Q1 2024 Report to Shareholders (Part 2)

National Bank of Canada

28 February 2024

Regulatory Announcement (Part 2)

Q1 2024 Results

National Bank of Canada (the "Bank") announces publication of its First Quarter 2024 Report to Shareholders. The First Quarter Results have been uploaded to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism and is available on the Bank's website at https://www.nbc.ca/about-us/investors/quarterly-results.html

To view the full PDF of this First Quarter 2024 Report to Shareholders, please click on the following link:

http://www.rns-pdf.londonstockexchange.com/rns/8195E_1-2024-2-28.pdf

Report to Shareholders

First Quarter 2024

Interim Condensed Consolidated

Financial Statements

(unaudited)

	Consolidated Balance Sheets	48
	Consolidated Statements of Income	49
	Consolidated Statements of Comprehensive Income	50
	Consolidated Statements of Changes in Equity	52
	Consolidated Statements of Cash Flows	53
	Notes to the Interim Condensed Consolidated Financial Statements	54

Consolidated Balance Sheets

(unaudited) (millions of Canadian dollars)

		As at January 31, 2024	As at October 31, 2023⁽¹⁾
Assets
Cash and deposits with financial institutions		37,399	35,234
Securities (Notes 3, 4 and 5)
At fair value through profit or loss		105,454	99,994
At fair value through other comprehensive income		12,309	9,242
At amortized cost		12,302	12,582
		130,065	121,818
Securities purchased under reverse repurchase agreements
	and securities borrowed	12,926	11,260
Loans (Note 6)
Residential mortgage		88,524	86,847
Personal		46,307	46,358
Credit card		2,541	2,603
Business and government		88,363	84,192
		225,735	220,000
Customers' liability under acceptances		5,633	6,627
Allowances for credit losses		(1,211)	(1,184)
		230,157	225,443
Other
Derivative financial instruments		10,627	17,516
Investments in associates and joint ventures		35	49
Premises and equipment		1,787	1,592
Goodwill		1,516	1,521
Intangible assets		1,237	1,256
Other assets (Note 7)		8,178	7,788
		23,380	29,722
		433,927	423,477
Liabilities and equity
Deposits (Notes 4 and 8)		300,097	288,173
Other
Acceptances		5,633	6,627
Obligations related to securities sold short		16,140	13,660
Obligations related to securities sold under repurchase agreements
	and securities loaned	37,313	38,347
Derivative financial instruments		17,030	19,888
Liabilities related to transferred receivables (Note 4)		25,682	25,034
Other liabilities (Note 9)		7,382	7,416
		109,180	110,972

Subordinated debt (Note 17)		749	748
Equity
Equity attributable to the Bank's shareholders and holders of other equity instruments (Notes 10 and 12)
Preferred shares and other equity instruments		3,150	3,150
Common shares		3,347	3,294
Contributed surplus		63	68
Retained earnings		17,042	16,650
Accumulated other comprehensive income		297	420
		23,899	23,582
Non-controlling interests		2	2
		23,901	23,584
		433,927	423,477
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

Consolidated Statements of Income

(unaudited) (millions of Canadian dollars)

		Quarter ended January 31
		2024	2023⁽¹⁾
Interest income
Loans		3,693	2,903
Securities at fair value through profit or loss		452	425
Securities at fair value through other comprehensive income		115	59
Securities at amortized cost		123	112
Deposits with financial institutions		423	372
		4,806	3,871
Interest expense
Deposits		3,174	2,096
Liabilities related to transferred receivables		172	142
Subordinated debt		11	15
Other		698	519
		4,055	2,772
Net interest income⁽²⁾		751	1,099
Non-interest income
Underwriting and advisory fees		88	107
Securities brokerage commissions		51	47
Mutual fund revenues		150	143
Investment management and trust service fees		268	242
Credit fees		148	137
Card revenues		50	46
Deposit and payment service charges		72	73
Trading revenues (losses)		1,001	531
Gains (losses) on non-trading securities, net		25	11
Insurance revenues, net		21	18
Foreign exchange revenues, other than trading		48	56
Share in the net income of associates and joint ventures		2	3
Other		35	49
		1,959	1,463
Total revenues		2,710	2,562
Non-interest expenses
Compensation and employee benefits		904	868
Occupancy		87	82
Technology		259	250
Communications		13	14
Professional fees		66	62
Other		120	114
		1,449	1,390
Income before provisions for credit losses and income taxes		1,261	1,172
Provisions for credit losses (Note 6)		120	86
Income before income taxes		1,141	1,086
Income taxes (Note 14)		219	210
Net income		922	876
Net income attributable to
Preferred shareholders and holders of other equity instruments		37	35
Common shareholders		885	841
Bank shareholders and holders of other equity instruments		922	876
Non-controlling interests		−	−
		922	876
Earnings per share (dollars) (Note 15)
	Basic	2.61	2.49
	Diluted	2.59	2.47
Dividends per common share (dollars) (Note 10)		1.06	0.97
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) Net interest income includes dividend income. For additional information, see Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Consolidated Statements of Comprehensive Income

(unaudited) (millions of Canadian dollars)

					Quarter ended January 31
						2024	2023⁽¹⁾
Net income						922	876
Other comprehensive income, net of income taxes
	Items that may be subsequently reclassified to net income
		Net foreign currency translation adjustments
			Net unrealized foreign currency translation gains (losses) on investments in foreign operations			(243)	(140)
			Impact of hedging net foreign currency translation gains (losses)			69	40
						(174)	(100)
		Net change in debt securities at fair value through other comprehensive income
			Net unrealized gains (losses) on debt securities at fair value through other comprehensive income			45	12
			Net (gains) losses on debt securities at fair value through other comprehensive
				income reclassified to net income		3	4
			Change in allowances for credit losses on debt securities at fair value through
				other comprehensive income reclassified to net income		−	(1)
						48	15
		Net change in cash flow hedges
			Net gains (losses) on derivative financial instruments designated as cash flow hedges			29	(25)
			Net (gains) losses on designated derivative financial instruments reclassified to net income			(26)	9
						3	(16)
		Share in the other comprehensive income of associates and joint ventures				−	1
	Items that will not be subsequently reclassified to net income
		Remeasurements of pension plans and other post-employment benefit plans				8	(59)
		Net gains (losses) on equity securities designated at fair value through other comprehensive income				22	10
		Net fair value change attributable to the credit risk on financial liabilities
			designated at fair value through profit or loss			(165)	(139)
						(135)	(188)
Total other comprehensive income, net of income taxes						(258)	(288)
Comprehensive income						664	588
Comprehensive income attributable to
	Bank shareholders and holders of other equity instruments					664	588
	Non-controlling interests					−	−
						664	588
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

Consolidated Statements of Comprehensive Income (cont.)

(unaudited) (millions of Canadian dollars)

Income Taxes - Other Comprehensive Income

The following table presents the income tax expense or recovery for each component of other comprehensive income.

				Quarter ended January 31
					2024	2023
Items that may be subsequently reclassified to net income
	Net foreign currency translation adjustments
		Net unrealized foreign currency translation gains (losses) on investments in foreign operations			6	5
		Impact of hedging net foreign currency translation gains (losses)			17	8
					23	13
	Net change in debt securities at fair value through other comprehensive income
		Net unrealized gains (losses) on debt securities at fair value through other comprehensive income			17	4
		Net (gains) losses on debt securities at fair value through other comprehensive income
			reclassified to net income		1	2
		Change in allowances for credit losses on debt securities at fair value through
			other comprehensive income reclassified to net income		−	−
					18	6
	Net change in cash flow hedges
		Net gains (losses) on derivative financial instruments designated as cash flow hedges			11	(10)
		Net (gains) losses on designated derivative financial instruments reclassified to net income			(10)	4
					1	(6)
	Share in the other comprehensive income of associates and joint ventures				−	−
Items that will not be subsequently reclassified to net income
	Remeasurements of pension plans and other post-employment benefit plans				3	(13)
	Net gains (losses) on equity securities designated at fair value through other comprehensive income				10	3
	Net fair value change attributable to the credit risk on financial liabilities
		designated at fair value through profit or loss			(63)	(53)
					(50)	(63)
					(8)	(50)
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Consolidated Statements of Changes in Equity

(unaudited) (millions of Canadian dollars)

		Quarter ended January 31
			2024	2023⁽¹⁾
Preferred shares and other equity instruments at beginning and at the end (Note 10)			3,150	3,150
Common shares at beginning (Note 10)			3,294	3,196
Issuances of common shares pursuant to the Stock Option Plan			51	34
Impact of shares purchased or sold for trading			2	6
Common shares at end			3,347	3,236
Contributed surplus at beginning			68	56
Stock option expense (Note 12)			4	5
Stock options exercised			(6)	(4)
Other			(3)	(2)
Contributed surplus at end			63	55
Retained earnings at beginning			16,650	15,140
Impact of IFRS 17 adoption on November 1, 2022 (Note 2)			−	(48)
Net income attributable to the Bank's shareholders and holders of other equity instruments			922	876
Dividends on preferred shares and distributions on other equity instruments (Note 10)			(43)	(40)
Dividends on common shares (Note 10)			(359)	(327)
Remeasurements of pension plans and other post-employment benefit plans			8	(59)
Net gains (losses) on equity securities designated at fair value through other comprehensive income			22	10
Net fair value change attributable to the credit risk on financial liabilities
	designated at fair value through profit or loss		(165)	(139)
Impact of a financial liability resulting from put options written to non-controlling interests			1	(1)
Other			6	5
Retained earnings at end			17,042	15,417
Accumulated other comprehensive income at beginning			420	202
Net foreign currency translation adjustments			(174)	(100)
Net change in unrealized gains (losses) on debt securities at fair value through other comprehensive income			48	15
Net change in gains (losses) on cash flow hedges			3	(16)
Share in the other comprehensive income of associates and joint ventures			−	1
Accumulated other comprehensive income at end			297	102
Equity attributable to the Bank's shareholders and holders of other equity instruments			23,899	21,960
Non-controlling interests at beginning			2	2
Net income attributable to non-controlling interests			−	−
Non-controlling interests at end			2	2
Equity			23,901	21,962

Accumulated Other Comprehensive Income

	As at January 31, 2024	As at January 31, 2023
Accumulated other comprehensive income
Net foreign currency translation adjustments	133	104
Net unrealized gains (losses) on debt securities at fair value through other comprehensive income	13	(19)
Net gains (losses) on instruments designated as cash flow hedges	149	15
Share in the other comprehensive income of associates and joint ventures	2	2
	297	102
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

Consolidated Statements of Cash Flows

(unaudited) (millions of Canadian dollars)

