NATIONAL BANK OF CANADA CAUTION REGARDING FORWARD-LOOKING STATEMENTS - PowerPoint PPT Presentation

NATIONAL BANK OF CANADA

CAUTION REGARDING FORWARD-LOOKING STATEMENTS From time to time, the Bank makes written and oral forward-looking statements, such as those contained in the Outlook for National Bank and the Major Economic Trends sections of the 2016 Annual Report, in other filings with Canadian securities regulators, and in other communications, for the purpose of describing the economic environment in which the Bank will operate during fiscal 2017 and the objectives it hopes to achieve for that period. These forward- looking statements are made in accordance with current securities legislation in Canada and the United States. They include, among others, statements with respect to the economy—particularly the Canadian and U.S. economies—market changes, observations regarding the Bank’s objectives and its strategies for achieving them, Bank-projected financial returns and certain risks faced by the Bank. These forward-looking statements are typically identified by future or conditional verbs or words such as “outlook,” “believe,” “anticipate,” “estimate,” “project,” “expect,” “intend,” “plan,” and similar terms and expressions. By their very nature, such forward-looking statements require assumptions to be made and involve inherent risks and uncertainties, both general and specific. Assumptions about the performance of the Canadian and U.S. economies in 2017 and how that will affect the Bank’s business are among the main factors considered in setting the Bank’s strategic priorities and objectives and in determining its financial targets, including provisions for credit losses. In determining its expectations for economic growth, both broadly and in the financial services sector in particular, the Bank primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. There is a strong possibility that express or implied projections contained in these forward-looking statements will not materialize or will not be accurate. The Bank recommends that readers not place undue reliance on these statements, as a number of factors, many of which are beyond the Bank’s control, could cause actual future results, conditions, actions or events to differ significantly from the targets, expectations, estimates or intentions expressed in the forward-looking statements. These factors include credit risk, market risk, liquidity and funding risk, operational risk, regulatory compliance risk, reputation risk, strategic risk and environmental risk, all of which are described in more detail in the Risk Management section beginning on page 48 of the 2016 Annual Report, general economic environment and financial market conditions in Canada, the United States and certain other countries in which the Bank conducts business, including regulatory changes affecting the Bank’s business, capital and liquidity; changes in the accounting policies the Bank uses to report its financial condition, including uncertainties associated with assumptions and critical accounting estimates; tax laws in the countries in which the Bank operates, primarily Canada and the United States (including the U.S. Foreign Account Tax Compliance Act (FATCA)); changes to capital and liquidity guidelines and to the manner in which they are to be presented and interpreted; changes to the credit ratings assigned to the Bank; and potential disruptions to the Bank’s information technology systems, including evolving cyber attack risk. The foregoing list of risk factors is not exhaustive. Additional information about these factors can be found in the Risk Management section of the 2016 Annual Report. Investors and others who rely on the Bank’s forward-looking statements should carefully consider the above factors as well as the uncertainties they represent and the risk they entail. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf. The forward-looking information contained in this document is presented for the purpose of interpreting the information contained herein and may not be appropriate for other purposes. Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 2

OVERVIEW Louis Vachon President & Chief Executive Officer

HIGHLIGHTS (millions of dollars) HIGHLIGHTS ADJUSTED RESULTS (1) Q3 17 Q2 17 Q3 16 QoQ YoY Revenues 1,743 1,654 1,610 5% 8%  Adjusted diluted EPS up 5% YoY Net Income (2) (3) 524 492 486 7% 8%  Positive operating leverage of 4.7% Diluted EPS (3) $1.39 $1.30 $1.33 7% 5%  Efficiency ratio improved by 250 bps Provision for Credit Losses 58 56 45 4% 29% Efficiency ratio 55.4% 56.6% 57.9%  ROE at 18.4% Return on Equity 18.4% 18.2% 19.0%  Common Equity Tier 1 ratio at 11.2% Common Equity Tier 1 Ratio Under Basel III 11.2% 10.8% 9.9% Dividend Payout (4) 42.1% 42.0% 49.9% (1) Excluding specified items (see Appendix 15), taxable equivalent basis (2) Net income before non-controlling interests (3) NA’s reported Q3-16 net income included a $41 million revaluation gain of ABA, or $0.12 per share (4) Trailing 4 quarters Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 4

