Q2 2023 Financial Statements (Part 2)

National Bank of Canada

31 May 2023

National Bank of Canada

May 31^st, 2023

Regulatory Announcement (Part 2)

Q2 2023 Results

National Bank of Canada (the "Bank") announces publication of its Second Quarter 2023 Report to Shareholders. The Second 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/en/about-us/investors/investor-relations/quarterly-results.html

To view the full PDF of this Second Quarter 2023 Report to Shareholders, please click on the following link:

http://www.rns-pdf.londonstockexchange.com/rns/2054B_1-2023-5-31.pdf

Report to Shareholders Second Quarter 2023

Interim Condensed Consolidated

Financial Statements

(unaudited)

	Consolidated Balance Sheets	54
	Consolidated Statements of Income	55
	Consolidated Statements of Comprehensive Income	56
	Consolidated Statements of Changes in Equity	58
	Consolidated Statements of Cash Flows	59
	Notes to the Interim Condensed Consolidated Financial Statements	60

Consolidated Balance Sheets

(unaudited) (millions of Canadian dollars)

		As at April 30, 2023	As at October 31, 2022

Assets
Cash and deposits with financial institutions		42,501	31,870

Securities (Notes 2, 3 and 4)
At fair value through profit or loss		93,111	87,375
At fair value through other comprehensive income		9,712	8,828
At amortized cost		14,099	13,516
		116,922	109,719

Securities purchased under reverse repurchase agreements
	and securities borrowed	16,827	26,486

Loans (Note 5)
Residential mortgage		83,441	80,129
Personal		45,255	45,323
Credit card		2,433	2,389
Business and government		79,138	73,317
		210,267	201,158
Customers' liability under acceptances		6,567	6,541
Allowances for credit losses		(1,070)	(955)
		215,764	206,744

Other
Derivative financial instruments		14,058	18,547
Investments in associates and joint ventures (Note 17)		146	140
Premises and equipment		1,508	1,397
Goodwill		1,518	1,519
Intangible assets		1,333	1,360
Other assets (Note 6)		7,107	5,958
		25,670	28,921
		417,684	403,740

Liabilities and equity
Deposits (Notes 3 and 7)		281,514	266,394

Other
Acceptances		6,567	6,541
Obligations related to securities sold short		18,721	21,817
Obligations related to securities sold under repurchase agreements
	and securities loaned	38,057	33,473
Derivative financial instruments		16,865	19,632
Liabilities related to transferred receivables (Note 3)		25,982	26,277
Other liabilities (Note 8)		6,609	6,361
		112,801	114,101

Subordinated debt (Note 9)		748	1,499

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		3,261	3,196
Contributed surplus		59	56
Retained earnings		15,943	15,140
Accumulated other comprehensive income		207	202
		22,620	21,744
Non-controlling interests		1	2
		22,621	21,746
		417,684	403,740
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

Consolidated Statements of Income

(unaudited) (millions of Canadian dollars)

		Quarter ended April 30		Six months ended April 30
		2023	2022⁽¹⁾	2023	2022⁽¹⁾

Interest income
Loans		3,026	1,469	5,929	2,891
Securities at fair value through profit or loss		358	319	783	685
Securities at fair value through other comprehensive income		68	31	127	62
Securities at amortized cost		119	52	231	98
Deposits with financial institutions		408	40	780	63
		3,979	1,911	7,850	3,799

Interest expense
Deposits		2,365	435	4,461	835
Liabilities related to transferred receivables		157	105	299	206
Subordinated debt		10	4	25	8
Other		565	54	1,084	105
		3,097	598	5,869	1,154
Net interest income⁽²⁾		882	1,313	1,981	2,645

Non-interest income
Underwriting and advisory fees		93	84	200	162
Securities brokerage commissions		47	59	94	116
Mutual fund revenues		141	147	284	303
Investment management and trust service fees		247	253	489	509
Credit fees		133	119	270	244
Card revenues		51	44	97	91
Deposit and payment service charges		73	73	146	144
Trading revenues (losses)		650	121	1,181	243
Gains (losses) on non-trading securities, net		30	53	41	107
Insurance revenues, net		45	37	83	84
Foreign exchange revenues, other than trading		38	56	94	108
Share in the net income of associates and joint ventures		4	15	7	20
Other		45	65	94	129
		1,597	1,126	3,080	2,260
Total revenues		2,479	2,439	5,061	4,905

Non-interest expenses
Compensation and employee benefits		833	808	1,708	1,625
Occupancy		83	76	166	152
Technology		255	232	507	463
Communications		15	16	29	30
Professional fees		62	57	125	120
Other		126	110	242	189
		1,374	1,299	2,777	2,579
Income before provisions for credit losses and income taxes		1,105	1,140	2,284	2,326
Provisions for credit losses (Note 5)		85	3	171	1
Income before income taxes		1,020	1,137	2,113	2,325
Income taxes		173	248	385	506
Net income		847	889	1,728	1,819

Net income attributable to
Preferred shareholders and holders of other equity instruments		35	25	70	51
Common shareholders		813	865	1,659	1,769
Bank shareholders and holders of other equity instruments		848	890	1,729	1,820
Non-controlling interests		(1)	(1)	(1)	(1)
		847	889	1,728	1,819

Earnings per share (dollars) (Note 15)
	Basic	2.41	2.56	4.92	5.24
	Diluted	2.38	2.53	4.87	5.17
Dividends per common share (dollars) (Note 10)		0.97	0.87	1.94	1.74
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) For the quarter and six-month period ended April 30, 2022, certain amounts have been adjusted to reflect a change in accounting policy related to cloud computing arrangements. For additional information, see Note 1.

(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, 2022.

Consolidated Statements of Comprehensive Income

(unaudited) (millions of Canadian dollars)

					Quarter ended April 30			Six months ended April 30
						2023	2022⁽¹⁾	2023	2022⁽¹⁾
Net income						847	889	1,728	1,819

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			109	48	(31)	164
			Impact of hedging net foreign currency translation gains (losses)			(34)	(17)	6	(51)
						75	31	(25)	113
		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			(40)	(56)	(28)	(120)
			Net (gains) losses on debt securities at fair value through other comprehensive
				income reclassified to net income		48	23	52	44
			Change in allowances for credit losses on debt securities at fair value through
				other comprehensive income reclassified to net income		1	−	−	−
						9	(33)	24	(76)
		Net change in cash flow hedges
			Net gains (losses) on derivative financial instruments designated as cash flow hedges			5	28	(20)	34
			Net (gains) losses on designated derivative financial instruments reclassified to net income			16	6	25	16
						21	34	5	50
		Share in the other comprehensive income of associates and joint ventures				−	(1)	1	(1)

	Items that will not be subsequently reclassified to net income
		Remeasurements of pension plans and other post-employment benefit plans				3	76	(56)	172
		Net gains (losses) on equity securities designated at fair value through other comprehensive income				(4)	(23)	6	(17)
		Net fair value change attributable to the credit risk on financial liabilities
			designated at fair value through profit or loss			(19)	304	(158)	325
						(20)	357	(208)	480
Total other comprehensive income, net of income taxes						85	388	(203)	566
Comprehensive income						932	1,277	1,525	2,385
Comprehensive income attributable to
	Bank shareholders and holders of other equity instruments					933	1,278	1,526	2,386
	Non-controlling interests					(1)	(1)	(1)	(1)
						932	1,277	1,525	2,385
The accompanying notes are an integral part of these unaudited interim condensed 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 April 30			Six months ended April 30
					2023	2022	2023	2022
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			(3)	−	2	(5)
		Impact of hedging net foreign currency translation gains (losses)			(8)	2	−	(5)
					(11)	2	2	(10)
	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			(15)	(20)	(11)	(43)
		Net (gains) losses on debt securities at fair value through other comprehensive income
			reclassified to net income		18	8	20	16
		Change in allowances for credit losses on debt securities at fair value through
			other comprehensive income reclassified to net income		−	−	−	−
					3	(12)	9	(27)
	Net change in cash flow hedges
		Net gains (losses) on derivative financial instruments designated as cash flow hedges			2	10	(8)	12
		Net (gains) losses on designated derivative financial instruments reclassified to net income			6	2	10	5
					8	12	2	17
	Share in the other comprehensive income of associates and joint ventures				−	(1)	−	(1)
Items that will not be subsequently reclassified to net income
	Remeasurements of pension plans and other post-employment benefit plans				1	27	(12)	62
	Net gains (losses) on equity securities designated at fair value through other comprehensive income				(1)	(8)	2	(6)
	Net fair value change attributable to the credit risk on financial liabilities
		designated at fair value through profit or loss			(8)	108	(61)	116
					(8)	127	(71)	172
					(8)	128	(58)	151
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)

		Six months ended April 30
			2023	2022⁽¹⁾

Preferred shares and other equity instruments at beginning and at end (Note 10)			3,150	2,650

Common shares at beginning (Note 10)			3,196	3,160
Issuances of common shares pursuant to the Stock Option Plan			60	52
Repurchases of common shares for cancellation			−	(24)
Impact of shares purchased or sold for trading			5	8
Common shares at end			3,261	3,196