		Quarter ended January 31
		2024	2023⁽¹⁾
Cash flows from operating activities
Net income		922	876
Adjustments for
	Provisions for credit losses	120	86
	Amortization of premises and equipment, including right-of-use assets	53	52
	Amortization of intangible assets	72	79
	Deferred taxes	(1)	(32)
	Losses (gains) on sales of non-trading securities, net	(25)	(11)
	Share in the net income of associates and joint ventures	(2)	(3)
	Stock option expense	4	5
Change in operating assets and liabilities
	Securities at fair value through profit or loss	(5,460)	(2,460)
	Securities purchased under reverse repurchase agreements and securities borrowed	(1,666)	56
	Loans and acceptances, net of securitization	(5,180)	(4,935)
	Deposits	11,924	16,111
	Obligations related to securities sold short	2,480	(2,039)
	Obligations related to securities sold under repurchase agreements and securities loaned	(1,034)	4,162
	Derivative financial instruments, net	4,031	2,025
	Interest and dividends receivable and interest payable	39	(48)
	Current tax assets and liabilities	116	(148)
	Other items	(347)	(1,104)
		6,046	12,672
Cash flows from financing activities
Issuances of common shares (including the impact of shares purchased for trading)		47	36
Repayments of lease liabilities		(37)	(25)
Dividends paid on shares and distributions on other equity instruments		(401)	(364)
		(391)	(353)
Cash flows from investing activities
Net change in investments in associates and joint ventures		10	−
Purchases of non-trading securities		(5,122)	(2,785)
Maturities of non-trading securities		1,059	691
Sales of non-trading securities		1,531	390
Net change in premises and equipment, excluding right-of-use assets		(245)	(89)
Net change in intangible assets		(53)	(60)
		(2,820)	(1,853)
Impact of currency rate movements on cash and cash equivalents		(670)	(50)
Increase (decrease) in cash and cash equivalents		2,165	10,416
Cash and cash equivalents at beginning		35,234	31,870
Cash and cash equivalents at end⁽²⁾		37,399	42,286
Supplementary information about cash flows from operating activities
Interest paid		4,108	2,445
Interest and dividends received		4,898	3,496
Income taxes paid		330	218
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) Certain amounts have been adjusted to reflect changes in accounting policies arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) This item is the equivalent of Consolidated Balance Sheet item Cash and deposits with financial institutions. It includes an amount of $9.5 billion as at January 31, 2024 ($9.3 billion as at October 31, 2023) for which there are restrictions and of which $5.7 billion ($6.5 billion as at October 31, 2023) represents the balances that the Bank must maintain with central banks, other regulatory agencies, and certain counterparties.

Notes to the Interim Condensed Consolidated Financial Statements

(unaudited) (millions of Canadian dollars)


Note 1	Basis of Presentation	54	Note 10	Share Capital and Other Equity Instruments	73
Note 2	Accounting Policy Changes	54	Note 11	Capital Disclosure	75
Note 3	Fair Value of Financial Instruments	56	Note 12	Share-Based Payments	76
Note 4	Financial Instruments Designated at Fair Value Through		Note 13	Employee Benefits - Pension Plans and Other
	Profit or Loss	61		Post-Employment Benefit Plans	76
Note 5	Securities	62	Note 14	Income Taxes	77
Note 6	Loans and Allowances for Credit Losses	63	Note 15	Earnings Per Share	78
Note 7	Other Assets	72	Note 16	Segment Disclosures	78
Note 8	Deposits	72	Note 17	Event After the Consolidated Balance Sheet Date	79
Note 9	Other Liabilities	73

Note 1 - Basis of Presentation

On February 27, 2024, the Board of Directors authorized the publication of the Bank's unaudited interim condensed consolidated financial statements (the consolidated financial statements) for the quarter ended January 31, 2024.

The Bank's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB). The financial statements also comply with section 308(4) of the Bank Act (Canada), which states that, except as otherwise specified by the Office of the Superintendent of Financial Institutions (Canada) (OSFI), the consolidated financial statements are to be prepared in accordance with IFRS. IFRS represent Canadian generally accepted accounting principles (GAAP). None of the OSFI accounting requirements are exceptions to IFRS.

These consolidated financial statements were prepared in accordance with IAS 34 - Interim Financial Reporting and using the same accounting policies as those described in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023, except for the changes described in Note 2 to these consolidated financial statements, which have been applied since November 1, 2023 upon the adoption of IFRS 17 - Insurance Contracts (IFRS 17). Certain comparative amounts have been adjusted to reflect these accounting policy changes.

Judgment, Estimates and Assumptions

In preparing consolidated financial statements in accordance with IFRS, management must exercise judgment and make estimates and assumptions that affect the reporting date carrying amounts of assets and liabilities, net income, and related information. Some of the Bank's accounting policies, such as measurement of expected credit losses (ECLs), require particularly complex judgments and estimates. See Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023 for a summary of the most significant estimation processes used to prepare the consolidated financial statements in accordance with IFRS and for the valuation techniques used to determine the carrying values and fair values of assets and liabilities.

The geopolitical landscape (notably, the Russia-Ukraine war and clashes between Hamas and Israel), inflation, climate change, and higher interest rates continue to create uncertainty. As a result, establishing reliable estimates and applying judgment continue to be substantially complex. The uncertainty regarding certain key inputs used in measuring ECLs is described in Note 6 to these consolidated financial statements.

Unless otherwise indicated, all amounts are expressed in Canadian dollars, which is the Bank's functional and presentation currency.

Note 2 - Accounting Policy Changes

On November 1, 2023, the Bank adopted IFRS 17 - Insurance Contracts (IFRS 17).

Insurance Revenues

Insurance contracts, including reinsurance contracts, are arrangements under which one party accepts significant insurance risk by agreeing to compensate the policyholder if a specified uncertain future event was to occur.

The Bank uses the General Measurement Model (GMM) to measure most of its insurance and reinsurance contracts based on the present value of estimates of the expected future cash flows necessary to fulfill the contracts, including an adjustment for non-financial risk as well as the contractual service margin (CSM), which represents the unearned profits that will be recognized as services are provided in the future. The Bank has chosen to apply the simplified approach (the Premium Allocation Approach or PAA) to measure insurance contracts with coverage periods of one year or less. The insurance revenues from these contracts are recognized systematically over the coverage period. For all measurement approaches, if contracts are expected to be onerous, losses are recognized immediately in the Consolidated Statement of Income.

Upon the issuance of a contract, an insurance asset or liability and a reinsurance asset, if applicable, are recognized in Other assets and in Other liabilities on the Consolidated Balance Sheet. Subsequent changes in the carrying values of the insurance asset and liability and reinsurance asset are recognized on a net basis in Non-interest income in the Consolidated Statement of Income.

Insurance service expenses consist mainly of incurred claims and other insurance service expenses, amortization of insurance acquisition cash flows, and losses on onerous contracts as well as reversals of such losses. Royalties received from reinsurers are recognized in the Consolidated Statement of Income as the Bank receives services under groups of reinsurance contracts. Amounts recovered from reinsurers comprise cash flows related to the claims or benefit experience of the underlying contracts. All of these amounts are recognized as a deduction from insurance revenues in Non-interest income in the Consolidated Statement of Income.

Impacts of IFRS 17 Adoption

The IFRS 17 requirements have been applied retrospectively by adjusting the Consolidated Balance Sheet balances on the date of initial application, i.e., November 1, 2022. The impacts of IFRS 17 adoption have been recognized through an adjustment to Retained earnings as at November 1, 2022. The following information presents the impacts on the Consolidated Balance Sheets as at November 1, 2022 and as at October 31, 2023:

Consolidated Balance Sheets

	As at October 31, 2023		As at October 31, 2023	As at October 31, 2022		As at November 1, 2022
	As published	IFRS 17 adjustments	Adjusted	As published	IFRS 17 adjustments	Adjusted
Assets
Other assets	7,889	(101)	7,788	5,958	(50)	5,908
Liabilities
Other liabilities	7,423	(7)	7,416	6,361	(2)	6,359
Equity
Retained earnings	16,744	(94)	16,650	15,140	(48)	15,092

As at October 31, 2023, the net CSM amount related to the new recognition and measurement principles for insurance and reinsurance assets and liabilities stood at $109 million ($89 million as at November 1, 2022).

The following information presents the impacts on the Consolidated Statement of Income for the comparative quarter:

Consolidated Statement of Income - Increase (Decrease)

Quarter ended January 31, 2023
Non-interest income - Insurance revenues, net		(20)
Total revenues		(20)
Compensation and employee benefits		(7)
Occupancy		(1)
Technology		(2)
Professional fees		(1)
Other		(2)
Non-interest expenses		(13)
Income before provisions for credit losses and income taxes		(7)
Income before income taxes		(7)
Income taxes		(2)
Net income		(5)

Note 3 - Fair Value of Financial Instruments

Fair Value and Carrying Value of Financial Instruments by Category

Financial assets and financial liabilities are recognized on the Consolidated Balance Sheet at fair value or at amortized cost in accordance with the categories set out in the accounting framework for financial instruments.

								As at January 31, 2024
			Carrying value and fair value				Carrying value	Fair value	Total carrying value	Total fair value
			Financial instruments classified as at fair value through profit or loss	Financial instruments designated at fair value through profit or loss	Debt securities classified as at fair value through other comprehensive income	Equity securities designated at fair value through other comprehensive income	Financial instruments at amortized cost, net	Financial instruments at amortized cost, net	Total carrying value	Total fair value
Financial assets
	Cash and deposits with financial
		institutions	−	−	−	−	37,399	37,399	37,399	37,399

	Securities		104,794	660	11,613	696	12,302	12,040	130,065	129,803

	Securities purchased under reverse
		repurchase agreements
		and securities borrowed	−	−	−	−	12,926	12,926	12,926	12,926

	Loans and acceptances, net of allowances		14,221	−	−	−	215,936	214,829	230,157	229,050

	Other
	Derivative financial instruments		10,627	−	−	−	−	−	10,627	10,627
	Other assets		1,845	−	−	−	3,087	3,087	4,932	4,932
Financial liabilities
	Deposits⁽¹⁾		−	21,372			278,725	278,697	300,097	300,069

	Other
	Acceptances		−	−			5,633	5,633	5,633	5,633
	Obligations related to securities sold short		16,140	−			−	−	16,140	16,140

	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	−	−			37,313	37,313	37,313	37,313
	Derivative financial instruments		17,030	−			−	−	17,030	17,030
	Liabilities related to transferred receivables		−	9,779			15,903	15,398	25,682	25,177
	Other liabilities		−	−			3,836	3,834	3,836	3,834

	Subordinated debt		−	−			749	759	749	759

(1) Includes embedded derivative financial instruments.

								As at October 31, 2023⁽¹⁾
			Carrying value and fair value				Carrying value	Fair value	Total carrying value	Total fair value
			Financial instruments classified as at fair value through profit or loss	Financial instruments designated at fair value through profit or loss	Debt securities classified as at fair value through other comprehensive income	Equity securities designated at fair value through other comprehensive income	Financial instruments at amortized cost, net	Financial instruments at amortized cost, net	Total carrying value	Total fair value
Financial assets
	Cash and deposits with financial
		institutions	−	−	−	−	35,234	35,234	35,234	35,234

	Securities		99,236	758	8,583	659	12,582	12,097	121,818	121,333

	Securities purchased under reverse
		repurchase agreements
		and securities borrowed	−	−	−	−	11,260	11,260	11,260	11,260

	Loans and acceptances, net of allowances		13,124	−	−	−	212,319	210,088	225,443	223,212

	Other
	Derivative financial instruments		17,516	−	−	−	−	−	17,516	17,516
	Other assets		73	−	−	−	4,285	4,285	4,358	4,358
Financial liabilities
	Deposits⁽²⁾		−	18,275			269,898	269,490	288,173	287,765

	Other
	Acceptances		−	−			6,627	6,627	6,627	6,627
	Obligations related to securities sold short		13,660	−			−	−	13,660	13,660

	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	−	−			38,347	38,347	38,347	38,347
	Derivative financial instruments		19,888	−			−	−	19,888	19,888
	Liabilities related to transferred receivables		−	9,952			15,082	14,255	25,034	24,207
	Other liabilities		−	−			3,497	3,494	3,497	3,494

	Subordinated debt		−	−			748	727	748	727

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) Includes embedded derivative financial instruments.

