Bank of Montreal

Good morning and welcome to the BMO Financial Group's Q1 2021 earnings and release and conference call for February 23rd, 2021. Your host for today is Mrs. Christine Viau, Head of Investor Relations. Mrs. Viau, please go ahead.

Thank you. Good morning and welcome to BMO's first quarter 2021 investor presentation. Our agenda today is as follows. We will begin the call with remarks from Darrell White, BMO's CEO. followed by presentations from Typhoon Tuzun, the bank's chief financial officer, and Pat Cronin, our chief risk officer. We also have with us today Ernie Johanson from Canadian PNC, Dave Kasper from US PNC, Dan Barkley from BMO Capital Markets, and Joanna Rotenberg from BMO Wealth Management. After their presentations, we will have a question and answer period where we will take questions from pre-qualified analysts. To give everyone a chance to participate, please keep it to one question and re-queue. On behalf of those speaking today, I note that forward-looking statements may be made during this call. Actual results could differ materially from forecast projections or conclusions in these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results to assess and measure performance by business and the overall bank. Management assesses performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Daryl and Tyson will be referring to adjusted results in their remarks unless otherwise noted as reported. Additional information on adjusting items, the bank's reported results and factors and assumptions related to forward-looking information can be found in our 2020 annual report and our first quarter 2021 report to shareholders. And with that, I'll turn it over to Daryl.

Thank you, Christine, and good morning, everyone. On our last call in December, I expressed my confidence in the resilience of the economy and our customers to recover from the challenges brought on by the pandemic. and in the underlying strength and positioning of our bank to deliver consistent top-tier performance against that backdrop. Our results today, this quarter, clearly demonstrate our potential. The key drivers of our very strong performance reflect the execution of our purpose-driven strategy, which are consistent over time. Number one, an advantaged business mix, diversified across businesses and geographies, positioned for resilience and growth. Number two, operating momentum in each business through a focus on customer loyalty and consistent investment in digital capabilities, product innovation, and frontline teams delivering leading financial advice. Number three, targeted actions to improve efficiency and returns and drive long-term profitability, including simplifying and digitizing processes. Number four, differentiated risk management and capital allocation driving consistent credit outperformance and flexibility for capital deployment. And number five, a steadfast commitment to support the financial well-being of our customers and communities today throughout the economic recovery period and beyond. Within this framework, we announced today very strong first quarter operating results with adjusted net income of $2 billion of 26% over last year and earnings per share of $3.06. We delivered operating leverage of 7.1% with solid revenue growth of 6% compared to prior year and the prior quarter and a 1% reduction in expenses and strong pre-provision, pre-tax earnings growth of 16% from last year. We continue to execute on targeted efficiency initiatives while strategically investing in key areas for future growth this quarter's efficiency ratio of 56.3 percent is an indication of our progress a significant improvement of 400 basis points from last year we continue to target stable expenses for the full year credit performance was also very strong reflecting both the credit quality of our loan portfolio and our commitment to superior risk management over time, as we discussed at our investor event in the fall. Our capital position continues to strengthen with a CET1 ratio of 12.4%, positioning us well for growth and the eventual relaxing of constraints on returning capital to shareholders. We achieved above-target ROE of 15.8%, an increase of 230 basis points from last year. Our U.S. segment is a key driver of diversified earnings growth now and in the future, contributing over 40% of total bank earnings this quarter. Net income doubled from last year and pre-provisioned pre-tax earnings were up 48% with an efficiency ratio in this segment of 53.5%. The United States is making good progress in vaccine distribution with over 17% of the population receiving at least one dose as of mid-February. As the rollout continues and restrictions ease, this, along with further fiscal stimulus and substantial household savings, has led to higher economic growth expectations of 6% for 2021 and 4% for 2022, with both business investment and consumer spending poised to rebound quickly. Our top tier commercial lending market position, leading deposit share in our core footprint, A growing, strategically focused capital markets presence and integrated approach to serving the North American market positions us remarkably well for that recovery. In Canada, while the recovery is projected to accelerate a little later this year, GDP is still expected to grow 5% in 2021 and 4.5% in 2022. Our flagship Canadian P&C business, continues to gain momentum in the current environment with another solid quarter of 4% PPPT growth. Revenue continues to improve sequentially, supported by good proprietary mortgage growth, where we're adding mortgage specialists and seeing strong renewal and refinancing rates. We've gained market share in key areas of focus, including retail and commercial deposits, cards, and commercial loans. We remain focused on improving efficiency, including our continued branch digitization journey, which is streamlining processes and creating capacity for frontline employees through a better user and customer experience. US P&C delivered very strong PPPT growth of 24% with higher revenue and effectively managed expenses. While commercial lending growth remained modest this quarter, With overall loan utilizations still below pre-COVID levels, we're continuing to expand and add new clients. The strong credit quality of our portfolio reflects our risk discipline, competitive market position, and in particular, our deep commitment to our clients throughout the pandemic. For example, I want to recognize the tremendous efforts of our transportation finance teams who supported the trucking industry and our customers by facilitating hundreds of PPP loans and deferring payments for thousands of carriers through the toughest months of 2020 to keep commerce flowing and customers on the road. These actions position us to grow with our clients as the economic recovery builds. In BMO Wealth Management, momentum continues to build with PPPT growth of 18%, driven by strong net income and traditional wealth up 35%. from last year. Our performance reflects actions we're taking to accelerate growth and returns. Consistent with that strategy, we entered into an agreement to sell our private banking business in Hong Kong and Singapore while investing in key areas of competitive strength. For example, this quarter we launched new ETFs that offer exposure to transformative market trends, including first in Canada index products, providing access to five MSCI innovation indices as well as the S&P Global Clean Energy Index. This strategic approach to innovation has maintained our leadership position in ETF market flows for 10 years in a row. We're also making ongoing enhancements to our online brokerage platforms that offer clients a full spectrum of digital investment options across BMO InvestorLine, AdviceDirect, and Smartfolio. And we're growing our teams to meet the unprecedented customer demand, which led to record transaction volumes this quarter. In BMO capital markets, strong PPPT growth of 34% reflects actions we've taken over the past few years to further strengthen and reposition the business for sustained strong performance going forward. We've maintained our strength in the Canadian market, ranking number one in Canadian equity underwriting for 2020. We've made targeted investments in our U.S. franchise, including the addition of KGS, which significantly added to our capabilities. And we're deepening our expertise in high-growth sectors such as technology and healthcare. In addition to our strong financial results, we continue to deepen our commitment to sustainability and our purpose. As an early signatory to the United Nations Principles for Responsible Banking and a leader in sustainable finance, were playing a critical role to support the transition to a net zero carbon economy. In support of an inclusive society, we recently launched BMO Empower, a five-year US $5 billion pledge to advance an inclusive economic recovery and address key barriers faced by minority businesses, communities, and families. This quarter, we were named as the top North American bank on the list of Corporate Night's 2021 Global 100 Most Sustainable Corporations in the World. And just this morning, BMO was recognized by the Ethisphere Institute for the fourth year in a row as one of the world's most ethical companies. Most importantly, we remain resolute in the support of our customers and communities in the face of ongoing challenges related to the pandemic, and we're focused on helping them recover stronger as the economy rebounds. This includes doing our part to support widespread vaccinations as the best way to save lives and reopen the economy. In conclusion, I'm confident that we've never been better positioned for the future as we drive towards a strong North American economic recovery through 2021 and into 2022. I'd now officially like to welcome Taifun to his first quarterly earnings call at BMO. As you know, Typhoon recently joined us as CFO, and we're very happy to have him here. Typhoon, I'll turn it over to you to talk about the first quarter results.