Q3 2024 Report to Shareholders (Part 1)

National Bank of Canada
28 August 2024
 

 


National Bank of Canada

August 28, 2024

 

Regulatory Announcement (Part 1)

Q3 2024 Results

National Bank of Canada (the "Bank") announces publication of its Third Quarter 2024 Report to Shareholders. The Third 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 Third Quarter 2024 Report to Shareholders, please click on the following link:

http://www.rns-pdf.londonstockexchange.com/rns/0591C_1-2024-8-28.pdf

 

 

Report to Shareholders               Third Quarter 2024

 

National Bank reports its results for the Third Quarter of 2024

 

 

The financial information reported in this document is based on the unaudited interim condensed consolidated financial statements for the quarter and nine-month period ended July 31, 2024 and is prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise indicated. IFRS represent Canadian generally accepted accounting principles (GAAP). All amounts are presented in Canadian dollars.

 

MONTREAL, August 28, 2024 - For the third quarter of 2024, National Bank is reporting net income of $1,033 million, up 24% from $830 million in the third quarter of 2023. Third-quarter diluted earnings per share stood at $2.89 compared to $2.33 in the third quarter of 2023. These increases were driven by good performance in all of the business segments. Adjusted net income(1), which excludes specified items(1) (notably the items related to the agreement to acquire Canadian Western Bank (CWB) recorded during the third quarter of 2024), totalled $960 million in the third quarter of 2024 compared to $781 million in the same quarter of 2023. Adjusted diluted earnings(1) per share stood at $2.68 compared to $2.18 in the third quarter of 2023.

 

For the first nine months of 2024, the Bank's net income totalled $2,861 million, up 13% from $2,538 million in the same period of 2023. Nine-month diluted earnings per share stood at $8.03 versus $7.14 in the same period last year. These increases were driven by good performance, owing to revenue growth, in all of the business segments, partly offset by increases in non-interest expenses, provisions for credit losses, and income taxes. Nine-month adjusted net income(1), which excludes specified items(1), totalled $2,788 million, up 11% from $2,513 million in the same period of 2023, and nine-month adjusted diluted earnings per share(1) stood at $7.82, up 11% from $7.06 in the same period of 2023.

 

"Our strong financial results for the third quarter reflect our diversified earnings mix and solid credit profile as well as disciplined execution across the Bank," said Laurent Ferreira, President and Chief Executive Officer of National Bank of Canada. "With our prudent approach to capital, credit, and costs, we remain well-positioned in a complex macro environment and we look forward to the growth opportunities ahead."



 

 

Highlights

 

(millions of Canadian dollars)



Quarter ended July 31



Nine months ended July 31






2024

 

 

 

2023(2)



% Change



2024




2023(2)



% Change


Net income

 

 

1,033

 

 

 

830



24



2,861

 

 

 

2,538



13

 

Diluted earnings per share (dollars)

 

$

2.89

 

 

$

2.33



24


$

8.03

 

 

$

7.14



12

 

Income before provisions for credit losses and income taxes



1,455

 

 

 

1,086

 

 

34

 

 

3,994

 

 

 

3,342



20

 

Return on common shareholders' equity(3)

 

 

18.4

%

 

 

16.1

%





17.5

%

 

 

17.0

%



 

Dividend payout ratio(3)

 

 

41.6

%

 

 

41.7

%





41.6

%

 

 

41.7

%



 

Operating results - Adjusted(1)

 

 

 

 

 

 







 

 

 

 





 

Net income - Adjusted

 

 

960

 

 

 

781



23



2,788

 

 

 

2,513



11

 

Diluted earnings per share - Adjusted (dollars)

 

$

2.68

 

 

$

2.18



23


$

7.82

 

 

$

7.06



11

 

Income before provisions for credit losses and income taxes - Adjusted

 

 

1,448

 

 

 

1,172



24



4,184

 

 

 

3,690



13

 



 

 






















 

 








As at

July 31,

 2024



As at

October 31, 2023





CET1 capital ratio under Basel III(4)

 


 

 









13.5

%



13.5

%




Leverage ratio under Basel III(4)

 


 

 









4.4

%



4.4

%




 

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP financial measures.

(2)       Certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the unaudited interim condensed consolidated financial statements for the quarter and nine-month period ended July 31, 2024.

(3)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(4)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

 


Report to Shareholders               Third Quarter 2024

 

Personal and Commercial

 

-      Net income totalled $366 million in the third quarter of 2024 versus $319 million in the third quarter of 2023, a 15% increase that was driven by growth in total revenues.

-      At $1,198 million, third-quarter total revenues rose $83 million or 7% year over year, mainly due to an increase in net interest income (driven by growth in loan and deposit volumes), partly offset by a lower net interest margin.

-      Compared to a year ago, personal lending grew 4% and commercial lending grew 14%.

-      The net interest margin(1) stood at 2.31% in the third quarter of 2024, down from 2.34% in the third quarter of 2023.

-      Third-quarter non-interest expenses stood at $615 million, up 3% year over year.

-      Provisions for credit losses rose $4 million year over year.

-      At 51.3%, the third-quarter efficiency ratio(1) improved from 53.8% in the third quarter of 2023.

 

 

Wealth Management

 

-      Net income totalled $217 million in the third quarter of 2024, a 19% increase from $183 million in the third quarter of 2023.

-      Third-quarter total revenues amounted to $716 million compared to $629 million in third-quarter 2023, an $87 million or 14% increase driven by growth in fee-based revenues and net interest income.

-      Third-quarter non-interest expenses stood at $416 million versus $375 million in third-quarter 2023, an 11% increase associated with revenue growth.

-      At 58.1%, the third-quarter efficiency ratio(1) improved from 59.6% in the third quarter of 2023.

 

 

Financial Markets

 

-      Net income totalled $318 million in the third quarter of 2024, up 55% from $205 million in the third quarter of 2023.

-      Third-quarter total revenues on a taxable equivalent basis amounted to $781 million, a 39% increase that was due to growth in global markets revenues and in corporate and investment banking revenues.

-      Third-quarter non-interest expenses stood at $320 million compared to $272 million in third-quarter 2023, an increase that was partly due to variable compensation and to the segment's technological investments.

-      Third-quarter provisions for credit losses stood at $22 million compared to $5 million in the third quarter of 2023.

-      At 41.0%, the efficiency ratio(1) on a taxable equivalent basis improved from 48.6% in the third quarter of 2023.

 

 

U.S. Specialty Finance and International

 

-      Net income totalled $158 million in the third quarter of 2024, up 23% from $128 million in the third quarter of 2023.

-      Third-quarter total revenues amounted to $361 million, a 24% year-over-year increase driven by revenue growth at both the Credigy and ABA Bank subsidiaries.

-      Third-quarter non-interest expenses stood at $115 million, a 15% year-over-year increase attributable to business growth at Credigy and ABA Bank.

-      Third-quarter provisions for credit losses were up $17 million year over year, with the increase being attributable to both Credigy and ABA Bank.

-      At 31.9%, the efficiency ratio(1) improved from 34.2% in the third quarter of 2023.

 

 

Other

 

-      There was a net loss of $26 million in the third quarter of 2024 compared to a net loss of $5 million in the same quarter of 2023, a change that essentially came from a year-over-year increase in non-interest expenses (notably higher variable compensation associated with the Bank's revenue growth), partly offset by a more favourable impact of specified items(2) on net loss in the third quarter of 2024.

 

 

CWB Transaction

 

-      On June 11, 2024, the Bank entered into an agreement to acquire all of the issued and outstanding common shares of CWB by way of a share exchange valuing CWB at approximately $5.0 billion. This transaction will enable the Bank to accelerate its growth across Canada. The transaction is subject to the satisfaction of customary closing conditions, including regulatory approvals, and is expected to close in 2025. For additional information, see the CWB Transaction section of this MD&A.

 

 

Capital Management

 

-      As at July 31, 2024, the Common Equity Tier 1 (CET1) capital ratio under Basel III(3) stood at 13.5%, unchanged from October 31, 2023.

-      As at July 31, 2024, the Basel III(3) leverage ratio was 4.4%, unchanged from October 31, 2023.

 



(1)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(2)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP financial measures.

(3)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

 

 

 

 
Management's Discussion

and Analysis

August 27, 2024

 

The following Management's Discussion and Analysis (MD&A) presents the financial condition and operating results of National Bank of Canada (the Bank). This analysis was prepared in accordance with the requirements set out in National Instrument 51-102, Continuous Disclosure Obligations, released by the Canadian Securities Administrators (CSA). It is based on the unaudited interim condensed consolidated financial statements (the consolidated financial statements) for the quarter and nine-month period ended July 31, 2024 and prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), unless otherwise indicated. IFRS represent Canadian generally accepted accounting principles (GAAP). This MD&A should be read in conjunction with the consolidated financial statements and accompanying notes for the quarter and nine-month period ended July 31, 2024 and with the 2023 Annual Report. All amounts are presented in Canadian dollars. Additional information about the Bank, including the Annual Information Form, can be obtained from the Bank's website at nbc.ca and SEDAR+'s website at sedarplus.ca. The information found in the various documents and reports published by the Bank or the information available on the Bank's website and mentioned herein is not and should not be considered incorporated by reference into the Report to Shareholders, the Management's Discussion and Analysis, or the consolidated financial statements, unless expressly stated otherwise.

Financial Reporting Method

4


Capital Management

24

Highlights

11


Risk Management

30

Economic Review and Outlook

12


Risk Disclosures

46

Financial Analysis 

13


Accounting Policies and Financial Disclosure

47

Consolidated Results

13


   Accounting Policies and Critical Accounting Estimates

47

Results by Segment

16


   Future Accounting Policy Changes

47

Consolidated Balance Sheet

21


   Financial Disclosure

47

CWB Transaction

22


Quarterly Financial Information

48

Related Party Transactions

22


Glossary

49

Securitization and Off-Balance-Sheet Arrangements

23


 

 

Income Taxes

23


 

 

 

 

Caution Regarding Forward-Looking Statements

Certain statements in this document are forward-looking statements. All such statements are made in accordance with applicable securities legislation in Canada and the United States. The forward-looking statements in this document may include, but are not limited to, statements made about the economy, market changes, the Bank's objectives, outlook, and priorities for fiscal year 2024 and beyond, the strategies or actions that will be taken to achieve them, expectations for the Bank's financial condition, its activities, the anticipated acquisition of Canadian Western Bank and the impacts and benefits of the transaction, the regulatory environment in which it operates, its environmental, social, and governance targets and commitments, and certain risks to which the Bank is exposed. These forward-looking statements are typically identified by verbs or words such as "outlook", "believe", "foresee", "forecast", "anticipate", "estimate", "project", "expect", "intend" and "plan", in their future or conditional forms, notably verbs such as "will", "may", "should", "could" or "would" as well as similar terms and expressions.

 

Such forward-looking statements are made for the purpose of assisting the holders of the Bank's securities in understanding the Bank's financial position and results of operations as at and for the periods ended on the dates presented, as well as the Bank's vision, strategic objectives, and performance targets, and may not be appropriate for other purposes. These forward-looking statements are based on current expectations, estimates, assumptions and intentions and are subject to uncertainty and inherent risks, many of which are beyond the Bank's control. There is a strong possibility that the Bank's express or implied predictions, forecasts, projections, expectations, or conclusions will not prove to be accurate, that its assumptions may not be confirmed, and that its vision, strategic objectives, and performance targets will not be achieved. The Bank cautions investors that these forward-looking statements are not guarantees of future performance and that actual events or results may differ significantly from these statements due to a number of factors. Thus, the Bank recommends that readers not place undue reliance on these forward-looking statements, as a number of factors could cause actual results to differ significantly from the expectations, estimates, or intentions expressed in these forward-looking statements. Investors and others who rely on the Bank's forward-looking statements should carefully consider the factors listed below as well as the uncertainties they represent and the risk they entail. Except as required by law, the Bank does not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time, by it or on its behalf.

 

Assumptions about the performance of the Canadian and U.S. economies in 2024 and how that performance will affect the Bank's business are among the factors considered in setting the Bank's strategic priorities and objectives, including allowances for credit losses. These assumptions appear in the Economic Review and Outlook section and, for each business segment, in the Economic and Market Review sections of the 2023 Annual Report and in the Economic Review and Outlook section of this Report to Shareholders, and may be updated in the quarterly reports to shareholders filed thereafter.

 

The forward-looking statements made in this document are based on a number of assumptions and are subject to risk factors, many of which are beyond the Bank's control and the impacts of which are difficult to predict. These risk factors include, among others, the general economic environment and financial market conditions in Canada, the United States, and the other countries where the Bank operates; the possible delay or failure to close the acquisition of Canadian Western Bank, the  potential failure to obtain the required approvals to the transaction in a timely manner or at all; the Bank's ability to complete the integration within anticipated time periods and at expected cost levels, the realization of the expected strategic, financial and other benefits of the transaction, such as achieving synergies, in the timeframe anticipated;  the impact of upheavals in the U.S. banking industry; exchange rate and interest rate fluctuations; inflation; global supply chain disruptions; higher funding costs and greater market volatility; changes made to fiscal, monetary, and other public policies; changes made to regulations that affect the Bank's business; geopolitical and sociopolitical uncertainty; climate change, including physical risks and those related to the transition to a low-carbon economy, and the Bank's ability to satisfy stakeholder expectations on environmental and social issues; significant changes in consumer behaviour; the housing situation, real estate market, and household indebtedness in Canada; the Bank's ability to achieve its key short-term priorities and long-term strategies; the timely development and launch of new products and services; the Bank's ability to recruit and retain key personnel; technological innovation, including advances in artificial intelligence and the open banking system, and heightened competition from established companies and from competitors offering non-traditional services; changes in the performance and creditworthiness of the Bank's clients and counterparties; the Bank's exposure to significant regulatory matters or litigation; changes made to the accounting policies used by the Bank to report financial information, including the uncertainty inherent to assumptions and critical accounting estimates; changes to tax legislation in the countries where the Bank operates; changes made to capital and liquidity guidelines as well as to the presentation and interpretation thereof; changes to the credit ratings assigned to the Bank by financial and extra-financial rating agencies; potential disruptions to key suppliers of goods and services to the Bank; the potential impacts of disruptions to the Bank's information technology systems, including cyberattacks as well as identity theft and theft of personal information; the risk of fraudulent activity; and possible impacts of major events affecting the economy, market conditions, or the Bank's outlook, including international conflicts, natural disasters, public health crises, and the measures taken in response to these events.

 

The foregoing list of risk factors is not exhaustive, and the forward-looking statements made in this document are also subject to credit risk, market risk, liquidity and funding risk, operational risk, regulatory compliance risk, reputation risk, strategic risk, and social and environmental risk as well as certain emerging risks or risks deemed significant. Additional information about these factors is provided in the Risk Management section of the 2023 Annual Report and in the Risk Management section of this Report to Shareholders for the Third Quarter of 2024, and may be updated in the quarterly reports to shareholders filed thereafter.


Financial Reporting Method                

 


 

The Bank's consolidated financial statements are prepared in accordance with IFRS, as issued by the 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, which represent Canadian GAAP. None of the OSFI accounting requirements are exceptions to IFRS.

 

The presentation of segment disclosures is consistent with the presentation adopted by the Bank for the fiscal year beginning November 1, 2023. This presentation reflects the retrospective application of accounting policy changes arising from the adoption of IFRS 17 - Insurance Contracts (IFRS 17). For additional information, see Note 2 to the consolidated financial statements. The figures for the 2023 quarters have been adjusted to reflect these accounting policy changes.

 

Non-GAAP and Other Financial Measures

 

The Bank uses a number of financial measures when assessing its results and measuring overall performance. Some of these financial measures are not calculated in accordance with GAAP. Regulation 52-112 Respecting Non-GAAP and Other Financial Measures Disclosure (Regulation 52-112) prescribes disclosure requirements that apply to the following measures used by the Bank:

 

·     non-GAAP financial measures;

·     non-GAAP ratios;

·     supplementary financial measures;

·     capital management measures.

 

Non-GAAP Financial Measures

The Bank uses non-GAAP financial measures that do not have standardized meanings under GAAP and that therefore may not be comparable to similar measures used by other companies. Presenting non-GAAP financial measures helps readers to better understand how management analyzes results, shows the impacts of specified items on the results of the reported periods, and allows readers to better assess results without the specified items if they consider such items not to be reflective of the underlying performance of the Bank's operations. In addition, the Bank uses the taxable equivalent basis to calculate net interest income, non-interest income, and income taxes. This calculation method consists of grossing up certain revenues taxed at lower rates (notably dividends) by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. An equivalent amount is added to income taxes. This adjustment is necessary in order to perform a uniform comparison of the return on different assets, regardless of their tax treatment. However, in light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction, nor did it or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

 

The key non-GAAP financial measures used by the Bank to analyze its results are described below, and a quantitative reconciliation of these measures is presented in the tables in the Reconciliation of Non-GAAP Financial Measures section on pages 8 to 10 and in the Consolidated Results table on page 13. Note that, for the quarter and nine-month period ended July 31, 2024, after the agreement to acquire Canadian Western Bank (CWB) was concluded, several acquisition-related items have been excluded from results (in particular, the amortization of the subscription receipt issuance costs of $5 million ($3 million net of income taxes); a gain of $120 million ($86 million net of income taxes) resulting from the remeasurement at fair value of the CWB common shares already held by the Bank; the impact of managing fair value changes, representing a loss of $7 million ($5 million net of income taxes); and $7 million in acquisition and integration charges ($5 million net of income taxes)). For the quarter and nine-month period ended July 31, 2023, a gain of $91 million ($67 million net of income taxes) recorded upon the fair value remeasurement of an equity interest and an expense related to the retroactive impact of changes to the Excise Tax Act of $25 million ($18 million net of income taxes) had been excluded from results. In addition, for the nine-month period ended July 31, 2023, a $24 million tax expense related to the Canadian government's 2022 tax measures had been excluded from results given the one-time nature of the item. This amount had included 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 the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022.

 

Adjusted Net Interest Income

This item represents net interest income on a taxable equivalent basis and excluding specified items, if any. A taxable equivalent is added to net interest income so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that net interest income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Non-Interest Income

This item represents non-interest income on a taxable equivalent basis and excluding specified items, if any. A taxable equivalent is added to non-interest income so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that non‑interest income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.



 

Adjusted Total Revenues

This item represents total revenues on a taxable equivalent basis and excluding specified items, if any. It consists of adjusted net interest income and adjusted non-interest income. A taxable equivalent is added to total revenues so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that total revenues can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Non-Interest Expenses

This item represents non-interest expenses excluding specified items, if any. Specified items, if any, are excluded so that non-interest expenses can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Income Before Provisions for Credit Losses and Income Taxes

This item represents income before provisions for credit losses and income taxes on a taxable equivalent basis and excluding specified items, if any. It also represents the difference between adjusted total revenues and adjusted non-interest expenses. A taxable equivalent is added to income before provisions for credit losses and income taxes so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that income before provisions for credit losses and income taxes can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Income Taxes

This item represents income taxes on a taxable equivalent basis and excluding income taxes on specified items, if any.

 

Adjusted Net Income

This item represents net income excluding specified items, if any. Specified items, if any, are excluded so that net income can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Net income Attributable to Common Shareholders

This item represents net income attributable to common shareholders excluding specified items, if any. Specified items, if any, are excluded so that net income attributable to common shareholders can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Basic Earnings Per Share

This item represents basic earnings per share excluding specified items, if any. Specified items, if any, are excluded so that basic earnings per share can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Diluted Earnings Per Share

This item represents diluted earnings per share excluding specified items, if any. Specified items, if any, are excluded so that diluted earnings per share can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

The Bank also uses the below-described measures to assess its results.