Establishing Fair Value

The fair value of a financial instrument is the price that would be received to sell a financial asset or paid to transfer a financial liability in an orderly transaction in the principal market at the measurement date under current market conditions (i.e., an exit price).

Unadjusted quoted prices in active markets provide the best evidence of fair value. When there is no quoted price in an active market, the Bank applies other valuation techniques that maximize the use of relevant observable inputs and that minimize the use of unobservable inputs. Such valuation techniques include the following: using information available from recent market transactions, referring to the current fair value of a comparable financial instrument, applying discounted cash flow analysis, applying option pricing models, or relying on any other valuation technique that is commonly used by market participants and has proven to yield reliable estimates. Judgment is required when applying many of the valuation techniques. The Bank's valuations were based on its assessment of the conditions prevailing as at January 31, 2024 and may change in the future. Furthermore, there may be measurement uncertainty resulting from the choice of valuation model used.

Fair value is established in accordance with a rigorous control framework. The Bank has policies and procedures that govern the process for determining fair value. The Bank's valuation governance structure has remained largely unchanged from that described in Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2023. The valuation techniques used to determine the fair value of financial assets and financial liabilities are also described in this note, and no significant changes have been made to the valuation techniques.

Note 3 - Fair Value of Financial Instruments (cont.)

Financial Instruments Recorded at Fair Value on the Consolidated Balance Sheet

Hierarchy of Fair Value Measurements

IFRS establishes a fair value measurement hierarchy that classifies the inputs used in financial instrument fair value measurement techniques according to three levels. This fair value hierarchy requires observable market inputs in an active market to be used whenever such inputs exist. According to the hierarchy, the highest level of inputs are unadjusted quoted prices in active markets for identical instruments and the lowest level of inputs are unobservable inputs. In some cases, the inputs used to measure the fair value of a financial instrument might be categorized within different levels of the fair value hierarchy. In those cases, the fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. For additional information, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Transfers of financial instruments between Levels 1 and 2 and transfers to (or from) Level 3 are deemed to have taken place at the beginning of the quarter in which the transfer occurred. Significant transfers can occur between the fair value hierarchy levels due to new information on inputs used to determine fair value and the observable nature of those inputs.

During the quarter ended January 31, 2024, $3 million in securities classified as at fair value through profit or loss were transferred from Level 2 to Level 1 as a result of changing market conditions ($6 million in securities classified as at fair value through profit or loss during the quarter ended January 31, 2023). Also, during the quarter ended January 31, 2024, $2 million in securities classified as at fair value through profit or loss were transferred from Level 1 to Level 2 as a result of changing market conditions ($4 million in securities classified as at fair value through profit or loss and $2 million in obligations related to securities sold short during the quarter ended January 31, 2023). During the quarters ended January 31, 2024 and 2023, financial instruments were transferred to (or from) Level 3 due to changes in the availability of observable market inputs as a result of changing market conditions.

The following tables show financial instruments recorded at fair value on the Consolidated Balance Sheet according to the fair value hierarchy.

						As at January 31, 2024
					Level 1	Level 2	Level 3	Total financial assets/liabilities at fair value
Financial assets
	Securities
		At fair value through profit or loss
			Securities issued or guaranteed by
				Canadian government	5,697	11,550	−	17,247
				Canadian provincial and municipal governments	−	8,539	−	8,539
				U.S. Treasury, other U.S. agencies and other foreign governments	1,602	1,274	−	2,876
			Other debt securities		−	4,150	56	4,206
			Equity securities		69,415	2,664	507	72,586
					76,714	28,177	563	105,454
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	75	5,415	−	5,490
				Canadian provincial and municipal governments	−	2,529	−	2,529
				U.S. Treasury, other U.S. agencies and other foreign governments	2,235	159	−	2,394
			Other debt securities		−	1,200	−	1,200
			Equity securities		−	333	363	696
					2,310	9,636	363	12,309
	Loans				−	14,009	212	14,221
	Other
		Derivative financial instruments			237	10,173	217	10,627
		Other assets - Other items			−	1,772	73	1,845
					79,261	63,767	1,428	144,456
Financial liabilities
	Deposits⁽¹⁾				−	21,469	−	21,469
	Other
		Obligations related to securities sold short			11,422	4,718	−	16,140
		Derivative financial instruments			416	16,599	15	17,030
		Liabilities related to transferred receivables			−	9,779	−	9,779
					11,838	52,565	15	64,418

(1) The amounts include the fair value of embedded derivative financial instruments in deposits.

						As at October 31, 2023
					Level 1	Level 2	Level 3	Total financial assets/liabilities at fair value
Financial assets
	Securities
		At fair value through profit or loss
			Securities issued or guaranteed by
				Canadian government	6,403	10,872	−	17,275
				Canadian provincial and municipal governments	−	8,260	−	8,260
				U.S. Treasury, other U.S. agencies and other foreign governments	2,781	2,105	−	4,886
			Other debt securities		−	3,450	65	3,515
			Equity securities		65,018	554	486	66,058
					74,202	25,241	551	99,994
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	73	4,124	−	4,197
				Canadian provincial and municipal governments	−	1,938	−	1,938
				U.S. Treasury, other U.S. agencies and other foreign governments	904	254	−	1,158
			Other debt securities		−	1,290	−	1,290
			Equity securities		−	281	378	659
					977	7,887	378	9,242
	Loans				−	12,907	217	13,124
	Other
		Derivative financial instruments			285	17,224	7	17,516
		Other assets - Other items			−	−	73	73
					75,464	63,259	1,226	139,949
Financial liabilities
	Deposits⁽¹⁾				−	18,134	−	18,134
	Other
		Obligations related to securities sold short			8,335	5,325	−	13,660
		Derivative financial instruments			467	19,399	22	19,888
		Liabilities related to transferred receivables			−	9,952	−	9,952
					8,802	52,810	22	61,634

(1) The amounts include the fair value of embedded derivative financial instruments in deposits.

Financial Instruments Classified in Level 3

The Bank classifies financial instruments in Level 3 when the valuation technique is based on at least one significant input that is not observable in the markets. The Bank maximizes the use of observable inputs to determine the fair value of financial instruments.

For a description of the valuation techniques and significant unobservable inputs used in determining the fair value of financial instruments classified in Level 3, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2023. For the quarter ended January 31, 2024, no significant change was made to the valuation techniques and significant unobservable inputs used in determining fair value.

Sensitivity Analysis of Financial Instruments Classified in Level 3

The Bank performs sensitivity analyses for the fair value measurements of Level 3 financial instruments, substituting unobservable inputs with one or more reasonably possible alternative assumptions. For additional information on how a change in an unobservable input might affect the fair value measurements of Level 3 financial instruments, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2023. For the quarter ended January 31, 2024, there were no significant changes in the sensitivity analyses of Level 3 financial instruments, except for derivative financial instruments for which the reasonable fair value range could result in a $58 million increase or decrease in the net fair value recorded as at January 31, 2024 (a $16 million increase or decrease as at October 31, 2023).

Note 3 - Fair Value of Financial Instruments (cont.)

Change in the Fair Value of Financial Instruments Classified in Level 3

The Bank may hedge the fair value of financial instruments classified in the various levels through offsetting hedge positions. Gains and losses on financial instruments classified in Level 3 presented in the following tables do not reflect the inverse gains and losses on financial instruments used for economic hedging purposes that may have been classified in Level 1 or Level 2 by the Bank. In addition, the Bank may hedge the fair value of financial instruments classified in Level 3 using other financial instruments classified in Level 3. The effect of these hedges is not included in the net amount presented in the following tables. The gains and losses presented hereafter may comprise changes in fair value based on observable and unobservable inputs.

Quarter ended January 31, 2024

Securities

at fair value

through profit

or loss

Securities

at fair value

through other

comprehensive

income

Loans and

other assets

Derivative

financial

instruments⁽¹⁾

Deposits⁽²⁾

Fair value as at October 31, 2023

551

378

290

(15)

−

Total realized and unrealized gains (losses) included in Net income ⁽³⁾

−

Total realized and unrealized gains (losses) included in

Other comprehensive income

−

(6)

−

Purchases

−

Sales

(8)

(9)

(2)

−

Issuances

−

Settlements and other

−

(17)

207

−

Financial instruments transferred into Level 3

−

Financial instruments transferred out of Level 3

−

Fair value as at January 31, 2024

563

363

285

202

−

Change in unrealized gains and losses included in Net income with respect

to financial assets and financial liabilities held as at January 31, 2024⁽⁴⁾

−

Quarter ended January 31, 2023

Securities

at fair value

through profit

or loss

Securities

at fair value

through other

comprehensive

income

Loans and

other assets

Derivative

financial

instruments⁽¹⁾

Deposits⁽²⁾

Fair value as at October 31, 2022

476

320

331

(17)

(8)

Total realized and unrealized gains (losses) included in Net income ⁽⁵⁾

(7)

−

Total realized and unrealized gains (losses) included in

Other comprehensive income

−

Purchases

−

Sales

(2)

−

Issuances

−

Settlements and other

−

(17)

−

Financial instruments transferred into Level 3

−

Financial instruments transferred out of Level 3

−

Fair value as at January 31, 2023

482

326

325

(4)

(1)

Change in unrealized gains and losses included in Net income with respect

to financial assets and financial liabilities held as at January 31, 2023⁽⁶⁾

(7)

−

(1) The derivative financial instruments include assets and liabilities presented on a net basis.

(2) The amounts include the fair value of embedded derivative financial instruments in deposits.

(3) Total gains (losses) included in Non-interest income was a gain of $25 million.

(4) Total unrealized gains (losses) included in Non-interest income was an unrealized gain of $71 million.

(5) Total gains (losses) included in Non-interest income was a gain of $3 million.

(6) Total unrealized gains (losses) included in Non-interest income was an unrealized gain of $3 million.

Note 4 - Financial Instruments Designated at Fair Value Through Profit or Loss

The Bank chose to designate certain financial instruments at fair value through profit or loss according to the criteria presented in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023. Consistent with its risk management strategy and in accordance with the fair value option, which permits the designation if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring financial assets and financial liabilities or recognizing the gains and losses thereon on different bases, the Bank designated certain securities, certain securities purchased under reverse repurchase agreements, and certain liabilities related to transferred receivables at fair value through profit or loss. The fair value of liabilities related to transferred receivables does not include credit risk, as the holders of these liabilities are not exposed to the Bank's credit risk. The Bank also designated certain deposits that include embedded derivative financial instruments at fair value through profit or loss.

