Fixed Income Investor Presentation 1 st Quarter 2019
Building full-service banking relationships with business owners across Canada Focused Balance Growth strategy to deliver high-quality balance sheet and earnings growth BANKING TRUST WEALTH MANAGEMENT Business banking and lending Commercial equipment leasing Real estate lending Personal banking and lending Alternative mortgage lending Corporate Personal Mutual fund services Discretionary investment management Opportunity for clients to stack CDIC insured deposits using our Bank and Trust entities 2
Executing on Balanced Growth strategy Transformation to increase shareholder value AIRB transition Technology investments Focused business transformation Diversified funding Diversified geographic footprint To a nationwide full service business bank From a regional lender with commercial specialization Specialized lending expertise Relationship based service Enhancing client experience and supporting competitive advantage 3
High quality liquid balance sheet Assets Liabilities & Equity 7% Cash & securities 18% Personal loans Branch demand & notice deposits 25% Branch term deposits 17% 74% Business loans Broker deposits 30% Capital markets funding 9% Other liabilities Debt 2% 7% 1% Other assets Equity 10% 4
Diversifying Loan Portfolio - Geography Significantly improved geographic diversification Q4 2008 Q1 2019 4% 2% 6% 27% 5% 3% 52% Total loans $8.7 billion 36% 32% Total loans $26.9 billion 33% British Columbia Alberta Ontario and Other Saskatchewan Manitoba Portfolio transformation adds resiliency from regional fluctuations and creates platform for significant growth 5
Diversifying Loan Portfolio - Industry More balanced industry mix through targeted growth of full-service relationships with business owners Q4 2008 Q1 2019 14% 15% 21% 18% 20% General commercial loans 27% 2% 21% 29% 15% 18% Equipment financing & leasing Personal loans and mortgages Commercial mortgages Real estate project loans Oil and gas production loans Increased business diversification with growth of general commercial and equipment financing and leasing Reduced concentration in commercial real estate, and oil and gas production loans Lending to oil and gas producers comprise less than 1% of CWB s total loans, and underlying commodity exposures skewed toward natural gas liquids 6
Strong Credit Quality Gross Impaired Loans & Write-offs (as a percentage of average loans) 2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% (1) (3) (2) 0.51% 0.08% $ Write-offs as a % of avg. loans $ Gross impaired loans as a % of avg. loans Gross impaired loans do not directly reflect the dollar value of expected write-offs given tangible security held in support of lending exposures Low write offs as a % of average loans demonstrates the benefits of CWB s secured lending practices and disciplined underwriting (1) As of Q1 11, financial results are reported under IFRS, as opposed to GAAP, and are not directly comparable. (2) Results for the period ended January 31, 2019 have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with IAS 39 and have not been restated. (3) In 2016 significantly higher provisioning within the oil and gas loan portfolio 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. 7
0.6 0% 0.5 0% 0.4 0% 0.3 0% 0.2 0% 0.1 0% 0.0 0% $14 0 $12 0 $10 0 $80 $60 $40 $20 $0 Solid Credit Quality Provision for Credit Losses on Total Loans (as a % of average loans) $90 $100 0.30% 0.28% 0.15% 0.17% $111 $119 $120 0.38% 0.36% 0.28% 0.28% 0.23% 0.20% (1) $90 0.33% 0.24% 2014 2015 2016 (2) 2017 2018 Q1 2019 (3) CWB Stage 1 & 2 Collective Allowance ($ millions) CWB Canadian Bank Avg. (6) Impact of low oil price produced PCLs only 2 basis points higher in 2016 than peer average, before returning to lower levels Transitioned to IFRS 9 in Q1 2019 with different account methodology Strong credit underwriting, close client relationships and proactive loan management contribute to strong credit quality (1) Results for the period ended January 31, 2019 have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with IAS 39 and have not been restated. (2) In 2016 significantly higher provisioning within the oil and gas loan portfolio 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. (3) Canadian Bank Avg. (6) 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). 8
Growth and Diversification of Funding Sources 11% Q1 2019 $25.9 billion 12% 7% 8% 30% 29% Diversification of core funding sources Total funding up 4%, with 5% growth in total deposits, 3% decline in capital markets deposits, and lower balance of securitization funding 33% 34% 17% 19% Branch demand & notice deposits Branch term deposits Broker term deposits Sub debt & capital markets term deposits Securitization Q1 2018 $24.9 billion Branch-raised deposits increased 3%, with very strong 13% growth of term deposits, partially offset by 2% lower demand and notice deposits Credit ratings (DBRS) stable trend Long-term Senior Debt and Longterm Deposits Short-term Instruments Subordinated Debt Preferred Shares A (low) R1 (low) BBB (high) Pfd-3 9