 

Adjusted Non-Trading Net Interest Income

This item represents non-trading net interest income on a taxable equivalent basis. It includes revenues related to financial assets and financial liabilities associated with non-trading activities, net of interest expenses and interest income related to the financing of these financial assets and financial liabilities, and is used to calculate adjusted non-trading net interest margin. A taxable equivalent is added to non-trading net interest income so that the performance of the various assets can be compared irrespective of their tax treatment.

 

Net Interest Income Related to Trading Activities on a Taxable Equivalent Basis

This item represents net interest income related to trading activities plus a taxable equivalent. It comprises dividends related to financial assets and liabilities associated with trading activities and certain interest income related to the financing of these financial assets and liabilities, net of interest expenses. A taxable equivalent is added to net interest income related to trading activities so that the performance of the various assets can be compared irrespective of their tax treatment.

 

Non-Interest Income Related to Trading Activities on a Taxable Equivalent Basis

This item represents non-interest income related to trading activities plus a taxable equivalent. It consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short, certain commission income as well as other trading activity revenues, and any applicable transaction costs. A taxable equivalent amount is added to the non-interest income related to trading activities such that the returns of different assets can be compared irrespective of their tax treatment.



 

Trading Activity Revenues on a Taxable Equivalent Basis

This item represents trading activity revenues plus a taxable equivalent. These revenues comprise dividends related to financial assets and financial liabilities associated with trading activities; certain interest income related to the financing of these financial assets and liabilities, net of interest expenses; realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss; income from held-for-trading derivative financial instruments; changes in the fair value of loans at fair value through profit or loss; changes in the fair value of financial instruments designated at fair value through profit or loss; realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short; certain commission income as well as other trading activity revenues, and any applicable transaction costs. A taxable equivalent is added to trading activity revenues so that the performance of the various assets can be compared irrespective of their tax treatment.

 

Non-GAAP Ratios

The Bank uses non-GAAP ratios that do not have standardized meanings under GAAP and that may therefore not be comparable to similar measures used by other companies. A non-GAAP ratio is a ratio in which at least one component is a non-GAAP financial measure. The Bank uses non-GAAP ratios to present aspects of its financial performance or financial position.

 

The key non-GAAP ratios used by the Bank are described below.

 

Adjusted Return on Common Shareholders' Equity (ROE)

This item represents ROE excluding specified items, if any. It is adjusted net income attributable to common shareholders expressed as a percentage of average equity attributable to common shareholders. It is a general measure of the Bank's efficiency in using equity. Specified items, if any, are excluded so that ROE can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Dividend Payout Ratio

This item represents the dividend payout ratio excluding specified items, if any. It is dividends on common shares (per share amount) expressed as a percentage of adjusted basic earnings per share. This ratio is a measure of the proportion of earnings that is paid out to shareholders in the form of dividends. Specified items, if any, are excluded so that the dividend payout ratio can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Operating Leverage

This item represents operating leverage on a taxable equivalent basis and excluding specified items, if any. It is the difference between the growth rate of adjusted total revenues and the growth rate of adjusted non-interest expenses, and it measures the sensitivity of the Bank's results to changes in its revenues. Adjusted operating leverage is presented on a taxable equivalent basis so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that the operating leverage can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Efficiency Ratio

This item represents the efficiency ratio on a taxable equivalent basis and excluding specified items, if any. The ratio represents adjusted non-interest expenses expressed as a percentage of adjusted total revenues. It measures the efficiency of the Bank's operations. The adjusted efficiency ratio is presented on a taxable equivalent basis so that the performance of the various assets can be compared irrespective of their tax treatment, and specified items, if any, are excluded so that the efficiency ratio can be better evaluated by excluding items that management believes do not reflect the underlying financial performance of the Bank's operations.

 

Adjusted Net Interest Margin, Non-Trading

This item represents the non-trading net interest margin on a taxable equivalent basis. It is calculated by dividing adjusted non-trading net interest income by average non-trading interest-bearing assets. This ratio is a measure of the profitability of non-trading activities. The adjusted non-trading net interest margin includes adjusted non-trading net interest income, which includes a taxable equivalent amount so that the performance of the various assets can be compared irrespective of their tax treatment.

 

Supplementary Financial Measures

A supplementary financial measure is a financial measure that: (a) is not reported in the Bank's consolidated financial statements, and (b) is, or is intended to be, reported periodically to represent historical or expected financial performance, financial position, or cash flows. The composition of these supplementary financial measures is presented in table footnotes or in the Glossary section on pages 49 to 52 of this MD&A.



Capital Management Measures

The financial reporting framework used to prepare the financial statements requires disclosure that helps readers assess the Bank's capital management objectives, policies, and processes, as set out in IFRS in IAS 1 - Presentation of Financial Statements. The Bank has its own methods for managing capital and liquidity, and IFRS does not prescribe any particular calculation method. These measures are calculated using various guidelines and advisories issued by OSFI, which are based on the standards, recommendations, and best practices of the Basel Committee on Banking Supervision (BCBS), as presented in the following table.

 

OSFI guideline or advisory

Measure

Capital Adequacy Requirements

Common Equity Tier 1 (CET1) capital ratio

Tier 1 capital ratio

Total capital ratio

CET1 capital

Tier 1 capital

Tier 2 capital

Total capital

Risk-weighted assets

Maximum credit risk exposure under the Basel asset classes

Leverage Requirements

Leverage ratio

Total exposure

Total Loss Absorbing Capacity (TLAC)

Key indicators - TLAC requirements

Available TLAC

TLAC ratio

TLAC leverage ratio

Liquidity Adequacy Requirements

Liquid asset portfolio

Encumbered assets and unencumbered assets

Liquidity coverage ratio (LCR)

High-quality liquid assets (HQLA)

Cash inflows/outflows and net cash outflows

Net stable funding ratio (NSFR)

Available stable funding items

Required stable funding items

Global Systemically Important Banks (G-SIBs) -

  Public Disclosure Requirements

G-SIB indicators

 

 

 

Reconciliation of Non-GAAP Financial Measures

 

Presentation of Results - Adjusted

 

(millions of Canadian dollars)







Quarter ended July 31













2024


2023(1)




Personal and Commercial

 

Wealth Management

 

Financial Markets

 

USSF&I

 

Other

 

 

 





 

 

 

 

 

Total

 

Total


Operating results

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income

913

 

219

 

(610)

 

326

 

(79)

 

769

 

870


Non-interest income

285

 

497

 

1,391

 

35

 

19

 

2,227

 

1,620


Total revenues

1,198

 

716

 

781

 

361

 

(60)

 

2,996

 

2,490


Non-interest expenses

615

 

416

 

320

 

115

 

75

 

1,541

 

1,404

 

Income before provisions for credit losses and income taxes

583

 

300

 

461

 

246

 

(135)

 

1,455

 

1,086

 

Provisions for credit losses

79

 

 

22

 

46

 

2

 

149

 

111

 

Income before income taxes (recovery)

504

 

300

 

439

 

200

 

(137)

 

1,306

 

975


Income taxes (recovery)

138

 

83

 

121

 

42

 

(111)

 

273

 

145


Net income

366

 

217

 

318

 

158

 

(26)

 

1,033

 

830



 

 

 

 

 

 

 

 

 

 

 

 



Items that have an impact on results

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income

 

 

 

 

 

 

 

 

 

 

 

 




Taxable equivalent(2)

 

 

 

 

(15)

 

(15)

 

(88)



Amortization of the subscription receipt issuance costs(3)

 

 

 

 

(5)

 

(5)

 


Impact on net interest income

 

 

 

 

(20)

 

(20)

 

(88)


Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Taxable equivalent(2)

 

 

 

 

(79)

 

(79)

 

(64)

 

 

Gain on the fair value remeasurement of equity interests(4)(5)

 

 

 

 

120

 

120

 

91

 

 

Management of the fair value changes related to the CWB acquisition(6)

 

 

 

 

(7)

 

(7)

 

 

Impact on non-interest income

 

 

 

 

34

 

34

 

27

 

Non-interest expenses

 

 

 

 

 

 

 

 

 

 

 

 


 

 

CWB acquisition and integration charges(7)

 

 

 

 

7

 

7

 

 

 

Expense related to changes to the Excise Tax Act(8)

 

 

 

 

 

 

25

 

Impact on non-interest expenses

 

 

 

 

7

 

7

 

25

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Taxable equivalent(2)

 

 

 

 

(94)

 

(94)

 

(152)


 

Income taxes on the amortization of the subscription receipt issuance

  costs(3)

 

 

 

 

(2)

 

(2)

 



Income taxes on the gain on the fair value remeasurement

  of equity interests(4)(5)

 

 

 

 

34

 

34

 

24

 

 

Income taxes on management of the fair value changes related to the

  CWB acquisition(6)

 

 

 

 

(2)

 

(2)

 


 

Income taxes on the CWB acquisition and integration charges(7)

 

 

 

 

(2)

 

(2)

 



Income taxes on the expense related to changes to the Excise Tax Act(8)

 

 

 

 

 

 

(7)

 

Impact on income taxes

 

 

 

 

(66)

 

(66)

 

(135)

 

Impact on net income

 

 

 

 

73

 

73

 

49


Operating results - Adjusted

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income - Adjusted

913

 

219

 

(610)

 

326

 

(59)

 

789

 

958

 

Non-interest income - Adjusted

285

 

497

 

1,391

 

35

 

(15)

 

2,193

 

1,593

 

Total revenues - Adjusted

1,198

 

716

 

781

 

361

 

(74)

 

2,982

 

2,551

 

Non-interest expenses - Adjusted

615

 

416

 

320

 

115

 

68

 

1,534

 

1,379

 

Income before provisions for credit losses and income taxes - Adjusted

583

 

300

 

461

 

246

 

(142)

 

1,448

 

1,172

 

Provisions for credit losses

79

 

 

22

 

46

 

2

 

149

 

111

 

Income before income taxes (recovery) - Adjusted

504

 

300

 

439

 

200

 

(144)

 

1,299

 

1,061


Income taxes (recovery) - Adjusted

138

 

83

 

121

 

42

 

(45)

 

339

 

280


Net income - Adjusted

366

 

217

 

318

 

158

 

(99)

 

960

 

781


 

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

(2)       In light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(3)       During the quarter ended July 31, 2024, the Bank recorded an amount of $5 million ($3 million net of income taxes) to reflect the amortization of the issuance costs of the subscription receipts issued as part of the agreement to acquire CWB (for additional information, see Notes 9 and 11 to the consolidated financial statements).

(4)       During the quarter ended July 31, 2024, the Bank recorded a gain of $120 million ($86 million net of income taxes) upon the remeasurement at fair value of the interest already held in CWB. 

(5)       During the quarter ended July 31, 2023, the Bank had concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore ceased using the equity method to account for this investment. The Bank had designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the measurement at fair value, a gain of $91 million ($67 million net of income taxes) had been recorded in the Other heading of segment results.

(6)       During the quarter ended July 31, 2024, the Bank recorded a mark-to-market loss of $7 million ($5 million net of income taxes) on interest rate swaps used to manage the fair value changes of CWB's assets and liabilities that result in volatility of goodwill and capital on closing of the transaction. For additional information, see the CWB Transaction section.

(7)       During the quarter ended July 31, 2024, the Bank recorded acquisition and integration charges of $7 million ($5 million net of income taxes) related to the CWB transaction.

(8)       During the quarter ended July 31, 2023, the Bank had recorded a $25 million expense ($18 million net of income taxes) in the Other heading of segment results, related to the retroactive impact of changes to the Excise Tax Act whereby payment card clearing services provided by payment card network operators are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

 

(millions of Canadian dollars)







Nine months ended July 31













2024


2023(1)




Personal and Commercial

 

Wealth Management

 

Financial Markets

 

USSF&I

 

Other

 

 

 





 

 

 

 

 

Total

 

Total


Operating results

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income

2,653

 

620

 

(1,787)

 

945

 

(276)

 

2,155

 

2,851


Non-interest income

830

 

1,439

 

4,089

 

92

 

(149)

 

6,301

 

4,647


Total revenues

3,483

 

2,059

 

2,302

 

1,037

 

(425)

 

8,456

 

7,498


Non-interest expenses

1,842

 

1,206

 

945

 

323

 

146

 

4,462

 

4,156

 

Income before provisions for credit losses and income taxes

1,641

 

853

 

1,357

 

714

 

(571)

 

3,994

 

3,342

 

Provisions for credit losses

239

 

 

50

 

119

 

(1)

 

407

 

282

 

Income before income taxes (recovery)

1,402

 

853

 

1,307

 

595

 

(570)

 

3,587

 

3,060


Income taxes (recovery)

386

 

235

 

359

 

124

 

(378)

 

726

 

522


Net income

1,016

 

618

 

948

 

471

 

(192)

 

2,861

 

2,538



 

 

 

 

 

 

 

 

 

 

 

 



Items that have an impact on results

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income

 

 

 

 

 

 

 

 

 

 

 

 




Taxable equivalent(2)

 

 

 

 

(66)

 

(66)

 

(242)



Amortization of the subscription receipt issuance costs(3)

 

 

 

 

(5)

 

(5)

 


Impact on net interest income

 

 

 

 

(71)

 

(71)

 

(242)


Non-interest income

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Taxable equivalent(2)

 

 

 

 

(225)

 

(225)

 

(172)

 

 

Gain on the fair value remeasurement of equity interests(4)(5)

 

 

 

 

120

 

120

 

91

 

 

Management of the fair value changes related to the CWB acquisition(6)

 

 

 

 

(7)

 

(7)

 

 

Impact on non-interest income

 

 

 

 

(112)

 

(112)

 

(81)

 

Non-interest expenses

 

 

 

 

 

 

 

 

 

 

 

 


 

 

CWB acquisition and integration charges(7)

 

 

 

 

7

 

7

 

 

 

Expense related to changes to the Excise Tax Act(8)

 

 

 

 

 

 

25

 

Impact on non-interest expenses

 

 

 

 

7

 

7

 

25

 

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Taxable equivalent(2)

 

 

 

 

(291)

 

(291)

 

(414)


 

Income taxes on the amortization of the subscription receipt issuance

  costs(3)

 

 

 

 

(2)

 

(2)

 


 

Income taxes on the gain on the fair value remeasurement

  of equity interests(4)(5)

 

 

 

 

34

 

34

 

24


 

Income taxes on management of the fair value changes related to the

  CWB acquisition(6)

 

 

 

 

(2)

 

(2)

 


 

Income taxes on the CWB acquisition and integration charges(7)

 

 

 

 

(2)

 

(2)

 


 

Income taxes on the expense related to changes to the Excise Tax Act(8)

 

 

 

 

 

 

(7)



Income taxes related to the Canadian government's 2022 tax measures(9)

 

 

 

 

 

 

24

 

Impact on income taxes

 

 

 

 

(263)

 

(263)

 

(373)

 

Impact on net income

 

 

 

 

73

 

73

 

25


Operating results - Adjusted

 

 

 

 

 

 

 

 

 

 

 

 



Net interest income - Adjusted

2,653

 

620

 

(1,787)

 

945

 

(205)

 

2,226

 

3,093

 

Non-interest income - Adjusted

830

 

1,439

 

4,089

 

92

 

(37)

 

6,413

 

4,728

 

Total revenues - Adjusted

3,483

 

2,059

 

2,302

 

1,037

 

(242)

 

8,639

 

7,821

 

Non-interest expenses - Adjusted

1,842

 

1,206

 

945

 

323

 

139

 

4,455

 

4,131

 

Income before provisions for credit losses and income taxes - Adjusted

1,641

 

853

 

1,357

 

714

 

(381)

 

4,184

 

3,690

 

Provisions for credit losses

239

 

 

50

 

119

 

(1)

 

407

 

282

 

Income before income taxes (recovery) - Adjusted

1,402

 

853

 

1,307

 

595

 

(380)

 

3,777

 

3,408


Income taxes (recovery) - Adjusted

386

 

235

 

359

 

124

 

(115)

 

989

 

895


Net income - Adjusted

1,016

 

618

 

948

 

471

 

(265)

 

2,788

 

2,513


 

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

(2)       In light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(3)       During the nine-month period ended July 31, 2024, the Bank recorded an amount of $5 million ($3 million net of income taxes) to reflect the amortization of the issuance costs of the subscription receipts issued as part of the agreement to acquire CWB (for additional information, see Notes 9 and 11 to the consolidated financial statements).

(4)       During the nine-month period ended July 31, 2024, the Bank recorded a gain of $120 million ($86 million net of income taxes) upon the remeasurement at fair value of the interest already held in CWB. 

(5)       During the nine-month period ended July 31, 2023, the Bank had concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore ceased using the equity method to account for this investment. The Bank had designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the fair value measurement, a gain of $91 million ($67 million net of income taxes) had been recorded in the Other heading of segment results.

(6)       During the nine-month period ended July 31, 2024, the Bank recorded a mark-to-market loss of $7 million ($5 million net of income taxes) on interest rate swaps used to manage the fair value changes of CWB's assets and liabilities that result in volatility of goodwill and capital on closing of the transaction. For additional information, see the CWB Transaction section.

 

(7)       During the nine-month period ended July 31, 2024, the Bank recorded acquisition and integration charges of $7 million ($5 million net of income taxes) related to the CWB transaction.

(8)       During the nine-month period ended July 31, 2023, the Bank had recorded a $25 million expense ($18 million net of income taxes), in the Other heading of segment results, to reflect the retroactive impact of changes to the Excise Tax Act whereby payment card clearing services provided by payment card network operators are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(9)       During the nine-month period ended July 31, 2023, the Bank had recorded, in the Other heading of segment results, 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 the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section.

 

Presentation of Basic and Diluted Earnings Per Share - Adjusted

 

(Canadian dollars)


Quarter ended July 31


Nine months ended July 31




2024




2023(1)



2024



2023(1)


Basic earnings per share


$

2.92

 


$

2.35


$

8.09


$

7.21


Amortization of the subscription receipt issuance costs(2)


 

0.01

 





0.01




Gain on the fair value remeasurement of equity interests(3)(4)


 

(0.25)

 



(0.20)



(0.25)



(0.20)


Management of the fair value changes related to the CWB acquisition(5)


 

0.01

 





0.01




CWB acquisition and integration charges(6)


 

0.02

 





0.02




Expense related to changes to the Excise Tax Act(7)


 

 



0.05





0.05


Income taxes related to the Canadian government's 2022 tax measures(8)


 

 







0.07


Basic earnings per share - Adjusted


$

2.71

 


$

2.20


$

7.88

 

$

7.13







 

 






 





Diluted earnings per share


$

2.89

 


$

2.33


$

8.03


$

7.14


Amortization of the subscription receipt issuance costs(2)


 

0.01

 




 

0.01




Gain on the fair value remeasurement of equity interests(3)(4)


 

(0.25)

 



(0.20)


 

(0.25)



(0.20)


Management of the fair value changes related to the CWB acquisition(5)


 

0.01

 




 

0.01




CWB acquisition and integration charges(6)


 

0.02

 




 

0.02




Expense related to changes to the Excise Tax Act(7)


 

 



0.05


 



0.05


Income taxes related to the Canadian government's 2022 tax measures(8)


 

 




 



0.07


Diluted earnings per share - Adjusted


$

2.68

 


$

2.18


$

7.82


$

7.06



















 

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

(2)       During the quarter and nine-month period ended July 31, 2024, the Bank recorded an amount of $5 million ($3 million net of income taxes) to reflect the amortization of the issuance costs of the subscription receipts issued as part of the agreement to acquire CWB (for additional information, see Notes 9 and 11 to the consolidated financial statements).