To determine a change in fair value arising from a change in the credit risk of deposits designated at fair value through profit or loss, the Bank calculates, at the beginning of the period, the present value of the instrument's contractual cash flows using the following rates: first, an observed discount rate for similar securities that reflects the Bank's credit spread and, then, a rate that excludes the Bank's credit spread. The difference obtained between the two values is then compared to the difference obtained using the same rates at the end of the period.

Information about the financial assets and financial liabilities designated at fair value through profit or loss is provided in the following tables.

		Carrying value as at January 31, 2024	Unrealized gains (losses) for the quarter ended January 31, 2024	Unrealized gains (losses) since the initial recognition of the instrument
Financial assets designated at fair value through profit or loss
	Securities	660	9	1
Financial liabilities designated at fair value through profit or loss
	Deposits⁽¹⁾⁽²⁾	21,372	(1,841)	2,073
	Liabilities related to transferred receivables	9,779	(170)	382
^.		31,151	(2,011)	2,455

		Carrying value as at January 31, 2023	Unrealized gains (losses) for the quarter ended January 31, 2023	Unrealized gains (losses) since the initial recognition of the instrument
Financial assets designated at fair value through profit or loss
	Securities	892	9	2
	Securities purchased under reverse repurchase agreements	39	−	−
		931	9	2
Financial liabilities designated at fair value through profit or loss
	Deposits⁽¹⁾⁽²⁾	17,632	(1,188)	1,899
	Liabilities related to transferred receivables	9,608	(146)	424
		27,240	(1,334)	2,323

(1) For the quarter ended January 31, 2024, the change in the fair value of deposits designated at fair value through profit or loss attributable to credit risk, and recorded in Other comprehensive income, resulted in a loss of $228 million ($192 million loss for the quarter ended January 31, 2023).

(2) The amount at maturity that the Bank will be contractually required to pay to the holders of these deposits varies and will differ from the reporting date fair value.

Note 5 - Securities

Credit Quality

As at January 31, 2024 and as at October 31, 2023, securities at fair value through other comprehensive income and securities at amortized cost were mainly classified in Stage 1, with their credit quality falling mostly in the "Excellent" category according to the Bank's internal risk-rating categories. For additional information on the reconciliation of allowances for credit losses, see Note 6 to these consolidated financial statements.

Unrealized Gross Gains (Losses) on Securities at Fair Value Through Other Comprehensive Income⁽¹⁾

		As at January 31, 2024
		Amortized cost	Unrealized gross gains	Unrealized gross losses	Carrying value⁽²⁾
Securities issued or guaranteed by
	Canadian government	5,562	40	(112)	5,490
	Canadian provincial and municipal governments	2,585	13	(69)	2,529
	U.S. Treasury, other U.S. agencies and other foreign governments	2,394	32	(32)	2,394
Other debt securities		1,269	2	(71)	1,200
Equity securities		624	84	(12)	696
		12,434	171	(296)	12,309

		As at October 31, 2023
		Amortized cost	Unrealized gross gains	Unrealized gross losses	Carrying value⁽²⁾
Securities issued or guaranteed by
	Canadian government	4,406	1	(210)	4,197
	Canadian provincial and municipal governments	2,110	−	(172)	1,938
	U.S. Treasury, other U.S. agencies and other foreign governments	1,227	−	(69)	1,158
Other debt securities		1,423	−	(133)	1,290
Equity securities		616	66	(23)	659
		9,782	67	(607)	9,242

(1) Excludes the impact of hedging.

(2) The allowances for credit losses on securities at fair value through other comprehensive income (excluding the equity securities), representing $3 million as at January 31, 2024 ($3 million as at October 31, 2023), are reported in Other comprehensive income. For additional information, see Note 6 to these consolidated financial statements.

Equity Securities Designated at Fair Value Through Other Comprehensive Income

The Bank designated certain equity securities, the main business objective of which is to generate dividend income, at fair value through other comprehensive income without subsequent reclassification of gains and losses to net income. During the quarter ended January 31, 2024, a dividend income amount of $17 million was recognized for these investments ($7 million for the quarter ended January 31, 2023), including a negligible amount for investments that were sold during the quarter ended January 31, 2024 (a negligible amount for investments that were sold during the quarter ended January 31, 2023).

			Quarter ended January 31, 2024			Quarter ended January 31, 2023
			Equity securities of private companies	Equity securities of public companies	Total	Equity securities of private companies	Equity securities of public companies	Total
Fair value at beginning			378	281	659	320	236	556
	Change in fair value		(6)	38	32	6	7	13
	Designated at fair value through
		other comprehensive income	−	51	51	−	25	25
	Sales⁽¹⁾		(9)	(37)	(46)	−	(21)	(21)
Fair value at end			363	333	696	326	247	573

(1) The Bank disposed of private and public company equity securities for economic reasons.

Securities at Amortized Cost

		As at January 31, 2024	As at October 31, 2023
Securities issued or guaranteed by
	Canadian government	6,541	6,172
	Canadian provincial and municipal governments	1,958	1,932
	U.S. Treasury, other U.S. agencies and other foreign governments	589	604
Other debt securities		3,217	3,878
Gross carrying value		12,305	12,586
Allowances for credit losses		3	4
Carrying value		12,302	12,582

Gains (Losses) on Disposals of Securities at Amortized Cost

During the quarter ended January 31, 2024, the Bank disposed of certain debt securities measured at amortized cost (no disposal during the quarter ended January 31, 2023). The carrying value of these securities upon disposal was $120 million for the quarter ended January 31, 2024, and the Bank recognized negligible gains for the quarter ended January 31, 2024 in Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income.

Note 6 - Loans and Allowances for Credit Losses

Determining and Measuring Expected Credit Losses (ECL)

Determining Expected Credit Losses

Expected credit losses are determined using a three-stage impairment approach that is based on the change in the credit quality of financial assets since initial recognition.

Non-Impaired Loans

Stage 1

Financial assets that have experienced no significant increase in credit risk between initial recognition and the reporting date, and for which 12-month expected credit losses are recorded at the reporting date, are classified in Stage 1.

Stage 2

Financial assets that have experienced a significant increase in credit risk between initial recognition and the reporting date, and for which lifetime expected credit losses are recorded at the reporting date, are classified in Stage 2.

Impaired Loans

Stage 3

Financial assets for which there is objective evidence of impairment, for which one or more events have had a detrimental impact on the estimated future cash flows of these financial assets at the reporting date, and for which lifetime expected credit losses are recorded, are classified in Stage 3.

POCI

Financial assets that are credit-impaired when purchased or originated (POCI) are classified in the POCI category.

For additional information, see Notes 1 and 7 to the audited annual consolidated financial statements for the year ended October 31, 2023.

Credit Quality of Loans

The following tables present the gross carrying amounts of loans as at January 31, 2024 and as at October 31, 2023, according to credit quality and ECL impairment stage of each loan category at amortized cost, and according to credit quality for loans at fair value through profit or loss. For additional information on credit quality according to the Internal Ratings-Based (IRB) categories, see the Internal Default Risk Ratings table on page 77 in the Credit Risk section of the 2023 Annual Report.

Note 6 - Loans and Allowances for Credit Losses (cont.)

					As at January 31, 2024
		Non-impaired loans		Impaired loans		Loans at fair value through profit or loss⁽¹⁾	Total
		Stage 1	Stage 2	Stage 3	POCI	Loans at fair value through profit or loss⁽¹⁾	Total
Residential mortgage
	Excellent	30,911	18	−	−	−	30,929
	Good	16,250	290	−	−	−	16,540
	Satisfactory	12,095	4,384	−	−	−	16,479
	Special mention	271	753	−	−	−	1,024
	Substandard	73	265	−	−	−	338
	Default	−	−	78	−	−	78
IRB Approach		59,600	5,710	78	−	−	65,388
Standardized Approach		9,820	173	326	281	12,536	23,136
Gross carrying amount		69,420	5,883	404	281	12,536	88,524
Allowances for credit losses⁽²⁾		71	91	96	(92)	−	166
Carrying amount		69,349	5,792	308	373	12,536	88,358
Personal
	Excellent	21,055	229	−	−	−	21,284
	Good	7,201	1,745	−	−	−	8,946
	Satisfactory	6,385	2,272	−	−	−	8,657
	Special mention	1,907	840	−	−	−	2,747
	Substandard	33	237	−	−	−	270
	Default	−	−	180	−	−	180
IRB Approach		36,581	5,323	180	−	−	42,084
Standardized Approach		3,894	73	80	176	−	4,223
Gross carrying amount		40,475	5,396	260	176	−	46,307
Allowances for credit losses⁽²⁾		92	111	103	(13)	−	293
Carrying amount		40,383	5,285	157	189	−	46,014
Credit card
	Excellent	570	−	−	−	−	570
	Good	353	1	−	−	−	354
	Satisfactory	765	67	−	−	−	832
	Special mention	314	220	−	−	−	534
	Substandard	37	92	−	−	−	129
	Default	−	−	−	−	−	−
IRB Approach		2,039	380	−	−	−	2,419
Standardized Approach		122	−	−	−	−	122
Gross carrying amount		2,161	380	−	−	−	2,541
Allowances for credit losses⁽²⁾		34	110	−	−	−	144
Carrying amount		2,127	270	−	−	−	2,397
Business and government⁽³⁾
	Excellent	7,842	−	−	−	1,426	9,268
	Good	29,248	1	−	−	53	29,302
	Satisfactory	31,294	9,848	−	−	139	41,281
	Special mention	178	1,944	−	−	−	2,122
	Substandard	173	342	−	2	−	517
	Default	−	−	371	−	−	371
IRB Approach		68,735	12,135	371	2	1,618	82,861
Standardized Approach		10,927	36	68	37	67	11,135
Gross carrying amount		79,662	12,171	439	39	1,685	93,996
Allowances for credit losses⁽²⁾		193	186	227	2	−	608
Carrying amount		79,469	11,985	212	37	1,685	93,388
Total loans and acceptances
Gross carrying amount		191,718	23,830	1,103	496	14,221	231,368
Allowances for credit losses⁽²⁾		390	498	426	(103)	−	1,211
Carrying amount		191,328	23,332	677	599	14,221	230,157

(1) Not subject to expected credit losses.

(2) The allowances for credit losses do not include the amounts related to undrawn commitments reported in the Other liabilities item of the Consolidated Balance Sheet.

(3) Includes customers' liability under acceptances.

