Building momentum, unlocking opportunities - February 26, 2021 - CWB Financial Group
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Building momentum, unlocking opportunities February 26, 2021
Advisory Forward-looking Statements From time to time, we make written and verbal forward-looking statements. Statements of this type are included in our 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 our 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 our predictions, forecasts, projections, expectations and conclusions will not prove to be accurate, that our assumptions may not be correct and that our strategic goals may not be achieved. A variety of factors, many of which are beyond our 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 housing market conditions, 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, material changes to trade agreements, transition to the Advanced Internal Ratings Based (AIRB) approach for calculating regulatory capital, legislative and regulatory developments, legal developments, the level of competition, the occurrence of natural catastrophes, outbreaks of disease or illness that affect local, national or international economies, changes in accounting standards and policies, information technology and cyber risk, the accuracy and completeness of information we receive 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 our 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 our 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 our actual results to differ materially from the expectations expressed in such forward-looking statements. Any forward-looking statements contained in this document represent our views as of the date hereof. Unless required by securities law, we do not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by us or on our behalf. The forward-looking statements contained in this document are presented for the purpose of assisting readers in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our strategic priorities and objectives, and may not be appropriate for other purposes. Assumptions about the performance of the Canadian economy over the forecast horizon and how it will affect our business are material factors considered when setting organizational objectives and targets. In determining expectations for economic growth, we consider our own forecasts, economic data and forecasts provided by the Canadian government and its agencies, as well as certain private sector forecasts. These forecasts are subject to inherent risks and uncertainties that may be general or specific. The full extent of the impact that the COVID-19 pandemic, including government and regulatory responses to the outbreak, will have on the Canadian economy and our business is highly uncertain and difficult to predict at this time. Where relevant, material economic assumptions underlying forward-looking statements are disclosed within the Outlook and Allowance for Credit Losses sections of our interim and annual MD&A. CWB Financial Group 2
Our strategic priorities
Solve for the unmet banking needs of Canadian entrepreneurs
Unrivaled customer experiences Destination for top talent Optimize our business
BUILD ON OUR Personalized service, specialized industry expertise, customized solutions, faster
STRENGTHS response times
TRANSFORM OUR TRANSFORMATION PRIORITIES GROWTH ACCELERATORS
BUSINESS • Targeted digital capabilities Brand: bolder and more visible to cut
• Client-focused operating model through the noise
• Fast, smooth, scalable processes Culture: proactive, client-focused,
• Transition to AIRB methodology for and change-ready to align with our
capital and risk management strategy
CREATE UNIQUE VALUE With delivery of a proactive client experience through a full range of in-person
and digital channels
DELIVER BREAKOUT As a disruptive force in Canadian financial services, and a clear full-service
GROWTH alternative for Canadian business owners
CWB Financial Group 3
We have built a robust and stable foundation through
solid growth and bold strategic moves
Strategic focus on business owners
Strong capital ratios
Sound Disciplined and secured lending model
business Strong capital
model and liquidity Robust liquidity to continue to support our
Specialized lending expertise clients through ongoing volatility
and
dedicated Destination for top talent: one of Canada’s 50 Best