(3)       During the quarter and nine-month period ended July 31, 2024, the Bank recorded a gain of $120 million ($86 million net of income taxes) upon the remeasurement at fair value of the interest already held in CWB. 

(4)       During the quarter and nine-month period ended July 31, 2023, the Bank had concluded that it had lost significant influence over TMX Group Limited (TMX) and therefore ceased using the equity method to account for this investment. The Bank had designated its investment in TMX as a financial asset measured at fair value through other comprehensive income in an amount of $191 million. Upon the fair value measurement, a gain of $91 million ($67 million net of income taxes) had been recorded in the Other heading of segment results.

(5)       During the quarter and the nine-month period ended July 31, 2024, the Bank recorded a mark-to-market loss of $7 million ($5 million net of income taxes) on interest rate swaps used to manage the fair value changes of CWB's assets and liabilities that result in volatility of goodwill and capital on closing of the transaction. For additional information, see the CWB Transaction section.

(6)       During the quarter and nine-month period ended July 31, 2024, the Bank recorded acquisition and integration charges of $7 million ($5 million net of income taxes) related to the CWB transaction.

(7)       During the quarter and nine-month period ended July 31, 2023, the Bank had recorded a $25 million expense ($18 million net of income taxes) in the Other heading of segment results to reflect the retroactive impact of changes to the Excise Tax Act whereby payment card clearing services provided by payment card network operators are subject to the goods and services tax (GST) and the harmonized sales tax (HST).

(8)       During the nine-month period ended July 31, 2023, the Bank had recorded, in the Other heading of segment results, 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 the 1.5% increase in the statutory tax rate, which included the impact related to current and deferred taxes for fiscal 2022. For additional information on these tax measures, see the Income Taxes section.

 


Highlights

 

 

(millions of Canadian dollars, except per share amounts)


Quarter ended July 31



Nine months ended July 31





2024

 

 

 

2023(1)



% Change



2024




2023(1)


% Change


Operating results

 

 

 

 

 

 







 








Total revenues

 

 

2,996

 

 


2,490



20


 

8,456

 

 


7,498


13

 

Income before provisions for credit losses and

  income taxes



1,455

 

 

 

1,086



34



3,994

 

 


3,342


20

 

Net income



1,033

 

 

 

830



24



2,861

 

 


2,538


13

 

Return on common shareholders' equity(2)



18.4

%

 

 

16.1

%





17.5

%

 


17.0

%


 

Operating leverage(2)



10.5

%

 

 

(4.4)

%





5.4

%

 


(4.5)

%


 

Efficiency ratio(2)

 

 

51.4

%

 


56.4

%




 

52.8

%

 


55.4

%


 

Earnings per share

 

 

 

 

 

 







 

 

 





 


Basic

 

$

2.92

 

 

$

2.35



24


$

8.09

 

 

$

7.21


12

 


Diluted


$

2.89

 

 

$

2.33



24


$

8.03

 

 

$

7.14


12

 

Operating results - Adjusted(3)

 

 

 

 

 

 







 

 

 






Total revenues - Adjusted(3)

 

 

2,982

 

 


2,551



17


 

8,639

 

 


7,821


10

 

Income before provisions for credit losses

  and income taxes - Adjusted(3)


 

1,448

 

 


1,172



24


 

4,184

 

 


3,690


13

 

Net income - Adjusted(3)



960

 

 


781



23



2,788

 

 


2,513


11

 

Return on common shareholders' equity - Adjusted(4)



17.0

%

 


15.1

%





17.0

%

 


16.9

%


 

Operating leverage - Adjusted(4)



5.7

%

 


(3.0)

%





2.7

%



(2.2)

%


 

Efficiency ratio - Adjusted(4)



51.4

%

 


54.1

%





51.6

%

 


52.8

%


 

Diluted earnings per share - Adjusted(3)

 

$

2.68

 

 

$

2.18



23


$

7.82

 

 

$

7.06


11

 

Common share information

 

 

 

 

 

 







 

 

 





 

Dividends declared

 

$

1.10

 

 

$

1.02



8


$

3.22

 

 

$

2.96


9

 

Book value(2)


$

64.64

 

 

$

58.53





$

64.64



$

58.53



 

Share price


 

 

 

 








 







 


High


$

118.17

 

 

$

103.28





$

118.17



$

103.45



 


Low


$

106.21

 

 

$

94.62





$

86.50



$

91.02



 


Close


$

115.48

 

 

$

103.28





$

115.48



$

103.28



 

Number of common shares (thousands)



340,523

 

 

 

338,228






340,523




338,228



 

Market capitalization



39,324

 

 

 

34,932






39,324




34,932



 
























(millions of Canadian dollars)

 

As at

July 31,

2024

 

 

As at

 October 31,

2023(1)


% Change


Balance sheet and off-balance-sheet









Total assets

 

453,933

 

 

423,477


7


Loans and acceptances, net of allowances


239,549



225,443


6


Deposits


320,587



288,173


11


Equity attributable to common shareholders


22,011



20,432


8


Assets under administration(2)


746,295



652,631


14


Assets under management(2)


150,239



120,858


24





 







Regulatory ratios under Basel III(5)









Capital ratios










Common Equity Tier 1 (CET1)


13.5

%

 

13.5

%




Tier 1

 

15.7

%

 

16.0

%




Total

 

16.9

%

 

16.8

%


 

Leverage ratio

 

4.4

%

 

4.4

%


 

TLAC ratio(5)

 

29.7

%

 

29.2

%


 

TLAC leverage ratio(5)

 

8.3

%

 

8.0

%


 

Liquidity coverage ratio (LCR)(5)

 

152

%

 

155

%


 

Net stable funding ratio (NSFR)(5)


120

%


118

%



Other information

 

 

 

 




 

Number of employees - Worldwide (full-time equivalent)


29,250



28,916


1


Number of branches in Canada 


369



368



Number of banking machines in Canada


946



944



 

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

(2)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(3)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP financial measures.

(4)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP ratios.

(5)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

 

 

 

 


Economic Review and Outlook

 

Global Economy

After a relatively encouraging first quarter, growth in China slowed considerably in the second quarter. Despite the stimulus measures announced by the government, property prices continued to fall during the quarter. This weighed heavily on consumer morale, judging by the poor growth in retail sales recorded in June. In the eurozone, the last few weeks have been marked by greater political uncertainty following the French legislative elections. Although they did not lead to a victory for the National Rally (Rassemblement National), the elections nevertheless failed to deliver a majority in the National Assembly, a situation that has historically been associated with some political stagnation. And while growing uncertainty will only make the European Central Bank more inclined to ease monetary policy in the future, this is unlikely to lead to exceptional economic growth anytime soon, as real interest rates are likely to remain high for some time to come. Instead, we expect growth in the eurozone to fall short of its potential in the short to medium term. When combined with relatively weak growth in China and the expected slowdown in economic activity in the U.S., this translates in our scenario into rather lacklustre global growth in 2024 (3.0%)(1) and 2025 (2.8%)(1).

 

Speaking to the media following the Federal Open Market Committee's latest monetary policy decision, Jerome Powell, Chair of the U.S. Federal Reserve (Fed), reaffirmed that as inflation moves closer to its target, the Fed will be paying more attention to the labour market when determining the appropriate level of policy rates. In this respect, he stated that he did not want to see "a much more pronounced slowdown" in employment figures. A few days later, a disappointing report on the labour market in July was published in the United States. This triggered the "Sahm rule," a metric that shows that once the unemployment rate rises to a certain threshold, the U.S. economy has never avoided a recession. The rule illustrates how labour market weakness can feed on itself. This is all the more worrying given that U.S. consumers have been saving well below pre-pandemic levels for several months now in order to finance consumption, a trend that cannot continue indefinitely. We believe that these developments, along with other labour market data such as low consumer confidence and falling job vacancies, justify rate cuts by the Fed, and probably more than it appears ready to admit. While our base-case scenario calls for other rate cuts between now and the end of the year, we believe that they will not be enough to avoid a significant economic slowdown. Growth should therefore come to a standstill around 2025, before accelerating again under the impetus of further easing by the Fed. This would lead to real GDP growth of 2.1%(1) in 2024 and only 1.0%(1) in 2025.

 

Canadian Economy

The Bank of Canada cut its key interest rate in June and July, while stating that it is "reasonable" to expect more cuts in future decisions. We see this as good news, since the economic environment is deteriorating rapidly based on a number of economic indicators, including the unemployment rate. In July, the unemployment rate had climbed 1.6 percentage points from its cyclical low, while hiring was failing to keep pace with population growth. The Business Outlook Survey published in July also confirmed our view that a number of corporations are currently overstaffed, which is not reassuring for the future. The proportion of companies reporting labour shortages has fallen to 15%, a level usually seen only during recessions. In 2022, the job-changing rate had reached an all-time high, helping to boost wages. But those days are now clearly over, as the rate has now reached a level comparable to that of past recessions. There is reason to believe that job opportunities are now limited but also that workers concerned about the outlook believe it is safer to stay with their current employer. While interest rates remain extremely restrictive, we expect other cuts over the next four quarters. The economy is expected to grow 0.7%(1) in 2024, accelerating slightly to 1.2%(1) in 2025. This would result in an unemployment rate averaging 6.4%(1) in 2024 (with a peak of 6.9%(1) at the end of the year) and 6.8%(1) in 2025.

 

Quebec Economy

GDP growth in Quebec was encouraging in April, with the private sector posting an increase of 0.6%, its strongest advance since January 2023. Despite this good momentum, the rest of 2024 promises to be challenging, much like in the rest of the country, given the restrictive monetary policy. The unemployment rate has already risen by 1.8 percentage points since its cyclical low compared with a 1.6 percentage-point increase in the Canadian rate. However, Quebec appears to be in a good position to counter these headwinds. First, Quebec has the country's most diversified economy, making it less vulnerable to fluctuations in the economic cycle. In addition, Quebec's household indebtedness is lower than the Canadian average, and the province has the highest proportion of dual-income households in the country. The savings rate, which is much higher than the national average, represents a cushion that could mitigate the impact on consumption should the economic environment deteriorate. We are forecasting weak growth in 2024 and 2025 (0.5%(1) and 1.0%(1), respectively). This could enable Quebec to post an unemployment rate below the national average for these two years, i.e., 5.5%(1) in 2024 (compared with 6.4%(1) for Canada) and 6.2%(1) in 2025 (compared with 6.8%(1)).

 

 

 

(1)       Forecasts of real GDP or unemployment rate, National Bank Financial's Economics and Strategy group

 


Financial Analysis

 

Consolidated Results

 

(millions of Canadian dollars)


Quarter ended July 31


Nine months ended July 31

 



2024

 


2023(1)


% Change


2024



2023(1)


% Change


Operating results


 

 




 



 

 







Net interest income


769

 


870


 

(12)


2,155

 


2,851



(24)


Non-interest income


2,227

 


1,620


 

37


6,301

 


4,647



36


Total revenues


2,996

 


2,490


 

20


8,456

 


7,498



13


Non-interest expenses


1,541

 


1,404


 

10


4,462

 


4,156



7


Income before provisions for credit losses and income taxes


1,455

 


1,086


 

34


3,994

 


3,342



20


Provisions for credit losses


149

 


111


 

34


407

 


282



44


Income before income taxes


1,306

 


975


 

34


3,587

 


3,060



17


Income taxes


273

 


145


 

88


726

 


522



39


Net income


1,033

 


830


 

24


2,861

 


2,538



13


Diluted earnings per share (dollars)


2.89

 


2.33


 

24


8.03

 


7.14



12





 

 




 



 

 







Taxable equivalent basis(2)


 

 




 



 

 







Net interest income


15

 


88


 



66

 


242





Non-interest income


79

 


64


 



225

 


172





Income taxes


94

 


152


 



291

 


414





Impact of taxable equivalent basis on net income


 



 



 









 

 




 



 

 







Specified items(2)


 

 




 



 

 







Amortization of the subscription receipt issuance costs


(5)

 



 



(5)

 






Gain on the fair value remeasurement of equity interests


120

 


91


 



120

 


91





Management of the fair value changes related to the CWB

   acquisition


(7)

 



 



(7)

 






CWB acquisition and integration charges


(7)

 



 



(7)

 






Expense related to changes to the Excise Tax Act


 


(25)


 



 


(25)





Specified items before income taxes


101

 


66


 



101

 


66





Income taxes related to the Canadian government's 2022

  tax measures


 



 



 


24





Income taxes related to other specified items


28

 


17


 



28

 


17





Specified items after income taxes


73

 


49


 



73

 


25





Operating results - Adjusted(2)


 

 




 



 

 







Net interest income - Adjusted


789

 


958


 

(18)


2,226

 


3,093



(28)


Non-interest income - Adjusted


2,193

 


1,593


 

38


6,413

 


4,728



36


Total revenues - Adjusted


2,982

 


2,551


 

17


8,639

 


7,821



10


Non-interest expenses - Adjusted


1,534

 


1,379


 

11


4,455

 


4,131



8


Income before provisions for credit losses and

  income taxes - Adjusted


1,448

 


1,172


 

24


4,184

 


3,690



13


Provisions for credit losses


149

 


111


 

34


407

 


282



44


Income before income taxes - Adjusted


1,299

 


1,061


 

22


3,777

 


3,408



11


Income taxes - Adjusted


339

 


280


 

21


989

 


895



11


Net income - Adjusted


960

 


781


 

23


2,788

 


2,513



11


Diluted earnings per share - Adjusted (dollars)


2.68

 


2.18


 

23


7.82

 


7.06



11


Average assets(3)


461,504

 


434,121


 

6


453,054

 


426,821



6


Average loans and acceptances(3)


236,990

 


218,115


 

9


232,288

 


213,823



9


Average deposits(3)


319,246

 


283,477


 

13


309,765

 


282,395



10


Operating leverage(4)


10.5

%


(4.4)

%

 



5.4

%


(4.5)

%




Operating leverage - Adjusted(5)


5.7

%


(3.0)

%

 



2.7

%


(2.2)

%




Efficiency ratio(4)


51.4

%


56.4

%

 



52.8

%


55.4

%




Efficiency ratio - Adjusted(5)


51.4

%


54.1

%

 



51.6

%


52.8

%




 

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

(2)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP financial measures.

(3)       Represents an average of the daily balances for the period.

(4)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(5)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP ratios.

 


Financial Results

For the third quarter of 2024, the Bank reported net income of $1,033 million, up 24% from $830 million in the third quarter of 2023. Third-quarter diluted earnings per share stood at $2.89 compared to $2.33 in the third quarter of 2023. These increases were driven by total revenue growth in all of the business segments, partly offset by increases in non-interest expenses, provisions for credit losses, and income taxes. The Bank's income before provisions for credit losses and income taxes totalled $1,455 million in third-quarter 2024 compared to $1,086 million in third-quarter 2023, a 34% increase owing to good performance in all of the business segments. Adjusted net income, which excludes items related to the agreement to acquire CWB, totalled $960 million in the third quarter of 2024, up 23% from adjusted net income of $781 million in the same quarter of 2023, which had excluded a gain on the remeasurement at fair value of an equity interest as well as an expense related to the retroactive impact of changes to the Excise Tax Act. Adjusted diluted earnings per share stood at $2.68 compared to $2.18 in the third quarter of 2023.

 

For the first nine months of 2024, the Bank's net income totalled $2,861 million, up 13% from $2,538 million in the same period of 2023. Nine-month diluted earnings per share stood at $8.03 versus $7.14 in the same nine-month period last year. These increases were driven by good performance, owing to revenue growth, in all of the business segments, partly offset by increases in non-interest expenses, provisions for credit losses, and income taxes. Nine-month income before provisions for credit losses and income taxes stood at $3,994 million, rising 20% from $3,342 million in the same period of 2023. Adjusted net income which excludes items related to the agreement to acquire CWB, totalled $2,788 million in the first nine months of 2024, up 11% from adjusted net income of $2,513 million in the same period of 2023, which had excluded the impact of the Canadian government's 2022 tax measures, a gain on the remeasurement at fair value of an equity interest, as well as an expense related to the retroactive impact of changes to the Excise Tax Act. Nine-month adjusted diluted earnings per share stood at $7.82, up 11% from $7.06 in the first nine months of 2023.

 

Return on common shareholders' equity was 17.5% for the nine-month period ended July 31, 2024 compared to 17.0% in the same nine-month period of 2023.

 

Total Revenues

For the third quarter of 2024, the Bank's total revenues amounted to $2,996 million, rising $506 million or 20% year over year. In the Personal and Commercial segment, total revenues rose 7% year over year due to growth in personal and commercial loans and deposits (partly offset by a lower net interest margin) as well as to increases in insurance revenues, internal commission revenues arising from the distribution of Wealth Management products, revenues from derivative financial instruments, as well as revenues from merger and acquisition activity. In the Wealth Management segment, third-quarter total revenues grew 14% year over year, mainly due to increases in fee-based revenues, notably revenues from investment management and trust service fees as well as mutual fund revenues. This growth was also due to increases in net interest income and securities brokerage commissions, which was driven by an increase in customer activity. In the Financial Markets segment, third-quarter total revenues on a taxable equivalent basis increased by 39% year over year due to increases in global markets revenues and in corporate and investment banking revenues. In the USSF&I segment, third-quarter total revenues were up 24% year over year owing to sustained revenue growth at ABA Bank as a result of business growth as well as to an increase in Credigy's revenues. In addition, during the third quarter of 2024, a gain of $120 million was recorded in gains on non-trading securities following a remeasurement at fair value of the Bank's existing equity interest in CWB, whereas a $91 million gain had been recorded in other revenues in the third quarter of 2023 following a remeasurement at fair value of the Bank's equity interest in TMX.

 

For the first nine months of 2024, the Bank's total revenues amounted to $8,456 million, up $958 million or 13% from $7,498 million in the same period of 2023. In the Personal and Commercial segment, total revenues rose $197 million or 6%, mainly due to growth in net interest income arising from growth in loans and deposits as well as to increases in insurance revenues, credit card revenues, revenues from merger and acquisition activity, and internal commission revenues arising from the distribution of Wealth Management products. These increases were partly offset by a decrease in revenues from bankers' acceptances, from letters of credit and guarantee, from derivative financial instruments, and from foreign exchange activities. In the Wealth Management segment, nine-month total revenues grew 9% year over year, mainly due to higher fee-based revenues, notably revenues from investment management and trust service fees as well as mutual fund revenues. In the Financial Markets segment, nine-month total revenues on a taxable equivalent basis rose $381 million or 20% year over year given growth in global markets revenues as well as in corporate and investment banking revenues. In the USSF&I segment, total revenues rose 16% year over year owing to revenue growth at ABA Bank (driven by business growth), to revenue growth at Credigy as well as to dividend income recorded during the first nine months of 2024 related to an investment in a financial group. For the first nine months of 2024, a gain of $120 million was recorded in gains on non-trading securities following a remeasurement at fair value of the Bank's equity interest in CWB, while a $91 million gain had been recorded during the same period of 2023 in other revenues following a remeasurement at fair value of the Bank's equity interest in TMX.

 

Non-Interest Expenses

For the third quarter of 2024, non-interest expenses stood at $1,541 million, up 10% from the third quarter of 2023. This increase was due to higher compensation and employee benefits (driven by wage growth) as well as to the variable compensation associated with revenue growth. Occupancy expense, including amortization expense, was also up, partly due to expenses related to the Bank's new head office building and to the expanding banking network at ABA Bank. Technology expenses were up, as significant investments were made to support the Bank's technological evolution and business development plan, while professional fees also increased (notably due to an increase in the external management fees of the Wealth Management segment) and include $7 million in charges related to the acquisition and integration of CWB recorded during the third quarter of 2024. As for other expenses, they were down slightly due to the fact that a $25 million expense had been recorded in the third quarter of 2023 to reflect the retroactive impact of changes to the Excise Tax Act. Third-quarter adjusted non-interest expenses stood at $1,534 million, up 11% from $1,379 million in third-quarter 2023.