					As at October 31, 2023
		Non-impaired loans		Impaired loans		Loans at fair value through profit or loss⁽¹⁾	Total
		Stage 1	Stage 2	Stage 3	POCI	Loans at fair value through profit or loss⁽¹⁾	Total
Residential mortgage
	Excellent	30,075	13	−	−	−	30,088
	Good	17,008	247	−	−	−	17,255
	Satisfactory	11,795	4,118	−	−	−	15,913
	Special mention	318	773	−	−	−	1,091
	Substandard	61	252	−	−	−	313
	Default	−	−	66	−	−	66
AIRB Approach		59,257	5,403	66	−	−	64,726
Standardized Approach		9,540	218	287	304	11,772	22,121
Gross carrying amount		68,797	5,621	353	304	11,772	86,847
Allowances for credit losses⁽²⁾		69	93	87	(95)	−	154
Carrying amount		68,728	5,528	266	399	11,772	86,693
Personal
	Excellent	21,338	120	−	−	−	21,458
	Good	7,360	1,665	−	−	−	9,025
	Satisfactory	6,497	2,240	−	−	−	8,737
	Special mention	1,849	810	−	−	−	2,659
	Substandard	29	224	−	−	−	253
	Default	−	−	156	−	−	156
AIRB Approach		37,073	5,059	156	−	−	42,288
Standardized Approach		3,713	79	71	207	−	4,070
Gross carrying amount		40,786	5,138	227	207	−	46,358
Allowances for credit losses⁽²⁾		91	108	87	(15)	−	271
Carrying amount		40,695	5,030	140	222	−	46,087
Credit card
	Excellent	641	−	−	−	−	641
	Good	380	1	−	−	−	381
	Satisfactory	752	68	−	−	−	820
	Special mention	304	210	−	−	−	514
	Substandard	37	86	−	−	−	123
	Default	−	−	−	−	−	−
AIRB Approach		2,114	365	−	−	−	2,479
Standardized Approach		124	−	−	−	−	124
Gross carrying amount		2,238	365	−	−	−	2,603
Allowances for credit losses⁽²⁾		33	106	−	−	−	139
Carrying amount		2,205	259	−	−	−	2,464
Business and government⁽³⁾
	Excellent	7,785	−	−	−	1,113	8,898
	Good	28,525	16	−	−	53	28,594
	Satisfactory	32,095	8,400	−	2	140	40,637
	Special mention	215	1,790	−	−	−	2,005
	Substandard	27	290	−	−	−	317
	Default	−	−	397	−	−	397
AIRB Approach		68,647	10,496	397	2	1,306	80,848
Standardized Approach		9,774	57	47	47	46	9,971
Gross carrying amount		78,421	10,553	444	49	1,352	90,819
Allowances for credit losses⁽²⁾		182	194	244	−	−	620
Carrying amount		78,239	10,359	200	49	1,352	90,199
Total loans and acceptances
Gross carrying amount		190,242	21,677	1,024	560	13,124	226,627
Allowances for credit losses⁽²⁾		375	501	418	(110)	−	1,184
Carrying amount		189,867	21,176	606	670	13,124	225,443

(1) Not subject to expected credit losses.

(2) The allowances for credit losses do not include the amounts related to undrawn commitments reported in the Other liabilities item of the Consolidated Balance Sheet.

(3) Includes customers' liability under acceptances.

Note 6 - Loans and Allowances for Credit Losses (cont.)

The following table presents the credit risk exposures of off-balance-sheet commitments as at January 31, 2024 and as at October 31, 2023 according to credit quality and ECL impairment stage.

			As at January 31, 2024					As at October 31, 2023
		Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Off-balance-sheet commitments⁽¹⁾
Retail
	Excellent	16,873	94	−	16,967	16,648	67	−	16,715
	Good	3,540	464	−	4,004	3,485	467	−	3,952
	Satisfactory	1,283	290	−	1,573	1,268	285	−	1,553
	Special mention	218	94	−	312	239	93	−	332
	Substandard	16	16	−	32	17	15	−	32
	Default	−	−	2	2	−	−	2	2
Non-retail
	Excellent	13,863	−	−	13,863	14,117	−	−	14,117
	Good	21,604	−	−	21,604	21,082	−	−	21,082
	Satisfactory	12,655	4,871	−	17,526	12,258	4,354	−	16,612
	Special mention	16	270	−	286	17	248	−	265
	Substandard	9	517	−	526	19	33	−	52
	Default	−	−	11	11	−	−	10	10
IRB Approach		70,077	6,616	13	76,706	69,150	5,562	12	74,724
Standardized Approach		18,425	−	−	18,425	18,172	−	−	18,172
Total exposure		88,502	6,616	13	95,131	87,322	5,562	12	92,896
Allowances for credit losses		133	59	−	192	116	60	−	176
Total exposure, net
	of allowances	88,369	6,557	13	94,939	87,206	5,502	12	92,720

(1) Represent letters of guarantee and documentary letters of credit, undrawn commitments, and backstop liquidity and credit enhancement facilities.

Loans Past Due But Not Impaired⁽¹⁾

		As at January 31, 2024						As at October 31, 2023
		Residential mortgage	Personal	Credit card	Business and government⁽²⁾	Residential mortgage	Personal	Credit card	Business and government⁽²⁾
Past due but not impaired
	31 to 60 days	148	97	28	41	139	102	27	38
	61 to 90 days	63	55	15	22	58	65	14	21
	Over 90 days⁽³⁾	−	−	32	−	−	−	30	−
		211	152	75	63	197	167	71	59

(1) Loans less than 31 days past due are not presented as they are not considered past due from an administrative standpoint.

(2) Includes customers' liability under acceptances.

(3) All loans more than 90 days past due, except for credit card receivables, are considered impaired (Stage 3).

Impaired Loans

			As at January 31, 2024		As at October 31, 2023
		Gross	Allowances for credit losses	Net	Gross	Allowances for credit losses	Net
Loans - Stage 3
	Residential mortgage	404	96	308	353	87	266
	Personal	260	103	157	227	87	140
	Credit card⁽¹⁾	−	−	−	−	−	−
	Business and government⁽²⁾	439	227	212	444	244	200
		1,103	426	677	1,024	418	606
Loans - POCI		496	(103)	599	560	(110)	670
		1,599	323	1,276	1,584	308	1,276

(1) Credit card receivables are considered impaired, at the latest, when payment is 180 days past due, and they are written off at that time.

(2) Includes customers' liability under acceptances.

Allowances for Credit Losses

The following tables present a reconciliation of the allowances for credit losses by Consolidated Balance Sheet item and by type of off-balance-sheet commitment.

						Quarter ended January 31, 2024
		Allowances for credit losses as at October 31, 2023	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at January 31, 2024
Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		10	(3)	−	−	−	7
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	3	−	−	−	−	3
	At amortized cost⁽²⁾	4	(1)	−	−	−	3
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	154	15	(1)	−	(2)	166
	Personal	271	44	(23)	−	1	293
	Credit card	139	27	(26)	−	4	144
	Business and government	567	23	(44)	−	10	556
	Customers' liability under acceptances	53	(1)	−	−	−	52
		1,184	108	(94)	−	13	1,211
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−
Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		16	3	−	−	−	19
Undrawn commitments		152	14	−	−	−	166
Backstop liquidity and credit enhancement facilities		8	(1)	−	−	−	7
		176	16	−	−	−	192
		1,377	120	(94)	−	13	1,416

						Quarter ended January 31, 2023
		Allowances for credit losses as at October 31, 2022	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at January 31, 2023
Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	−	−	−	−	5
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	2	(1)	−	−	−	1
	At amortized cost⁽²⁾	7	1	−	−	−	8
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	118	19	(1)	−	(1)	135
	Personal	239	31	(16)	−	3	257
	Credit card	126	25	(18)	−	3	136
	Business and government	418	19	(5)	−	−	432
	Customers' liability under acceptances	54	(7)	−	−	−	47
		955	87	(40)	−	5	1,007
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−
Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		13	−	−	−	−	13
Undrawn commitments		143	(1)	−	−	−	142
Backstop liquidity and credit enhancement facilities		6	−	−	−	−	6
		162	(1)	−	−	−	161
		1,131	86	(40)	−	5	1,182

(1) The contractual amount outstanding on financial assets that were written off during the quarter ended January 31, 2024 and that are still subject to enforcement activity was $35 million ($25 million for the quarter ended January 31, 2023).

(2) These financial assets are presented net of the allowances for credit losses on the Consolidated Balance Sheet.

(3) As at January 31, 2024 and 2023, these financial assets were mainly classified in Stage 1 and their credit quality fell mostly within the Excellent category.

(4) The allowances for credit losses are reported in the Accumulated other comprehensive income item of the Consolidated Balance Sheet.

(5) The allowances for credit losses are reported in the Allowances for credit losses item of the Consolidated Balance Sheet.

(6) The allowances for credit losses are reported in the Other liabilities item of the Consolidated Balance Sheet.

Note 6 - Loans and Allowances for Credit Losses (cont.)

The following tables present a reconciliation of allowances for credit losses for each loan category at amortized cost according to ECL impairment stage.

				Quarter ended January 31, 2024						Quarter ended January 31, 2023
			Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total	Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total
			Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total	Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total
Residential mortgage
Balance at beginning			69	93	87	(95)	154	53	80	61	(76)	118
	Originations or purchases		2	−	−	−	2	5	−	−	−	5
	Transfers⁽²⁾:
		to Stage 1	16	(14)	(2)	−	−	8	(7)	(1)	−	−
		to Stage 2	(3)	7	(4)	−	−	(3)	9	(6)	−	−
		to Stage 3	−	(13)	13	−	−	−	(8)	8	−	−
	Net remeasurement of loss allowances⁽³⁾		(8)	33	(1)	1	25	−	12	3	3	18
	Derecognitions⁽⁴⁾		(2)	(2)	(2)	−	(6)	(1)	(1)	(2)	−	(4)
	Changes to models		(2)	(12)	8	−	(6)	−	−	−	−	−
Provisions for credit losses			3	(1)	12	1	15	9	5	2	3	19
Write-offs			−	−	(1)	−	(1)	−	−	(1)	−	(1)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	−	−	−	−	−	−	−	−
Foreign exchange movements and other			(1)	(1)	(2)	2	(2)	−	(1)	(2)	2	(1)
Balance at end			71	91	96	(92)	166	62	84	60	(71)	135
Includes:
	Amounts drawn		71	91	96	(92)	166	62	84	60	(71)	135
	Undrawn commitments⁽⁵⁾		−	−	−	−	−	−	−	−	−	−
Personal
Balance at beginning			95	114	87	(15)	281	70	117	75	(16)	246
	Originations or purchases		7	−	−	−	7	10	−	−	−	10
	Transfers⁽²⁾:
		to Stage 1	21	(19)	(2)	−	−	19	(17)	(2)	−	−
		to Stage 2	(5)	6	(1)	−	−	(4)	4	−	−	−
		to Stage 3	−	(18)	18	−	−	−	(12)	12	−	−
	Net remeasurement of loss allowances⁽³⁾		(17)	39	19	1	42	(18)	33	7	5	27
	Derecognitions⁽⁴⁾		(2)	(4)	(1)	−	(7)	(2)	(4)	(1)	−	(7)
	Changes to models		−	(1)	3	−	2	1	−	−	−	1
Provisions for credit losses			4	3	36	1	44	6	4	16	5	31
Write-offs			−	−	(23)	−	(23)	−	−	(16)	−	(16)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	4	−	4	−	−	5	−	5
Foreign exchange movements and other			(2)	(1)	(1)	1	(3)	(1)	−	(1)	−	(2)
Balance at end			97	116	103	(13)	303	75	121	79	(11)	264
Includes:
	Amounts drawn		92	111	103	(13)	293	72	117	79	(11)	257
	Undrawn commitments⁽⁵⁾		5	5	−	−	10	3	4	−	−	7

(1) No POCI loans were acquired during the quarters ended January 31, 2024 and 2023.