SEGMENT SNAPSHOT – Q3 2017 (millions of dollars) HIGHLIGHTS (YoY) ADJUSTED NET INCOME Q3 17 Q2 17 Q3 16 QoQ YoY  P&C BANKING 240 233 199 3% 21% P&C Banking  Net income up 21% P&C Banking 240 204 199 18% 21% Revenues up 6% due to increase in  excl. sectoral provision adj. (1) loans, deposits, and other revenues 112 105 87 7% 29% Wealth Management NIM up 1 bp (YoY) and 3 bps (QoQ) to 2.27%  168 175 156 (4%) 8% Financial Markets  WEALTH MANAGEMENT US Specialty Finance 51 40 64 28% (20%) 29% net income growth  & International (2) Revenues up 12%  (1) Reversal of sectoral provision of $40M ($29M after taxes) in Q2-17  AUA and AUM up 10% and 13%, respectively (2) NA’s reported Q3-16 net income included a $41 million revaluation gain of ABA  FINANCIAL MARKETS  Net income up 8% Revenues up 6%   US SPECIALTY FINANCE & INTERNATIONAL Credigy and ABA ahead of plan  Expects USSF&I contribution to be around 10% of  overall results Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 5

FINANCIAL REVIEW Ghislain Parent Chief Financial Officer and Executive Vice-President, Finance and Treasury

TRANSFORMATION DRIVING EFFICIENCIES Excluding specified items Taxable equivalent basis (millions of dollars) HIGHLIGHTS Total Bank Q3 17 Q2 17 Q3 16 YoY  Positive operating leverage: +4.7% Revenues 1,743 1,654 1,610 8.3%  P&C: +8.4%  Wealth Management: +7.7% Expenses 966 936 932 3.6%  Financial Markets: +2.1%  US Specialty Finance & International: +6.1% Operating Leverage 4.7%  Efficiency ratio improvement YTD: 190 bps YoY Efficiency Ratio (YTD) 9M 17 9M 16 (bps)  On track to meet P&C efficiency ratio targets  F2017: ≈ 54% Total Bank 56.2% 58.1% 190  F2018: ≈ 53 % Personal & Commercial 54.3% 57.3% 300  Structural savings ahead of plan in F2017 with Wealth Management 63.5% 67.6% 410 additional savings expected in F2018 Financial Markets 40.9% 42.3% 140  Positive operating leverage target in F2018 US Specialty Finance 43.7% 45.6% 190 & International Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 7

STRONG CAPITAL POSITION COMMON EQUITY TIER 1 UNDER BASEL III TOTAL RISK-WEIGHTED ASSETS EVOLUTION (QoQ) UNDER BASEL III 0.14% 0.40% 0.04% 69,156 69,383 68,530 68,574 0.09% 68,205 2,768 3,263 3,291 2,807 3,815 9,760 9,495 9,827 9,391 9,611 11.27% 11.17% 11.18% 11.18% 10.77% 10.77% 56,855 55,848 55,903 56,066 55,148 Common Net Income AOCI pension Repurchase of RWA and Others Common Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Equity Tier 1 (net of dividends) plans common shares Equity Tier 1 Q2 2017 Q3 2017 Total Credit Risk Operational Risk Market Risk HIGHLIGHTS Common Equity Tier 1 ratio at 11.2%  Total capital ratio at 15.5%  Leverage ratio at 4.0%  Liquidity coverage ratio at 134%  Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 8

RISK MANAGEMENT William Bonnell Executive Vice-President, Risk Management

RETAIL MORTGAGE AND HELOC PORTFOLIO CANADIAN RETAIL MORTGAGE PORTFOLIO DISTRIBUTION DISTRIBUTION BY CANADIAN PROVINCE As at July 31, 2017 130% 10 2 2 1 2 1 PCL (bps) 0 110% 55% -10 90% 31% 31% 31% 34% 34% -20 Insured 70% 62% Uninsured & HELOC -30 21% 22% 23% 23% 23% 25% 50% -40 50% 30% 8% -50 48% 47% 46% 43% 43% 7% 38% 5% 33% 44% 50% 37% 10% -60 67% 56% 63% QC ON AB BC Other Provinces Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 -10% -70 62% 47% 65% 46% 54% Insured Uninsured HELOC PCL (bps) Uninsured and HELOC - Average LTV (1) (1) Average LTV are updated using Teranet-National Bank sub-indices by area and property type. HIGHLIGHTS Insured mortgages represent 46% of the total portfolio  Outside Central Canada, greater than 60% of the portfolio is insured mortgages  The average LTV (1) on the uninsured mortgages and HELOC portfolio was approximately 58%  Uninsured mortgages and HELOC in GTA and GVA represent 8% and 2% of the total portfolio and have an average  LTV (1) of 43% and 44% respectively Q3 2017 RESULTS CONFERENCE CALL – August 30, 2017 I 10