 

For the first nine months of 2024, non-interest expenses stood at $4,462 million, up 7% year over year. This increase was due to the same reasons provided above for the quarter. Nine-month other expenses were up year over year. Nine-month adjusted non-interest expenses stood at $4,455 million, an 8% year-over-year increase from $4,131 million in the same nine-month period of 2023.

 

Provisions for Credit Losses

For the third quarter of 2024, the Bank recorded $149 million in provisions for credit losses compared to $111 million in the same quarter of 2023. Third-quarter provisions for credit losses on impaired loans, excluding purchased or originated credit-impaired (POCI) loans(1), rose $37 million year over year. This increase came from Personal Banking (including credit card receivables), as there was a normalization of credit performance, from Financial Markets, from Credigy (excluding POCI loans), and from ABA Bank. These increases were partly offset by a decrease in provisions for credit losses on impaired Commercial Banking loans. As for third-quarter provisions for credit losses on non-impaired loans, they were down $13 million year over year, mainly due to a more favourable impact of updated macroeconomic scenarios and an unfavourable impact of recalibrating certain risk parameters that were below those of third-quarter 2023. These decreases were partly offset by the impacts of credit risk migration, which were more favourable in the third quarter of 2023, and by growth in the loan portfolios. The provisions for credit losses on POCI loans rose $14 million, mainly due to a favourable remeasurement of certain portfolios of the Credigy subsidiary during the third quarter of 2023.

 

For the first nine months of 2024, the Bank recorded $407 million in provisions for credit losses compared to $282 million in the same period of 2023. The increase came from higher provisions for credit losses on impaired loans excluding POCI loans(1), from Personal Banking (including credit card receivables), from Commercial Banking, from the Financial Markets segment, from Credigy, and from ABA Bank. As for nine-month provisions for credit losses on non-impaired loans, they were down year over year, mainly due to a more favourable impact of revised macroeconomic outlooks during the first nine months of 2024. This decrease was partly offset by the impacts of recalibrating certain risk parameters and by growth in the loan portfolios. The provisions for credit losses on POCI loans were also down, due to recoveries of credit losses following repayments of Commercial Banking POCI loans during the nine months ended July 31, 2024, partly offset by favourable remeasurements of certain Credigy portfolios recorded during the same period of 2023.

 

Income Taxes

For the third quarter of 2024, income taxes stood at $273 million compared to $145 million in the same quarter of 2023. The 2024 third-quarter effective income tax rate was 21% compared to 15% in the same quarter of 2023. This is mainly explained by a lower level and proportion of tax-exempt income in third-quarter 2024, which reflects the denial of the deduction in respect of dividends covered by Bill C-59 since January 1, 2024.

 

For the nine-month period ended July 31, 2024, the effective income tax rate stood at 20% compared to 17% in the same period of 2023. The year-over-year change in effective income tax rate was due to the same reason as that mentioned for the quarter, partly offset by the impact of the Canadian government's 2022 tax measures recorded in the first quarter of 2023, namely, the Canada Recovery Dividend and the additional 1.5% tax on banks and life insurers.

 

 

(1)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

 

Results by Segment

 

The Bank carries out its activities in four business segments: Personal and Commercial, Wealth Management, Financial Markets, and U.S. Specialty Finance and International, which mainly comprises the activities of the Credigy Ltd. (Credigy) and Advanced Bank of Asia Limited (ABA Bank) subsidiaries. Other operating activities, certain specified items, Treasury activities, and the operations of the Flinks Technology Inc. (Flinks) subsidiary are grouped in the Other heading of segment results. Each reportable segment is distinguished by services offered, type of clientele, and marketing strategy.

 

Personal and Commercial

 

(millions of Canadian dollars)


 Quarter ended July 31


Nine months ended July 31

 



2024

 

 

2023(1)



% Change


2024



2023(1)



% Change


Operating results


 

 

 






 

 







Net interest income


913

 

 

837



9


2,653

 


2,464



8


Non-interest income


285

 

 

278



3


830

 


822



1


Total revenues


1,198

 

 

1,115



7


3,483

 


3,286



6


Non-interest expenses


615

 

 

600



3


1,842

 


1,782



3


Income before provisions for credit losses and income taxes


583

 

 

515



13


1,641

 


1,504



9


Provisions for credit losses


79

 

 

75



5


239

 


173



38


Income before income taxes


504

 

 

440



15


1,402

 


1,331



5


Income taxes


138

 

 

121



14


386

 


366



5


Net income


366

 

 

319



15


1,016

 


965



5


Net interest margin(2)


2.31

%

 

2.34

%




2.34

%


2.34

%




Average interest-bearing assets(2)


157,327

 

 

141,939



11


151,376

 


140,493



8


Average assets(3)


160,666

 

 

148,934



8


157,483

 


147,462



7


Average loans and acceptances(3)


159,142

 

 

148,142



7


155,849

 


146,660



6


Net impaired loans(2)


465

 

 

246



89


465

 


246



89


Net impaired loans as a % of total loans and acceptances(2)


0.3

%

 

0.2

%




0.3

%


0.2

%




Average deposits(3)


91,906

 

 

86,852



6


89,936

 


85,310



5


Efficiency ratio(2)


51.3

%

 

53.8

%




52.9

%


54.2

%




 

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

(2)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(3)       Represents an average of the daily balances for the period.

 

In the Personal and Commercial segment, net income totalled $366 million in the third quarter of 2024, up 15% from $319 million in the third quarter of 2023. Third-quarter net interest income rose 9% year over year owing to growth in personal and commercial loans and deposits, which more than offset the impact of a lower net interest margin, which was 2.31% compared to 2.34% in the third quarter of 2023. As for third-quarter non-interest income, it grew $7 million or 3% year over year.

 

Personal Banking's third-quarter total revenues increased by $40 million year over year. This increase was driven by higher net interest income, attributable to growth in loans and deposits, as well as to increases in insurance revenues and in internal commission revenues arising from the distribution of Wealth Management products. Commercial Banking's third-quarter total revenues grew $43 million year over year, mainly due to an increase in net interest income that was driven by loan and deposit growth, partly offset by a lower net interest margin on loans. In addition, revenues from derivative financial instruments as well as revenues from merger and acquisition activity rose year over year, whereas revenues from bankers' acceptances decreased.

 

Third-quarter non-interest expenses stood at $615 million, a 3% year-over-year increase that was due to higher compensation and employee benefits (driven by wage growth) and to greater investment in the segment's technological evolution. These increases were partly offset by an $11 million lump sum reimbursement recorded during the third quarter of 2024. At 51.3% in the third quarter of 2024, the efficiency ratio improved by 2.5 percentage points year over year. The segment recorded $79 million in provisions for credit losses in the third quarter of 2024 compared to $75 million in the third quarter of 2023. An increase in provisions for credit losses on Personal Banking impaired loans (including credit card receivables), which reflects a normalization of credit performance, was partly offset by a decrease in provisions for credit losses on Commercial Banking impaired loans. Third-quarter provisions for credit losses on non-impaired loans and Commercial Banking POCI loans were up year over year.

 

For the nine-month period ended July 31, 2024, Personal and Commercial's net income totalled $1,016 million, up 5% from $965 million in the first nine months of last year. The segment's total revenues rose $197 million year over year, partly offset by higher non-interest expenses and higher provisions for credit losses. Nine-month income before provisions for credit losses and income taxes stood at $1,641 million, rising 9% year over year. Personal Banking's nine-month total revenues posted a year-over-year increase that was mainly due to loan and deposit growth, a higher margin on deposits, and increases in insurance revenues, credit card revenues, and internal commission revenues arising from the distribution of Wealth Management products. In addition, Commercial Banking's nine-month total revenues were also up year over year due to growth in loans and deposits (partly offset by a smaller margin on loans) as well as to an increase in revenues generated by merger and acquisition activity (partly offset by a decrease in revenues from bankers' acceptances from letters of credit and guarantee, from derivative financial instruments, and from foreign exchange activities).

 

For the first nine months of 2024, non-interest expenses stood at $1,842 million, a 3% year-over-year increase that came from compensation and employee benefits as well as from investments made to the segment's technological evolution. At 52.9%, the nine-month efficiency ratio improved by 1.3 percentage points compared to the same period in 2023. In the Personal and Commercial segment, provisions for credit losses rose $66 million year over year. This increase was mainly due to higher provisions for credit losses on Personal Banking impaired loans (including credit card receivables) and Commercial Banking impaired loans. As for nine-month provisions for credit losses on non-impaired loans, they were down year over year. Also, as a result of loan repayments, the segment recorded recoveries of credit losses on Commercial Banking's POCI loans during the first nine months of 2024.

 

Wealth Management

 

(millions of Canadian dollars)


Quarter ended July 31


Nine months ended July 31

 



2024



2023


 

% Change


2024

 


2023



% Change


Operating results


 

 

 

 


 



 

 







Net interest income


219

 

 

192


 

14


620

 


590



5


Fee-based revenues


409

 

 

364


 

12


1,178

 


1,061



11


Transaction-based and other revenues


88

 

 

73


 

21


261

 


232



13


Total revenues


716

 

 

629


 

14


2,059

 


1,883



9


Non-interest expenses 


416

 

 

375


 

11


1,206

 


1,111



9


Income before provisions for credit losses and income taxes


300

 

 

254


 

18


853

 


772



10


Provisions for credit losses


 

 

1


 

(100)


 


1



(100)


Income before income taxes


300

 

 

253


 

19


853

 


771



11


Income taxes


83

 

 

70


 

19


235

 


212



11


Net income


217

 

 

183


 

19


618

 


559



11


Average assets(1)


9,479

 

 

8,702


 

9


9,050

 


8,582



5


Average loans and acceptances(1)


8,440

 

 

7,711


 

9


8,041

 


7,602



6


Net impaired loans(2)


7

 

 

6


 

17


7

 


6



17


Average deposits(1)


43,285

 

 

40,028


 

8


42,144

 


40,194



5


Assets under administration(2)


746,295

 

 

678,753


 

10


746,295

 


678,753



10


Assets under management(2)


150,239

 

 

125,603


 

20


150,239

 


125,603



20


Efficiency ratio(2)


58.1

%

 

59.6

%

 



58.6

%


59.0

%




 

(1)       Represents an average of the daily balances for the period.

(2)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

 

In the Wealth Management segment, net income totalled $217 million in the third quarter of 2024, a 19% increase from $183 million in the third quarter of 2023. The segment's third-quarter total revenues amounted to $716 million, up $87 million or 14% from $629 million in the third quarter of 2023. Third-quarter net interest income grew 14% year over year due to growth in deposit volumes and to the favourable impact of a change in the composition of deposits. Fee-based revenues increased by 12%, mostly due to stronger stock market performance compared to the third quarter of 2023 and to positive net inflows into various solutions. As for transaction-based and other revenues, they rose 21% year over year due to greater activity among clients.

 

Third-quarter non-interest expenses stood at $416 million, an 11% increase from $375 million in the third quarter of 2023. This increase was due to higher variable compensation and the external management fees associated with revenue growth and to higher technology expenses related to the segment's initiatives. At 58.1%, the third-quarter efficiency ratio improved from 59.6% in the third quarter of 2023. The provisions for credit losses were negligible in the third quarter of 2024, whereas $1 million in provisions for credit losses had been recorded during the third quarter of 2023.

 

For the first nine months of 2024, Wealth Management's net income totalled $618 million, up 11% from $559 million in the same period of 2023. The segment's nine-month total revenues amounted to $2,059 million, up 9% from $1,883 million in the same period of 2023. Net interest income rose 5% and fee-based revenues rose 11%, due to growth in assets under administration and under management resulting from stock market performance as well to positive net inflows into various solutions. In addition, nine-month transaction-based and other revenues rose 13% year over year due to greater activity among clients. Nine-month non-interest expenses stood at $1,206 million compared to $1,111 million in the same period of 2023, a 9% increase that was due to the same reasons provided above for the quarter. The segment's nine-month efficiency ratio was 58.6%, an improvement from 59.0% in the same period of 2023. As for the nine-month provisions for credit losses, they were negligible compared to $1 million in the same period of 2023.

 

Financial Markets

 

(taxable equivalent basis)(1)


















(millions of Canadian dollars)


 Quarter ended July 31


Nine months ended July 31

 



2024

 


2023

 

 

% Change


2024

 


2023



 % Change


Operating results


 

 







 

 







Global markets


 

 







 

 







 

Equities


274

 


171



60


735

 


585



26


 

Interest rate and credit


146

 


85



72


462

 


333



39


 

Commodities and foreign exchange


32

 


21



52


159

 


141



13


 


452

 


277



63


1,356

 


1,059



28


Corporate and investment banking


329

 


283



16


946

 


862



10


Total revenues(1)


781

 


560



39


2,302

 


1,921



20


Non-interest expenses


320

 


272



18


945

 


842



12


Income before provisions for credit losses and income taxes


461

 


288



60


1,357

 


1,079



26


Provisions for credit losses


22

 


5





50

 


15





Income before income taxes


439

 


283



55


1,307

 


1,064



23


Income taxes(1)


121

 


78



55


359

 


293



23


Net income


318

 


205



55


948

 


771



23


Average assets(2)


197,996

 


186,236



6


194,199

 


176,575



10


Average loans and acceptances(2) (Corporate Banking only)


32,229

 


29,974



8


31,933

 


28,613



12


Net impaired loans(3)


54

 


56



(4)


54

 


56



(4)


Net impaired loans as a % of total loans and acceptances(3)


0.2

%


0.2

%




0.2

%


0.2

%




Average deposits(2)


65,447

 


59,287



10


64,452

 


56,803



13


Efficiency ratio(3)


41.0

%


48.6

%




41.1

%


43.8

%




 

(1)       The Total revenues and Income taxes items of the Financial Markets segment 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 quarter ended July 31, 2024, Total revenues were grossed up by $92 million ($150 million in 2023) and an equivalent amount was recognized in Income taxes. For the nine-month period ended July 31, 2024, Total revenues were grossed up by $285 million ($409 million in 2023) and an equivalent amount was recognized in Income taxes. The effect of these adjustments has been reversed under the Other heading of segment results. In light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction or use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(2)       Represents an average of the daily balances for the period.

(3)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

 

In the Financial Markets segment, net income totalled $318 million in the third quarter of 2024, up 55% from $205 million in the third quarter of 2023. The segment's third-quarter total revenues on a taxable equivalent basis amounted to $781 million, up $221 million or 39% from $560 million in the third quarter of 2023. Global markets revenues rose 63% year over year owing to growth in all revenue types. Third-quarter corporate and investment banking revenues grew 16% year over year given an increase in revenues from capital markets activity, banking service revenues, and revenues from merger and acquisition activity.

 

Third-quarter non-interest expenses stood at $320 million, an 18% year-over-year increase that was due to higher compensation and employee benefits (notably the variable compensation associated with revenue growth), to higher technology investment expenses, and to higher other expenses related to the segment's business growth. At 41.0%, the segment's third-quarter efficiency ratio improved by 7.6 percentage points from 48.6% in the third quarter of 2023. Third-quarter provisions for credit losses rose $17 million year over year. This increase came from $20 million in provisions for credit losses on impaired loans recorded in the third quarter of 2024, whereas $5 million in recoveries of credit losses on impaired loans had been recorded during the third quarter of 2023. This increase was partly offset by a year-over-year decrease in provisions for credit losses on non-impaired loans.

 

For the first nine months of 2024, the segment's net income totalled $948 million, up 23% from the first nine months of last year. Nine-month income before provisions for credit losses and income taxes totalled $1,357 million, up 26% year over year. As for nine-month total revenues on a taxable equivalent basis, they amounted to $2,302 million, up $381 million or 20% from $1,921 million in the same period of 2023. Global markets revenues rose 28% year over year owing to growth in all revenue types. In addition, nine-month corporate and investment banking revenues grew 10% year over year given increases in revenues related to capital markets activities and revenues from banking services, partly offset by a decrease in revenues from merger and acquisition activity.

 

For the first nine months of 2024, the segment's non-interest expenses rose 12% year over year. This increase was due to higher variable compensation resulting from revenue growth and to an increase in technology investment expenses and other expenses related to the segment's business growth. The segment's nine-month efficiency ratio was 41.1%, an improvement of 2.7 percentage points from 43.8% in the same period of 2023. Nine-month provisions for credit losses rose $35 million year over year. This increase came mainly from provisions for credit losses on impaired loans recorded in the nine-month period ended July 31, 2024 compared to recoveries of credit losses on impaired loans recorded during the same period of 2023. In addition, provisions for credit losses on non-impaired loans were up year over year.

 

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

 

(millions of Canadian dollars)


 Quarter ended July 31


Nine months ended July 31

 



2024

 

 

2023



% Change


2024



2023



% Change


Total revenues


 

 

 






 

 








Credigy


139

 

 

112



24


400

 


357



12



ABA Bank


223

 

 

181



23


626

 


539



16



International


(1)

 

 

(1)





11

 









361

 

 

292



24


1,037

 


896



16


Non-interest expenses


 

 

 






 

 








Credigy


39

 

 

33



18


108

 


102



6



ABA Bank


76

 

 

66



15


214

 


192



11



International


 

 

1





1

 


2







115

 

 

100



15


323

 


296



9


Income before provisions for credit losses and income taxes


246

 

 

192



28


714

 


600



19


Provisions for credit losses


 

 

 






 

 








Credigy


29

 

 

20



45


80

 


71



13



ABA Bank


17

 

 

9



89


39

 


19



105





46

 

 

29



59


119

 


90



32


Income before income taxes


200

 

 

163



23


595

 


510



17


Income taxes


 

 

 






 

 








Credigy


15

 

 

12



25


44

 


38



16



ABA Bank


27

 

 

23



17


78

 


69



13



International


 

 





2

 









42

 

 

35



20


124

 


107



16


Net income


 

 

 






 

 








Credigy


56

 

 

47



19


168

 


146



15



ABA Bank


103

 

 

83



24


295

 


259



14



International


(1)

 

 

(2)





8

 


(2)








158

 

 

128



23


471

 


403



17


Average assets(1)


28,189

 

 

23,589



20


27,205

 


22,586



20


Average loans and receivables(1)


22,116

 

 

19,103



16


21,528

 


18,472



17


Purchased or originated credit-impaired (POCI) loans


395

 

 

532



(26)


395

 


532



(26)


Net impaired loans excluding POCI loans(2)


433

 

 

229



89


433

 


229



89


Average deposits(1)


13,272

 

 

10,966



21


12,732

 


10,454



22


Efficiency ratio(2)


31.9

%

 

34.2

%




31.1

%


33.0

%




 

(1)       Represents an average of the daily balances for the period.

(2)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

 

In the USSF&I segment, net income totalled $158 million in the third quarter of 2024, up 23% from $128 million in the same quarter of 2023. The segment's third-quarter total revenues amounted to $361 million compared to $292 million in the third quarter of 2023, a $69 million or 24% year-over-year increase that was due to revenue growth of $27 million at Credigy and of $42 million at ABA Bank. For the first nine months of 2024, the segment posted net income of $471 million compared to $403 million in the same period of 2023, a 17% increase attributable to the activities of the Credigy and ABA Bank subsidiaries as well as to dividend income recorded during the first nine months of 2024 related to an investment in a financial group.