teams Workplaces™ (Great Place to Work™) and Canada’s
Most Admired Corporate CulturesTM (Waterstone Completing a parallel run of AIRB models
Human Capital) and tools. AIRB approval is expected to
improve capital ratios
Strategic Our wealth acquisition is a transformative
Strong growth in Ontario brings continued progress step forward for CWB to become a leader
on our 30%-30%-30% goal for BC, AB, and ON investments in the Canadian private wealth industry
Diversified
business
Diversified funding mix and strong, with consistent Delivering an ambitious digital agenda to
growth in branch-raised deposits. transform our client experience, and
optimize backend operations
CWB Financial Group 4
Strong loan growth with balanced geography
Diversified platform provides significant growth opportunity and increased resilience to
regional fluctuations
Total Loans, by
Loans by Province Geography
Q1 Y/Y
(October 31, 2010 in brackets) 2021 Change
Others ($ billions)
2% British Columbia $9.9 4%
(-)
Alberta $9.6 5%
BC QC
AB Ontario $7.2 14%
32% 3%
31% SK MB (1%) Saskatchewan $1.4 2%
(33%) 5% 3%
(48%) ON
(6%) (3%) Quebec $1.0 4%
24%
(9%) Manitoba $0.9 7%
Other $0.6 2%
Total $30.6 6%
• Ontario loans grew 14%, supported by our increased presence with the opening of our Mississauga branch
• We are very close to achieving the 30-30-30 diversification objective for British Columbia, Alberta, and Ontario
CWB Financial Group 5
Strong loan growth ̶ Increasingly diversified
Targeted growth of full-service relationships is strategically shifting industry mix
$30.6B
General commercial loans 1% • Very strong annual growth in general
Equipment financing and leasing
10% commercial loans of 15%, including 23%
Personal loans and mortgages growth in Ontario
Commercial mortgages 19% – Reflects our focus to increase full-
Real estate project loans service client relationships across
Oil and gas production loans
our national footprint
20% Total Loans, by type Q1 Y/Y
($ billions) 2021 Change
General commercial loans $10.0 15%
$10.6B 17%
Personal loans and mortgages $6.1 5%
2%
15%
Commercial mortgages $5.9 7%
24%
Equipment financing and leasing $5.2 ̶
17% 33%
16% Real estate project loans $3.2 9%
26% Oil and gas production loans $0.2 21%
Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014 Q4 2015 Q4 2016 Q4 2017 Q4 2018 Q4 2019 Q4 2020 Q1 2021 Total $30.6 6%
CWB Financial Group 6
Significant sequential improvement in funding diversification
Full-service relationship growth resulted in continued reduction of broker deposits in Q1
Q1 2021 Total Funding Q1 Y/Y
$31.2 billion ($ billions) 2021 Change
14% 7% Total branch-raised deposits $17.6 20%
4% Branch demand & notice $12.7 36%
3%
Branch demand & Branch term $4.9 7%
35% notice deposits
Broker term $7.0 8%
22% Q4 2010 31% Branch term
Sub debt & capital market $4.4 19%
deposits
$11.5 billion
41% Broker term Securitization $2.2 10%
deposits
Total $31.2 12%
27% Sub debt & capital
market
• Branch-raised deposit growth lowers our
16% Securitization funding costs, which helped support a two
basis point sequential improvement in our net
interest margin this quarter
CWB Financial Group 7
Revenue growth
Very strong branch-raised deposit growth supported continued net interest margin improvement
3.95%
300 4.00%
245
250 237
226
($ million)
220 214 215
207 3.50%
201 201
200 191 3.21%
150 3.00%
100
2.45% 2.45% 2.45%
2.50%
2.54%
50 30 30 2.45% 2.47%
19 23 25 2.40% 2.40%
0 2.00%
Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021
Non-interest income Net interest income Total revenue Average prime rate Net interest margin
CWB Financial Group 8Provision for credit losses reflects secured and prudent
lending model
Provision for Credit Losses on Total Loans(1) Performing Loan Allowance
(as a % of average loans) (Stage 1 & 2, in $ millions)
0.50% $130 $126
0.38% $119
0.40% 0.32%
0.30% 0.26% 0.24%
0.23% 0.21%
0.32% 0.20%
0.20%
0.19% 0.19% 0.21%
0.10% 0.18% 0.18%
0.10%
0.00%
-0.10%
2016 2017 2018 2019 2020 Q4 2020 Q1 2021 Q3 2020 Q4 2020 Q1 2021
Provision for credit losses on total loans Provision for credit losses on impaired loans
• The Q1 2021 six basis point recovery on performing loans due to improved macroeconomic forecasts related to the impact
of the COVID-19 pandemic
(1) As of Q1 2019, results have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with IAS 39 and have not been restated.