Debt capital markets Historical Issuance $1,000 $800 $600 Maturity Schedule (1) $1,000 $800 $600 $250 (3) $400 $300 $250 $700 $900 $823 $400 $58 (2) $750 $850 $650 $200 $250 $300 $250 $400 $300 $200 $325 $350 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Fiscal Years $0 2019 2020 2021 2022 2023 Fiscal Years Senior Deposit Notes Subordinated Debentures Bearer Deposit Notes Total debt instruments outstanding of $3,233 million (1) Issued $125 million of NVCC preferred shares in January 2019 and $300 million of 3- year Senior Deposit Notes in March (1) As of March 21, 2019 (2) Average maturity for the seven bearer deposit notes outstanding at January 31, 2019 (3) Earliest redeemable date 10
Strong Capital & Low Leverage Standardized approach for calculating risk-weighted assets Q1 2019 Regulatory Minimum (1) Common equity Tier 1 capital (CET1) 9.1% 7.0% Tier 1 capital 10.7% 8.5% Total capital 12.0% 10.5% Basel III Leverage Ratio 8.5% 3.0% Low Leverage (total assets-to-equity) (%) 25 20 15 10 5 2014 2015 2016 2017 2018 Q1 2019 Canadian Western Bank Canadian Bank Avg. (6) (2) (1) CWB is not subject to the Big 6 100 bp add-on nor the Domestic Buffer Stability. (2) 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). 11
AIRB Transition On track to submit our final application in fiscal 2019 for transition to the AIRB approach CWB currently reports its regulatory capital ratios using the Standardized approach Requires CWB to carry significantly more capital for certain credit exposures compared to requirements under the AIRB approach Expected benefits from AIRB include improved data analytics for risk management risk-based pricing capabilities and economic capital estimations competitive offering stress testing capabilities capital allocation opportunities over time 10% decrease in RWA is approximately 100 basis points of CET 1 Capital Transformation to AIRB methodology expected to enhance competitive advantage 12
Strong Q1 2019 Operating Performance Strong financial performance Pre-tax, Pre-provision income up 10% 10% revenue growth 44.4% efficiency ratio Positive operating leverage Strong credit quality Strong growth 10% loan growth Improved diversification Ontario and Eastern Canada now represents 27% of loan portfolio, compared to 6% ten years ago Deep and liquid funding sources Pre-tax, Pre-provision Income ($ million) 107 111 +10% +6% 118 Q1 2018 Q4 2018 Q1 2019 13
Medium-term Targets Key Metrics Medium-term Performance Target Ranges Current Context Adjusted cash earnings per common share growth (1) 7 12% Delivered 7.0% Adjusted return on common shareholders' equity (2) 12 15% Delivered 11.9% Operating leverage (3) Positive Delivered positive 0.4% Common equity Tier 1 capital ratio under the Standardized approach (4) Strong Delivered a very strong ratio of 9.1% Common share dividend payout ratio (5) ~ 30% Delivered 36%, with an increase in the quarterly common share dividend declared to $0.27 (1) 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. Excluded items are not considered to be indicative of ongoing operating performance. (2) Adjusted return on common shareholders equity is calculated as 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. (3) Operating leverage is calculated as the growth rate of total revenue less the growth rate of non-interest expenses, excluding the pre-tax amortization of acquisition-related intangible assets. (4) 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). (5) Common share dividend payout ratio is calculated as common share dividends declared during the past twelve months divided by common shareholders net income earned over the same period. 14
Questions? 15
Investor Relations Contact Matt Evans and Chris Williams Tel: 780.508.8229 Toll-free: 1.800.836.1886 InvestorRelations@cwbank.com Canadian Western Bank Place Suite 3000 10303 Jasper Ave Edmonton, Alberta T5J 3X6 cwb.com Common shares TSX symbol: CWB S&P/TSX Index Inclusions: Composite, Completion (mid-cap), Capped Financial Shares outstanding: 87.2 million Market Cap: ~$2.6 Billion 16
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. 17
Appendix 18
Competitive Strength Strong performance under Standardized approach vs peers Q1 2019 vs Q1 2018 CWB Peer Average (1) Net interest income growth 13% 6% Total revenue growth 10% 4% Net income growth 7% -1% Average loan growth 13% 5% Efficiency ratio 44.4% 47.8% Provision for credit losses 0.24% 0.33% ROE 11.9% 15.5% (2) Transformation to AIRB methodology expected to enhance competitive advantage and improve data analytics (1) Calculated based on consolidated information contained in the publicly available company reports of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). (2) Under AIRB approach. 19
Quarterly Loan Growth Loan growth (before the allowance for credit losses) ($ millions) $1,200 $1,000 $800 $600 $400 $200 $- $(200) $554 $668 $749 $523 $1,047 $504 $514 $445 -$182 $211 $478 $924 $883 $416 $482 $429 $637 Q1 2015 Q3 2015 Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018 Q3 2018 Q1 2019 Consistently delivered positive loan growth in the last 5 years Growth in Q1 2018 includes $850 million portfolio acquisition Negative loan growth in Q1 2017 resulted from the lagged impact of Alberta recession 20