 

Credigy

The Credigy subsidiary's net income totalled $56 million in the third quarter of 2024, up $9 million or 19% year over year. Its third-quarter total revenues amounted to $139 million compared to $112 million in the third quarter of 2023, an increase that was due to loan volume growth as well as to growth in non-interest income arising mainly from remeasuring certain portfolios at fair value during the third quarter of 2024. Non-interest expenses stood at $39 million in the third quarter of 2024, a $6 million year-over-year increase that was due to compensation and employee benefits as well as to professional fees. Provisions for credit losses rose $9 million compared to the third quarter of 2023 due to higher provisions for credit losses on impaired loans, a result of the normal maturation of loan portfolios, and higher provisions for credit losses on POCI loans, partly offset by lower provisions for credit losses recorded on non-impaired loans.

 

For the first nine months of 2024, the Credigy subsidiary's net income totalled $168 million, rising 15% year over year. Its nine-month total revenues amounted to $400 million, up from $357 million in the same period of 2023. This increase was due to the same reasons provided above for the quarter as well as to a gain realized during the second quarter of 2024 following the disposal of a loan portfolio, partly offset by revenues recorded upon a prepayment of a credit facility in the first quarter of 2023. Nine-month non-interest expenses stood at $108 million, a 6% year-over-year increase that was due to compensation and employee benefits. Nine-month provisions for credit losses rose $9 million year over year, an increase that was due to the same reasons provided above for the quarter.

 

ABA Bank

The ABA Bank subsidiary's net income totalled $103 million in the third quarter of 2024, up $20 million or 24% year over year. Its third-quarter total revenues rose 23% year over year, mainly due to sustained growth in assets. Non-interest expenses for the third quarter of 2024 stood at $76 million, a $10 million or 15% year-over-year increase attributable essentially to higher compensation and employee benefits as well as higher occupancy and technology expenses resulting from the subsidiary's business growth and the opening of new branches. Provisions for credit losses, which stood at $17 million in the third quarter of 2024, increased $8 million year over year. This increase came from higher provisions for credit losses on impaired loans and non-impaired loans.

 

For the first nine months of 2024, ABA Bank recorded net income of $295 million, a 14% or $36 million year-over-year increase. Growth in the subsidiary's business activities, mainly sustained growth in assets, explains a 16% year-over-year increase in its nine-month total revenues. Nine-month non-interest expenses stood at $214 million, an 11% year-over-year increase that was due to the same reasons provided above for the third quarter. The subsidiary's nine-month provisions for credit losses stood at $39 million, a $20 million year-over-year increase that stems from higher provisions for credit losses on impaired loans, partly offset by lower provisions for credit losses on non-impaired loans.

 

Other

 

(millions of Canadian dollars)


 Quarter ended July 31

 

Nine months ended July 31

 



2024


2023

 

2024

 

2023


Operating results


 



 

 

 



Net interest income(1)


(79)


(121)

 

(276)

 

(430)


Non-interest income(1)


19


15

 

(149)

 

(58)


Total revenues


(60)


(106)

 

(425)

 

(488)


Non-interest expenses


75


57

 

146

 

125


Income before provisions for credit losses and income taxes


(135)


(163)

 

(571)

 

(613)


Provisions for credit losses


2


1

 

(1)

 

3


Income before income taxes


(137)


(164)

 

(570)

 

(616)


Income taxes (recovery)(1)


(111)


(159)

 

(378)

 

(456)


Net loss


(26)


(5)

 

(192)

 

(160)


Non-controlling interests



(1)

 

(1)

 

(2)


Net loss attributable to the Bank's shareholders and holders of

   other equity instruments


(26)


(4)

 

(191)

 

(158)


Less: Specified items after income taxes(2)


73


49

 

73

 

25


Net loss - Adjusted(2)


(99)


(54)

 

(265)

 

(185)


Average assets(3)


65,174


66,660

 

65,117


71,616


 

(1)       For the quarter ended July 31, 2024, Net interest income was reduced by $15 million ($88 million in 2023), Non-interest income was reduced by $79 million ($64 million in 2023), and an equivalent amount was recorded in Income taxes (recovery). For the nine-month period ended July 31, 2024, Net interest income was reduced by $66 million ($242 million in 2023), Non-interest income was reduced by $225 million ($172 million in 2023), and an equivalent amount was recorded in Income taxes (recovery). These adjustments include a reversal of the taxable equivalent of the Financial Markets segment and the Other heading. Taxable equivalent basis is a calculation method that consists in 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. In light of the enacted legislation with respect to Canadian dividends, the Bank did not recognize an income tax deduction, nor did it use the taxable equivalent basis method to adjust revenues related to affected dividends received after January 1, 2024 (for additional information, see the Income Taxes section).

(2)       See the Financial Reporting Method section on pages 4 to 10 for additional information on non-GAAP financial measures.

(3)       Represents an average of the daily balances for the period.

 

For the Other heading of segment results, there was a net loss of $26 million in the third quarter of 2024 compared to a net loss of $5 million in the third quarter of 2023. The change in net loss came essentially from a year-over-year increase in non-interest expenses, notably due to the higher variable compensation associated with the Bank's revenue growth, partly offset by a more favourable impact of specified items, notably the items related to the agreement to acquire CWB, on net loss in the third quarter of 2024. Adjusted net loss was $99 million for the third quarter of 2024 compared to $54 million in the same quarter of 2023.

 

For the first nine months of 2024, net loss stood at $192 million compared to a $160 million net loss in the same period of 2023. The change in net loss was partly due to a lower contribution from treasury activities related to the Bank's asset/liability management activities as well as to a year-over-year increase in non-interest expenses, notably an increase in the variable compensation associated with the Bank's revenue growth. These factors were partly offset by the specified items, which had a $73 million favourable impact on net loss for the nine-month period ended July 31, 2024 compared to a favourable impact of $25 million in the same period of 2023. Adjusted net loss was $265 million for the first nine months of 2024 compared to $185 million in the same period of 2023.

 

Consolidated Balance Sheet

 

Consolidated Balance Sheet Summary

 

(millions of Canadian dollars)


As at July 31, 2024


As at October 31, 2023(1)


% Change


Assets

 

 






Cash and deposits with financial institutions

 

32,489


35,234


(8)


Securities

 

144,275


121,818


18


Securities purchased under reverse repurchase agreements and securities borrowed

 

13,879


11,260


23


Loans and acceptances, net of allowances

 

239,549

 

225,443


6


Other


23,741


29,722


(20)



 

 

453,933


423,477


7


Liabilities and equity

 

 






Deposits

 

320,587

 

288,173


11


Other


106,930


110,972


(4)


Subordinated debt

 

1,254

 

748


68


Equity attributable to the Bank's shareholders and holders of other equity instruments

25,161


23,582


7


Non-controlling interests

 

1


2


(50)



 

 

453,933


423,477


7


 

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

 

Assets

As at July 31, 2024, the Bank had total assets of $453.9 billion, a $30.4 billion or 7% increase from $423.5 billion as at October 31, 2023. At $32.5 billion as at July 31, 2024, cash and deposits with financial institutions decreased $2.7 billion, mainly due to a decrease in deposits with regulated financial institutions, in particular the U.S. Federal Reserve, partly offset by an increase in deposits with the Bank of Canada.

 

Since October 31, 2023, securities rose $22.5 billion due to a $16.0 billion or 16% increase in securities at fair value through profit or loss, with this increase being essentially attributable to equity securities, partly offset by a decrease in securities issued or guaranteed by U.S. Treasury, other U.S. agencies, and other foreign governments. The increase was also due to a $6.5 billion increase in securities other than those measured at fair value through profit or loss, with this increase being essentially attributable to securities issued or guaranteed by U.S. Treasury, other U.S. agencies, and other foreign governments and to securities issued or guaranteed by the Canadian government. Securities purchased under reverse repurchase agreements and securities borrowed increased by $2.6 billion since October 31, 2023, mainly due to the activities of the Financial Markets segment.

 

Totalling $239.5 billion as at July 31, 2024, loans and acceptances, net of allowances for credit losses, rose $14.1 billion or 6% since October 31, 2023. The following table provides a breakdown of the main loan and acceptance portfolios.

 

(millions of Canadian dollars)


As at July 31, 2024

 

As at October 31, 2023


As at July 31, 2023


Loans and acceptances


 

 





Residential mortgage and home equity lines of credit


122,521

 

116,444


114,481


Personal


17,387

 

16,761


16,088


Credit card


2,692

 

2,603


2,491


Business and government


98,244

 

90,819


87,493





240,844

 

226,627


220,553


Allowances for credit losses


(1,295)

 

(1,184)


(1,120)



 

 

239,549

 

225,443


219,433


 

Since October 31, 2023, residential mortgages (including home equity lines of credit) rose $6.1 billion or 5% given the business activities of the Personal and Commercial segment, the Financial Markets segment, and the Credigy and ABA Bank subsidiaries. Also since October 31, 2023, personal loans were up $0.6 billion, credit card receivables were up slightly, and loans and acceptances to business and government rose $7.4 billion or 8%, mainly due to business growth at Commercial Banking, in the Financial Markets segment, in the Wealth Management segment, and at the Credigy and ABA Bank subsidiaries.

 

Since July 31, 2023, loans and acceptances, net of allowances for credit losses, grew $20.1 billion or 9%. Residential mortgages (including home equity lines of credit) rose $8.0 billion or 7% due to sustained demand for mortgage credit in the Personal and Commercial segment and to business growth in the Financial Markets segment and at the ABA Bank and Credigy subsidiaries. Also since July 31, 2023, personal loans rose $1.3 billion, credit card receivables were up $0.2 billion, and loans and acceptances to business and government grew $10.7 billion or 12%, owing essentially to greater business activity at Commercial Banking, in the Financial Markets and Wealth Management segments, and at the ABA Bank and Credigy subsidiaries, partly offset by a decrease in Treasury activities.



Impaired loans include all loans classified in Stage 3 of the expected credit loss model and POCI loans. As at July 31, 2024, gross impaired loans stood at $1,852 million compared to $1,584 million as at October 31, 2023. As for net impaired loans, they totalled $1,482 million as at July 31, 2024 compared to $1,276 million as at October 31, 2023. Net impaired loans excluding POCI loans amounted to $959 million as at July 31, 2024, rising $353 million from $606 million as at October 31, 2023. This increase was due to an increase in the net impaired loans of the loan portfolios of Personal Banking and Commercial Banking, the Financial Markets segment, and the Credigy (excluding POCI loans) and ABA Bank subsidiaries. Net POCI loans stood at $523 million as at July 31, 2024 compared to $670 million as at October 31, 2023, a decrease due to the maturities of certain portfolios and to loan repayments.

 

As at July 31, 2024, other assets totalled $23.7 billion, a $6.0 billion decrease since October 31, 2023 that came mainly from a decrease in derivative financial instruments.

 

Liabilities

As at July 31, 2024, the Bank had total liabilities of $428.8 billion compared to $399.9 billion as at October 31, 2023.

 

The Bank's total deposit liability stood at $320.6 billion as at July 31, 2024, rising $32.4 billion or 11% from $288.2 billion as at October 31, 2023. As at July 31, 2024, personal deposits stood at $94.2 billion, rising $6.3 billion since October 31, 2023. This increase was driven by business growth at Personal Banking, in both the Financial Markets and Wealth Management segments, and at ABA Bank.

 

Business and government deposits stood at $220.9 billion as at July 31, 2024, rising $23.6 billion since October 31, 2023. The increase came from Treasury funding activities (including $4.7 billion in deposits subject to bank recapitalization (bail-in) conversion regulations) from Commercial Banking activities, from the activities of the Financial Markets and Wealth Management segments, and from an amount of $1.0 billion related to the investment agreements for subscription receipts issued as part of the anticipated acquisition of CWB. As at July 31, 2024, deposits from deposit-taking institutions stood at $5.5 billion, increasing $2.5 billion since October 31, 2023 and arising from Treasury funding activities and the activities of the Financial Markets segment and Commercial Banking.

 

As at July 31, 2024, other liabilities stood at $106.9 billion, decreasing $4.1 billion since October 31, 2023, essentially due to a $6.5 billion decrease in acceptances, a result of the transition of bankers' acceptances towards loans indexed at CORRA (Canadian Overnight Repo Rate Average), to a $2.2 billion decrease in derivative financial instruments, and to a $1.7 billion decrease in obligations related to securities sold short. These decreases were partly offset by a $3.5 billion increase in obligations related to securities sold under repurchase agreements and securities loaned and a $2.0 billion increase in liabilities related to transferred receivables.

 

Subordinated debt increased since October 31, 2023 as a result of the $500 million issuance of medium-term notes on February 5, 2024.

 

Equity

As at July 31, 2024, equity attributable to the Bank's shareholders and holders of other equity instruments was $25.2 billion, rising $1.6 billion since October 31, 2023. This increase was due to net income net of dividends, to remeasurements of pension plans and other post-employment plans, and to issuances of common shares under the Stock Option Plan. These increases were partly offset by the net fair value change attributable to the credit risk on financial liabilities designated at fair value through profit or loss and by the net change in gains (losses) on cash flow hedges.

 

CWB Transaction

 

On June 11, 2024, the Bank entered into an agreement to acquire all of the issued and outstanding common shares of Canadian Western Bank (CWB) by way of a share exchange valuing CWB at approximately $5 billion. Each CWB common share, other than those held by the Bank, will be exchanged for 0.450 of a common share of National Bank. CWB is a diversified financial services institution based in Edmonton, Alberta. This transaction will enable the Bank to accelerate its growth across Canada. The business combination brings together two complementary Canadian banks with growing businesses, thereby enhancing customer service by offering a full range of products and services nationwide, with a regionally focused service model.

 

The transaction is subject to the satisfaction of customary closing conditions, including regulatory approvals, and is expected to close in 2025. The results of the acquired business will be consolidated from the date of closing.

 

Between the announcement and closing of the transaction, the Bank is exposed to changes in the fair value of CWB's assets and liabilities due to changes in market interest rates. Increases in interest rates will impact the fair value of net assets on closing of the transaction, increasing the amount of goodwill and reducing capital ratios. To manage the volatility of goodwill and capital on closing of the transaction, the Bank entered into interest rate swaps to economically hedge its exposure. Mark-to-market changes have been recognized in Non-interest income -Trading revenues (losses) in the Consolidated Statement of Income.

 

Related Party Transactions

 

The Bank's policies and procedures regarding related party transactions have not significantly changed since October 31, 2023. For additional information, see Note 28 to the audited annual consolidated financial statements for the year ended October 31, 2023.

 

Securitization and Off-Balance-Sheet Arrangements

 

In the normal course of business, the Bank is party to various financial arrangements that, under IFRS, are not required to be recorded on the Consolidated Balance Sheet or are recorded under amounts other than their notional or contractual values. These arrangements include, among others, transactions with structured entities, derivative financial instruments, issuances of guarantees, credit instruments, and financial assets received as collateral. A complete analysis of these types of arrangements, including their nature, business purpose, and importance, is provided on pages 51 and 52 of the 2023 Annual Report.

 

For additional information on financial assets transferred but not derecognized, guarantees, commitments, and structured entities, see Notes 8, 26, and 27 to the audited annual consolidated financial statements for the year ended October 31, 2023.

 

Income Taxes

 

Notice of Assessment

In April 2024, the Bank was reassessed by the Canada Revenue Agency (CRA) for additional income tax and interest of approximately $110 million (including estimated provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2019 taxation year. 

 

In prior fiscal years, the Bank had been reassessed for additional income tax and interest of approximately $965 million (including provincial tax and interest) in respect of certain Canadian dividends received by the Bank during the 2012-2018 taxation years. 

 

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

 

In October 2023, the Bank filed a notice of appeal with the Tax Court of Canada, and the matter is now in litigation. The CRA may issue reassessments to the Bank for taxation years subsequent to 2019 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 July 31, 2024.

 

Canadian Government's 2022 Tax Measures

 

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

 

Other Tax Measures

On November 30, 2023, the Government of Canada introduced Bill C-59 - An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 to implement tax measures applicable to the Bank. The measures include the denial of the deduction in respect of dividends received after 2023 on shares that are mark-to-market property for tax purposes (except for dividends received on "taxable preferred shares" as defined in the Income Tax Act), as well as the application of a 2% tax on the net value of equity repurchases occurring as of January 1, 2024. On June 20, 2024, Bill C-59 received royal assent and these tax measures were enacted at the reporting date. The consolidated financial statements reflect, since January 1, 2024, the denial of the deduction in respect of the dividends covered by Bill C-59.

 

On May 2, 2024, the Government of Canada introduced Bill C-69 - An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024. The bill includes the Pillar 2 rules (global minimum tax) published by the Organisation for Economic Co-operation and Development (OECD) that will apply to fiscal years beginning on or after December 31, 2023 (November 1, 2024 for the Bank). On June 20, 2024, Bill C-69 received royal assent. To date, the Pillar 2 rules have been included in a bill or enacted in certain jurisdictions where the Bank operates. The Pillar 2 rules do not apply to this fiscal year, and the Bank is currently assessing its income tax exposure arising from these rules.

 


Capital Management

 

Capital management has a dual role of ensuring a competitive return to the Bank's shareholders while maintaining a solid capital foundation that covers the risks inherent to the Bank's business activities, supports its business segments, and protects its clients. The Bank's capital management policy defines the guiding principles as well as the roles and responsibilities of its internal capital adequacy assessment process. This process aims to determine the capital that the Bank needs to maintain to pursue its business activities and accommodate unexpected losses arising from extremely adverse economic and operational conditions. For additional information on the capital management framework, see the Capital Management section on pages 53 to 61 of the Bank's 2023 Annual Report.

 

Basel Accord

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 11.5%, a Tier 1 capital ratio of at least 13.0%, and a Total capital ratio of at least 15.0%. For additional information on the ratio calculations, see pages 54 and 55 of the 2023 Annual Report. All of these ratios include a capital conservation buffer of 2.5% established by the BCBS and OSFI, a 1.0% surcharge applicable solely to Domestic Systemically Important Banks (D‑SIBs), and a 3.5% domestic stability buffer (DSB) established by OSFI. The DSB, which can vary from 0% to 4.0% of risk-weighted assets (RWA), consists exclusively of CET1 capital. A D-SIB that fails to meet this buffer requirement will not be subject to automatic constraints to reduce capital distributions but will have to provide a remediation plan to OSFI. The Bank must also meet the requirements of the capital output floor that will ensure that its total calculated RWA is not below 72.5% of the total RWA as calculated under the Basel III Standardized Approaches. Initially, OSFI was allowing a phase-in of the floor factor over three years, starting at 65.0% in the second quarter of 2023 and rising 2.5% per year to reach 72.5% in fiscal 2026. On July 5, 2024, OSFI announced a one-year delay to the increase in the capital output floor. Therefore, the revised floor factor will reach 72.5% in fiscal 2027. For fiscal 2024, the floor factor is set at 67.5%; it will remain at this level until the end of fiscal 2025 and then increase until 2027. If the capital requirement is less than the capital output floor requirement after applying the floor factor, the difference is added to the total RWA. Lastly, OSFI requires D-SIBs to maintain a Basel III leverage ratio of at least 3.5%, which includes a Tier 1 capital buffer of 0.5% applicable only to D-SIBs. For additional information on the leverage ratio calculation, see page 55 of the 2023 Annual Report.

 

In the first quarter of 2024, the Bank implemented OSFI's finalized guidance of the revised market risk framework, consistent with the BCBS's Fundamental Review of the Trading Book (FRTB) as well as the revised credit valuation adjustment (CVA) risk framework. For both market risk and CVA, the Bank uses the sensitivities-based Standardized Approach (SA) for computing RWA. The implementation of these revised frameworks on November 1, 2023 had a negative impact of 38 bps on the Bank's CET1 capital ratio.

