Risk Review 4th Quarter 2001 Mike Maila EVP & Head of Risk Management C REDIT R ISK H IGHLIGHTS : • F2001 Total Provision for Credit Losses (PCL) is $980MM including $880MM in Specific PCL’s (the latter is equivalent to 60 basis points of the loan portfolio) • Loan portfolio performance remains within expected range, given U.S. recession and slowdown in Canada • Disciplined underwriting and diversification standards continue to result in modest exposure to sectors currently attracting attention • Specific PCL’s for F2002 are estimated at this time to be in the range of 40 to 50 basis points of the loan portfolio 2
N O U NDUE C ONCENTRATIONS O F E XPOSURE T O T HE S ECTORS M OST L IKELY T O B E A FFECTED B Y: • The U.S. recession and the economic slowdown in Canada • Border issues between Canada and the U.S. 3 N O S INGLE S ECTOR R EPRESENTS A L ARGE P ROPORTION O F T HE I MPAIRED L OAN P ORTFOLIO Gross Impaired Loans by Industry Sector (% of Total as at October 31, 2001) Construction Financial Institutions Other Commercial Individuals Mortgages Retail Trade Food, Beverage & Real Estate Tobacco Minerals & Chemicals Wholesale Trade Fabricated Metals Forestry Utilities Steel Other Manufacturing Transportation [104 sub-sectors] Mining Broadcasting, Advertising and Media Energy Telecom Service Industries 4
S LOWDOWN H AS P RIMARILY A FFECTED T HE U.S. C ORPORATE /C OMMERCIAL A S W ELL A S T HE C ANADIAN C ORPORATE P ORTFOLIO Specific PCL Breakdown by Portfolio Segments (Canadian $MM) F2000 F2001 Segments Most Affected U.S. Corporate 16 453 U.S. Commercial 16 41 Canadian/Int’l Corporate 82 180 Sub-total 114 674 Segments Not As Affected Individual (Canada and U.S.) 113 136 Canadian Commercial 63 70 Sub-total 176 206 Total Specific Provisions 290 880 5 M ARKET A ND E QUITY R ISK H IGHLIGHTS 6
S TRUCTURAL M ARKET R ISK E XPOSURES R EMAIN W ITHIN E XPECTED R ANGES $MM 400 Market Value Exposure (MVE) 1 300 $233 MM 200 Earnings at Risk (EAR) 2 100 $80 MM 0 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 2001 1 MVE = potential after tax impact on balance sheet values 2 EAR = potential impact on after tax earnings over the next 12 months 7 T RADING P ERFORMANCE W AS P ROFITABLE A ND R ELATIVELY S TABLE I N Q4 40 Q4 Trading Revenue vs. VaR 30 20 10 CAD 000s 0 10/10 10/12 10/16 10/18 10/22 10/24 10/26 10/30 8/1 8/3 8/8 8/10 8/14 8/16 8/20 8/22 8/24 8/28 8/30 9/4 9/6 9/10 9/13 9/17 9/19 9/21 9/25 9/27 10/1 10/3 10/5 -10 -20 -30 -40 Total P&L Total VaR 8
E QUITY I NVESTMENTS A ND I NVESTMENT P ORTFOLIOS A RE W ELL D IVERSIFIED CDN $MM As at Oct 31/01 Major Equity Investments and Book Investment Portfolios* Value Merchant Banking 381 Venture Capital 181 CBO Equity 107 Common Equity Portfolio 91 * Excluding subsidiaries, affiliates & joint ventures 9 A PPENDIX 10
O UTSTANDING G ROSS L OANS A ND BA S T O S ELECTED I NDUSTRY S ECTORS (Total Portfolio $147Bn as at October 31, 2001) % of Gross Industry Sector (Cdn. $MM) Outstandings Portfolio Impaired Manufacturing Food, Beverage & Tobacco 2,406 1.6 19 Minerals & Chemicals 1,195 0.8 12 Fabricated Metals 1,614 1.1 54 Forestry (Exc. Softwood Lumber) 634 0.4 42 Softwood Lumber 466 0.3 6 Auto (incl. Parts/Suppliers) 836 0.6 3 Steel 354 0.2 112 Aircraft Manufacturing 200 0.1 1 Other Manufacturing * 5,360 3.6 230 Total Manufacturing 13,065 8.9 479 * Consisting of 104 sub-sectors 11 O UTSTANDING G ROSS L OANS A ND BA S T O S ELECTED I NDUSTRY S ECTORS (Total Portfolio $147Bn as at October 31, 2001) % of Gross Industry Sector (Cdn. $MM) Outstandings Portfolio Impaired Retail Trade 3,240 2.2 179 Wholesale Trade 2,992 2.0 127 Transportation 2,389 1.6 244 Airline Transportation 125 0.1 33 Utilities 1,609 1.1 173 P&C Insurance 1,263 0.9 13 Auto Rentals 680 0.5 3 Hotel and Tour Operators 270 0.2 3 12
O UTSTANDING G ROSS L OANS A ND BA S T O S ELECTED I NDUSTRY S ECTORS (Total Portfolio $147Bn as at October 31, 2001) % of Gross Industry Sector Outstandings Portfolio Impaired Telecom Cable 1,157 0.8 0 Regulated Telecom 439 0.3 1 Wireless 301 0.2 13 Long Haul Fibre Optics 300 0.2 61 Other Telecom 225 0.2 12 CLECs 44 0.0 11 Total Telecom 2,466 1.7 98 13 O UTSTANDING G ROSS L OANS A ND BA S T O S ELECTED I NDUSTRY S ECTORS (Total Portfolio $147Bn as at October 31, 2001) % of Gross Industry Sector (Cdn. $MM) Outstandings Portfolio Impaired Broadcasting, Advertising and Media Broadcasting 841 0.6 40 Advertising 790 0.5 0 Media and Other 154 0.1 1 Total 1,785 1.2 41 14
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