(2) Represent stage transfers deemed to have taken place at the beginning of the quarter in which the transfer occurred.

(3) Includes the net remeasurement of loss allowances (after transfers) attributable mainly to changes in volumes and in the credit quality of existing loans as well as to changes in risk parameters.

(4) Represent reversals to loss allowances arising from full loan repayments (excluding write-offs and disposals).

(5) The allowances for credit losses on undrawn commitments are reported in the Other liabilities item of the Consolidated Balance Sheet.

				Quarter ended January 31, 2024						Quarter ended January 31, 2023
			Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total	Allowances for credit losses on non-impaired loans		Allowances for credit losses on impaired loans		Total
			Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total	Stage 1	Stage 2	Stage 3	POCI⁽¹⁾	Total
Credit card
Balance at beginning			59	127	−	−	186	53	112	−	−	165
	Originations or purchases		2	−	−	−	2	2	−	−	−	2
	Transfers⁽²⁾:
		to Stage 1	29	(29)	−	−	−	25	(25)	−	−	−
		to Stage 2	(5)	5	−	−	−	(4)	4	−	−	−
		to Stage 3	−	(10)	10	−	−	−	(7)	7	−	−
	Net remeasurement of loss allowances⁽³⁾		(25)	38	12	−	25	(16)	33	8	−	25
	Derecognitions⁽⁴⁾		(1)	−	−	−	(1)	(1)	−	−	−	(1)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			−	4	22	−	26	6	5	15	−	26
Write-offs			−	−	(26)	−	(26)	−	−	(18)	−	(18)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	4	−	4	−	−	3	−	3
Foreign exchange movements and other			−	−	−	−	−	−	−	−	−	−
Balance at end			59	131	−	−	190	59	117	−	−	176
Includes:
	Amounts drawn		34	110	−	−	144	37	99	−	−	136
	Undrawn commitments⁽⁵⁾		25	21	−	−	46	22	18	−	−	40
Business and government⁽⁶⁾
Balance at beginning			251	220	244	−	715	177	195	197	−	569
	Originations or purchases		39	−	−	−	39	24	−	−	−	24
	Transfers⁽²⁾:
		to Stage 1	9	(8)	(1)	−	−	17	(17)	−	−	−
		to Stage 2	(13)	14	(1)	−	−	(6)	8	(2)	−	−
		to Stage 3	−	(2)	2	−	−	−	(1)	1	−	−
	Net remeasurement of loss allowances⁽³⁾		(1)	−	31	(11)	19	(10)	21	(10)	−	1
	Derecognitions⁽⁴⁾		(8)	(6)	(3)	−	(17)	(5)	(8)	(2)	−	(15)
	Changes to models		−	(5)	1	−	(4)	−	−	−	−	−
Provisions for credit losses			26	(7)	29	(11)	37	20	3	(13)	−	10
Write-offs			−	−	(44)	−	(44)	−	−	(5)	−	(5)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	1	13	14	−	−	1	−	1
Foreign exchange movements and other			(1)	−	(3)	−	(4)	−	−	(1)	−	(1)
Balance at end			276	213	227	2	718	197	198	179	−	574
Includes:
	Amounts drawn		193	186	227	2	608	134	167	178	−	479
	Undrawn commitments⁽⁵⁾		83	27	−	−	110	63	31	1	−	95
Total allowances for credit losses at end⁽⁷⁾			503	551	426	(103)	1,377	393	520	318	(82)	1,149
Includes:
	Amounts drawn		390	498	426	(103)	1,211	305	467	317	(82)	1,007
	Undrawn commitments⁽⁵⁾		113	53	−	−	166	88	53	1	−	142

(1) No POCI loans were acquired during the quarters ended January 31, 2024 and 2023.

(2) Represent stage transfers deemed to have taken place at the beginning of the quarter in which the transfer occurred.

(3) Includes the net remeasurement of loss allowances (after transfers) attributable mainly to changes in volumes and in the credit quality of existing loans as well as to changes in risk parameters.

(4) Represent reversals to loss allowances arising from full loan repayments (excluding write-offs and disposals).

(5) The allowances for credit losses on undrawn commitments are reported in the Other liabilities item of the Consolidated Balance Sheet.

(6) Includes customers' liability under acceptances.

(7) Excludes allowances for credit losses on other financial assets at amortized cost and on off-balance-sheet commitments other than undrawn commitments.

Note 6 - Loans and Allowances for Credit Losses (cont.)

Main Macroeconomic Factors

The following tables show the main macroeconomic factors used to estimate the allowances for credit losses on loans. For each scenario, namely, the base scenario, upside scenario, and downside scenario, the average values of the macroeconomic factors over the next 12 months (used for Stage 1 credit loss calculations) and over the remaining forecast period (used for Stage 2 credit loss calculations) are presented.

										As at January 31, 2024
		Base scenario				Upside scenario					Downside scenario
		Next 12 months		Remaining forecast period		Next 12 months		Remaining forecast period			Next 12 months		Remaining forecast period
Macroeconomic factors⁽¹⁾
	GDP growth⁽²⁾	0.2	%	1.9	%	0.9	%	1.9	%		(5.1)	%	2.6	%
	Unemployment rate	6.7	%	6.7	%	6.2	%	5.9	%		8.0	%	7.5	%
	Housing price index growth⁽²⁾	0.8	%	2.3	%	6.1	%	2.6	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.4	%	2.1	%	1.9	%	1.8	%		3.1	%	2.3	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	(7.0)	%	3.5	%	4.0	%	3.0	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	70		80		91		86			46		56

										As at October 31, 2023
		Base scenario				Upside scenario					Downside scenario
		Next 12 months		Remaining forecast period		Next 12 months		Remaining forecast period			Next 12 months		Remaining forecast period
Macroeconomic factors⁽¹⁾
	GDP growth⁽²⁾	−	%	1.7	%	0.4	%	1.9	%		(4.9)	%	2.6	%
	Unemployment rate	6.3	%	6.5	%	5.9	%	5.9	%		7.7	%	7.2	%
	Housing price index growth⁽²⁾	(1.1)	%	1.9	%	2.5	%	2.4	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.4	%	2.1	%	1.9	%	1.8	%		3.1	%	2.3	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	(10.0)	%	3.7	%	4.0	%	3.0	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	77		80		91		86			46		56

(1) All macroeconomic factors are based on the Canadian economy unless otherwise indicated.

(2) Growth rate is annualized.

(3) Yield on corporate BBB bonds less yield on Canadian federal government bonds with 10-year maturity.

(4) Main stock index in Canada.

(5) The West Texas Intermediate (WTI) index is commonly used as a benchmark for the price of oil.

The main macroeconomic factors used for the personal credit portfolio are unemployment rate and growth in the housing price index, based on the economy of Canada or Quebec. The main macroeconomic factors used for the business and government credit portfolio are unemployment rate, spread on corporate BBB bonds, S&P/TSX growth, and WTI oil price. An increase in unemployment rate or BBB spread will generally lead to higher allowances for credit losses, whereas an increase in the other macroeconomic factors (GDP, S&P/TSX, housing price index, and WTI oil price) will generally lead to lower allowances for credit losses.

During the quarter ended January 31, 2024, the macroeconomic outlook remained essentially unchanged and uncertainty remains high.

The economic outlook remains uncertain as central banks remain determined to curb inflation, which has shown signs of improvement but is too high in several countries. Although interest rates may be cut in 2024, monetary policy will remain tight, and this could be a difficult year. While the U.S. economy held up well over the past year due to an expansionary fiscal policy and sustained consumption, the delayed impact of monetary policy will continue to be felt, which should lead to a sluggish economy in the coming quarters. The sensitivity of the Canadian economy to interest rates has materialized and suggests new weaknesses in the labour market that may spill over into the real estate market, which has remained resilient given strong demographic growth. A contraction in the Canadian economy is expected around midyear, leading to stagnant growth in 2024. In the base scenario, the unemployment rate stands at 7.0% after 12 months, up 1.2 percentage points. Despite an initial decline, housing prices rise slightly, up 0.8% year over year. The S&P/TSX sits at 18,500 points after one year, and the price of oil hovers around US$73.

In the upside scenario, an easing of geopolitical tensions strengthens confidence. Prices for goods continue to fall due to a slowdown in the global economy, where inflation continues to subside without the tight monetary policy having caused too much damage to the economy. The Canadian and U.S. governments maintain spending growth, which tempers the restrictive monetary policies. With the labour market holding up, consumer spending remains relatively resilient. Housing prices rise at a moderate pace against a backdrop of strong demographic growth. After one year, the unemployment rate is more favourable than in the base scenario (eight-tenths lower). Housing prices rise 6.1%, the S&P/TSX is at 20,687 points after one year, and the price of oil hovers around US$91.

In the downside scenario, central banks have underestimated the impact of simultaneous tightening measures, and the global economy sinks into a recession as falling demand translates into reduced investment by businesses, which also lay off a large number of workers. Given budgetary constraints, governments are unable to support households and businesses as they did during the pandemic. The geopolitical situation continues to cause concern, with the risk of conflicts escalating. After 12 months, economic contraction pushes unemployment to 8.8%. Housing prices fall sharply (-13.9%). The S&P/TSX sits at 14,801 points after one year, and the price of oil hovers around US$40.

Given the uncertainty surrounding key inputs used to measure credit losses, the Bank has applied expert credit judgment to adjust the modelled expected credit loss results.

Sensitivity Analysis of Allowances for Credit Losses on Non-Impaired Loans

Scenarios

The following table shows a comparison of the Bank's allowances for credit losses on non-impaired loans (Stages 1 and 2) as at January 31, 2024 based on the probability weightings of three scenarios with allowances for credit losses resulting from simulations of each scenario weighted at 100%.

		Allowances for credit losses on non-impaired loans
Balance as at January 31, 2024		1,054
Simulations
	100% upside scenario	716
	100% base scenario	842
	100% downside scenario	1,373

Note 7 - Other Assets

	As at January 31, 2024	As at October 31, 2023⁽¹⁾
Receivables, prepaid expenses and other items	3,276	3,118
Interest and dividends receivable	1,513	1,605
Due from clients, dealers and brokers	1,061	538
Defined benefit asset	394	356
Deferred tax assets	645	666
Current tax assets	736	925
Reinsurance assets	20	16
Insurance assets	19	20
Commodities⁽²⁾	514	544
	8,178	7,788

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) Commodities are recorded at fair value based on quoted prices in active markets and are classified in Level 1 of the fair value measurement hierarchy.

Note 8 - Deposits

			As at January 31, 2024		As at October 31, 2023
	On demand⁽¹⁾	After notice⁽²⁾	Fixed term⁽³⁾	Total	Total
Personal	4,530	36,049	50,485	91,064	87,883
Business and government	63,865	31,498	109,061	204,424	197,328
Deposit-taking institutions	2,518	196	1,895	4,609	2,962
	70,913	67,743	161,441	300,097	288,173

(1) Demand deposits are deposits for which the Bank does not have the right to require a notice of withdrawal and consist essentially of deposits in chequing accounts.

