F INANCIAL R ESULTS Q3 2002 Karen Maidment Executive Vice President and Chief Financial Officer Quarterly Investor Presentation August 27, 2002
Q3 Financial Snapshot Q3 2002 Q3 2001 Q2 2002 Excluding Non-recurring Items Net Income ($MM) 360 444 301 Cash EPS – Diluted ($/share) 0.72 0.88 0.59 EPS – Diluted ($/share) 0.68 0.83 0.57 * Cash Return on Equity (%) 14.4 17.8 12.2 * Return on Equity (%) 13.5 16.8 11.6 Revenue Growth (%) (4.1) 7.5 1.2 Productivity Ratio (%) 68.4 63.6 66.4 * PCL/Avg. Loans Accept. (%) 0.44 0.32 0.87 Capital: Tier 1 Ratio (%) 8.72 8.84 8.61 * Annualized 1 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Financial Highlights • Personal & Commercial net income increased by 22% from a year ago and the trend of increasing volumes continued • Private Client net income was unchanged from a year ago despite a weak operating environment • Investment Banking net income decreased reflecting investment write-downs and weaker capital markets • Excluding acquisitions, expenses were reduced by 3% from a year ago, reflecting focus on cost management • Provision for credit losses in the quarter returned to more typical levels and expected losses for the year are unchanged 2 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Group Performance Net Income ($MM) Q3 2002 Q3 2001 Q2 2002 Personal & Commercial 255 210 229 Investment Banking 108 187 154 Private Client 25 25 32 Corporate & Emfisys (28) 22 (114) Total Bank 360 444 301 3 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Group Performance Net Income ($MM) Q3 ’01 thru Q3 ’02 360 255 108 25 -28 P&C IBG PCG Corp. & Total Bank Emfisys 4 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Earnings Per Share 0.88 0.75 Cash EPS ($) 0.72 0.83 0.71 0.59 EPS ($) 0.68 0.57 0.25 0.19 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 5 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Diluted Cash EPS Q3 ’02 vs Q2 ’02 Q3 ’02 vs Q3 ’01 ($/share) ($/share) ↑ ↑ ↑ ↑ 22.3% ↓ ↓ ↓ 18.2% ↓ 0.21 ↑ ↑ ↑ ↑ 0.88 ↑ ↑ 0.04 0.06 ↑ ↑ ↓ ↓ ↓ ↓ 0.01 ↓ ↓ ↓ ↓ 0.07 ↓ ↓ ↓ ↓ 0.06 ↓ ↓ ↓ ↓ 0.72 0.72 0.01 ↓ ↓ ↓ ↓ 0.07 ↓ ↓ ↓ ↓ 0.59 Q2 02 PCL CBO Other Other Q3 02 Q3 01 PCL CBO Other Other Q3 02 Net Inv. Net Inv. Losses Losses 6 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Return On Equity 17.8 Cash 15.2 16.8 14.4 ROE (%) 14.5 12.2 ROE (%) 13.5 11.6 4.8 3.8 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 7 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Revenue Growth ↓ ↓ 79 ( ↓ ↓ ↓ ($MM) ↓ 3.6%) ↓ ↓ 2234 2222 2143 1003 1022 Other Income 926 Net Interest Income 1231 1217 1200 Q3 ’02 vs Q2 ’02 • Other Income down $96MM or 9.4% • NII up $17MM or 1.4% Q3 01 Q2 02 Q3 02 8 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Revenue Growth … investment write-downs more than offset favourable impact of acquisitions $MM Q3 ’02 vs Q2 ’02 ($MM) -79 (-3.6%) -40 (-1.9%) -66 (-2.9%) 27 (1.2%) Q3 ’02 vs Q3 ’01 ($MM) -91 (-4.1%) -68 (-3.0%) -118 (-5.3%) 95 (4.2%) Total Growth Business Growth Investment Acquisitions / Securities Losses Disposals & Initiatives 9 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Net Interest Margins Decline Net Interest Margin (bps) 320 315 312 312 308 P&C 209 207 202 195 194 Total Bank 126 122 110 107 95 IBG Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 10 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Investment Write-downs Q3 2002 $MM EPS ($/share) pre-tax CBO Equity 56 0.07 WorldCom 27 0.03 Other 75 0.10 * Total Write-downs 158 0.20 Net Realized Gains (42) (0.06) * Net Investment Securities Losses 116 0.14 * Total write-downs are $158MM pre-tax ($98MM after-tax) and Net Investment Securities Losses are $116MM pre-tax ($72MM after-tax) 11 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Expense Growth … reflects management of core expenses and lower variable compensation $MM Q3 ’02 vs Q2 ’02 ($MM) -11 (-0.8%) -9 (-0.6%) -24 (-1.7%) 0 (0.0%) 22 (1.5%) Q3 ’02 vs Q3 ’01 ($MM) -5 (-0.4%) 0 (0.0%) -38 (-2.7%) 44 (3.1%) 87 (6.2%) Total Growth Acquisitions Ongoing Growth Disposals & Variable Comp. Initiatives 12 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 Expense-to-Revenue Ratio (%) 68.4 68.1 66.4 66.3 63.6 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 13 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Delivers Strong Results Q3 P&C Delivers Strong Results Revenue & Net Income ($MM) 1171 1131 • Volume growth in 1108 1099 1094 