Contributed surplus at beginning			56	47
Stock option expense (Note 12)			9	8
Stock options exercised			(6)	(6)
Contributed surplus at end			59	49

Retained earnings at beginning			15,140	12,854
Net income attributable to the Bank's shareholders and holders of other equity instruments			1,729	1,820
Dividends on preferred shares and distributions on other equity instruments (Note 10)			(80)	(56)
Dividends on common shares (Note 10)			(655)	(587)
Premium paid on common shares repurchased for cancellation (Note 10)			−	(221)
Remeasurements of pension plans and other post-employment benefit plans			(56)	172
Net gains (losses) on equity securities designated at fair value through other comprehensive income			6	(17)
Net fair value change attributable to the credit risk on financial liabilities
	designated at fair value through profit or loss		(158)	325
Impact of a financial liability resulting from put options written to non-controlling interests			7	(2)
Other			10	5
Retained earnings at end			15,943	14,293

Accumulated other comprehensive income at beginning			202	(32)
Net foreign currency translation adjustments			(25)	113
Net change in unrealized gains (losses) on debt securities at fair value through other comprehensive income			24	(76)
Net change in gains (losses) on cash flow hedges			5	50
Share in the other comprehensive income of associates and joint ventures			1	(1)
Accumulated other comprehensive income at end			207	54
			−
Equity attributable to the Bank's shareholders and holders of other equity instruments			22,620	20,242

Non-controlling interests at beginning			2	3
Net income attributable to non-controlling interests			(1)	(1)
Non-controlling interests at end			1	2

Equity			22,621	20,244

Accumulated Other Comprehensive Income

	As at April 30, 2023	As at April 30, 2022
Accumulated other comprehensive income
Net foreign currency translation adjustments	179	(16)
Net unrealized gains (losses) on debt securities at fair value through other comprehensive income	(10)	(5)
Net gains (losses) on instruments designated as cash flow hedges	36	73
Share in the other comprehensive income of associates and joint ventures	2	2
	207	54
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

(1) For the six-month period ended April 30, 2022, certain amounts have been adjusted to reflect a change in accounting policy related to cloud computing arrangements. For additional information, see Note 1.

Consolidated Statements of Cash Flows

(unaudited) (millions of Canadian dollars)

		Six months ended April 30
		2023	2022⁽¹⁾
Cash flows from operating activities
Net income		1,728	1,819
Adjustments for
	Provisions for credit losses	171	1
	Amortization of premises and equipment, including right-of-use assets	105	101
	Amortization of intangible assets	157	141
	Deferred taxes	(58)	94
	Losses (gains) on sales of non-trading securities, net	(41)	(107)
	Share in the net income of associates and joint ventures	(7)	(20)
	Stock option expense	9	8
Change in operating assets and liabilities
	Securities at fair value through profit or loss	(5,736)	6,723
	Securities purchased under reverse repurchase agreements and securities borrowed	9,659	(4,225)
	Loans and acceptances, net of securitization	(9,444)	(12,125)
	Deposits	15,120	5,746
	Obligations related to securities sold short	(3,096)	1,095
	Obligations related to securities sold under repurchase agreements and securities loaned	4,584	6,999
	Derivative financial instruments, net	1,722	(5,848)
	Interest and dividends receivable and interest payable	170	25
	Current tax assets and liabilities	(271)	(415)
	Other items	(1,448)	(1,998)
		13,324	(1,986)
Cash flows from financing activities
Issuances of common shares (including the impact of shares purchased for trading)		59	54
Repurchases of common shares for cancellation		−	(245)
Redemption of subordinated debt		(750)	−
Repayments of lease liabilities		(50)	(50)
Dividends paid on shares and distributions on other equity instruments		(732)	(643)
		(1,473)	(884)
Cash flows from investing activities
Net change in investments in associates and joint ventures		−	119
Purchases of non-trading securities		(5,149)	(5,882)
Maturities of non-trading securities		1,473	912
Sales of non-trading securities		2,443	3,878
Net change in premises and equipment, excluding right-of-use assets		(181)	(156)
Net change in intangible assets		(130)	(178)
		(1,544)	(1,307)
Impact of currency rate movements on cash and cash equivalents		324	721
Increase (decrease) in cash and cash equivalents		10,631	(3,456)
Cash and cash equivalents at beginning		31,870	33,879
Cash and cash equivalents at end⁽²⁾		42,501	30,423
Supplementary information about cash flows from operating activities
Interest paid		5,166	1,127
Interest and dividends received		7,317	3,798
Income taxes paid		428	786
The accompanying notes are an integral part of these unaudited interim condensed 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 $7.3 billion as at April 30, 2023 ($7.7 billion as at October 31, 2022) for which there are restrictions and of which $4.4 billion ($5.3 billion as at October 31, 2022) represent 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	60	Note 10	Share Capital and Other Equity Instruments	81
Note 2	Fair Value of Financial Instruments	61	Note 11	Capital Disclosure	82
Note 3	Financial Instruments Designated at Fair Value Through		Note 12	Share-Based Payments	83
	Profit or Loss	66	Note 13	Employee Benefits - Pension Plans and Other
Note 4	Securities	67		Post-Employment Benefit Plans	84
Note 5	Loans and Allowances for Credit Losses	68	Note 14	Income Taxes	85
Note 6	Other Assets	79	Note 15	Earnings Per Share	85
Note 7	Deposits	80	Note 16	Segment Disclosures	86
Note 8	Other Liabilities	80	Note 17	Event After the Consolidated Balance Sheet Date	87
Note 9	Subordinated Debt	80

Note 1 - Basis of Presentation

On May 30, 2023, the Board of Directors authorized the publication of the Bank's unaudited interim condensed consolidated financial statements (the consolidated financial statements) for the quarter and six-month period ended April 30, 2023.

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, 2022. Since these interim consolidated financial statements do not include all of the annual financial statement disclosures required under IFRS, they should be read in conjunction with the audited annual consolidated financial statements and accompanying notes for the year ended October 31, 2022. Future accounting policy changes that have not yet come into effect are described in Note 2 to the audited annual consolidated financial statements for the year ended October 31, 2022.

Certain comparative amounts have been adjusted to reflect an accounting policy change related to cloud computing arrangements, as described in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2022.

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, 2022 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, rising inflation, higher interest rates, and the Russia-Ukraine war 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 5 to these unaudited interim condensed consolidated financial statements.

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

Note 2 - 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 April 30, 2023
			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	−	−	−	−	42,501	42,501	42,501	42,501

	Securities		92,256	855	9,144	568	14,099	13,741	116,922	116,564

	Securities purchased under reverse
		repurchase agreements
		and securities borrowed	−	39	−	−	16,788	16,788	16,827	16,827

	Loans and acceptances, net of allowances		11,567	−	−	−	204,197	202,275	215,764	213,842

	Other
	Derivative financial instruments		14,058	−	−	−	−	−	14,058	14,058
	Other assets		80	−	−	−	3,758	3,758	3,838	3,838

Financial liabilities
	Deposits⁽¹⁾		−	18,625			262,889	262,273	281,514	280,898

	Other
	Acceptances		−	−			6,567	6,567	6,567	6,567
	Obligations related to securities sold short		18,721	−			−	−	18,721	18,721

	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	−	−			38,057	38,057	38,057	38,057
	Derivative financial instruments		16,865	−			−	−	16,865	16,865
	Liabilities related to transferred receivables		−	10,419			15,563	15,033	25,982	25,452
	Other liabilities		−	−			3,109	3,106	3,109	3,106

	Subordinated debt		−	−			748	757	748	757

(1) Includes embedded derivative financial instruments.

Note 2 - Fair Value of Financial Instruments (cont.)

								As at October 31, 2022
			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	−	−	−	−	31,870	31,870	31,870	31,870

	Securities		86,338	1,037	8,272	556	13,516	13,007	109,719	109,210

	Securities purchased under reverse
		repurchase agreements
		and securities borrowed	−	−	−	−	26,486	26,486	26,486	26,486

	Loans and acceptances, net of allowances		10,516	−	−	−	196,228	190,955	206,744	201,471

	Other
	Derivative financial instruments		18,547	−	−	−	−	−	18,547	18,547
	Other assets		87	−	−	−	3,221	3,221	3,308	3,308

Financial liabilities
	Deposits⁽¹⁾		−	15,355			251,039	249,937	266,394	265,292

	Other
	Acceptances		−	−			6,541	6,541	6,541	6,541
	Obligations related to securities sold short		21,817	−			−	−	21,817	21,817

	Obligations related to securities sold under
		repurchase agreements and
		securities loaned	−	−			33,473	33,473	33,473	33,473
	Derivative financial instruments		19,632	−			−	−	19,632	19,632
	Liabilities related to transferred receivables		−	11,352			14,925	14,137	26,277	25,489
	Other liabilities		−	−			2,632	2,627	2,632	2,627

	Subordinated debt		−	−			1,499	1,478	1,499	1,478

(1) 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 April 30, 2023 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, 2022. 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.

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. If inputs from different levels of the hierarchy are used, the financial instrument is classified in the same level as the lowest level input that is significant to the fair value measurement. For additional information, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2022.