(2) Notice deposits are deposits for which the Bank may legally require a notice of withdrawal and consist mainly of deposits in savings accounts.

(3) Fixed-term deposits are deposits that can be withdrawn by the holder on a specified date and include term deposits, guaranteed investment certificates, savings accounts and plans, covered bonds, and other similar instruments.

The Deposits - Business and government item includes, among other items, covered bonds for which the balance was $9.8 billion as at January 31, 2024 ($10.9 billion as at October 31, 2023). During the quarter ended January 31, 2024, an amount of 750 million euros in covered bonds came to maturity (the Bank issued 280 million Swiss francs in covered bonds during the quarter ended January 31, 2023). For additional information on covered bonds, see Note 27 to the audited annual consolidated financial statements for the year ended October 31, 2023.

In addition, as at January 31, 2024, the Deposits - Business and government item also includes deposits of $19.7 billion ($17.7 billion as at October 31, 2023) that are subject to the bank bail-in conversion regulations issued by the Government of Canada. These regulations provide certain powers to the Canada Deposit Insurance Corporation (CDIC), notably the power to convert certain eligible Bank shares and liabilities into common shares should the Bank become non-viable.

Note 9 - Other Liabilities

	As at January 31, 2024	As at October 31, 2023⁽¹⁾
Accounts payable and accrued expenses	2,127	2,458
Subsidiaries' debts to third parties	239	224
Interest and dividends payable	1,970	2,022
Lease liabilities	483	517
Due to clients, dealers and brokers	840	669
Defined benefit liability	101	94
Allowances for credit losses - Off-balance-sheet commitments (Note 6)	192	176
Deferred tax liabilities	38	28
Current tax liabilities	131	204
Insurance liabilities	7	8
Other items^(2)(3)(4)	1,254	1,016
	7,382	7,416

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) As at January 31, 2024, Other items included $22 million in litigation provisions ($42 million as at October 31, 2023).

(3) As at January 31, 2024, Other items included $29 million in provisions for onerous contracts ($31 million as at October 31, 2023).

(4) As at January 31, 2024, Other items included the financial liability resulting from put options written to non-controlling interests of Flinks Technology Inc. (Flinks) for an amount of $22 million ($23 million as at October 31, 2023).

Note 10 - Share Capital and Other Equity Instruments

Shares and Other Equity Instruments Outstanding

		As at January 31, 2024		As at October 31, 2023
		Number of shares or LRCN⁽¹⁾	Shares or LRCN $	Number of shares or LRCN	Shares or LRCN $
		Number of shares or LRCN⁽¹⁾	Shares or LRCN $	Number of shares or LRCN	Shares or LRCN $
First Preferred Shares
	Series 30	14,000,000	350	14,000,000	350
	Series 32	12,000,000	300	12,000,000	300
	Series 38	16,000,000	400	16,000,000	400
	Series 40	12,000,000	300	12,000,000	300
	Series 42	12,000,000	300	12,000,000	300
		66,000,000	1,650	66,000,000	1,650
Other equity instruments
	LRCN - Series 1	500,000	500	500,000	500
	LRCN - Series 2	500,000	500	500,000	500
	LRCN - Series 3	500,000	500	500,000	500
		1,500,000	1,500	1,500,000	1,500
Preferred shares and other equity instruments		67,500,000	3,150	67,500,000	3,150
Common shares at beginning of fiscal year		338,284,629	3,294	336,582,124	3,196
Issued pursuant to the Stock Option Plan		858,373	51	1,678,321	95
Impact of shares purchased or sold for trading⁽²⁾		23,348	2	31,975	3
Other		−	−	(7,791)	−
Common shares at end of period		339,166,350	3,347	338,284,629	3,294

(1) Limited Recourse Capital Notes (LRCN).

(2) As at January 31, 2024, a total of 50,073 shares were sold short for trading, representing $5 million (26,725 shares were sold short for trading, representing an amount of $3 million as at October 31, 2023).

Note 10 - Share Capital and Other Equity Instruments (cont.)

Dividends Declared and Distributions on Other Equity Instruments

				Quarter ended January 31
		2024		2023
		Dividends or interest $	Dividends per share	Dividends or interest $	Dividends per share
		Dividends or interest $	Dividends per share	Dividends or interest $	Dividends per share
First Preferred Shares
	Series 30	3	0.2516	3	0.2516
	Series 32	3	0.2399	3	0.2399
	Series 38	7	0.4392	7	0.4392
	Series 40	5	0.3636	3	0.2875
	Series 42	5	0.4410	4	0.3094
		23		20
Other equity instruments
	LRCN - Series 1⁽¹⁾	5		5
	LRCN - Series 2⁽²⁾	5		5
	LRCN - Series 3⁽³⁾	10		10
		20		20
Preferred shares and other equity instruments		43		40
Common shares		359	1.0600	327	0.9700
		402		367

(1) The LRCN - Series 1 bear interest at a fixed rate of 4.30% per annum.

(2) The LRCN - Series 2 bear interest at a fixed rate of 4.05% per annum.

(3) The LRCN - Series 3 bear interest at a fixed rate of 7.50% per annum.

Repurchase of Common Shares

On December 12, 2023, the Bank began a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ending on December 11, 2024. On December 12, 2022, the Bank had begun a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ended December 11, 2023. Any repurchase through the Toronto Stock Exchange will be done at market prices. The common shares may also be repurchased through other means authorized by the Toronto Stock Exchange and applicable regulations, including private agreements or share repurchase programs under issuer bid exemption orders issued by the securities regulators. A private purchase made under an exemption order issued by a securities regulator will be done at a discount to the prevailing market price. The amounts that are paid above the average book value of the common shares are charged to Retained earnings. During the quarters ended January 31, 2024 and 2023, the Bank did not repurchase any common shares.

Note 11 - Capital Disclosure

The Bank and all other major Canadian banks have to maintain the following minimum capital ratios established by the Office of the Superintendent of Financial Institutions (OSFI): a CET1 capital ratio of at least 11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of at least 15.0%. All of these ratios include a capital conservation buffer of 2.5% established by the Basel Committee on Banking Supervision (BCBS) and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D-SIBs), and a 3.5% domestic stability buffer (DSB) established by OSFI. The DSB, which can vary from 0% to 4.0% of risk-weighted assets (RWA), consists exclusively of CET1 capital. A D‑SIB that fails to meet this buffer requirement will not be subject to automatic constraints to reduce capital distributions but must provide a remediation plan to OSFI. The Bank also has to meet the requirements of the capital output floor calculated under the Basel III Standardized Approaches. OSFI is allowing a phase-in of the floor factor over three years, starting at 65.0% in the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal 2026. For fiscal 2024, the floor factor is set at 67.5%. If the capital requirement is less than the capital output floor requirement after applying the floor factor, the difference is added to the total RWA. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%, which includes a Tier 1 capital buffer of 0.5% applicable only to D-SIBs.

OSFI also requires D-SIBs to maintain a risk-based total loss-absorbing capacity (TLAC) ratio of at least 25.0% (including the DSB) of RWA and a TLAC leverage ratio of at least 7.25%. The purpose of TLAC is to ensure that a D-SIB has sufficient loss-absorbing capacity to support its internal recapitalization in the unlikely event it becomes non-viable.

In the first quarter of 2024, the Bank implemented OSFI's finalized guidance of the revised market risk capital rules, consistent with the BCBS's Fundamental Review of the Trading Book (FRTB) as well as the revised credit valuation adjustment (CVA) risk framework.

During the quarter ended January 31, 2024, the Bank was compliant with all of OSFI's regulatory capital, leverage, and TLAC requirements.

Regulatory Capital⁽¹⁾, Leverage Ratio⁽¹⁾ and TLAC⁽²⁾

		As at January 31, 2024		As at October 31, 2023
Capital
	CET1	17,350		16,920
	Tier 1	20,498		20,068
	Total	21,423		21,056
Risk-weighted assets		132,370		125,592
Total exposure		478,484		456,478
Capital ratios
	CET1	13.1	%	13.5	%
	Tier 1	15.5	%	16.0	%
	Total	16.2	%	16.8	%
Leverage ratio		4.3	%	4.4	%
Available TLAC		37,162		36,732
TLAC ratio		28.1	%	29.2	%
TLAC leverage ratio		7.8	%	8.0	%

(1) Capital, risk-weighted assets, total exposure, the capital ratios, and the leverage ratio are calculated in accordance with the Basel III rules, as set out in OSFI's Capital Adequacy Requirements Guideline and Leverage Requirements Guideline.

(2) Available TLAC, the TLAC ratio, and the TLAC leverage ratio are calculated in accordance with OSFI's Total Loss Absorbing Capacity Guideline.

Note 12 - Share-Based Payments

Stock Option Plan

During the quarter ended January 31, 2024, the Bank awarded 1,222,652 stock options (1,416,060 stock options during the quarter ended January 31, 2023) with an average fair value of $13.74 per option ($14.76 in 2023).

As at January 31, 2024, there were 11,892,260 stock options outstanding (11,546,688 stock options as at October 31, 2023).

The average fair value of the options awarded was estimated on the award date using the Black-Scholes model as well as the following assumptions.

	Quarter ended January 31
	2024	2023
Risk-free interest rate	3.61%	3.25%
Expected life of options	7 years	7 years
Expected volatility	22.29%	23.13%
Expected dividend yield	4.62%	4.23%

During the quarter ended January 31, 2024, a $4 million compensation expense was recorded for this plan ($5 million for the quarter ended January 31, 2023).

Note 13 - Employee Benefits - Pension Plans and Other Post-Employment Benefit Plans

The Bank offers pension plans that have a defined benefit component and a defined contribution component. The Bank also offers other post-employment benefit plans to eligible employees. The cost associated with these plans, including the remeasurements recognized in Other comprehensive income, is presented in the following table.

Cost for Pension Plans and Other Post-Employment Benefit Plans

				Quarter ended January 31
		Pension plans		Other post-employment benefit plans
		2024	2023	2024	2023
Current service cost		20	23	−	−
Interest expense (income), net		(4)	(6)	1	2
Administrative costs		1	1
Expense of the defined benefit component		17	18	1	2
Expense of the defined contribution component		4	1
Expense recognized in Net income		21	19	1	2
Remeasurements⁽¹⁾
	Actuarial (gains) losses on defined benefit obligation	504	330	8	6
	Return on plan assets⁽²⁾	(523)	(264)
Remeasurements recognized in Other comprehensive income		(19)	66	8	6
		2	85	9	8

(1) Changes related to the discount rate and to the return on plan assets are reviewed and updated on a quarterly basis. All other assumptions are updated annually.

(2) Excludes interest income.

Note 14 - Income Taxes

Notice of Assessment

In March 2023, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $90 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2018 taxation year.

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $875 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2012-2017 taxation years.

In the reassessments, the CRA alleges that the dividends were received as part of a "dividend rental arrangement".

In October 2023, the Bank filed a notice of appeal with the Tax Court of Canada, and the matter is now in litigation. The CRA may issue reassessments to the Bank for taxation years subsequent to 2018 in regard to certain activities similar to those that were the subject of the above-mentioned reassessments. The Bank remains confident that its tax position was appropriate and intends to vigorously defend its position. As a result, no amount has been recognized in the consolidated financial statements as at January 31, 2024.