 

In addition, OSFI requires that regulatory capital instruments other than common equity must have a non-viability contingent capital (NVCC) clause to ensure that investors bear losses before taxpayers should the government determine that rescuing a non-viable financial institution is in the public interest. The Bank's regulatory capital instruments, other than common shares, all have an NVCC clause.

 


OSFI's Total Loss Absorbing Capacity (TLAC) Guideline, which applies to all D-SIBs under the federal government's bail-in regulations, is intended to ensure that a D-SIB has sufficient loss-absorbing capacity to support its internal recapitalization in the unlikely event it becomes non-viable. Available TLAC includes total capital as well as certain senior unsecured debts that satisfy all of the eligibility criteria of OSFI's TLAC guideline. OSFI requires D-SIBs to maintain a risk-based TLAC ratio of at least 25.0% (including the DSB) of RWA and a TLAC leverage ratio of at least 7.25%. The TLAC ratio is calculated by dividing available TLAC by RWA, and the TLAC leverage ratio is calculated by dividing available TLAC by total exposure. As at July 31, 2024, outstanding liabilities of $22.4 billion ($17.7 billion as at October 31, 2023) were subject to conversion under the bail-in regulations.

 

 

Requirements - Regulatory Capital(1), Leverage(1), and TLAC(2) Ratios

 












Requirements as at July 31, 2024

 

Ratios as at July 31, 2024


Minimum

 

 

Capital

conservation

buffer

 

 

Minimum

set by

 BCBS

 

 

D-SIB surcharge

 

 

Minimum

set by

OSFI

 

 

Domestic

stability

buffer(3)

 

 

Minimum set by OSFI, including the domestic stability buffer

 

 

 

 

 

Capital ratios

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


CET1

4.5

%

 

2.5

%

 

7.0

%

 

1.0

%

 

8.0

%

 

3.5

%

 

11.5

%

 

13.5

%

 


Tier 1

6.0

%

 

2.5

%

 

8.5

%

 

1.0

%

 

9.5

%

 

3.5

%

 

13.0

%

 

15.7

%

 


Total

8.0

%

 

2.5

%

 

10.5

%

 

1.0

%

 

11.5

%

 

3.5

%

 

15.0

%

 

16.9

%

 

Leverage ratio

3.0

%

 

n.a.

 

 

3.0

%

 

0.5

%

 

3.5

%

 

n.a.

 

 

3.5

%

 

4.4

%

 

TLAC ratio

21.5

%


n.a.

 


21.5

%


n.a.

 


21.5

%


3.5

%


25.0

%


29.7

%


TLAC leverage ratio

6.75

%


n.a.



6.75

%


0.5

%


7.25

%


n.a.



7.25

%


8.3

%


 

n.a.      Not applicable

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

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

(3)       On June 18, 2024, OSFI confirmed that the domestic stability buffer was being maintained at 3.5%.

 

The Bank ensures that its capital levels are always above the minimum capital requirements set by OSFI, including the DSB. By maintaining a strong capital structure, the Bank can cover the risks inherent to its business activities, support its business segments, and protect its clients.

 

Other disclosure requirements pursuant to Pillar 3 of the Basel Accord and a set of recommendations defined by the Enhanced Disclosure Task Force (EDTF) are presented in the Supplementary Regulatory Capital and Pillar 3 Disclosure report published quarterly and available on the Bank's website at nbc.ca. Furthermore, a complete list of capital instruments and their main features is also available on the Bank's website.

 

Regulatory Developments

The Bank closely monitors regulatory developments and participates actively in various consultative processes. During the first quarter of 2024, the Bank implemented the revised market risk and CVA risk frameworks. Since November 1, 2023, there have been no other new regulatory developments to be considered, except for the one-year postponement of the increase to the capital output floor, as previously mentioned.

 

Management Activities

On December 12, 2023, the Bank began a normal course issuer bid to repurchase for cancellation up to 7,000,000 common shares (representing approximately 2.1% of its then outstanding common shares) over the 12-month period ending no later than December 11, 2024. During the nine-month period ended July 31, 2024, the Bank did not repurchase any common shares.

 

On February 5, 2024, the Bank issued medium-term notes for a total amount of $500 million bearing interest at 5.279% and maturing on February 15, 2034. Given that the medium-term notes satisfy the NVCC requirements, they qualify for the purposes of calculating regulatory capital under the Basel III rules.

 

Dividends

On August 27, 2024, the Board of Directors declared regular dividends on the various series of first preferred shares and a dividend of $1.10 per common share, payable on November 1, 2024 to shareholders of record on September 30, 2024.

 

Shares, Other Equity Instruments, and Stock Options

 

 


As at July 31, 2024




Number of shares or

LRCN(1)


$ million


First preferred shares

 






Series 30

 

14,000,000


350



Series 32

 

12,000,000


300



Series 38

 

16,000,000


400



Series 40

 

12,000,000


300



Series 42

 

12,000,000


300




 

66,000,000


1,650


Other equity instruments

 

 


 



LRCN - Series 1

 

500,000


500



LRCN - Series 2

 

500,000


500



LRCN - Series 3

 

500,000


500




 

1,500,000


1,500




 

67,500,000


3,150


Common shares

 

340,522,825


3,442


Stock options


10,614,466


 


 

(1)       Limited Recourse Capital Notes (LRCN).

 

As at August 23, 2024, there were 340,384,098 common shares and 10,614,466 stock options outstanding. NVCC provisions require the conversion of capital instruments into a variable number of common shares should OSFI deem a bank to be non-viable or should the government publicly announce that a bank has accepted or agreed to accept a capital injection. If an NVCC trigger event were to occur, all of the Bank's preferred shares, LRCNs, and medium-term notes maturing on August 16, 2032 and on February 15, 2034, which are NVCC capital instruments, would be converted into common shares of the Bank according to an automatic conversion formula at a conversion price corresponding to the greater of the following amounts: (i) a $5.00 contractual floor price; or (ii) the market price of the Bank's common shares on the date of the trigger event (10-day weighted average price). Based on a $5.00 floor price and including an estimate for accrued dividends and interest, these NVCC capital instruments would be converted into a maximum of 1,024 million Bank common shares, which would have a 75.0% dilutive effect based on the number of Bank common shares outstanding as at July 31, 2024.

 

Movement in Regulatory Capital(1)

(millions of Canadian dollars)

 

 

 

Nine months ended

July 31, 2024

 

Common Equity Tier 1 (CET1) capital




 

 

Balance at beginning




16,920

 


Issuance of common shares (including Stock Option Plan)




119

 


Impact of shares purchased or sold for trading




14

 


Repurchase of common shares




 


Other contributed surplus




16

 


Dividends on preferred and common shares and distributions on other equity instruments




(1,224)

 







 

 


Net income attributable to the Bank's shareholders and holders of other equity instruments




2,862

 


Removal of own credit spread (net of income taxes)




322

 


Impact of adopting IFRS 17




(94)

 


Other




(54)

 







 

 


Movements in accumulated other comprehensive income




 

 



Translation adjustments




(39)

 



Debt securities at fair value through other comprehensive income




32

 



Other




 


Change in goodwill and intangible assets (net of related tax liability)




37

 


Other, including regulatory adjustments




 

 



Change in defined benefit pension plan asset (net of related tax liability)




(179)

 



Change in amount exceeding 15% threshold




 

 



   Deferred tax assets




 



   Significant investment in common shares of financial institutions




 



Deferred tax assets, unless they result from temporary differences (net of related tax liability)




(26)

 



Other deductions or regulatory adjustments to CET1 implemented by OSFI




(1)

 



Change in other regulatory adjustments




 

Balance at end




18,705

 

Additional Tier 1 capital




 

 

Balance at beginning




3,148

 


New Tier 1 eligible capital issuances




 


Redeemed capital




 


Other, including regulatory adjustments




2

 

Balance at end




3,150

 

Total Tier 1 capital




21,855

 

Tier 2 capital




 

 

Balance at beginning




988

 


New Tier 2 eligible capital issuances




500

 


Redeemed capital




 


Tier 2 instruments issued by subsidiaries and held by third parties




 


Change in certain allowances for credit losses




35

 


Other, including regulatory adjustments




54

 

Balance at end




1,577

 

Total regulatory capital




23,432

 

 

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

 



Risk-Weighted Assets by Key Risk Drivers

Risk-weighted assets (RWA) amounted to $138.9 billion as at July 31, 2024 compared to $125.6 billion as at October 31, 2023, a $13.3 billion increase resulting from organic growth in RWA, a deterioration in the credit quality of the loan portfolio, and methodology changes related mainly to the implementation of the revised market risk and CVA risk frameworks. The changes in the Bank's RWA by risk type are presented in the following table.

 

Movement of Risk-Weighted Assets by Key Drivers(1)

 

(millions of Canadian dollars)



Quarter ended



July 31,

2024

 

April 30,

 2024


January 31, 2024

 

October 31,

 2023

 




Non-counterparty

 credit risk

 

Counterparty

credit risk

 

Total

 

Total


Total

 

Total

 

Credit risk - Risk-weighted assets at beginning

106,694

 

5,969

 

112,663

108,838


107,145


102,087



Book size

3,394

 

90

 

3,484

2,484


5,020


2,288



Book quality

714

 

(65)

 

649

508


435


1,045



Model updates

(244)

 

 

(244)


(31)


(107)



Methodology and policy

 

 


(2,629)




Acquisitions and disposals

 

 





Foreign exchange movements

121

 

11

 

132

833


(1,102)


1,832


Credit risk - Risk-weighted assets at end

110,679

 

6,005

 

116,684

112,663


108,838


107,145


Market risk - Risk-weighted assets at beginning

 

 

 

 

9,641

10,148


5,662


5,985



Movement in risk levels(2)

 

 

 

 

(1,575)

(507)


(352)


(323)



Model updates

 

 

 

 





Methodology and policy

 

 

 

 


4,838




Acquisitions and disposals

 

 

 

 




Market risk - Risk-weighted assets at end

 

 

 

 

8,066

9,641


10,148


5,662


Operational risk - Risk-weighted assets at beginning

 

 

 

 

13,811

13,384


12,785


12,490



Movement in risk levels

 

 

 

 

357

427


599


295



Methodology and policy

 

 

 

 





Acquisitions and disposals

 

 

 

 




Operational risk - Risk-weighted assets at end

 

 

 

 

14,168

13,811


13,384


12,785





 

 

 

 

 







Risk-weighted assets at end

 

 

 

 

138,918

136,115


132,370


125,592


 

(1)         See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)         Also includes foreign exchange rate movements that are not considered material.

 

The table above provides risk-weighted asset movements by the key drivers underlying the different risk categories.

 

The Book size item reflects organic changes in book size and composition (including new loans and maturing loans). RWA movements attributable to book size include increases or decreases in exposures, measured by exposure at default, assuming a stable risk profile.

 

The Book quality item is the Bank's best estimate of changes in book quality related to experience, such as underlying customer behaviour or demographics, including changes resulting from model recalibrations or realignments and also including risk mitigation factors.

 

The Model updates item is used to reflect implementations of new models, changes in model scope, and any other change applied to address model malfunctions.

 

The Methodology and policy item presents the impact of changes in calculation methods resulting from changes in regulatory policies or from new regulations. During the first quarter of 2024, the Bank refined the credit risk RWA calculation related to derivatives and certain non-retail exposures, and it also implemented OSFI's revised market risk and CVA risk frameworks.

 

Regulatory Capital Ratios, Leverage Ratio, and TLAC Ratios

As at July 31, 2024, the Bank's CET1, Tier 1, and Total capital ratios were, respectively, 13.5%, 15.7%, and 16.9% compared to ratios of, respectively, 13.5%, 16.0%, and 16.8% as at October 31, 2023. The CET1 capital ratio has remained stable compared to October 31, 2023, whereas the Tier 1 capital ratio decreased and the Total capital ratio rose slightly. Growth in RWA and the impact of implementing OSFI's revised market risk and CVA risk frameworks had unfavorable impacts on the ratios. These factors were partly offset by net income (net of dividends), common share issuances under the Stock Option Plan, and the removal of the Bank's own credit spread. Furthermore, the $500 million issuance of medium-term notes had a favourable impact on the Total capital ratio.

 

As at July 31, 2024, the leverage ratio was 4.4%, unchanged from October 31, 2023, as growth in total exposure was offset by growth in Tier 1 capital.

 

As at July 31, 2024, the Bank's TLAC ratio and TLAC leverage ratio were, respectively, 29.7% and 8.3% compared to 29.2% and 8.0%, respectively, as at October 31, 2023. The increases in both the TLAC and TLAC leverage ratios are primarily explained by the net issuances of instruments that met the TLAC eligibility criteria during the period.

 

During the quarter and nine-month period ended July 31, 2024, the Bank was compliant with all of OSFI's regulatory capital, leverage, and TLAC requirements.

 

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

 

(millions of Canadian dollars)

 

As at July 31, 2024

 


As at October 31, 2023


 

Capital



 






CET1


18,705

 


16,920




Tier 1


21,855

 


20,068




Total


23,432

 


21,056



Risk-weighted assets


138,918

 


125,592



Total exposure


499,963

 


456,478



Capital ratios


 

 






CET1

 

13.5

%

 

13.5

%



Tier 1


15.7

%


16.0

%



Total


16.9

%


16.8

%


Leverage ratio


4.4

%


4.4

%


Available TLAC


41,295

 


36,732



TLAC ratio


29.7

%


29.2

%


TLAC leverage ratio


8.3

%


8.0

%


 

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

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

 

Public Disclosure Requirements for Global Systemically Important Banks

The BCBS developed an assessment methodology and additional loss absorbency requirements as well as indicators to be used by the BCBS and the Financial Stability Board to evaluate Global Systemically Important Banks (G-SIBs). The annual public disclosure requirements apply to large, globally active banks.

 

The most recent version of OSFI's advisory entitled Global Systemically Important Banks - Public Disclosure Requirements  regarding implementation of public disclosure requirements for G-SIBs in Canada took effect in 2022. Canadian banks, including the Bank, that have not been designated as G‑SIBs and that have total exposure (as calculated using the Basel III leverage ratio) greater than 200 billion euros at fiscal year-end must publish the indicators annually. The indicators are calculated and presented in accordance with specific BCBS guidelines, which are updated annually. Consequently, the values obtained may not be comparable to the other measures presented in this report. The following table presents the indicators used in the BCBS's assessment methodology for evaluating G-SIBs.



Indicators - Global Systemically Important Banks (G-SIBs)(1)

 

(millions of Canadian dollars)


As at October 31


Category

Indicators


2023

 

2022


Cross-jurisdictional activity(2)

Cross-jurisdictional claims


117,016


97,929



Cross-jurisdictional liabilities


90,476


75,961


Size(3)

Total exposures as defined for use in the Basel III leverage ratio(4)


459,090


429,692


Interconnectedness(5)

Intra-financial system assets(4)

 

73,022


66,590



Intra-financial system liabilities(4)

 

38,238


42,806



Securities outstanding(4)

 

109,831


105,572


Substitutability / financial institutions infrastructure(6)

Payment activity(7)

 

16,801,902


17,366,801


  

Assets under custody

 

652,463


615,973



Underwritten transactions in debt and equity markets

 

31,821


26,017



Trading volume(8)

 






   Fixed-income securities(8)

 

845,554


829,877



   Equities and other securities(8)

 

1,124,984


1,335,166


Complexity(9)

Notional amount of over-the-counter derivative financial instruments(4)

 

1,847,636


1,816,770



Trading and investment securities(10)

 

54,740


49,493



Level 3 financial assets(4)

 

1,226


1,128


 

(1)       The G-SIB indicators are prepared using the methodology prescribed in the BCBS guidelines published in July 2018 and are calculated using the specific instructions updated by the BCBS each year.

(2)       Represents the Bank's level of interaction outside Canada.

(3)       Represents the Bank's total on-and-off balance sheet exposures, as determined by OSFI's Basel III leverage ratio rules before regulatory adjustments.

(4)       Includes insurance activities.

(5)       Represents transactions with other financial institutions.

(6)       Represents the extent to which the Bank's services could be substituted by other institutions.

(7)       For the fiscal years ended October 31, 2023 and 2022.

(8)       This indicator consists of two sub-indicators: fixed-income securities as well as equities and other securities.

(9)       Includes the level of complexity and volume of the Bank's trading activities represented through derivative financial instruments, trading securities, investment securities, and Level 3 financial assets.

(10)    The amount as at October 31, 2023 has been revised compared to that previously presented.

 


 

Risk Management

 

Risk-taking is intrinsic to a financial institution's business. The Bank views risk as an integral part of its development and the diversification of its activities. It advocates a risk management approach that is consistent with its business strategy. The Bank voluntarily exposes itself to certain risk categories, particularly credit and market risk, in order to generate revenue. It also assumes certain risks that are inherent to its activities-to which it does not choose to expose itself-and that do not generate revenue, i.e., mainly operational risks.

 

Despite the exercise of stringent risk management and existing mitigation measures, risk cannot be eliminated entirely, and residual risks may occasionally cause losses. Certain risks are discussed hereafter. For additional information, see the Risk Management section on pages 62 to 106 of the 2023 Annual Report. Risk management information is also provided in Note 7 to the consolidated financial statements, which covers loans.

 

 


Credit Risk

 

Credit risk is the risk of incurring a financial loss if an obligor does not fully honour its contractual commitments to the Bank. Obligors may be debtors, issuers, counterparties, or guarantors. Credit risk is the most significant risk facing the Bank in the normal course of business.

 

Between March 2, 2022 and July 12, 2023, the Bank of Canada raised its policy rate ten times; the rate has thus risen from 0.25% to 5%. This rapid increase in rates, undertaken primarily to counter inflation in Canada, is putting pressure on the ability of borrowers to make payments, notably borrowers with variable-rate mortgages or for whom the mortgage term is up for renewal. Over the course of its last two announcements, which took place on June 5, 2024 and July 24, 2024, the Bank of Canada lowered its policy rate from 5% to 4.50%.

 

Regulatory Developments

The Bank closely monitors regulatory developments and participates actively in various consultative processes. For additional information about the regulatory context on October 31, 2023, see page 77 of the Risk Management section of the 2023 Annual Report. In addition, since November 1, 2023, the below-described regulatory development should also be considered.

 

On February 5, 2024, the Prohibition on the Purchase of Residential Property by Non-Canadians Act, which was to be in effect until January 1, 2025, was extended until January 1, 2027.

 



The amounts in the following tables represent the Bank's maximum exposure to credit risk as at the financial reporting date without considering any collateral held or any other credit enhancements. These amounts do not include allowances for credit losses nor amounts pledged as collateral. The tables also exclude equity securities.