Capital and Leverage * All comparative information as referenced within this presentation is calculated based on information contained in the publicly available company reports for fiscal 2018 of Canada s six largest banks (TSX trading symbols: BMO, BNS, CM, NA, RY, TD). 21
Solid Credit Quality Provision for credit losses on total loans (as a percentage of average loans) 0.60% 0.50% 0.47% 0.47% 0.50% 0.40% 0.30% 0.31% 0.33% 0.29% 0.35% 0.28% 0.40% 0.20% 0.24% 0.24% 0.18% 0.25% 0.24% 0.24% 0.12% 0.10% CWB Canadian Bank Avg. (6)* BMO CIBC National RBC Scotia TD 5-Year Avg. (2015-2019) Q1 2019 (1) Demonstrated history of low credit losses relative to the six largest Canadian banks * 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) Results for the period ended January 31, 2019 have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with IAS 39 and have not been restated. 22
Solid Credit Quality Provision for credit losses (1) (bp) 50 (3) 40 30 20 10 - (2) 2014 2015 2016 2017 2018 Q1 2019 Impaired loans (specific allowances) Performing loans (collective allowance) (1) As a percentage of average loans (2) In 2016 significantly higher provisioning within the oil and gas loans portfolio 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. (3) Results for the period ended January 31, 2019 have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with IAS 39 and have not been restated. 23
Complementary Lines of Business 24
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 (43 years in business) Approximately 80,000 active leases providing diversification by geography, industry and equipment type Established presence across Canada Synergies with existing banking/lending operations (funding, growth, technology) Total Leases (including securitized portfolios) ($ millions) $3,000 $2,500 $2,000 $1,500 $1,000 $500 $1,566 $1,720 $1,877 $2,602 $2,592 2015 2016 2017 2018 Q1 2019 Provincial Breakdown of Leases as at January 31, 2019 31% 8% 6% 7% 19% 12% 17% ON AB QC SK BC MB Other 25
Lines of Business Specialized Financing Specialized financing solutions primarily provided in the areas of health care, golf, transportation, real estate, and general corporate financing Provides loans, equipment leases and structured financing solutions to more than 35,000 clients, mainly in Ontario Proven management team Long history of strong performance Securitized assets originated prior to March 1, 2016 were not included in the transaction Total Loans ($ millions) $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $1,322 $1,476 $1,586 $1,686 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Provincial Breakdown of Loans as at January 31, 2019 1% 1% 5% 5% 8% 80% ON AB BC SK MB Other 26
Lines of Business Franchise Financing Specialized financing solutions to leading hotel industry owneroperators and prominent high growth restaurant brands across Canada Proven management team with over 90 years of combined experience in the restaurant and hotel financing industry Long history of strong performance Total Loans ($ millions) Provincial Breakdown of Loans as at January 31, 2019 $1,000 $900 $800 $700 $600 $571 $617 $791 $897 41% 15% ON AB BC $500 $400 $300 Q2 2018 Q3 2018 Q4 2018 Q1 2019 1% 8% 9% 8% 18% MB QC SK Other 27
Lines of Business Optimum Mortgage Broker-driven origination model providing alternative and insured residential mortgages across Western Canada, Ontario and selected regions of Atlantic Canada As at January 31, 2019 CWB Optimum: Represents ~54% of CWB s personal loans and mortgage portfolio Q1 originations were primarily driven by alternative mortgages secured via first mortgages carrying a weighted average loan-to-value at initiation of ~69%, along with an increasing proportion of A mortgages sourced through the broker channel. Solid source of loan growth and profitability (fee-based income and interest revenues) Considerable future growth opportunities Total Optimum Mortgages ($ millions) $3,500 $3,000 $2,283 $2,500 $1,925 $2,000 $2,746 $3,013 $3,014 $1,500 $1,000 $500 2015 2016 2017 2018 Q1 2019 28
Lines of Business Wealth Management Specialized discretionary wealth and portfolio management Complementary business line with good potential for growth Synergies with banking and fiduciary trust operations Relatively stable source of fee-based income with low capital investment Assets Under Management (AUM) ($ millions) $2,500 $2,000 $1,500 $1,000 $1,883 $1,924 $2,115 $2,101 $2,137 $500 $0 2015 2016 2017 2018 Q1 2019 29
Lines of Business Trust Services Trust Services office in Vancouver Trust assets under administration over $8 billion; lower cost deposits of more than $1 billion Total Revenue ($ thousands) $15,000 Personal Trust Corporate Trust $10,000 $5,000 $0 2015 2016 2017 2018 Q1 2019 Note: On August 16, 2017, CWB announced that Canadian Western Trust (CWT) will focus its activities within business lines that are most aligned with the strategic objectives of, and will no longer offer self-directed account services to holders of certain securities. CWT initiated a process to appoint successor trustees for these accounts (referred to as the CWT strategic transactions ). The CWT strategic transactions were completed in fiscal 2018. 30
Risk Management Overview 31
Enterprise-wide Risk Management Framework 32