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 April 30, 2023, $1 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 ($21 million in securities classified as at fair value through profit or loss during the quarter ended April 30, 2022). Also, during the quarter ended April 30, 2023, $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 ($3 million in securities classified as at fair value through profit or loss during the quarter ended April 30, 2022). During the six-month periods ended April 30, 2023 and 2022, 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 April 30, 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	4,389	10,211	−	14,600
				Canadian provincial and municipal governments	−	8,731	−	8,731
				U.S. Treasury, other U.S. agencies and other foreign governments	3,997	3,319	−	7,316
			Other debt securities		−	3,911	79	3,990
			Equity securities		57,525	524	425	58,474
					65,911	26,696	504	93,111
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	81	4,008	−	4,089
				Canadian provincial and municipal governments	−	2,457	−	2,457
				U.S. Treasury, other U.S. agencies and other foreign governments	805	215	−	1,020
			Other debt securities		−	1,578	−	1,578
			Equity securities		−	237	331	568
					886	8,495	331	9,712
	Securities purchased under reverse repurchase agreements and
		securities borrowed			−	39	−	39

	Loans				−	11,330	237	11,567

	Other
		Derivative financial instruments			260	13,786	12	14,058
		Other assets - Other items			−	−	80	80
					67,057	60,346	1,164	128,567

Financial liabilities
	Deposits⁽¹⁾				−	18,639	−	18,639

	Other
		Obligations related to securities sold short			13,365	5,356	−	18,721
		Derivative financial instruments			413	16,439	13	16,865
		Liabilities related to transferred receivables			−	10,419	−	10,419
					13,778	50,853	13	64,644

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

Note 2 - Fair Value of Financial Instruments (cont.)

						As at October 31, 2022
					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	4,736	8,186	−	12,922
				Canadian provincial and municipal governments	−	9,260	−	9,260
				U.S. Treasury, other U.S. agencies and other foreign governments	10,639	4,445	−	15,084
			Other debt securities		−	3,324	60	3,384
			Equity securities		45,805	504	416	46,725
					61,180	25,719	476	87,375
		At fair value through other comprehensive income
			Securities issued or guaranteed by
				Canadian government	21	3,191	−	3,212
				Canadian provincial and municipal governments	−	1,970	−	1,970
				U.S. Treasury, other U.S. agencies and other foreign governments	1,687	191	−	1,878
			Other debt securities		−	1,212	−	1,212
			Equity securities		−	236	320	556
					1,708	6,800	320	8,828

	Loans				−	10,272	244	10,516

	Other
		Derivative financial instruments			342	18,204	1	18,547
		Other assets - Other items			−	−	87	87
					63,230	60,995	1,128	125,353

Financial liabilities
	Deposits⁽¹⁾				−	15,424	8	15,432

	Other
		Obligations related to securities sold short			15,213	6,604	−	21,817
		Derivative financial instruments			625	18,989	18	19,632
		Liabilities related to transferred receivables			−	11,352	−	11,352
					15,838	52,369	26	68,233

(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, 2022. For the quarter and six-month period ended April 30, 2023, 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, 2022. For the six-month period ended April 30, 2023, there were no significant changes in the sensitivity analyses of Level 3 financial instruments.

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.

Six months ended April 30, 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 ⁽³⁾

−

Total realized and unrealized gains (losses) included in

Other comprehensive income

−

Purchases

−

Sales

(9)

−

Issuances

−

Settlements and other

−

(30)

−

Financial instruments transferred into Level 3

−

Financial instruments transferred out of Level 3

−

Fair value as at April 30, 2023

504

331

317

(1)

−

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

to financial assets and financial liabilities held as at April 30, 2023⁽⁴⁾

−

					Six months ended April 30, 2022
		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, 2021		471	306	297	2	−
Total realized and unrealized gains (losses) included in Net income ⁽⁵⁾		22	−	(20)	(6)	2
Total realized and unrealized gains (losses) included in
	Other comprehensive income	−	6	−	−	−
Purchases		31	7	71	−	−
Sales		(26)	−	−	−	−
Issuances		−	−	10	−	−
Settlements and other		−	−	7	(4)	−
Financial instruments transferred into Level 3		−	−	1	1	(3)
Financial instruments transferred out of Level 3		(12)	−	−	−	−
Fair value as at April 30, 2022		486	319	366	(7)	(1)
Change in unrealized gains and losses included in Net income with respect
	to financial assets and financial liabilities held as at April 30, 2022⁽⁶⁾	15	12	(20)	(6)	2

(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 $9 million.

(4) Total unrealized gains (losses) included in Non-interest income was an unrealized gain of $21 million.

(5) Total gains (losses) included in Non-interest income was a loss of $2 million.

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

Note 3 - 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, 2022. 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 April 30, 2023		Unrealized gains (losses) for the quarter ended April 30, 2023		Unrealized gains (losses) for the six months ended April 30, 2023		Unrealized gains (losses) since the initial recognition of the instrument
Financial assets designated at fair value through profit or loss
		Securities		855		3		10		3
		Securities purchased under reverse repurchase agreements		39		−		−		−
				894		3		10		3
Financial liabilities designated at fair value through profit or loss
		Deposits⁽¹⁾⁽²⁾		18,625		66		(1,066)		2,071
		Liabilities related to transferred receivables		10,419		(7)		(107)		410
^.				29,044		59		(1,173)		2,481


			Carrying value as at April 30, 2022		Unrealized gains (losses) for the quarter ended April 30, 2022		Unrealized gains (losses) for the six months ended April 30, 2022		Unrealized gains (losses) since the initial recognition of the instrument
Financial assets designated at fair value through profit or loss
	Securities		1,164		(36)		(46)		(20)
Financial liabilities designated at fair value through profit or loss
	Deposits⁽¹⁾⁽²⁾		13,735		1,526		1,675		1,601
	Liabilities related to transferred receivables		10,324		273		325		351
			24,059		1,799		2,000		1,952

(1) For the quarter ended April 30, 2023, 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 $27 million ($412 million gain for the quarter ended April 30, 2022). For the six-month period ended April 30, 2023, the corresponding change in this item resulted in a loss of $219 million ($441 million gain for the six-month period ended April 30, 2022).

(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 4 - Securities

Credit Quality

As at April 30, 2023 and as at October 31, 2022, 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 5 to these consolidated financial statements.

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

		As at April 30, 2023
		Amortized cost	Gross unrealized gains	Gross unrealized losses	Carrying value⁽¹⁾

Securities issued or guaranteed by
	Canadian government	4,220	8	(139)	4,089
	Canadian provincial and municipal governments	2,520	23	(86)	2,457
	U.S. Treasury, other U.S. agencies and other foreign governments	1,054	8	(42)	1,020
Other debt securities		1,670	3	(95)	1,578
Equity securities		568	17	(17)	568
		10,032	59	(379)	9,712

		As at October 31, 2022
		Amortized cost	Gross unrealized gains	Gross unrealized losses	Carrying value⁽¹⁾

Securities issued or guaranteed by
	Canadian government	3,386	1	(175)	3,212
	Canadian provincial and municipal governments	2,129	1	(160)	1,970
	U.S. Treasury, other U.S. agencies and other foreign governments	2,022	−	(144)	1,878
Other debt securities		1,355	−	(143)	1,212
Equity securities		570	21	(35)	556
		9,462	23	(657)	8,828

(1) The allowances for credit losses on securities at fair value through other comprehensive income (excluding the equity securities), representing $2 million as at April 30, 2023 ($2 million as at October 31, 2022), are reported in Other comprehensive income. For additional information, see Note 5 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 six-month period ended April 30, 2023, a dividend income amount of $12 million was recognized for these investments ($7 million for the six-month period ended April 30, 2022), including amounts of $1 million for investments that were sold during the six-month period ended April 30, 2023 ($1 million for investments that were sold during the six-month period ended April 30, 2022).

			Six months ended April 30, 2023			Six months ended April 30, 2022
			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			320	236	556	306	311	617
	Change in fair value		11	(3)	8	6	(29)	(23)
	Designated at fair value through
		other comprehensive income	−	44	44	7	44	51
	Sales⁽¹⁾		−	(40)	(40)	−	(71)	(71)
Fair value at end			331	237	568	319	255	574

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

Note 4 - Securities (cont.)

Securities at Amortized Cost

		As at April 30, 2023	As at October 31, 2022

Securities issued or guaranteed by
	Canadian government	5,630	5,737
	Canadian provincial and municipal governments	1,890	1,826
	U.S. Treasury, other U.S. agencies and other foreign governments	545	150
Other debt securities		6,042	5,810
Gross carrying value		14,107	13,523
Allowances for credit losses		8	7
Carrying value		14,099	13,516

Gains (Losses) on Disposals of Securities at Amortized Cost

During the six-month period ended April 30, 2023, the Bank did not dispose of any securities measured at amortized cost. During the six-month period ended April 30, 2022, the Bank had sold certain debt securities measured at amortized cost. The carrying value of these securities upon disposal was $287 million, and the Bank had recognized gains of $4 million in Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income.

Note 5 - 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, 2022.

Credit Quality of Loans

The following tables present the gross carrying amounts of loans as at April 30, 2023 and as at October 31, 2022, 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 78 in the Credit Risk section of the 2022 Annual Report.