 

Maximum Credit Risk Exposure Under the Basel Asset Categories(1)

 

(millions of Canadian dollars)

 

As at July 31, 2024



 

 

Drawn(2)


Undrawn

commitments


Repo-style

transactions(3)


Derivative

financial

instruments

 

Other

off-balance-

sheet items(4)

 


Total

 

Standardized Approach(5)



IRB

 Approach

 

 

Retail

 












 

 

 

 

 

 

 



Residential mortgages


79,320

 

9,457

 

 

 

 

 

88,777

 

12

%

 

88

%



Qualifying revolving retail


3,250

 

11,557

 

 

 

 

 

14,807

 

%

 

100

%



Other retail


17,093

 

2,749

 

 

 

35

 

 

19,877

 

14

%

 

86

%


 

 

99,663

 

23,763

 

 

 

35

 

 

123,461

 

 

 

 

 

 


Non-retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Corporate


94,515

 

31,711

 

44,044

 

306

 

8,516

 

 

179,092

 

16

%

 

84

%



Sovereign


67,358

 

6,270

 

75,557

 

 

269

 

 

149,454

 

3

%

 

97

%



Financial institutions


8,103

 

1,053

 

134,810

 

2,147

 

1,694

 

 

147,807

 

21

%

 

79

%


 


169,976

 

39,034

 

254,411

 

2,453

 

10,479

 

 

476,353

 

 

 

 

 

 


Trading portfolio


 

 

 

13,140

 

 

 

13,140

 

3

%

 

97

%


Securitization


4,653

 

 

 

 

5,444

 

 

10,097

 

92

%

 

8

%


Total - Gross credit risk

 

274,292

 

62,797

 

254,411

 

15,593

 

15,958

 

 

623,051

 

14

%

 

86

%


Standardized Approach(5)


38,365

 

1,256

 

38,979

 

2,261

 

5,916

 

 

86,777

 

 

 

 

 

 


IRB Approach


235,927

 

61,541

 

215,432

 

13,332

 

10,042

 

 

536,274

 

 

 

 

 

 


Total - Gross credit risk


274,292

 

62,797

 

254,411

 

15,593

 

15,958

 

 

623,051

 

14

%

 

86

%




 

 




















(millions of Canadian dollars)

 

As at October 31, 2023



 

 

Drawn(2)


Undrawn

commitments


Repo-style

transactions(3)


Derivative

financial

instruments


Other

off-balance-

sheet items(4)



Total


Standardized Approach(5)



IRB

 Approach



Retail

 





















Residential mortgages


77,073


9,094






86,167


12

%


88

%



Qualifying revolving retail


3,183


12,052






15,235


%


100

%



Other retail


16,078


2,692




33



18,803


13

%


87

%


 

 

96,334


23,838




33



120,205








Non-retail

 





















Corporate


91,994


27,846


38,549


385


6,915



165,689


18

%


82

%



Sovereign


61,438


5,921


61,580



267



129,206


3

%


97

%



Financial institutions


6,719


1,002


98,222


3,013


1,506



110,462


23

%


77

%


 


160,151


34,769


198,351


3,398


8,688



405,357








Trading portfolio





13,778




13,778


2

%


98

%


Securitization


4,351





5,318



9,669


92

%


8

%


Total - Gross credit risk

 

260,836


58,607


198,351


17,176


14,039



549,009


15

%


85

%


Standardized Approach(5)


35,461


1,260


34,717


3,211


5,568



80,217








IRB Approach


225,375


57,347


163,634


13,965


8,471



468,792








Total - Gross credit risk


260,836


58,607


198,351


17,176


14,039



549,009


15

%


85

%


 

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)       Excludes equity securities and certain other assets such as investments in deconsolidated subsidiaries and joint ventures, right-of-use properties and assets, goodwill, deferred tax assets, and intangible assets.

(3)       Securities purchased under reverse repurchase agreements and sold under repurchase agreements as well as securities loaned and borrowed.

(4)       Letters of guarantee, documentary letters of credit, and securitized assets that represent the Bank's commitment to make payments in the event that an obligor cannot meet its financial obligations to third parties.

(5)       Includes exposures to qualifying central counterparties (QCCP).

 

To meet OSFI's mortgage loan disclosure requirements, additional information has been provided in Supplementary Financial Information - Third Quarter 2024 and in Supplementary Regulatory Capital and Pillar 3 Disclosure - Third Quarter 2024, which are available on the Bank's website at nbc.ca.

 

Market Risk

 

Market risk is the risk of losses arising from movements in market prices. The Bank is exposed to market risk through its participation in trading, investment, and asset/liability management activities. In recent years, the Bank has been operating in a volatile environment. The geopolitical landscape (notably the Russia-Ukraine war and the clashes between Israel and Hamas), inflation, climate change, and high interest rates continue to create uncertainty.

 

The following tables provide a breakdown of the Bank's Consolidated Balance Sheet into financial assets and liabilities by those that carry market risk and those that do not carry market risk, distinguishing between trading positions whose main risk measures are Value-at-Risk (VaR) and non-trading positions that use other risk measures.

 

Reconciliation of Market Risk With Consolidated Balance Sheet Items

 

(millions of Canadian dollars)

As at July 31, 2024






Market risk measures









Balance

sheet

 

Trading(1)

 

Non-trading(2)

 

Not subject to market risk

 

Non-traded risk

primary risk sensitivity


Assets











 

Cash and deposits with financial institutions

32,489


147


19,971


12,371


Interest rate(3)



Securities













At fair value through profit or loss

115,993

 

113,153

 

2,840


 

Interest rate(3) and equity




At fair value through other comprehensive income

15,233

 

 

15,233


 

Interest rate(3) and equity(4)




At amortized cost

13,049

 

 

13,049


 

Interest rate(3)



Securities purchased under reverse repurchase

 

 

 

 

 


 

 





agreements and securities borrowed

13,879

 

 

13,879


 

Interest rate(3)(5)



Loans and acceptances, net of allowances

239,549

 

14,185

 

225,364


 

Interest rate(3)



Derivative financial instruments

10,468

 

10,232

 

236


 

Interest rate and exchange rate



Defined benefit asset

607

 

 

607


 

Other



Other

12,666

 

520

 


12,146

 

 





453,933

 

138,237

 

291,179


24,517

 



Liabilities

 

 

 

 

 


 

 




Deposits

320,587

 

25,257

 

295,330


 

Interest rate(3)



Acceptances

137

 

 

137


 

Interest rate(3)



Obligations related to securities sold short

11,974

 

11,974

 


 




Obligations related to securities sold under repurchase

 

 

 

 

 


 

 





agreements and securities loaned

41,781

 

 

41,781


 

Interest rate(3)(5)



Derivative financial instruments

17,682

 

17,294

 

388


 

Interest rate and exchange rate



Liabilities related to transferred receivables

27,035

 

9,598

 

17,437


 

Interest rate(3)



Defined benefit liability

99

 

 

99


 

Other



Other

8,222

 

 

48


8,174

 

Interest rate(3)



Subordinated debt

1,254

 

 

1,254


 

Interest rate(3)




428,771

 

64,123

 

356,474


8,174

 



 

(1)       Trading positions whose risk measure is total VaR. For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect.

(2)       Non-trading positions that use other risk measures.

(3)       For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect and the interest rate sensitivity table.

(4)       The fair value of equity securities designated at fair value through other comprehensive income is presented in Notes 4 and 6 to the consolidated financial statements.

(5)       These instruments are recorded at amortized cost and are subject to credit risk for capital management purposes. For trading-related transactions with maturities of more than one day, interest rate risk is included in the VaR measures. 

 

(millions of Canadian dollars)

As at October 31, 2023(1)






Market risk measures









Balance

sheet


Trading(2)


Non-trading(3)


Not subject to market risk


Non-traded risk primary

risk sensitivity


Assets











 

Cash and deposits with financial institutions

35,234


685


24,950


9,599


Interest rate(4)



Securities













At fair value through profit or loss

99,994


98,559


1,435



Interest rate(4) and equity(5)




At fair value through other comprehensive income

9,242



9,242



Interest rate(4) and equity(6)




Amortized cost

12,582



12,582



Interest rate(4)



Securities purchased under reverse repurchase













agreements and securities borrowed

11,260



11,260



Interest rate(4)(7)



Loans and acceptances, net of allowances

225,443


12,739


212,704



Interest rate(4)



Derivative financial instruments

17,516


16,349


1,167



Interest rate(8) and exchange rate(8)



Defined benefit asset

356



356



Other(9)



Other

11,850


544



11,306







423,477


128,876


273,696


20,905




Liabilities












Deposits

288,173


18,126


270,047



Interest rate(4)



Acceptances

6,627



6,627



Interest rate(4)



Obligations related to securities sold short

13,660


13,660







Obligations related to securities sold under repurchase













agreements and securities loaned

38,347



38,347



Interest rate(4)(7)



Derivative financial instruments

19,888


19,145


743



Interest rate(8) and exchange rate(8)



Liabilities related to transferred receivables

25,034


9,507


15,527



Interest rate(4)



Defined benefit liability

94



94



Other(9)



Other

7,322



49


7,273


Interest rate(4)



Subordinated debt

748



748



Interest rate(4)




399,893


60,438


332,182


7,273




 

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

(2)       Trading positions whose risk measures are VaR as well as total SVaR. For additional information, see the table on the following page and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect.

(3)       Non-trading positions that use other risk measures.

(4)       For additional information, see the table in the pages ahead and in the Market Risk section of the 2023 Annual Report that shows the VaR distribution of the trading portfolios by risk category and their diversification effect and the interest rate sensitivity table.

(5)       For additional information, see Note 6 to the audited annual consolidated financial statements for the year ended October 31, 2023.

(6)       The fair value of equity securities designated at fair value through other comprehensive income is presented in Notes 4 and 6 to the consolidated financial statements.

(7)       These instruments are recorded at amortized cost and are subject to credit risk for capital management purposes. For trading-related transactions with maturities of more than one day, interest rate risk is included in the VaR and SVaR measures.

(8)       For additional information, see Notes 16 and 17 to the audited annual consolidated financial statements for the year ended October 31, 2023.

(9)       For additional information, see Note 23 to the audited annual consolidated financial statements for the year ended October 31, 2023. 

 

Trading Activities

The table below shows the VaR distribution of trading portfolios by risk category and their diversification effect.

 

VaR of Trading Portfolios(1)(2)

 

(millions of Canadian dollars)


 

 

Quarter ended


Nine months ended




July 31, 2024

 

April 30, 2024


July 31, 2023


July 31, 2024


July 31, 2023




Low

 

High

 

Average

 

Period end

 

Average


Period end


Average


Period end

 

Average


Average

 

Interest rate


(5.9)

 

(11.8)

 

(8.5)

 

(6.7)

 

(10.2)


(10.1)


(7.5)


(7.0)


(8.9)


(6.9)


Exchange rate


(0.7)

 

(3.1)

 

(1.7)

 

(1.5)

 

(1.9)


(1.5)


(2.9)


(3.3)


(2.0)


(2.4)


Equity


(1.8)

 

(5.5)

 

(3.4)

 

(3.3)

 

(5.0)


(4.5)


(7.8)


(5.8)


(5.6)


(7.5)


Commodity


(0.9)

 

(1.6)

 

(1.2)

 

(1.0)

 

(1.4)


(1.5)


(1.3)


(1.5)


(1.5)


(1.2)


Diversification effect(3)


n.m.

 

n.m.

 

5.9

 

6.6

 

7.4


7.4


9.5


7.8


7.2


8.9


Total trading VaR

 

(5.9)

 

(11.7)

 

(8.9)

 

(5.9)

 

(11.1)


(10.2)


(10.0)


(9.8)


(10.8)


(9.1)


 

n.m.    Computation of a diversification effect for the high and low is not meaningful, as highs and lows may occur on different days and be attributable to different types of risk.

(1)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

(2)       Amounts are presented on a pre-tax basis and represent one-day VaR using a 99% confidence level.

(3)       The total trading VaR is less than the sum of the individual risk factor VaR results due to the diversification effect. 

 

The average total trading VaR decreased from $11.1 million to $8.9 million between the second quarter and third quarter of 2024, mainly due to a decrease in both interest rate risk and equity risk.

 

Daily Trading and Underwriting Revenues

The following chart shows daily trading and underwriting revenues and VaR. During the quarter ended July 31, 2024, daily trading and underwriting revenues were positive on all the days.

 

Quarter Ended July 31, 2024

(millions of Canadian dollars)

 



Interest Rate Sensitivity - Non-Trading Activities (Before Tax)

The following table presents the potential before-tax impact of an immediate and sustained 100-basis-point increase or of an immediate and sustained 100‑basis-point decrease in interest rates on the economic value of equity and on the net interest income of the Bank's non-trading portfolios for the next 12 months, assuming no further hedging is undertaken.

 

(millions of Canadian dollars)


As at July 31, 2024

 



As at October 31, 2023




Canadian dollar

 

Other currencies

 

Total

 

Canadian dollar


Other currencies


Total


Impact on equity


 

 

 

 

 

 







100-basis-point increase in the interest rate


(320)

 

(46)

 

(366)

 

(297)


2


(295)


100-basis-point decrease in the interest rate


297

 

42

 

339

 

272


7


279


Impact on net interest income


 

 

 

 

 

 







100-basis-point increase in the interest rate


93

 

(13)

 

80

 

73


1


74


100-basis-point decrease in the interest rate


(121)

 

7

 

(114)

 

(103)


1


(102)


 

Liquidity and Funding Risk

 

Liquidity and funding risk is the risk that the Bank will be unable to honour daily cash and financial obligations without resorting to costly and untimely measures. Liquidity and funding risk arises when sources of funds become insufficient to meet scheduled payments under the Bank's commitments.

 

Liquidity risk stems from mismatched cash flows related to assets and liabilities as well as the characteristics of certain products such as credit commitments and non-fixed-term deposits.

 

Funding risk is defined as the risk to the Bank's ongoing ability to raise sufficient funds to finance actual or proposed business activities on an unsecured or secured basis at an acceptable price. The funding management priority is to achieve an optimal balance between deposits, securitization, secured funding, and unsecured funding. This brings optimal stability to the funding and reduces vulnerability to unpredictable events.

 

Regulatory Developments

The Bank continues to closely monitor regulatory developments and participates actively in various consultative processes. For additional information about the regulatory context as at October 31, 2023, refer to page 91 of the Risk Management section in the 2023 Annual Report. Since November 1, 2023, the below-described regulatory development should also be considered.

 

On October 31, 2023, OSFI announced its decision on reviewing the Liquidity Adequacy Requirements (LAR) Guideline with respect to wholesale funding sources with retail-like characteristics, specifically high-interest savings account exchange-traded funds (HISA ETFs). OSFI determined these sources to be unsecure wholesale funding provided by other legal entities. Despite some retail-like characteristics and term agreements with depositors, the fact that these products are held directly by fund managers led OSFI to conclude that a 100% run-off factor for these products was appropriate. As a result, deposit-taking institutions exposed to such funding must hold sufficient high-quality liquid assets to support all HISA ETF balances that can be withdrawn within 30 days. Since January 31, 2024, all deposit-taking institutions have transitioned the measurement and related reporting to the run-off treatment specified in the LAR. Moreover, changes for reporting the LCR were calculated retrospectively to the start of the first quarter to account for daily fluctuations in the ratio (November 1, 2023 for the Bank).

 

Liquidity Management

Liquid Assets

To protect depositors and creditors from unexpected crisis situations, the Bank holds a portfolio of unencumbered liquid assets that can be readily liquidated to meet financial obligations. The majority of the unencumbered liquid assets are held in Canadian or U.S. dollars. Moreover, all assets that can be quickly monetized are considered liquid assets. The Bank's liquidity reserves do not factor in the availability of the emergency liquidity facilities of central banks. The following tables provide information on the Bank's encumbered and unencumbered assets.

 



Liquid Asset Portfolio(1)

 

(millions of Canadian dollars)


 

 

 




As at July 31,

 2024


As at October 31,

2023






Bank-owned                                                                                                                                                                                                     liquid assets(2)

 

Liquid assets

received(3)


Total

liquid assets


Encumbered

liquid assets(4)

 

Unencumbered                                                                                                                                                                                         liquid assets


Unencumbered                                                                                                                                                                                         liquid assets


Cash and deposits with financial institutions


32,489

 

 

32,489


9,665

 

22,824


25,944


Securities


 

 

 

 

 


 

 

 




 

Issued or guaranteed by the Canadian government, U.S.


 

 

 

 

 


 

 

 




 


Treasury, other U.S. agencies and other foreign governments


37,948

 

51,123

 

89,071


53,813

 

35,258


29,062


 

Issued or guaranteed by Canadian provincial and


 

 

 

 

 


 

 

 




 


municipal governments


13,980

 

7,234

 

21,214


13,617

 

7,597


6,403


 

Other debt securities


6,670

 

3,845

 

10,515


2,745

 

7,770


10,095


 

Equity securities


85,677

 

49,822

 

135,499


92,105

 

43,394


27,253


Loans


 

 

 

 

 


 

 

 




 

Securities backed by insured residential mortgages


14,863

 

 

14,863


6,420

 

8,443


6,140


As at July 31, 2024


191,627

 

112,024

 

303,651


178,365

 

125,286




As at October 31, 2023


169,888


87,919


257,807


152,910




104,897


 

(millions of Canadian dollars)


As at July 31, 2024


As at October 31, 2023


Unencumbered liquid assets by entity


 





National Bank (parent)


77,407


55,626



Domestic subsidiaries


11,889


10,013



Foreign subsidiaries and branches


35,990


39,258




 


125,286


104,897










 

(millions of Canadian dollars)


As at July 31, 2024


As at October 31, 2023


Unencumbered liquid assets by currency


 





Canadian dollar


62,163


51,882



U.S. dollar


54,880


35,243



Other currencies


8,243


17,772




 


125,286


104,897










 

Liquid Asset Portfolio(1) - Average(5)

 

(millions of Canadian dollars)


 

 

 




Quarter ended






 

 

 




July 31, 2024


October 31, 2023






Bank-owned

liquid assets(2)

 

Liquid assets

received(3)


Total

liquid assets


Encumbered

liquid assets(4)

 

Unencumbered                                                                                                                                                                                         liquid assets


Unencumbered                                                                                                                                                                                         liquid assets


Cash and deposits with financial institutions


31,233

 

 

31,233

 

9,967

 

21,266


27,651


Securities


 

 

 

 

 


 

 

 




 

Issued or guaranteed by the Canadian government, U.S.


 

 

 

 

 


 

 

 




 


Treasury, other U.S. agencies and other foreign governments


41,191

 

50,975

 

92,166

 

57,963

 

34,203


23,902


 

Issued or guaranteed by Canadian provincial and


 

 

 

 

 

 

 

 

 




 


municipal governments


14,566

 

7,147

 

21,713

 

15,061

 

6,652


8,214


 

Other debt securities


7,311

 

3,876

 

11,187

 

3,021

 

8,166


10,350


 

Equity securities


86,737

 

51,109

 

137,846

 

93,285

 

44,561


32,820


Loans


 

 

 

 

 

 

 

 

 




 

Securities backed by insured residential mortgages


13,739

 

 

13,739

 

6,172

 

7,567


5,342


 


194,777

 

113,107

 

307,884

 

185,469

 

122,415


108,279


 

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)       Bank-owned liquid assets include assets for which there are no legal or geographic restrictions.

(3)       Securities received as collateral with respect to securities financing and derivative transactions and securities purchased under reverse repurchase agreements and securities borrowed.

(4)       In the normal course of its funding activities, the Bank pledges assets as collateral in accordance with standard terms. Encumbered liquid assets include assets used to cover short sales, obligations related to securities sold under repurchase agreements and securities loaned, guarantees related to security-backed loans and borrowings, collateral related to derivative financial instrument transactions, asset-backed securities, and liquid assets legally restricted from transfers.

(5)       The average is based on the sum of the end-of-period balances of the three months of the quarter divided by three.

