Performing - "Non-Investment Grade" Diversified and Regulated PPA* Projects Merchant Projects ** 847 *** * Power Purchase Agreement ** Represents 0.6% of the total loan portfolio (excluding reverse repos). *** U.S. 68%, 32% (Refer to the Supplementary Financial Package pages 26, 29 and 30) 9

6 0% Loans & Acceptances by Geography US 25% 75% Portfolio Migration (%) 70% 60% 50% 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Performing - "Investment Grade" Performing - "Non-Investment Grade" Forest Products Loans & BA's as at October 31, Performing Portfolio Net "Investment Grade" "Non- Investment Grade" Forest Products Manufacturing Logging * 66** * Represents 0.6% of the total loan portfolio (excluding reverse repos). ** U.S. 61%, 39% (Refer to the Supplementary Financial Package pages 26, 29 and 30) 10 Loans & Acceptances by Geography Automotive Manufacturing and Supply US 47% 5% 48% Loans & BA's as at October 31, Performing Portfolio Net "Investment Grade" "Non- Investment Grade" Portfolio Migration (%) 60% 50% 40% 30% 20% 10% 0% Q1 Q2 Q3 Q4 Performing - "Investment Grade" Performing - "Non-Investment Grade" Suppliers Motor Vehicle Manufacturing 689 * 76 ** * Represents 0.5% of the total loan portfolio (excluding reverse repos). ** U.S. 97%, 3% (Refer to the Supplementary Financial Package pages 26, 29 and 30) 11

7 Specific Provisions for Credit Losses as a percentage of Average Net Loans and Acceptances (including Reverse Repos) - BMO versus Canadian Competitors (1990-) 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% BMO Cdn. Competitors* 13 Year Average (1990 to 2002) 0.42% 0.64% F Q3 YTD 0.32% 0.57% F 0.30% N/A Q1/03Q2/03Q3/03Q4/03 Q3/ % Q4/ % BMO Weighted Avg of Cdn Competitors (Excl. impact of TD's sectoral provisions) BMO 13 Year Average ( ) * BMO s Canadian competitors include: Royal, BNS, CIBC, TD and National. Competitor average excludes the impact of TD s sectoral provisions in F2002 and subsequent transfers/drawdowns. 12 Major Equity Investment Portfolios Book Value as at October 31, Merchant Banking 359 Venture Capital 189 High Grade Conduits 96 Common Equity 33 Sectoral Composition of Merchant Banking and Venture Capital Portfolios Media / Telecom Home networking Hosting Optical Networking Technology & Wireless Radio/TV Broadcasting General Manufacturing & Services Investment Fund & Limited Partnerships IT Services Printed Media Home Security Consumer Products Life Sciences Energy Real Estate Auto & Durable Goods Mfg. General Technology Financial Services 13

8 Structural Market Risk: Market Value Exposure and Earnings Volatility Market Value Exposure (MVE)* 400 $312 Million Earnings Volatility (EV)* 100 $25 Million 0 Q4 02 Q1 03 Q2 03 Q3 03 Q4 (Refer to Supplementary Financial Package page 33 for definitions and risk data) 14 RISK REVIEW FOURTH QUARTER Trading and Underwriting Daily P&L versus Value at Risk Daily P&L versus Value at Risk (VaR) August 1, to October 31, (presented on a pre-tax basis) Daily P&L 10 (pre-tax) 1-Aug (10) 1-Sep 30-Sep 31-Oct Mark-to-Market portfolio VaR (20) Accrual portfolio VaR (30) VaR (40) (Refer to Supplementary Financial Package page 33 for risk data - presented on an after tax basis) RISK REVIEW FOURTH QUARTER 15

9 Frequency Distribution of Daily Trading and Underwriting P&L Frequency Distribution of Daily P&L for Trading and Underwriting Portfolios August 1, to October 31, Frequency in number of days (3) (2) (1) Daily P&L pre-tax () 16 Forward-Looking Statements 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 presentation, and may be included in filings with Canadian securities regulators or the U.S. Securities and Exchange Commission, or in other communications. All such statements are made pursuant to the 'safe harbor' provisions of the United States Private Securities Litigation Reform Act of Forward-looking statements may involve, but are not limited to, comments with respect to our objectives for and beyond, our strategies or future actions, our targets, expectations for our financial condition or share price, and the results of or outlook for our operations or for the Canadian and U.S. economies. By their nature, forward-looking statements require us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking statements will not prove to be accurate. We caution readers of this document not to place undue reliance on our forward-looking statements as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking statements. The future outcomes that relate to forward-looking statements may be influenced by many factors, including but not limited to: global capital market activities; interest rate and currency value fluctuations; the effects of war or terrorist activities; the effects of disease or illness that impact on local, national or international economies; the effects of disruptions to public infrastructure, such as transportation, communication, power or water supply disruptions; industry and worldwide economic and political conditions; regulatory and statutory developments; the effects of competition in the geographic and business areas in which we operate; management actions; and technological changes. We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking statements to make decisions with respect to Bank of Montreal, investors and others should carefully consider these factors, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements. Bank of Montreal does not undertake to update any forwardlooking statement, whether written or oral, that may be made, from time to time, by the organization or on its behalf. Investor Relations Susan Payne Lynn Inglis Amanda Mason Fax investor.relations@bmo.com 17