					As at April 30, 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	29,851	1	−	−	−	29,852
	Good	16,937	140	−	−	−	17,077
	Satisfactory	10,545	3,832	−	−	−	14,377
	Special mention	359	744	−	−	−	1,103
	Substandard	57	196	−	−	−	253
	Default	−	−	53	−	−	53
IRB Approach		57,749	4,913	53	−	−	62,715
Standardized Approach		8,743	198	204	335	11,246	20,726
Gross carrying amount		66,492	5,111	257	335	11,246	83,441
Allowances for credit losses⁽²⁾		64	81	63	(67)	−	141
Carrying amount		66,428	5,030	194	402	11,246	83,300

Personal
	Excellent	21,692	20	−	−	−	21,712
	Good	8,262	652	−	−	−	8,914
	Satisfactory	5,985	1,797	−	−	−	7,782
	Special mention	1,905	804	−	−	−	2,709
	Substandard	27	208	−	−	−	235
	Default	−	−	149	−	−	149
IRB Approach		37,871	3,481	149	−	−	41,501
Standardized Approach		3,575	80	44	55	−	3,754
Gross carrying amount		41,446	3,561	193	55	−	45,255
Allowances for credit losses⁽²⁾		79	110	83	(10)	−	262
Carrying amount		41,367	3,451	110	65	−	44,993

Credit card
	Excellent	629	−	−	−	−	629
	Good	360	1	−	−	−	361
	Satisfactory	701	59	−	−	−	760
	Special mention	276	191	−	−	−	467
	Substandard	37	79	−	−	−	116
	Default	−	−	−	−	−	−
IRB Approach		2,003	330	−	−	−	2,333
Standardized Approach		100	−	−	−	−	100
Gross carrying amount		2,103	330	−	−	−	2,433
Allowances for credit losses⁽²⁾		33	101	−	−	−	134
Carrying amount		2,070	229	−	−	−	2,299

Business and government⁽³⁾
	Excellent	7,922	−	−	−	103	8,025
	Good	27,987	1	−	−	53	28,041
	Satisfactory	31,328	6,354	−	−	138	37,820
	Special mention	150	1,697	−	−	−	1,847
	Substandard	10	259	301	−	−	570
	Default	−	−	43	−	−	43
IRB Approach		67,397	8,311	344	−	294	76,346
Standardized Approach		9,255	57	20	−	27	9,359
Gross carrying amount		76,652	8,368	364	−	321	85,705
Allowances for credit losses⁽²⁾		163	179	191	−	−	533
Carrying amount		76,489	8,189	173	−	321	85,172
Total loans and acceptances
Gross carrying amount		186,693	17,370	814	390	11,567	216,834
Allowances for credit losses⁽²⁾		339	471	337	(77)	−	1,070
Carrying amount		186,354	16,899	477	467	11,567	215,764

(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 5 - Loans and Allowances for Credit Losses (cont.)

					As at October 31, 2022
		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	30,465	−	−	−	−	30,465
	Good	16,351	12	−	−	−	16,363
	Satisfactory	10,765	3,269	−	−	−	14,034
	Special mention	609	394	−	−	−	1,003
	Substandard	76	140	−	−	−	216
	Default	−	−	49	−	−	49
AIRB Approach		58,266	3,815	49	−	−	62,130
Standardized Approach		7,266	179	211	384	9,959	17,999
Gross carrying amount		65,532	3,994	260	384	9,959	80,129
Allowances for credit losses⁽²⁾		53	80	61	(76)	−	118
Carrying amount		65,479	3,914	199	460	9,959	80,011

Personal
	Excellent	22,190	22	−	−	−	22,212
	Good	8,792	479	−	−	−	9,271
	Satisfactory	6,928	1,394	−	−	−	8,322
	Special mention	358	775	−	−	−	1,133
	Substandard	26	203	−	−	−	229
	Default	−	−	130	−	−	130
AIRB Approach		38,294	2,873	130	−	−	41,297
Standardized Approach		3,837	78	36	75	−	4,026
Gross carrying amount		42,131	2,951	166	75	−	45,323
Allowances for credit losses⁽²⁾		67	113	75	(16)	−	239
Carrying amount		42,064	2,838	91	91	−	45,084

Credit card
	Excellent	600	−	−	−	−	600
	Good	359	−	−	−	−	359
	Satisfactory	689	51	−	−	−	740
	Special mention	287	178	−	−	−	465
	Substandard	37	71	−	−	−	108
	Default	−	−	−	−	−	−
AIRB Approach		1,972	300	−	−	−	2,272
Standardized Approach		117	−	−	−	−	117
Gross carrying amount		2,089	300	−	−	−	2,389
Allowances for credit losses⁽²⁾		31	95	−	−	−	126
Carrying amount		2,058	205	−	−	−	2,263

Business and government⁽³⁾
	Excellent	6,140	2	−	−	147	6,289
	Good	27,607	112	−	−	53	27,772
	Satisfactory	26,567	8,803	−	−	145	35,515
	Special mention	75	1,172	−	−	−	1,247
	Substandard	41	272	−	−	−	313
	Default	−	−	367	−	−	367
AIRB Approach		60,430	10,361	367	−	345	71,503
Standardized Approach		8,096	28	19	−	212	8,355
Gross carrying amount		68,526	10,389	386	−	557	79,858
Allowances for credit losses⁽²⁾		115	160	197	−	−	472
Carrying amount		68,411	10,229	189	−	557	79,386
Total loans and acceptances
Gross carrying amount		178,278	17,634	812	459	10,516	207,699
Allowances for credit losses⁽²⁾		266	448	333	(92)	−	955
Carrying amount		178,012	17,186	479	551	10,516	206,744

(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.

The following table presents the credit risk exposures of off-balance-sheet commitments as at April 30, 2023 and as at October 31, 2022 according to credit quality and ECL impairment stage.

			As at April 30, 2023					As at October 31, 2022
		Stage 1	Stage 2	Stage 3	Total	Stage 1	Stage 2	Stage 3	Total
Off-balance-sheet commitments⁽¹⁾
Retail
	Excellent	15,821	14	−	15,835	15,292	13	−	15,305
	Good	3,397	203	−	3,600	3,316	165	−	3,481
	Satisfactory	1,224	209	−	1,433	1,170	180	−	1,350
	Special mention	224	78	−	302	193	68	−	261
	Substandard	17	17	−	34	15	15	−	30
	Default	−	−	1	1	−	−	1	1
Non-retail
	Excellent	14,795	−	−	14,795	13,136	−	−	13,136
	Good	19,544	−	−	19,544	18,723	24	−	18,747
	Satisfactory	10,800	3,210	−	14,010	7,894	3,488	−	11,382
	Special mention	15	277	−	292	12	246	−	258
	Substandard	6	24	−	30	4	24	−	28
	Default	−	−	1	1	−	−	18	18
IRB Approach		65,843	4,032	2	69,877	59,755	4,223	19	63,997
Standardized Approach		16,617	−	9	16,626	15,432	−	−	15,432
Total exposure		82,460	4,032	11	86,503	75,187	4,223	19	79,429
Allowances for credit losses		94	54	−	148	99	63	−	162
Total exposure, net
	of allowances	82,366	3,978	11	86,355	75,088	4,160	19	79,267

(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 April 30, 2023						As at October 31, 2022
		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	70	94	24	13	106	105	23	23
	61 to 90 days	41	41	13	18	38	30	11	9
	Over 90 days⁽³⁾	−	−	27	−	−	−	22	−
		111	135	64	31	144	135	56	32

(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 April 30, 2023		As at October 31, 2022
		Gross	Allowances for credit losses	Net	Gross	Allowances for credit losses	Net

Loans - Stage 3
	Residential mortgage	257	63	194	260	61	199
	Personal	193	83	110	166	75	91
	Credit card⁽¹⁾	−	−	−	−	−	−
	Business and government⁽²⁾	364	191	173	386	197	189
		814	337	477	812	333	479
Loans - POCI		390	(77)	467	459	(92)	551
		1,204	260	944	1,271	241	1,030

(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.

Note 5 - Loans and Allowances for Credit Losses (cont.)

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 April 30, 2023
		Allowances for credit losses as at January 31, 2023	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at April 30, 2023

Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	2	−	−	−	7
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	1	1	−	−	−	2
	At amortized cost⁽²⁾	8	−	−	−	−	8
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	135	6	−	−	−	141
	Personal	257	21	(21)	−	5	262
	Credit card	136	14	(20)	−	4	134
	Business and government	432	63	(3)	−	3	495
	Customers' liability under acceptances	47	(9)	−	−	−	38
		1,007	95	(44)	−	12	1,070
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−

Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		13	(2)	−	−	−	11
Undrawn commitments		142	(11)	−	−	−	131
Backstop liquidity and credit enhancement facilities		6	−	−	−	−	6
		161	(13)	−	−	−	148
		1,182	85	(44)	−	12	1,235

						Quarter ended April 30, 2022
		Allowances for credit losses as at January 31, 2022	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at April 30, 2022

Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		7	(2)	−	−	−	5
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	1	−	−	−	−	1
	At amortized cost⁽²⁾	5	1	−	−	−	6
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	80	1	(1)	−	1	81
	Personal	212	11	(12)	−	4	215
	Credit card	124	8	(15)	−	5	122
	Business and government	451	10	(14)	−	1	448
	Customers' liability under acceptances	61	(12)	−	−	−	49
		928	18	(42)	−	11	915
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−
Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		10	1	−	−	−	11
Undrawn commitments		130	(15)	−	−	−	115
Backstop liquidity and credit enhancement facilities		5	−	−	−	−	5
		145	(14)	−	−	−	131
		1,086	3	(42)	−	11	1,058

(1) The contractual amount outstanding on financial assets that were written off during the quarter ended April 30, 2023 and that are still subject to enforcement activity was $27 million ($25 million for the quarter ended April 30, 2022).