Canada • U.S. margin down, Canada flat vs. Q2 • Continued cost 255 containment in 229 227 210 Canada 195 • Significant improvement over prior year Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Net Income Revenue 14 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Net Income … Improved contributions from Canadian and US franchises 206 189 185 182 167 49 47 38 28 25 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Chicagoland Banking ($MM) Canada ($MM) 15 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Net Interest Margin • Margin flat in Canada, down in 3.20 US. 3.15 3.12 3.12 3.08 • Cost containment and revenue growth drives NIX / Revenue ratio lower Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 NIX / Revenue Cash ROE 62.4 62.2 27.7 61.6 26.6 60.0 24.6 58.7 23.8 23.6 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 16 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Delivers Volume Growth Q3 P&C Delivers Volume Growth Residential Mortgages 48.4 47.1 45.6 44.3 42.6 13.5 12.4 9.0 7.1 6.1 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Yr./Yr. Growth (%) Average Balances ($B) 17 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Delivers Volume Growth Q3 P&C Delivers Volume Growth Personal Loans 20.4 19.7 19.0 18.5 17.7 14.7 12.3 10.9 9.5 6.6 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Yr./Yr. Growth (%) Average Balances ($B) 18 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Delivers Volume Growth Q3 P&C Delivers Volume Growth Personal Deposits 39.5 38.9 37.7 35.0 32.2 23.2 22.7 20.9 13.5 5.1 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Yr./Yr. Growth (%) Average Balances ($B) 19 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 P&C Market Share (%) 1 Small Business Loans 19.28 ($ 0-5MM) 19.04 18.87 18.82 18.80 Residential Mortgages 14.80 14.77 14.69 14.59 14.55 (Incl.3 rd Party) 13.33 13.26 13.24 Personal Loans 13.11 13.05 Personal Deposits 12.89 12.90 12.81 12.71 12.55 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 1 Small Business Loans are on a calendar quarter and 3 month lag basis. 20 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 IBG Environment Remains Very Challenging Q3 IBG Environment Remains Very Challenging Revenue & Net Income ($MM) 749 721 716 642 • Investment 537 security losses, narrower margins and reduced merger and 187 183 acquisition activity 154 108 • Continued focus 7 on cost reduction Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Net Income Revenue 21 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 IBG Net Interest Margin • Margin decreased due mainly to 1.26 the effect of a flatter yield curve 1.22 1.10 1.07 on capital markets businesses 0.95 • NIX / Revenue increased as revenue declined. Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 NIX / Revenue Cash ROE 62.5 15.3 54.9 13.0 52.6 11.2 51.7 7.3 47.8 -0.6 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 22 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 PCG Solid Performance In Difficult Markets Q3 PCG Solid Performance In Difficult Markets Revenue & Net Income ($MM) • Revenue growth driven by (Excluding Non-recurring) acquisitions; other 439 438 businesses stable 387 despite market 366 363 environment • CSFB direct contributed positive Cash Net Income ($23MM acquisition 39 32 related costs 25 25 classified as non- 11 recurring) • Investment in long- Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 term growth strategy continues Net Income Revenue 23 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 PCG Net Interest Margin • Wider spreads on retail investment products 10.70 10.61 • NIX / Revenue ratio driven by 10.09 9.97 9.69 acquired businesses and continued investment in strategic initiatives Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 NIX / Revenue Cash ROE 93.0 17.2 15.1 88.7 87.4 11.8 10.2 84.7 84.4 8.5 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 24 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
Q3 PCG Solid Performance In Difficult Markets Q3 PCG Solid Performance In Difficult Markets AUA / AUM ($B) 276 273 247 239 237 AUM 83 83 84 80 79 193 AUA & Term 190 163 159 158 • AUA/AUM & Term year over year increase primarily attributable to acquisitions & strategic initiatives Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 25 Q 3 2 0 0 2 F I N A N C I A L R E S U L T S
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