CWB Financial Group 9Low history of write-offs(1) 1.80% Write-offs as a % of average loans Gross impaired loans as a % of gross loans 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% • The dollar level of gross impaired loans fluctuates as loans become impaired and are subsequently resolved, and does not directly reflect the dollar value of expected write-offs given tangible security held in support of lending exposures • Write-offs as a percentage of total loans remain low and continue to demonstrate the benefits of CWB’s secured lending practices and disciplined underwriting (1) As of the first quarter 2019, results have been prepared in accordance with IFRS 9. Prior period comparatives have been prepared in accordance with prior accounting standards and have not been restated. CWB Financial Group 10
Strong capital position
Standardized approach Regulatory
for calculating risk-weighted assets Q1 2021 Q1 2020 Minimum(1)
Common equity Tier 1 capital (CET1) 8.8% 9.1% 7.0%
Tier 1 capital 10.8% 10.6% 8.5%
Total capital 12.6% 11.9% 10.5%
Basel III Leverage Ratio 8.4% 8.4% 3.0%
• Strong regulatory capital position under the Standardized approach
• AIRB transition provides upside potential for our capital ratios
• Our CET1 capital ratio has remained stable through the economic volatility, other than our 30 basis
point investment for the wealth acquisition
• In Q4 2020, a $175 million Limited Recourse Capital Notes (NVCC) issuance increased the Tier 1 and
Total capital ratios by 70 basis points
(1) CWB is not subject to the Domestic Systemically Important Banks’ 100-bp add-on nor the Domestic Stability Buffer.
CWB Financial Group 11We generate consistent growth of dividends and book value
Historical Valuation (share price, book value per share, and dividends per common share)
$1.20 $40.00
$35.00
$1.00
$30.00
$0.80 +2%
+8% $25.00
+12%
$0.60 +5% $20.00
+5%
+6%
+14%
+12% $15.00
$0.40 +9%
+15%
-1% $10.00
$0.20
$5.00
$13.87 $15.94 $17.45 $19.52 $22.18 $23.58 $24.82 $26.09 $29.29 $31.76 $32.24
$- $-
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Q1 2021
Book value per share (right scale) Dividends (left scale) Share price (right scale)
CWB Financial Group 12AIRB approach is expected to result in improved capital ratios
We are actively using our AIRB tools in day to day risk management activities, which better equip
us to manage through economic downturns
Opportunity on initial AIRB approval to recalculate our risk-weighted assets (RWA), and therefore all
capital ratios. Will enable the following enhanced capital allocation options, in order of priority:
• Higher levels of organic growth, where prudent
• Acquisition opportunities/portfolio acquisitions
• Right-size capital levels through common share In March 2020 OSFI mandated that
federally-regulated financial institutions
NCIB/significant issuer bid halt dividend increases and suspend
• Special dividend to common shareholders the use of share buyback programs
Additional benefits expected from the transition include:
• Improved data analytics for risk management
• Improved risk-based pricing capabilities and economic capital estimations
• Improved stress testing capabilities
• More accretive capital allocation opportunities over time
CWB Financial Group 13Financial performance highlights & outlook
Q1 2021 results compared to Q1 2020
Common Shareholders’ Net Income Pre-tax, Pre-provision Income
($ millions) ($ millions)
+10% +9%
72 79 130
120
Q1 2020 Q1 2021 Q1 2020 Q1 2021
Adjusted Earnings Per Share, up 12% from Q1 2020
($ millions)
$0.12 $0.01 $0.01 -$0.05 $0.93
$0.01
$0.83 Non-interest Wealth Non-interest Other
income acquisition
Net interest expenses
income
Q1 2020 Q1 2021
CWB Financial Group 15Q1 2021 results compared to Q4 2020
Common Shareholders’ Net Income Pre-tax, Pre-provision Income
($ millions) ($ millions)
+25% +12%
79 130
63 116
Q4 2020 Q1 2021 Q4 2020 Q1 2021
Adjusted Earnings Per Share, up 24% sequentially
($ millions)
$0.05 $0.01 $0.93
$0.07 $0.05
Other
$0.75 Non-interest
Provision for
Net interest credit losses
expenses
income
Q4 2020 Q1 2021
CWB Financial Group 16Updated fiscal 2021 financial outlook
The current economic volatility will pass, and our continued strategic execution will position us for
accelerated growth
Despite the potential for near-term volatility, we continue to expect an overall gradual recovery of the
Canadian economy through 2021
Under this assumption and building from our strong first quarter results, we now expect to deliver:
• Full year 2021 mid-single digit percentage growth of adjusted earnings per common share; and
• To hold our efficiency ratio below 50%, driven by stronger net interest income growth
• Higher net interest income and net interest margin is expected to be primarily driven by
lower funding costs and a favorable shift in our funding mix; and
• Planned strategic investments expected to drive a higher level of non-interest expenses
through the remainder of the year compared to the first quarter
CWB Financial Group 17Our diversified lines of business
Our differentiated market focus drives growth of full-
service relationships with business owners across Canada
• Full-service business banking and
lending
Bank • Full-service personal banking and
lending
• Specialized finance
• Corporate
Trust
• Personal
Wealth • Discretionary investment management
Management • Mutual fund services
CWB Financial Group 19CWB Wealth Management
• A leader in sophisticated financial planning for private wealth clients, with
institutional quality investment management
• Specialized investment management and advisory capabilities for institutional clients
and Indigenous communities
• Very strong advisor and client retention following the wealth acquisition(1); we
expect the acquired teams to help accelerate full-service client growth
• The wealth acquisition is expected to support adjusted earnings per common share
modestly at first, with further accretion beginning in fiscal 2022
CWB Wealth Assets Under Management, 9,136
8,455
Advisement and Administration
($ millions)
2,516 2,437 2,461
2017 2018 2019 2020 Q1 2021
(1On June 1, 2020, we acquired the businesses of T.E. Wealth and Leon Frazer & Associates (the wealth acquisition).