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

(3) As at April 30, 2023 and 2022, 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.

					Six months ended April 30, 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 April 30, 2023

Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	2	−	−	−	7
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	2	−	−	−	−	2
	At amortized cost⁽²⁾	7	1	−	−	−	8
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	118	25	(1)	−	(1)	141
	Personal	239	52	(37)	−	8	262
	Credit card	126	39	(38)	−	7	134
	Business and government	418	82	(8)	−	3	495
	Customers' liability under acceptances	54	(16)	−	−	−	38
		955	182	(84)	−	17	1,070
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−

Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		13	(2)	−	−	−	11
Undrawn commitments		143	(12)	−	−	−	131
Backstop liquidity and credit enhancement facilities		6	−	−	−	−	6
		162	(14)	−	−	−	148
		1,131	171	(84)	−	17	1,235

						Six months ended April 30, 2022
		Allowances for credit losses as at October 31, 2021	Provisions for credit losses	Write-offs⁽¹⁾	Disposals	Recoveries and other	Allowances for credit losses as at April 30, 2022

Balance sheet
Cash and deposits with financial institutions⁽²⁾⁽³⁾		5	−	−	−	−	5
Securities⁽³⁾
	At fair value through other comprehensive income⁽⁴⁾	1	−	−	−	−	1
	At amortized cost⁽²⁾	3	3	−	−	−	6
Securities purchased under reverse repurchase
	agreements and securities borrowed⁽²⁾⁽³⁾	−	−	−	−	−	−
Loans⁽⁵⁾
	Residential mortgage	71	11	(2)	−	1	81
	Personal	202	26	(23)	−	10	215
	Credit card	122	21	(30)	−	9	122
	Business and government	515	10	(81)	−	4	448
	Customers' liability under acceptances	88	(39)	−	−	−	49
		998	29	(136)	−	24	915
Other assets⁽²⁾⁽³⁾		−	−	−	−	−	−

Off-balance-sheet commitments⁽⁶⁾
Letters of guarantee and documentary letters of credit		13	(2)	−	−	−	11
Undrawn commitments		143	(28)	−	−	−	115
Backstop liquidity and credit enhancement facilities		6	(1)	−	−	−	5
		162	(31)	−	−	−	131
		1,169	1	(136)	−	24	1,058

(1) The contractual amount outstanding on financial assets that were written off during the six-month period ended April 30, 2023 and that are still subject to enforcement activity was $52 million ($47 million for the six-month period ended April 30, 2022).

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

(3) As at April 30, 2023 and 2022, 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 5 - 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 April 30, 2023						Quarter ended April 30, 2022
			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			62	84	60	(71)	135	40	63	34	(57)	80
	Originations or purchases		3	−	−	−	3	4	−	−	−	4
	Transfers⁽²⁾:
		to Stage 1	13	(11)	(2)	−	−	7	(6)	(1)	−	−
		to Stage 2	(3)	9	(6)	−	−	(1)	1	−	−	−
		to Stage 3	−	(6)	6	−	−	−	−	−	−	−
	Net remeasurement of loss allowances⁽³⁾		(9)	9	5	5	10	(5)	(1)	6	(1)	(1)
	Derecognitions⁽⁴⁾		(2)	(4)	(1)	−	(7)	(1)	(1)	−	−	(2)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			2	(3)	2	5	6	4	(7)	5	(1)	1
Write-offs			−	−	−	−	−	−	−	(1)	−	(1)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	−	−	−	−	−	1	−	1
Foreign exchange movements and other			−	−	1	(1)	−	−	1	−	(1)	−
Balance at end			64	81	63	(67)	141	44	57	39	(59)	81
Includes:
	Amounts drawn		64	81	63	(67)	141	44	57	39	(59)	81
	Undrawn commitments⁽⁵⁾		−	−	−	−	−	−	−	−	−	−
Personal
Balance at beginning			75	121	79	(11)	264	70	111	63	(25)	219
	Originations or purchases		7	−	−	−	7	12	−	−	−	12
	Transfers⁽²⁾:
		to Stage 1	29	(28)	(1)	−	−	13	(12)	(1)	−	−
		to Stage 2	(3)	5	(2)	−	−	(3)	4	(1)	−	−
		to Stage 3	−	(14)	14	−	−	−	(7)	7	−	−
	Net remeasurement of loss allowances⁽³⁾		(25)	35	11	1	22	(19)	16	5	3	5
	Derecognitions⁽⁴⁾		(2)	(5)	(1)	−	(8)	(2)	(4)	−	−	(6)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			6	(7)	21	1	21	1	(3)	10	3	11
Write-offs			−	−	(21)	−	(21)	−	−	(12)	−	(12)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	4	−	4	−	−	5	−	5
Foreign exchange movements and other			1	−	−	−	1	(1)	1	(1)	−	(1)
Balance at end			82	114	83	(10)	269	70	109	65	(22)	222
Includes:
	Amounts drawn		79	110	83	(10)	262	67	105	65	(22)	215
	Undrawn commitments⁽⁵⁾		3	4	−	−	7	3	4	−	−	7

(1) No POCI loan was acquired during the quarter ended April 30, 2023 (the total amount of undiscounted initially expected credit losses on the POCI loans acquired during the quarter ended April 30, 2022 was $4 million). The expected credit losses reflected in the purchase price have been discounted.

(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 April 30, 2023						Quarter ended April 30, 2022
			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	117	−	−	176	55	103	−	−	158
	Originations or purchases		3	−	−	−	3	3	−	−	−	3
	Transfers⁽²⁾:
		to Stage 1	22	(22)	−	−	−	21	(21)	−	−	−
		to Stage 2	(4)	4	−	−	−	(4)	4	−	−	−
		to Stage 3	−	(9)	9	−	−	−	(6)	6	−	−
	Net remeasurement of loss allowances⁽³⁾		(22)	32	7	−	17	(20)	23	4	−	7
	Derecognitions⁽⁴⁾		(1)	(1)	−	−	(2)	−	(1)	−	−	(1)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			(2)	4	16	−	18	−	(1)	10	−	9
Write-offs			−	−	(20)	−	(20)	−	−	(15)	−	(15)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	4	−	4	−	−	5	−	5
Foreign exchange movements and other			−	−	−	−	−	−	−	−	−	−
Balance at end			57	121	−	−	178	55	102	−	−	157
Includes:
	Amounts drawn		33	101	−	−	134	33	89	−	−	122
	Undrawn commitments⁽⁵⁾		24	20	−	−	44	22	13	−	−	35
Business and government⁽⁶⁾
Balance at beginning			197	198	179	−	574	175	202	224	−	601
	Originations or purchases		22	−	−	−	22	14	−	−	−	14
	Transfers⁽²⁾:
		to Stage 1	15	(15)	−	−	−	12	(12)	−	−	−
		to Stage 2	(5)	6	(1)	−	−	(4)	5	(1)	−	−
		to Stage 3	−	(1)	1	−	−	−	−	−	−	−
	Net remeasurement of loss allowances⁽³⁾		(5)	27	15	−	37	(22)	(2)	6	−	(18)
	Derecognitions⁽⁴⁾		(5)	(11)	(2)	−	(18)	(9)	(3)	(2)	−	(14)
	Changes to models		(1)	(1)	−	−	(2)	−	−	−	−	−
Provisions for credit losses			21	5	13	−	39	(9)	(12)	3	−	(18)
Write-offs			−	−	(3)	−	(3)	−	−	(14)	−	(14)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	2	−	2	−	−	1	−	1
Foreign exchange movements and other			−	1	−	−	1	−	−	−	−	−
Balance at end			218	204	191	−	613	166	190	214	−	570
Includes:
	Amounts drawn		163	179	191	−	533	115	168	214	−	497
	Undrawn commitments⁽⁵⁾		55	25	−	−	80	51	22	−	−	73
Total allowances for credit losses at end⁽⁷⁾			421	520	337	(77)	1,201	335	458	318	(81)	1,030
Includes:
	Amounts drawn		339	471	337	(77)	1,070	259	419	318	(81)	915
	Undrawn commitments⁽⁵⁾		82	49	−	−	131	76	39	−	−	115

(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 5 - Loans and Allowances for Credit Losses (cont.)