Canadian Government's 2022 Tax Measures

On November 4, 2022, the Government of Canada introduced Bill C-32 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 3, 2022 and certain provisions of the budget tabled in Parliament on April 7, 2022 to implement tax measures applicable to certain entities of banking and life insurer groups, as presented in its April 7, 2022 budget. These tax measures included the Canada Recovery Dividend (CRD), which is a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion, as well as a 1.5% increase in the statutory tax rate. On December 15, 2022, Bill C-32 received royal assent. Given that these tax measures were in effect as at January 31, 2023, a $32 million tax expense for the CRD and an $8 million tax recovery for the tax rate increase, including the impact related to current and deferred taxes for fiscal 2022, were recognized in the consolidated financial statements during the quarter ended January 31, 2023.

Proposed Legislation

On November 30, 2023, the Government of Canada introduced Bill C-59 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 to implement tax measures applicable to the Bank. The measures include the denial of the deduction in respect of dividends received after 2023 on shares that are mark-to-market property for tax purposes (except for dividends received on "taxable preferred shares" as defined in the Income Tax Act), as well as the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024. Although these tax measures were not substantively enacted at the reporting date, the consolidated financial statements reflect, since January 1, 2024, the denial of the deduction in respect of the dividends covered by Bill C-59.

During fiscal 2023, the Government of Canada proposed to implement the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) that will apply to fiscal years beginning on or after December 31, 2023 (November 1, 2024 for the Bank). To date, the Pillar 2 rules have not yet been included in a bill in Canada but have been included in a bill or enacted in certain jurisdictions where the Bank operates. The Pillar 2 rules do not apply to this fiscal year, and the Bank is currently assessing its income tax exposure arising from these rules.

Note 15 - Earnings Per Share

Diluted earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average number of common shares outstanding after taking into account the dilution effect of stock options using the treasury stock method and any gain (loss) on the redemption of preferred shares.

		Quarter ended January 31
		2024	2023⁽¹⁾

Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity instruments		922	876
Dividends on preferred shares and distributions on other equity instruments		37	35
Net income attributable to common shareholders		885	841
Weighted average basic number of common shares outstanding (thousands)		338,675	336,993
Basic earnings per share (dollars)		2.61	2.49

Diluted earnings per share
Net income attributable to common shareholders		885	841
Weighted average basic number of common shares outstanding (thousands)		338,675	336,993
Adjustment to average number of common shares (thousands)
	Stock options⁽²⁾	2,664	3,450
Weighted average diluted number of common shares outstanding (thousands)		341,339	340,443
Diluted earnings per share (dollars)		2.59	2.47

(1) Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) For the quarter ended January 31, 2024, the calculation of diluted earnings per share excluded an average number of 1,719,303 options outstanding with a weighted average exercise price of $96.35 (1,754,368 options outstanding with a weighted average exercise price of $96.35 for the quarter ended January 31, 2023), given that the exercise price of these options was greater than the average price of the Bank's common shares.

Note 16 - Segment Disclosures

The Bank carries out its activities in four business segments, which are defined below. For presentation purposes, other activities are grouped in the Other heading. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy. The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2023. This presentation reflects the retrospective application of the accounting policy changes arising from the adoption of IFRS 17. The figures for the 2023 quarters have been adjusted to reflect these accounting policy changes.

Personal and Commercial

The Personal and Commercial segment encompasses the banking, financing, and investing services offered to individuals, advisors, and businesses as well as insurance operations.

Wealth Management

The Wealth Management segment comprises investment solutions, trust services, banking services, lending services, and other wealth management solutions offered through internal and third-party distribution networks.

Financial Markets

The Financial Markets segment encompasses corporate banking and investment banking and financial solutions for large and mid-size corporations, public sector organizations, and institutional investors.

U.S. Specialty Finance and International (USSF&I)

The USSF&I segment encompasses the specialty finance expertise provided by the Credigy subsidiary; the activities of the ABA Bank subsidiary, which offers financial products and services to individuals and businesses in Cambodia; and the activities of targeted investments in certain emerging markets.

Other

This heading encompasses treasury activities; liquidity management; Bank funding; asset/liability management activities; the activities of the Flinks subsidiary, a fintech company specialized in financial data aggregation and distribution; certain specified items; and the unallocated portion of corporate units.

							Quarter ended January 31⁽¹⁾
		Personal and Commercial		Wealth Management		Financial Markets				USSF&I		Other			Total
		2024	2023	2024	2023	2024		2023	2024		2023	2024	2023	2024	2023
Net interest income⁽²⁾		870	825	198	208	(518)		(91)	301		299	(100)	(142)	751	1,099
Non-interest income⁽²⁾		284	279	462	429	1,273		780	25		20	(85)	(45)	1,959	1,463
Total revenues		1,154	1,104	660	637	755		689	326		319	(185)	(187)	2,710	2,562
Non-interest expenses		615	593	390	364	313		287	100		98	31	48	1,449	1,390
Income before provisions for credit losses and income taxes		539	511	270	273	442		402	226		221	(216)	(235)	1,261	1,172
Provisions for credit losses		71	61	−	−	17		(9)	36		35	(4)	(1)	120	86
Income before income taxes (recovery)		468	450	270	273	425		411	190		186	(212)	(234)	1,141	1,086
Income taxes (recovery)⁽²⁾⁽³⁾		129	124	74	75	117		113	40		39	(141)	(141)	219	210
Net income		339	326	196	198	308		298	150		147	(71)	(93)	922	876
Non-controlling interests		−	−	−	−	−		−	−		−	−	−	−	−
Net income attributable
	to the Bank's shareholders and holders of other equity instruments	339	326	196	198	308		298	150		147	(71)	(93)	922	876
Average assets⁽⁴⁾		155,031	146,131	8,708	8,523	190,443		173,262	26,025		21,606	62,459	75,424	442,666	424,946
Total assets		156,433	146,797	8,769	8,427	180,458		163,581	26,667		22,072	61,600	77,410	433,927	418,287

(1) Certain comparative figures have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to these consolidated financial statements.

(2) The Net interest income, Non-interest income, and Income taxes (recovery) items of the business segments are presented on a taxable equivalent basis. Taxable equivalent basis is a calculation method that consists of grossing up certain revenues taxed at lower rates by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. For the business segments as a whole, Net interest income was grossed up by $37 million ($78 million in 2023), Non-interest income was grossed up by $73 million ($52 million in 2023), and an equivalent amount was recognized in Income taxes (recovery). The effect of these adjustments have been reversed under the Other heading. In light of the proposed legislation with respect to Canadian dividends, the Bank did not either recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see Note 14).

(3) During the quarter ended January 31, 2023, the Bank had recorded a $32 million tax expense with respect to the Canada Recovery Dividend, i.e., a one-time, 15% tax on the fiscal 2021 and 2020 average taxable income above $1 billion as well as an $8 million tax recovery related to a 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. These items were recorded in the Other heading. For additional information on these tax measures, see Note 14.

(4) Represents the average of the daily balances for the period, which is also the basis on which sectoral assets are reported in the business segments.

Note 17 - Event After the Consolidated Balance Sheet Date

Issuance of Subordinated Debt

On February 5, 2024, the Bank issued medium-term notes for a total amount of $500 million. They bear interest at 5.279% and mature on February 15, 2034. The interest on these notes will be payable semi-annually at a rate of 5.279% per annum until February 15, 2029 and, thereafter, will be payable quarterly at a floating rate equal to Daily Compounded CORRA plus 1.80%. With the prior approval of OSFI, the Bank may, at its option, redeem these notes as of February 15, 2029, in whole or in part, at their nominal value plus accrued and unpaid interest. Given that the medium-term notes satisfy the non-viability contingent capital requirements, they qualify for the purposes of calculating regulatory capital under Basel III.

Information for Shareholders and Investors

Investor Relations

Financial analysts and investors who want to obtain financial information on the Bank may contact the Investor Relations Department.

600 De La Gauchetière Street West, 7^th Floor

Montreal, Quebec H3B 4L2

Toll-free: 1-866-517-5455

Email: investorrelations@nbc.ca

Website: nbc.ca/investorrelations

Communications and Corporate Social Responsibility

800 Saint-Jacques Street, 28^th Floor

Montreal, Quebec H3C 1A3

Telephone: 514-394-8644

Email: pa@nbc.ca

Quarterly Report Publication Dates for Fiscal 2024

(subject to approval by the Board of Directors of the Bank)

First quarter	February 28
Second quarter	May 29
Third quarter	August 28
Fourth quarter	December 4

Disclosure of

First Quarter 2024 Results

Conference Call

- A conference call for analysts and institutional investors will be held on Wednesday, February 28, 2024 at 1:00 p.m. EST.

- Access by telephone in listen-only mode: 1-800-806-5484 or

416-340-2217. The access code is 8438144#.

- A recording of the conference call can be heard until May 24, 2024 by dialing 1-800-408-3053 or 905-694-9451. The access code is 8808810#.

Webcast

- The conference call will be webcast live at nbc.ca/investorrelations.

- A recording of the webcast will also be available on National Bank's website after the call.

Financial Documents

- The Report to Shareholders (which includes the quarterly consolidated financial statements) is available at all times on National Bank's website at nbc.ca/investorrelations.

- The Report to Shareholders, the Supplementary Financial Information, the Supplementary Regulatory Capital and Pillar 3 Disclosure, and a slide presentation will be available on the Investor Relations page of National Bank's website on the morning of the day of the conference call.

Transfer Agent and Registrar

For information about stock transfers, address changes, dividends, lost certificates, tax forms, and estate transfers, shareholders of record may contact the transfer agent, Computershare Trust Company of Canada, at the address or telephone number below.

Computershare Trust Company of Canada

Share Ownership Management

100 University Avenue, 8^th Floor

Toronto, Ontario M5J 2Y1

Telephone: 1-888-838-1407

Fax: 1-888-453-0330

Email: service@computershare.com

Website: computershare.com

Shareholders whose shares are held by a market intermediary are asked to contact the market intermediary concerned.

Direct Deposit Service for Dividends

Shareholders may elect to have their dividend payments deposited directly via electronic funds transfer to their bank account at any financial institution that is a member of the Canadian Payments Association. To do so, they must send a written request to the transfer agent, Computershare Trust Company of Canada.

Dividend Reinvestment and Share Purchase Plan

National Bank has a Dividend Reinvestment and Share Purchase Plan for holders of its common and preferred shares under which they can acquire common shares of the Bank without paying commissions or administration fees. Participants acquire common shares through the reinvestment of cash dividends paid on the shares they hold or through optional cash payments of at least $1 per payment, up to a maximum of $5,000 per quarter.

For additional information, shareholders may contact National Bank's registrar and transfer agent, Computershare Trust Company of Canada, at 1‑888‑838‑1407. To participate in the plan, National Bank's beneficial or non-registered common shareholders must contact their financial institution or broker.

Dividends

Dividends paid are "eligible dividends" in accordance with the Income Tax Act (Canada).

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