CWB Financial Group 20CWB National Leasing
• Industry leader in small and mid-ticket equipment leasing / Average size: $60K at
origination
• Proven management team and ~380 employees
• Long history of strong performance (44 years), with established presence across Canada
- Leases diversified by geography, industry and equipment type
- Synergies with existing banking/lending operations (funding, growth, technology)
Total Leases (including securitized portfolios) Provincial Breakdown of Leases
($ millions) As at January 31, 2021
2,739 2,715 2,671
2,602 ON
17% AB
1,877
29% QC
19%
SK
BC
8% 12% MB
7% 8%
2017 2018 2019 2020 Q1 2021 Other
CWB Financial Group 21CWB Maxium
• 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
• Proven management team
Total Loans Provincial Breakdown of Loans
($ millions) 2,157 as at January 31, 2021
2,076 3% 1%
1,853
8% 1%
1,586 ON
1%
4% AB
861 BC
SK
MB
82% QC
2017 2018 2019 2020 Q1 2021 Other
CWB Financial Group 22CWB Franchise Finance
• Specialized financing solutions to leading hotel industry owner-operators and prominent
high growth restaurant brands across Canada
• Long standing management team with a strong track record and proven experience in the
restaurant and hotel financing industry
• Strong historical performance
• Hotel portfolio has a low average LTV ratio and represents 75% of CWB Franchise Finance total portfolio
• Restaurant portfolio has a reasonable average leverage position and represents the remaining 25% of
total portfolio
Total Loans Provincial Breakdown of Loans
($ millions) as at January 31, 2021
1,265
1,196 2%
1,008 6% 10% ON
791 17% 5% AB
BC
519
MB
16%
QC
44% SK
2017 2018 2019 2020 2021 Other
CWB Financial Group 23CWB 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, 2021, CWB Optimum:
– Represents ~49% of CWB’s personal loans and mortgage portfolio and 10% of total loans
– Solid source of fee-based income and interest revenues with an attractive yield
Total Optimum Mortgages Provincial Breakdown of Loans
($ millions) 3,074 as at January 31, 2021
3,013 3,022 3,016 2%
5%
21% ON
4%
AB
2,746
21% BC
MB
47% SK
2017 2018 2019 2020 Q1 2021 Other
CWB Financial Group 24CWB Trust Services
• Trust Services head office in Vancouver
– Assets under administration of $12.2 billion
• Trust deposits support our funding diversity
– Lower cost deposits of $3.8 billion
– Deposit flows tend to be counter-cyclical to markets
– Deposits are primarily priced off prime
Total Revenue CWT Trust Services Notice and Demand Deposits
($ thousands) ($ millions) 3,775
3,432
12,000
7,998 2,383
8,000 2,155
8,841 8,914 (1) 1,806
4,101 3,511
4,000
3,678 4,129 4,624
-
2017 2018 2019 2020 Q1 2021 2017 2018 2019 2020 2021
Personal Trust Corporate Trust Combined
Note:
On August 16, 2017, we announced that the division of Canadian Western Trust (CWT) now known as CWB Trust Services will focus its activities within business lines
that are most aligned with the strategic objectives of CWB Financial Group, 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.
(1) Annualized.