			Six months ended April 30, 2023					Six months ended April 30, 2022
			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			53	80	61	(76)	118	50	52	29	(60)	71
	Originations or purchases		8	−	−	−	8	9	−	−	−	9
	Transfers⁽²⁾:
		to Stage 1	21	(18)	(3)	−	−	10	(9)	(1)	−	−
		to Stage 2	(6)	18	(12)	−	−	(2)	2	−	−	−
		to Stage 3	−	(14)	14	−	−	−	−	−	−	−
	Net remeasurement of loss allowances⁽³⁾		(9)	21	8	8	28	(23)	13	12	3	5
	Derecognitions⁽⁴⁾		(3)	(5)	(3)	−	(11)	(1)	(2)	−	−	(3)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			11	2	4	8	25	(7)	4	11	3	11
Write-offs			−	−	(1)	−	(1)	−	−	(2)	−	(2)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	−	−	−	−	−	1	−	1
Foreign exchange movements and other			−	(1)	(1)	1	(1)	1	1	−	(2)	−
Balance at end			64	81	63	(67)	141	44	57	39	(59)	81
Includes:
	Amounts drawn		64	81	63	(67)	141	44	57	39	(59)	81
	Undrawn commitments⁽⁵⁾		−	−	−	−	−	−	−	−	−	−
Personal
Balance at beginning			70	117	75	(16)	246	73	103	63	(29)	210
	Originations or purchases		17	−	−	−	17	24	−	−	−	24
	Transfers⁽²⁾:
		to Stage 1	48	(45)	(3)	−	−	31	(28)	(3)	−	−
		to Stage 2	(7)	9	(2)	−	−	(6)	7	(1)	−	−
		to Stage 3	−	(26)	26	−	−	−	(13)	13	−	−
	Net remeasurement of loss allowances⁽³⁾		(43)	68	18	6	49	(45)	39	8	7	9
	Derecognitions⁽⁴⁾		(4)	(9)	(2)	−	(15)	(5)	(8)	(1)	−	(14)
	Changes to models		1	−	−	−	1	(2)	8	−	−	6
Provisions for credit losses			12	(3)	37	6	52	(3)	5	16	7	25
Write-offs			−	−	(37)	−	(37)	−	−	(23)	−	(23)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	9	−	9	−	−	10	−	10
Foreign exchange movements and other			−	−	(1)	−	(1)	−	1	(1)	−	−
Balance at end			82	114	83	(10)	269	70	109	65	(22)	222
Includes:
	Amounts drawn		79	110	83	(10)	262	67	105	65	(22)	215
	Undrawn commitments⁽⁵⁾		3	4	−	−	7	3	4	−	−	7

(1) No POCI loan was acquired during the six-month period ended April 30, 2023 (the total amount of undiscounted initially expected credit losses on the POCI loans acquired during the six-month period ended April 30, 2022 was $9 million). The expected credit losses reflected in the purchase price have been discounted.

(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.

			Six months ended April 30, 2023					Six months ended April 30, 2022
			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			53	112	−	−	165	57	101	−	−	158
	Originations or purchases		5	−	−	−	5	6	−	−	−	6
	Transfers⁽²⁾:
		to Stage 1	47	(47)	−	−	−	43	(43)	−	−	−
		to Stage 2	(8)	8	−	−	−	(9)	9	−	−	−
		to Stage 3	−	(16)	16	−	−	−	(11)	11	−	−
	Net remeasurement of loss allowances⁽³⁾		(38)	65	15	−	42	(41)	47	10	−	16
	Derecognitions⁽⁴⁾		(2)	(1)	−	−	(3)	(1)	(1)	−	−	(2)
	Changes to models		−	−	−	−	−	−	−	−	−	−
Provisions for credit losses			4	9	31	−	44	(2)	1	21	−	20
Write-offs			−	−	(38)	−	(38)	−	−	(30)	−	(30)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	7	−	7	−	−	9	−	9
Foreign exchange movements and other			−	−	−	−	−	−	−	−	−	−
Balance at end			57	121	−	−	178	55	102	−	−	157
Includes:
	Amounts drawn		33	101	−	−	134	33	89	−	−	122
	Undrawn commitments⁽⁵⁾		24	20	−	−	44	22	13	−	−	35
Business and government⁽⁶⁾
Balance at beginning			177	195	197	−	569	177	238	287	−	702
	Originations or purchases		46	−	−	−	46	36	−	−	−	36
	Transfers⁽²⁾:
		to Stage 1	32	(32)	−	−	−	40	(40)	−	−	−
		to Stage 2	(11)	14	(3)	−	−	(12)	14	(2)	−	−
		to Stage 3	−	(2)	2	−	−	−	(1)	1	−	−
	Net remeasurement of loss allowances⁽³⁾		(15)	48	5	−	38	(57)	(4)	7	−	(54)
	Derecognitions⁽⁴⁾		(10)	(19)	(4)	−	(33)	(18)	(17)	(2)	−	(37)
	Changes to models		(1)	(1)	−	−	(2)	−	−	−	−	−
Provisions for credit losses			41	8	−	−	49	(11)	(48)	4	−	(55)
Write-offs			−	−	(8)	−	(8)	−	−	(81)	−	(81)
Disposals			−	−	−	−	−	−	−	−	−	−
Recoveries			−	−	3	−	3	−	−	2	−	2
Foreign exchange movements and other			−	1	(1)	−	−	−	−	2	−	2
Balance at end			218	204	191	−	613	166	190	214	−	570
Includes:
	Amounts drawn		163	179	191	−	533	115	168	214	−	497
	Undrawn commitments⁽⁵⁾		55	25	−	−	80	51	22	−	−	73
Total allowances for credit losses at end⁽⁷⁾			421	520	337	(77)	1,201	335	458	318	(81)	1,030
Includes:
	Amounts drawn		339	471	337	(77)	1,070	259	419	318	(81)	915
	Undrawn commitments⁽⁵⁾		82	49	−	−	131	76	39	−	−	115

(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 5 - 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 April 30, 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⁾	(0.3)	%	1.7	%	0.5	%	1.9	%		(5.1)	%	2.6	%
	Unemployment rate	5.8	%	6.3	%	5.5	%	5.5	%		7.3	%	6.9	%
	Housing price index growth⁽²⁾	(6.6)	%	1.4	%	(0.7)	%	1.2	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.2	%	2.0	%	1.9	%	1.8	%		3.1	%	2.3	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	1.2	%	2.0	%	5.6	%	2.6	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	71		69		84		80			43		52

										As at January 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⁾	0.3	%	1.8	%	0.8	%	1.9	%		(5.1)	%	2.6	%
	Unemployment rate	5.8	%	6.2	%	5.5	%	5.6	%		7.3	%	6.8	%
	Housing price index growth⁽²⁾	(9.6)	%	1.3	%	(0.8)	%	0.4	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.3	%	2.1	%	2.1	%	1.9	%		3.3	%	2.5	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	4.2	%	2.0	%	5.6	%	2.6	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	77		75		92		87			46		57

										As at October 31, 2022
		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⁾	0.6	%	1.7	%	1.1	%	1.6	%		(5.2)	%	2.9	%
	Unemployment rate	6.0	%	6.1	%	5.4	%	5.4	%		7.4	%	6.4	%
	Housing price index growth⁽²⁾	(11.2)	%	0.7	%	−	%	0.2	%		(13.9)	%	0.3	%
	BBB spread⁽³⁾	2.4	%	2.1	%	2.0	%	1.9	%		3.4	%	2.6	%
	S&P/TSX growth⁽²⁾⁽⁴⁾	(4.3)	%	2.4	%	5.1	%	2.6	%		(25.6)	%	5.5	%
	WTI oil price⁽⁵⁾ (US$ per barrel)	78		77		102		97			44		51

(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 April 30, 2023, the macroeconomic risks are similar to those of the previous quarter, with uncertainty remaining high.

Despite greater-than-anticipated resilience in global growth in early 2023, new concerns have emerged, in particular surrounding the U.S. and European banking systems, which could slow growth. The restrictive monetary policy ushered in by the major central banks in response to rising inflation, which is improving but still too high globally, suggests a cautious outlook. In the United States, negotiations over raising the debt ceiling is making investors nervous as the government could find itself short of liquidity during the summer. The U.S. Federal Reserve is pausing interest rate hikes but the underlying inflation and high wages do not suggest rate cuts before the last quarter of the year. Monetary policy that remains so restrictive for so long will translate, in our scenario, into three quarters of economic contraction starting in the fourth quarter. The Bank of Canada was able to announce a rate hike pause before the U.S. Federal Reserve given greater success against inflation but that may not prevent the Canadian economy from experiencing lethargy caused by the high interest rates. A stronger banking system, greater excess savings, and advantageous foreign exchange terms lead us to believe that Canada's economy might be more resilient than the U.S. economy in the coming quarters. After 12 months, the unemployment rate rises 1.2 percentage points to 6.2%. Housing prices decrease by 6.6% year over year. The S&P/TSX sits at 20,427 points after one year, and the price of oil hovers around US$66.

In the upside scenario, an easing of geopolitical tensions boosts confidence. Inflation comes under control as supply chains normalize, and the tight monetary policy does not inflict too much damage on the economy. Governments maintain a sizable fiscal stimulus in Canada and the United States, offsetting the tight monetary policy. Consumer spending is surprisingly high because of the excess savings amassed since the start of the pandemic. After one year, the unemployment rate is more favourable than the base scenario (five-tenths lower). Housing prices remain unchanged, the S&P/TSX is at 21,305 points after one year, and the price of oil hovers around US$84.

In the downside scenario, central bankers have underestimated the impact of their simultaneous tightening measures, and the global economy sinks into a recession, as a decrease in demand is reflected in reduced investment by businesses, which also carry out layoffs. Given budgetary constraints, governments cannot support households and businesses as they did during the pandemic. After 12 months, the economic contraction pushes the unemployment rate to 8.1%. Housing prices decrease considerably. The S&P/TSX sits at 15,015 points after one year, and the price of oil hovers around US$37.

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 April 30, 2023 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 April 30, 2023		941

Simulations
	100% upside scenario	699
	100% base scenario	773
	100% downside scenario	1,183

Note 6 - Other Assets

	As at April 30, 2023	As at October 31, 2022

Receivables, prepaid expenses and other items	3,070	2,591
Interest and dividends receivable	1,590	1,057
Due from clients, dealers and brokers	631	842
Defined benefit asset	470	498
Deferred tax assets	450	389
Current tax assets	762	471
Reinsurance assets	6	6
Insurance assets	128	104
	7,107	5,958

Note 7 - Deposits

			As at April 30, 2023		As at October 31, 2022
	On demand⁽¹⁾	After notice⁽²⁾	Fixed term⁽³⁾	Total	Total

Personal	4,591	35,986	45,029	85,606	78,811
Business and government	62,134	32,512	97,109	191,755	184,230
Deposit-taking institutions	1,340	121	2,692	4,153	3,353
	68,065	68,619	144,830	281,514	266,394

(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 $13.2 billion as at April 30, 2023 ($10.4 billion as at October 31, 2022). During the six-month period ended April 30, 2023, the Bank issued 280 million Swiss francs and 1.0 billion euros in covered bonds (1.0 billion euros in covered bonds came to maturity, and the Bank issued 1.3 billion euros and US$1.5 billion in covered bonds during the six-month period ended April 30, 2022). For additional information on covered bonds, see Note 27 to the audited annual consolidated financial statements for the year ended October 31, 2022.

In addition, as at April 30, 2023, the Deposits - Business and government item also includes deposits of $15.4 billion ($12.8 billion as at October 31, 2022) 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 8 - Other Liabilities

	As at April 30, 2023	As at October 31, 2022

Accounts payable and accrued expenses	2,038	2,582
Subsidiaries' debts to third parties	268	156
Interest and dividends payable	1,769	1,063
Lease liabilities	536	552
Due to clients, dealers and brokers	495	730
Defined benefit liability	116	111
Allowances for credit losses - Off-balance-sheet commitments (Note 5)	148	162
Deferred tax liabilities	17	14
Current tax liabilities	87	67
Insurance liabilities	10	10
Other items^(1)(2)(3)	1,125	914
	6,609	6,361

(1) As at April 30, 2023, Other items included $6 million in litigation provisions ($11 million as at October 31, 2022).

(2) As at April 30, 2023, Other items included $32 million in provisions for onerous contracts ($33 million as at October 31, 2022).

(3) As at April 30, 2023, Other items included the financial liability resulting from put options written to non-controlling interests of Flinks Technology Inc. (Flinks) for an amount of $26 million ($33 million as at October 31, 2022).

Note 9 - Subordinated Debt

Redemption of Subordinated Debt

On February 1, 2023, the Bank redeemed $750 million of medium-term notes maturing on February 1, 2028 at a price equal to their nominal value plus accrued interest.

Note 10 - Share Capital and Other Equity Instruments

Shares and Other Equity Instruments Outstanding

		As at April 30, 2023		As at October 31, 2022
		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		336,582,124	3,196	337,912,283	3,160
Issued pursuant to the Stock Option Plan		1,088,870	60	1,193,663	61
Repurchases of common shares for cancellation		−	−	(2,500,000)	(24)
Impact of shares purchased or sold for trading⁽²⁾		48,589	5	(18,295)	(1)
Other		−	−	(5,527)	−
Common shares at end of period		337,719,583	3,261	336,582,124	3,196

(1) Limited Recourse Capital Notes (LRCN).

(2) As at April 30, 2023, a total of 43,339 shares were sold short for trading, representing $5 million (5,250 shares were held for trading, representing a negligible amount as at October 31, 2022).

Dividends Declared and Distributions on Other Equity Instruments

				Six months ended April 30
		2023		2022
		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	7	0.5031	7	0.5031
	Series 32	6	0.4799	6	0.4799
	Series 38	14	0.8784	9	0.5563
	Series 40	7	0.5750	7	0.5750
	Series 42	7	0.6188	7	0.6188
		41		36
Other equity instruments
	LRCN - Series 1⁽¹⁾	10		10
	LRCN - Series 2⁽²⁾	10		10
	LRCN - Series 3⁽³⁾	19		−
		39		20
Preferred shares and other equity instruments		80		56
Common shares		655	1.9400	587	1.7400
		735		643

(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.

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

Repurchase of Common Shares

On December 12, 2022, 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 outstanding common shares) over the 12-month period ending on December 11, 2023. On December 10, 2021, the Bank had begun a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2% of its then outstanding common shares) over the 12-month period ended December 9, 2022. 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 six-month period ended April 30, 2023, the Bank did not repurchase any common shares. During the six-month period ended April 30, 2022, the Bank had repurchased 2,500,000 common shares for $245 million, which had reduced Common share capital by $24 million and Retained earnings by $221 million.

Note 11 - Capital Disclosure

The Bank and all other major Canadian banks have to maintain the following minimum capital ratios established by OSFI: a CET1 capital ratio of at least 11.0%, a Tier 1 capital ratio of at least 12.5%, and a Total capital ratio of at least 14.5%. All of these ratios include a capital conservation buffer of 2.5% established by the Basel Committee on Banking Supervision and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D-SIBs) and a 3.0% domestic stability buffer. On December 8, 2022, OSFI expanded the domestic stability buffer range, setting it at 0% to 4.0% instead of the previous range of 0% to 2.5%, and it announced that the buffer would rise from 2.5% to 3.0% effective February 1, 2023. The domestic stability buffer must consist 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. Banks also have to meet the requirements of an updated capital output floor calculated under the Basel III revised Standardized Approach. If the capital requirement is less than 65.0% of the capital output floor requirement calculated using the Basel III revised Standardized Approach, the difference is added to the total risk-weighted assets. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%. Effective February 1, 2023, OSFI increased the leverage ratio minimum requirement by imposing 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 24.5% (including the domestic stability buffer) of risk-weighted assets and a TLAC leverage ratio of at least 7.25% (increased by 0.5% effective February 1, 2023). 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 second quarter of 2023, the Bank implemented OSFI's guidance relating to the Basel III reforms, notably:

· a revised Standardized Approach and Internal Ratings-Based (IRB) Approach to credit risk;

· a revised Standardized Approach for operational risk;

· a revised capital output floor;

· a revised Leverage Ratio Framework; and

· revised Pillar 3 disclosure requirements.

The Basel III reforms also affected the market risk and credit valuation adjustment (CVA) risk frameworks, which will be implemented in the first quarter of 2024.

During the quarter and six-month period ended April 30, 2023, the Bank was in compliance with all of OSFI's regulatory capital, leverage, and TLAC requirements.

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

		As at April 30, 2023		As at October 31, 2022
Capital
	CET1	15,892		14,818
	Tier 1	19,037		17,961
	Total	20,110		19,727
Risk-weighted assets		119,111		116,840

Total exposure		448,584		401,780

Capital ratios
	CET1	13.3	%	12.7	%
	Tier 1	16.0	%	15.4	%
	Total	16.9	%	16.9	%
Leverage ratio		4.2	%	4.5	%
Available TLAC		34,886		32,351
TLAC ratio		29.3	%	27.7	%
TLAC leverage ratio		7.8	%	8.1	%

(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. The calculation of the figures as at October 31, 2022 had included the transitional measure applicable to expected credit loss provisioning and the temporary measure regarding the exclusion of central bank reserves implemented by OSFI in response to the COVID-19 pandemic. These provisions ceased to apply on November 1, 2022 and April 1, 2023, respectively.

(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 quarters ended April 30, 2023 and 2022, the Bank did not award any stock options. During the six-month period ended April 30, 2023, the Bank awarded 1,416,060 stock options (1,771,588 stock options during the six-month period ended April 30, 2022) with an average fair value of $14.76 per option ($13.24 in 2022).

As at April 30, 2023, there were 12,170,881 stock options outstanding (11,861,749 stock options as at October 31, 2022).

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.

	Six months ended April 30
	2023	2022

Risk-free interest rate	3.25%	1.79%
Expected life of options	7 years	7 years
Expected volatility	23.13%	22.68%
Expected dividend yield	4.23%	3.88%

During the quarter ended April 30, 2023, a $4 million compensation expense was recorded for this plan ($4 million for the quarter ended April 30, 2022). During the six-month period ended April 30, 2023, a $9 million compensation expense was recorded for this plan ($8 million for the six-month period ended April 30, 2022).