CWB Financial Group 25Provincial Operating Environments
Operating environment: British Columbia
BC is our largest geography with 32% of the loan portfolio, compared to 33% in 2010
• Continued source of loan growth and funding
Capital projects set to fuel BC recovery
• Major projects & non-residential construction continue to progress in 2021,
boosting BC’s labor market
• Manufacturing sales and exports are expected to perform well, bolstered by strong
lumber markets from high activity in house building/renovations in CAN/US
• Home resale activity of ~17% in 2021 is set to lead all provinces
• Tourism is expected to significantly rebound as vaccines roll out & restrictions lift.
BC is one of Canada’s top domestic destinations
• With second highest immigration annually, BC could face weak population growth
dragging on productivity, GDP, and home construction
Opportunities
• Capital projects & government infrastructure will create downstream opportunities
in equipment, general commercial, and construction
• Strong home resales will create opportunities for mortgages
• Growth of full service relationships
• We have an opportunity to grow our BC market share, up from 9.0% currently(1)
(1) Source: Canadian Bankers Association business lending data
CWB Financial Group 27Operating environment: Alberta
Alberta continues to provide sound business opportunities
• 31% of loan portfolio, down from 48% at the end of 2010
Outlook
• GDP % growth in Alberta is projected to be in the “mid 4s” for 2021
• Agriculture notable bright spot with production, exports, and farm receipts all up in 2020
• Alberta government's $815 million investment in irrigation system bodes well for the
sector
• Construction on Trans Mountain expansion continues
Opportunities
• Growth opportunities for Alberta service companies from BC infrastructure projects and Trans
Mountain expansion project
• The agriculture sector presents a large addressable market for CWB that presents exciting
loan and full-service banking opportunities for our newly established Ag business
• Benefits from lower taxes and less red tape
• We have an opportunity to grow our Alberta market share, up from 7.4% currently(1)
(1) Source: Canadian Bankers Association business lending data
CWB Financial Group 28Operating environment: Ontario
Ontario is our strongest growth and an increasing part of our footprint
• We have a significant opportunity to expand our market presence in Ontario for Canadian business owners, up from
market share of only 1.4% in the province(1)
• With a significant portion of T.E. Wealth and Leon Frazer & Associates’ client base in Ontario, the wealth acquisition
will help accelerate full-service client growth through our first branch opened in Ontario on August 4th, 2020
• 29% of loan portfolio comprised of Ontario and other provinces in Central
and Eastern Canada, up significantly from 10% at the end of 2010
Outlook
• Ontario is expected to perform well above provincial average after Q1
• Opportunities will develop in Manufacturing sector as consumer sentiment
returns
• Housing expected to maintain strength
• Record high savings rates and rising house prices will have a positive impact
• Opportunities
• Continued manufacturing strength will create opportunities in equipment,
general commercial, and full-service banking
• Opportunities to expand market share in each of six business lines
(1) Source: Canadian Bankers Association business lending data
CWB Financial Group 29Capital Markets Funding
Capital markets maturity schedule
Maturity Schedule Subordinated Debentures
($ millions) Senior Deposit Notes
Bearer Deposit Notes
600 Senior FRN
500 500 500
500
400
350 350 350 350
300 300
300 (2)
250 250
200 185(1)
(2)
USD 125 125
100
19-Jul-21 01-Mar-21 29-Jul-21 13-Sep-21 10-Dec-21 14-Mar-22 16-Jun-22 15-Dec-22 14-Sep-23 11-Jun-24 06-Sep-24 30-Jan-25 29-Jun-25 16-Dec-27
(1) Average maturity for the ten bearer deposit notes outstanding at January 31, 2021
(2) Earliest redeemable date
CWB Financial Group 31Investor Relations
Contact Listing and credit ratings
Common share listing
TSX symbol: CWB
Chris Williams
Tel: 780.508.8229 S&P/TSX Index Inclusions: Composite,
Toll-free: 1.800.836.1886 Completion (mid-cap), Capped Financial
InvestorRelations@cwbank.com
cwb.com/investor-relations Shares outstanding: 87.1 million
Canadian Western Bank Place Market Cap: ~$2.5 Billion
Suite 3000
10303 Jasper Ave
Edmonton, Alberta Credit ratings (DBRS Morningstar) Rating
T5J 3X6 Long-term Senior Debt and Long-term Deposits A (low)
Short-term Instruments R-1 (low)
Subordinated Debt (NVCC) BBB (low)
Limited Recourse Capital Notes BB (High)
Preferred Shares Pfd-3
CWB Financial Group 32You can also read