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 April 30
		Pension plans		Other post-employment benefit plans
		2023	2022	2023	2022

Current service cost		23	31	−	−
Interest expense (income), net		(6)	(5)	1	1
Administrative costs		1	1
Expense of the defined benefit component		18	27	1	1
Expense of the defined contribution component		3
Expense recognized in Net income		21	27	1	1
Remeasurements⁽¹⁾
	Actuarial (gains) losses on defined benefit obligation	32	(725)	1	(19)
	Return on plan assets⁽²⁾	(37)	641
Remeasurements recognized in Other comprehensive income		(5)	(84)	1	(19)
		16	(57)	2	(18)

				Six months ended April 30
			Pension plans	Other post-employment benefit plans
		2023	2022	2023	2022

Current service cost		46	62	−	−
Interest expense (income), net		(12)	(10)	3	2
Administrative costs		2	2
Expense of the defined benefit component		36	54	3	2
Expense of the defined contribution component		4
Expense recognized in Net income		40	54	3	2
Remeasurements⁽¹⁾
	Actuarial (gains) losses on defined benefit obligation	362	(910)	7	(23)
	Return on plan assets⁽²⁾	(301)	699
Remeasurements recognized in Other comprehensive income		61	(211)	7	(23)
		101	(157)	10	(21)

(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".

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 April 30, 2023.

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 include 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 at the financial reporting date, 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 as at April 30, 2023.

Proposed Legislation

In its March 28, 2023 budget, the Government of Canada proposed to introduce certain 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, the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024, as well as the government's intention to implement the Pillar Two rules (global minimum tax) published by the Organization for Economic Co-operation and Development (OECD) for fiscal years beginning as of December 31, 2023. The proposed measures have not yet been included in a bill at the reporting date.

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 April 30		Six months ended April 30
		2023	2022⁽¹⁾	2023	2022⁽¹⁾

Basic earnings per share
Net income attributable to the Bank's shareholders and holders of other equity instruments		848	890	1,729	1,820
Dividends on preferred shares and distributions on other equity instruments		35	25	70	51
Net income attributable to common shareholders		813	865	1,659	1,769
Weighted average basic number of common shares outstanding (thousands)		337,497	337,381	337,241	337,724
Basic earnings per share (dollars)		2.41	2.56	4.92	5.24

Diluted earnings per share
Net income attributable to common shareholders		813	865	1,659	1,769
Weighted average basic number of common shares outstanding (thousands)		337,497	337,381	337,241	337,724
Adjustment to average number of common shares (thousands)
	Stock options⁽²⁾	3,474	4,037	3,384	4,126
Weighted average diluted number of common shares outstanding (thousands)		340,971	341,418	340,625	341,850
Diluted earnings per share (dollars)		2.38	2.53	4.87	5.17

(2) For the quarter and six-month period ended April 30, 2023, as the exercise price of the options was lower than the average price of the Bank's common shares, no options were excluded from the diluted earnings per share calculation (no options were excluded from the diluted earnings per share calculation for the quarter and six-month period ended April 30, 2022).

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, 2022. This presentation reflects a revision to the method used for the sectoral allocation of technology investment expenses, which are now immediately allocated to the various business segments, whereas certain expenses, notably costs incurred during the research phase of projects, had previously been recorded in the Other heading of segment results. This revision is consistent with the accounting policy change applied in fiscal 2022 related to cloud computing arrangements. For the quarter and six-month period ended April 30, 2022, certain amounts have been adjusted to reflect this accounting policy change (for additional information, see Note 1).

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 April 30⁽¹⁾
		Personal and Commercial		Wealth Management		Financial Markets				USSF&I		Other			Total
		2023	2022	2023	2022	2023		2022	2023		2022	2023	2022	2023	2022

Net interest income⁽²⁾		802	670	190	127	(212)		355	269		277	(167)	(116)	882	1,313
Non-interest income⁽²⁾		298	292	427	452	884		277	16		8	(28)	97	1,597	1,126
Total revenues		1,100	962	617	579	672		632	285		285	(195)	(19)	2,479	2,439
Non-interest expenses		601	552	372	357	283		258	98		88	20	44	1,374	1,299
Income before provisions for credit losses and income taxes		499	410	245	222	389		374	187		197	(215)	(63)	1,105	1,140
Provisions for credit losses		37	11	−	−	19		(16)	26		9	3	(1)	85	3
Income before income taxes (recovery)		462	399	245	222	370		390	161		188	(218)	(62)	1,020	1,137
Income taxes (recovery)⁽²⁾		127	106	67	59	102		103	33		36	(156)	(56)	173	248
Net income		335	293	178	163	268		287	128		152	(62)	(6)	847	889
Non-controlling interests		−	−	−	−	−		−	−		−	(1)	(1)	(1)	(1)
Net income attributable
	to the Bank's shareholders and holders of other equity instruments	335	293	178	163	268		287	128		152	(61)	(5)	848	890
Average assets⁽³⁾		147,316	137,636	8,518	8,327	172,361		149,029	22,562		18,230	70,458	71,404	421,215	384,626
Total assets		148,914	141,068	8,699	8,426	168,164		142,421	23,243		18,634	68,664	59,021	417,684	369,570

							Six months ended April 30⁽¹⁾
		Personal and Commercial		Wealth Management		Financial Markets				USSF&I	Other			Total
		2023	2022	2023	2022	2023		2022	2023	2022	2023	2022	2023	2022

Net interest income⁽⁴⁾		1,627	1,339	398	246	(303)		753	568	547	(309)	(240)	1,981	2,645
Non-interest income⁽⁴⁾		597	581	856	925	1,664		541	36	23	(73)	190	3,080	2,260
Total revenues		2,224	1,920	1,254	1,171	1,361		1,294	604	570	(382)	(50)	5,061	4,905
Non-interest expenses		1,207	1,107	736	717	570		521	196	168	68	66	2,777	2,579
Income before provisions for credit losses and income taxes		1,017	813	518	454	791		773	408	402	(450)	(116)	2,284	2,326
Provisions for credit losses		98	6	−	−	10		(32)	61	27	2	−	171	1
Income before income taxes (recovery)		919	807	518	454	781		805	347	375	(452)	(116)	2,113	2,325
Income taxes (recovery)⁽⁴⁾⁽⁵⁾		253	214	142	121	215		213	72	75	(297)	(117)	385	506
Net income		666	593	376	333	566		592	275	300	(155)	1	1,728	1,819
Non-controlling interests		−	−	−	−	−		−	−	−	(1)	(1)	(1)	(1)
Net income attributable
	to the Bank's shareholders and holders of other equity instruments	666	593	376	333	566		592	275	300	(154)	2	1,729	1,820
Average assets⁽³⁾		146,714	136,852	8,521	8,329	172,819		153,467	22,076	18,100	72,981	69,935	423,111	386,683
Total assets		148,914	141,068	8,699	8,426	168,164		142,421	23,243	18,634	68,664	59,021	417,684	369,570

(1) For the quarter and six-month period ended April 30, 2022, certain amounts have been reclassified, notably due to a revised method for the sectoral allocation of technology investment expenses. In addition, certain amounts have been adjusted to reflect a change in accounting policy related to cloud computing arrangements (for additional information, see Note 1).

(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 $76 million ($49 million in 2022), Non-interest income was grossed up by $56 million ($3 million in 2022), and an equivalent amount was recognized in Income taxes (recovery). The effect of these adjustments is reversed under the Other heading.

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

(4) During the six-month period ended April 30, 2023, for the business segments as whole, Net interest income was grossed up by $154 million ($109 million in 2022), Non-interest income was grossed up by $108 million ($7 million in 2022), and an equivalent amount was recognized in Income taxes (recovery). The effect of these adjustments has been reversed under the Other heading.

(5) During the six-month period ended April 30, 2023, the Bank 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 includes the impact related to current and deferred taxes for fiscal 2022. These items are recorded in the Other heading. For additional information on these tax measures, see Note 14.

Note 17 - Event After the Consolidated Balance Sheet Date

On May 2, 2023, the Bank concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore, as of this date, ceased using the equity method to account for this investment. The Bank designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Following the fair value measurement, a $91 million gain will be recorded in the Non-interest income - Other item of the Consolidated Statement of Income and will be reported in the Other heading of segment results during the third quarter of 2023. As at April 30, 2023, the Bank's ownership interest in TMX was 2.5%.

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

600 De La Gauchetière Street West, 18^th Floor

Montreal, Quebec H3B 4L2

Telephone: 514-394-8644

Email: pa@nbc.ca

Quarterly Report Publication Dates for Fiscal 2023

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

First quarter	March 1
Second quarter	May 31
Third quarter	August 30
Fourth quarter	December 1

Disclosure of

Second Quarter 2023 Results

Conference Call

- A conference call for analysts and institutional investors will be held on Wednesday, May 31, 2023 at 1:00 p.m. EDT.

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

416-340-2217. The access code is 9583004#.

- A recording of the conference call can be heard until August 31, 2023 by dialing 1-800-408-3053 or 905-694-9451. The access code is 5604431#.

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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