Summary of Encumbered and Unencumbered Assets(1)

 

(millions of Canadian dollars)










As at July 31, 2024





Encumbered

assets(2)

 

Unencumbered

assets

 

Total

 

Encumbered

assets as a %

of total assets





Pledged as

collateral

 

Other(3)

 

Available as

collateral

 

Other(4)

 

 

 

 


Cash and deposits with financial institutions


551

 

9,114

 

22,824

 

 

32,489

 

2.1


Securities


52,162

 

 

92,113

 

 

144,275

 

11.5


Securities purchased under reverse repurchase


 

 

 

 

 

 

 

 

 

 

 



agreements and securities borrowed


 

11,973

 

1,906

 

 

13,879

 

2.7


Loans and acceptances, net of allowances


37,858

 

 

8,443

 

193,248

 

239,549

 

8.3


Derivative financial instruments


 

 

 

10,468

 

10,468

 


Investments in associates and joint ventures


 

 

 

38

 

38

 


Premises and equipment


 

 

 

1,830

 

1,830

 


Goodwill


 

 

 

1,521

 

1,521

 


Intangible assets


 

 

 

1,227

 

1,227

 


Other assets


 

 

 

8,657

 

8,657

 




90,571

 

21,087

 

125,286

 

216,989

 

453,933

 

24.6
































(millions of Canadian dollars)










As at October 31, 2023(5)





Encumbered

assets(2)


Unencumbered

assets


Total


Encumbered

assets as a %

of total assets





Pledged as

collateral


Other(3)


Available as

collateral


Other(4)






Cash and deposits with financial institutions


449


8,841


25,944



35,234


2.2


Securities


49,005



72,813



121,818


11.6


Securities purchased under reverse repurchase















agreements and securities borrowed



11,260




11,260


2.6


Loans and acceptances, net of allowances


36,705



6,140


182,598


225,443


8.7


Derivative financial instruments





17,516


17,516



Investments in associates and joint ventures





49


49



Premises and equipment





1,592


1,592



Goodwill





1,521


1,521



Intangible assets





1,256


1,256



Other assets





7,788


7,788





86,159


20,101


104,897


212,320


423,477


25.1


 

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)       In the normal course of its funding activities, the Bank pledges assets as collateral in accordance with standard terms. Encumbered assets include assets used to cover short sales, obligations related to securities sold under repurchase agreements and securities loaned, guarantees related to security-backed loans and borrowings, collateral related to derivative financial instrument transactions, asset-backed securities, residential mortgage loans securitized and transferred under the Canada Mortgage Bond program, assets held in consolidated trusts supporting the Bank's funding activities, and mortgage loans transferred under the covered bond program.

(3)       Other encumbered assets include assets for which there are restrictions and that cannot therefore be used for collateral or funding purposes as well as assets used to cover short sales.

(4)       Other unencumbered assets are assets that cannot be used for collateral or funding purposes in their current form. This category includes assets that are potentially eligible as funding program collateral (e.g., mortgages insured by the Canada Mortgage and Housing Corporation that can be securitized into mortgage-backed securities under the National Housing Act (Canada)).

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

 

Liquidity Coverage Ratio

The liquidity coverage ratio (LCR) was introduced primarily to ensure that banks could withstand periods of severe short-term stress. LCR is calculated by dividing the total amount of high-quality liquid assets (HQLA) by the total amount of net cash outflows. OSFI requires Canadian banks to maintain a minimum LCR of 100%. An LCR above 100% ensures that banks are holding sufficient high-quality liquid assets to cover net cash outflows given a severe, 30‑day liquidity crisis. The assumptions underlying the LCR scenario are established by the BCBS and OSFI's Liquidity Adequacy Requirements Guideline.

 

The table on the following page provides average LCR data calculated using the daily figures in the quarter. For the quarter ended July 31, 2024, the Bank's average LCR was 152%, well above the 100% regulatory requirement and demonstrating the Bank's solid short-term liquidity position.



LCR Disclosure Requirements(1)(2)

 

(millions of Canadian dollars)





Quarter ended





July 31, 2024

 

 

April 30, 2024






Total unweighted

value(3) (average)

 

Total weighted

value(4) (average)

 

 

Total weighted

value(4) (average)



High-quality liquid assets (HQLA)


 

 

 

 

 





Total HQLA


n.a.

 

80,724

 

 

79,455



Cash outflows


 

 

 

 

 





Retail deposits and deposits from small business customers, of which:


63,738

 

5,774

 

 

5,568





Stable deposits


27,654

 

829

 

 

819





Less stable deposits


36,084

 

4,945

 

 

4,749




Unsecured wholesale funding, of which:


114,333

 

64,409

 

 

64,834





Operational deposits (all counterparties) and deposits in networks of cooperative banks


35,127

 

8,602

 

 

7,706





Non-operational deposits (all counterparties)


70,848

 

47,357

 

 

46,781





Unsecured debt


8,358

 

8,450

 

 

10,347




Secured wholesale funding


n.a.

 

23,448

 

 

23,043




Additional requirements, of which:


73,946

 

19,152

 

 

17,265





Outflows related to derivative exposures and other collateral requirements


25,211

 

10,901

 

 

9,358





Outflows related to loss of funding on secured debt securities


1,641

 

1,635

 

 

1,548





Backstop liquidity and credit enhancement facilities and commitments to extend credit


47,094

 

6,616

 

 

6,359




Other contractual commitments to extend credit


2,550

 

731

 

 

1,061




Other contingent commitments to extend credit


153,374

 

2,105

 

 

2,072




Total cash outflows


n.a.

 

115,619

 

 

113,843



Cash inflows


 

 

 

 

 





Secured lending (e.g., reverse repos)


131,039

 

27,808

 

 

29,556




Inflows from fully performing exposures


12,382

 

8,481

 

 

7,893




Other cash inflows


25,561

 

25,531

 

 

24,366




Total cash inflows


168,982

 

61,820

 

 

61,815








 

 


 

 









 

 

Total adjusted

value(5)

 

 

Total adjusted

value(5)



Total HQLA


 

 

80,724

 

 

79,455



Total net cash outflows


 

 

53,799

 

 

52,028



Liquidity coverage ratio (%)(6)


 

 

152

%

 

155

%

 

n.a.      Not applicable

(1)      See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)      OSFI prescribed a table format in order to standardize disclosure throughout the banking industry.

(3)       Unweighted values are calculated as outstanding balances maturing or callable within 30 days (for cash inflows and outflows).

(4)       Weighted values are calculated after the application of respective haircuts (for HQLA) or inflow and outflow rates.

(5)       Total adjusted values are calculated after the application of both haircuts and inflow and outflow rates and any applicable caps.

(6)       The data in this table is calculated using averages of the daily figures in the quarter.

 

As at July 31, 2024, Level 1 liquid assets represented 86% of the Bank's HQLA, which includes cash, central bank deposits, and bonds issued or guaranteed by the Canadian government and Canadian provincial governments.

 

Cash outflows arise from the application of OSFI-prescribed assumptions on deposits, debt, secured funding, commitments and additional collateral requirements. The cash outflows are partly offset by cash inflows, which come mainly from secured loans and performing loans. The Bank expects some quarter-over-quarter variation between reported LCRs without such variation being necessarily indicative of a trend. The variation between the quarter ended July 31, 2024 and the preceding quarter was a result of normal business operations. The Bank's liquid asset buffer is well in excess of its total net cash outflows.

 

The LCR assumptions differ from the assumptions used for the liquidity disclosures presented in the tables on the previous pages or those used for internal liquidity management rules. While the liquidity disclosure framework is prescribed by the EDTF, the Bank's internal liquidity metrics use assumptions that are calibrated according to its business model and experience.

 

Net Stable Funding Ratio

The BCBS has developed the net stable funding ratio (NSFR) to promote a more resilient banking sector. The NSFR requires institutions to maintain a stable funding profile in relation to the composition of their assets and off-balance-sheet activities. A viable funding structure is intended to reduce the likelihood that disruptions to an institution's regular sources of funding would erode its liquidity position in a way that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR is calculated by dividing available stable funding by required stable funding. OSFI has been requiring Canadian banks to maintain a minimum NSFR of 100%.



The following table provides the available stable funding and required stable funding in accordance with OSFI's Liquidity Adequacy Requirements Guideline. As at July 31, 2024, the Bank's NSFR was 120%, well above the 100% regulatory requirement and demonstrating the Bank's solid long-term liquidity position.

 

NSFR Disclosure Requirements(1)(2)

 

(millions of Canadian dollars)







 

 

As at July 31,

2024

 

 

As at April 30,

2024


 




Unweighted value by residual maturity

 

Weighted

 value(3)

 

 



 




No

maturity

 

6 months

 or less

 

Over

6 months

to 1 year

 

Over

1 year

 

 

 

Weighted

 value(3)


Available Stable Funding (ASF) Items

 

 

 

 

 

 

 

 

 

 

 



 

Capital:

25,355

 

 

 

1,254

 

26,610

 

 

25,724


 


Regulatory capital

25,355

 

 

 

1,254

 

26,610

 

 

25,724


 


Other capital instruments

 

 

 

 

 

 


 

Retail deposits and deposits from small business customers:

57,284

 

16,181

 

7,594

 

28,804

 

102,165

 

 

99,917


 


Stable deposits

25,540

 

5,616

 

4,054

 

8,325

 

41,773

 

 

41,776


 


Less stable deposits

31,744

 

10,565

 

3,540

 

20,479

 

60,392

 

 

58,141


 

Wholesale funding:

80,451

 

87,317

 

27,082

 

52,396

 

118,597

 

 

115,278


 


Operational deposits

35,355

 

 

 

 

17,678

 

 

16,765


 


Other wholesale funding

45,096

 

87,317

 

27,082

 

52,396

 

100,919

 

 

98,513


 

Liabilities with matching interdependent assets(4)

 

2,433

 

2,533

 

22,069

 

 

 


 

Other liabilities(5):

16,202

 

 

 

15,050

 

 

 

835

 

 

750


 


NSFR derivative liabilities(5)

n.a.

 

 

 

4,764

 

 

 

n.a.

 

 

n.a.


 


All other liabilities and equity not included in the above categories

16,202

 

2,904

 

224

 

7,158

 

835

 

 

750


 

Total ASF

n.a.

 

n.a.

 

n.a.

 

n.a.

 

248,207

 

 

241,669


 

Required Stable Funding (RSF) Items

 

 

 

 

 

 

 

 

 

 

 



 

Total NSFR high-quality liquid assets (HQLA)

n.a.

 

n.a.

 

n.a.

 

n.a.

 

10,254

 

 

7,937


 

Deposits held at other financial institutions for operational purposes

 

 

 

 

 

 


 

Performing loans and securities:

66,796

 

88,727

 

29,828

 

98,251

 

166,477

 

 

164,812


 


Performing loans to financial institutions secured by Level 1 HQLA

94

 

1,361

 

108

 

 

258

 

 

412


 


Performing loans to financial institutions secured by non-Level-1

   HQLA and unsecured performing loans to financial institutions

6,792

 

51,640

 

3,756

 

1,459

 

10,534

 

 

8,513


 


Performing loans to non-financial corporate clients, loans to retail

   and small business customers, and loans to sovereigns, central

   banks and PSEs, of which:

34,251

 

26,318

 

17,670

 

34,544

 

82,729

 

 

82,848


 



With a risk weight of less than or equal to 35% under the Basel II

    Standardized Approach for credit risk

610

 

1,604

 

527

 

73

 

1,510

 

 

4,206


 


Performing residential mortgages, of which:

9,131

 

7,322

 

8,048

 

60,083

 

55,862

 

 

55,474


 



With a risk weight of less than or equal to 35% under the Basel II

  Standardized Approach for credit risk

9,131

 

7,322

 

8,048

 

60,083

 

55,862

 

 

55,474


 


Securities that are not in default and do not qualify as HQLA, including

   exchange-traded equities

16,528

 

2,086

 

246

 

2,165

 

17,094

 

 

17,565


 

Assets with matching interdependent liabilities(4)

 

2,433

 

2,533

 

22,069

 

 

 


 

Other assets(5):

7,091

 

 

 

33,086

 

 

 

24,567

 

 

24,419


 


Physical traded commodities, including gold

551

 

n.a.

 

n.a.

 

n.a.

 

551

 

 

506


 


Assets posted as initial margin for derivative contracts and

    contributions to default funds of CCPs(5)

n.a.

 

 

 

12,646

 

 

 

10,750

 

 

11,146


 


NSFR derivative assets(5)

n.a.

 

 

 

1,091

 

 

 

 

 


 


NSFR derivative liabilities before deduction of the variation

   margin posted(5)

n.a.

 

 

 

12,228

 

 

 

611

 

 

678


 


All other assets not included in the above categories

6,540

 

3,588

 

1,869

 

1,664

 

12,655

 

 

12,089


 

Off-balance-sheet items(5)

n.a.

 

 

 

123,388

 

 

 

4,686

 

 

4,545


 

Total RSF

n.a.

 

n.a.

 

n.a.

 

n.a.

 

205,984

 

 

201,713


 

Net Stable Funding Ratio (%)

n.a.

 

n.a.

 

n.a.

 

n.a.

 

120

%

 

120

%

 

 

n.a.      Not applicable

(1)       See the Financial Reporting Method section on pages 4 to 10 for additional information on capital management measures.

(2)       OSFI prescribed a table format in order to standardize disclosure throughout the banking industry.

(3)       Weighted values are calculated after application of the weightings set out in OSFI's Liquidity Adequacy Requirements Guideline.

(4)       As per OSFI's specifications, liabilities arising from transactions involving the Canada Mortgage Bond program and their corresponding encumbered mortgages are given ASF and RSF weights of 0%, respectively.

(5)       As per OSFI's specifications, there is no need to differentiate by maturities.



The NSFR represents the amount of ASF relative to the amount of RSF. ASF is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of RSF of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance-sheet exposures. The ASF and RSF amounts are calibrated to reflect the degree of stability of liabilities and liquidity of assets. The Bank expects some quarter-over-quarter variation between reported NSFRs without such variation being necessarily indicative of a long-term trend.

 

The NSFR assumptions differ from the assumptions used for the liquidity disclosures provided in the tables on the preceding pages or those used for internal liquidity management rules. While the liquidity disclosure framework is prescribed by the EDTF, the Bank's internal liquidity metrics use assumptions that are calibrated according to its business model and experience.

 

Funding

The Bank continuously monitors and analyzes market trends as well as possibilities for accessing less expensive and more flexible funding, considering both the risks and opportunities observed. The deposit strategy remains a priority for the Bank, which continues to prefer deposits to institutional funding.

 

The table below presents the residual contractual maturities of the Bank's wholesale funding. The information has been presented in accordance with the categories recommended by the EDTF working group for comparison purposes with other banks.

 

Residual Contractual Maturities of Wholesale Funding(1)

 

(millions of Canadian dollars)














As at July 31, 2024





1 month or less

 

Over 1

month to

3 months

 

Over 3

months to

6 months

 

Over 6

months to

12 months

 

Subtotal

1 year

or less

 

Over 1

year to

2 years

 

Over 2

 years

 

Total


Deposits from banks(2)


456

 

53

 

 

139

 

648

 

 

 

648


Certificates of deposit and commercial paper(3)


2,503

 

4,064

 

7,425

 

13,840

 

27,832

 

 

 

27,832


Senior unsecured medium-term notes(4)(5)


2,448

 

460

 

2,429

 

4,020

 

9,357

 

3,270

 

11,729

 

24,356


Senior unsecured structured notes


 

 

34

 

6

 

40

 

1,197

 

3,846

 

5,083


Covered bonds and asset-backed securities


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Mortgage securitization


 

583

 

1,610

 

2,539

 

4,732

 

3,508

 

18,795

 

27,035



Covered bonds


 

 

352

 

1,489

 

1,841

 

1,342

 

6,884

 

10,067



Securitization of credit card receivables


 

 

49

 

 

49

 

 

 

49


Subordinated liabilities(6)


 

 

 

 

 

 

1,254

 

1,254




5,407

 

5,160

 

11,899

 

22,033

 

44,499

 

9,317

 

42,508

 

96,324


Secured funding


 

583

 

2,011

 

4,028

 

6,622

 

4,850

 

25,679

 

37,151


Unsecured funding


5,407

 

4,577

 

9,888

 

18,005

 

37,877

 

4,467

 

16,829

 

59,173


 


5,407

 

5,160

 

11,899

 

22,033

 

44,499

 

9,317

 

42,508

 

96,324


As at October 31, 2023


3,337


6,616


15,200


6,868


32,021


12,347


34,370


78,738


 

(1)       Bankers' acceptances are not included in this table.

(2)       Deposits from banks include all non-negotiable term deposits from banks.

(3)       Includes bearer deposit notes.

(4)       Certificates of deposit denominated in euros are included in senior unsecured medium-term notes.

(5)       Includes debts subject to bank recapitalization (bail-in) conversion regulations.

(6)       Subordinated debt is presented in this table, but the Bank does not consider it as part of its wholesale funding.

 

As part of a comprehensive liquidity management framework, the Bank regularly reviews its contracts that stipulate that additional collateral could be required in the event of a downgrade of the Bank's credit rating. The Bank's liquidity position management approach already incorporates additional collateral requirements in the event of a one-notch to three-notch downgrade in credit rating. The table below presents the additional collateral requirements in the event of a one-, two-, or three-notch credit rating downgrade.

 

(millions of Canadian dollars)




As at July 31, 2024

 




One-notch

downgrade

 

Two-notch

downgrade

 

Three-notch

downgrade











Derivatives(1)


39

 

91

 

94


 

(1)       Contractual requirements related to agreements known as initial margins and variation margins.

 

Residual Contractual Maturities of Balance Sheet Items and Off-Balance-Sheet Commitments

The following tables present balance sheet items and off-balance-sheet commitments by residual contractual maturity as at July 31, 2024 with comparative figures as at October 31, 2023. The information gathered from this maturity analysis is a component of liquidity and funding management. However, this maturity profile does not represent how the Bank manages its interest rate risk or its liquidity risk and funding needs. The Bank considers factors other than contractual maturity when assessing liquid assets or determining expected future cash flows.

 

In the normal course of business, the Bank enters into various off-balance-sheet commitments. The credit instruments used to meet the financing needs of its clients represent the maximum amount of additional credit the Bank could be obligated to extend if the commitments were fully drawn.

 

The Bank also has future minimum commitments under leases for premises as well as under other contracts, mainly commitments to purchase loans and contracts for outsourced information technology services. Most of the lease commitments are related to operating leases.

 

(millions of Canadian dollars)















As at July 31, 2024







1 month                                                                                                                                                                                                                     or less


Over 1

month to

3 months     


Over 3

months to

6 months


Over 6

months to

9 months


Over 9

months to

12 months


Over 1

 year to

2 years


Over 2

years to

 5 years


Over 5 years


No

 specified

 maturity


Total


Assets





















Cash and deposits

 

 

 

 

 

 

 















with financial institutions

22,133

 

629

 

552

 

268

 

392

 

 

 

 

8,515

 

32,489


Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



At fair value through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




profit or loss

226

 

752

 

696

 

846

 

864

 

5,787

 

11,183

 

10,593

 

85,046

 

115,993



At fair value through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




other comprehensive income

62

 

183

 

159

 

311

 

32

 

2,523

 

6,251

 

5,081

 

631

 

15,233



At amortized cost

69

 

1,107

 

1,023

 

253

 

752

 

2,047

 

6,730

 

1,068

 

 

13,049







357

 

2,042

 

1,878

 

1,410

 

1,648

 

10,357

 

24,164

 

16,742

 

85,677

 

144,275


Securities purchased under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



reverse repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



agreements and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



securities borrowed

3,486

 

2,335

 

776

 

86

 

1,880

 

690

 

 

 

4,626

 

13,879


Loans(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Residential mortgage

1,825

 

1,954

 

3,136

 

3,390

 

4,535

 

22,594

 

45,264

 

9,730

 

529

 

92,957



Personal

760

 

959

 

1,369

 

1,652

 

1,885

 

8,086

 

12,510

 

6,045

 

13,685

 

46,951



Credit card

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,692

 

2,692



Business and government

12,948

 

5,012

 

5,014

 

4,332

 

3,647

 

11,527

 

18,041

 

6,635

 

30,951

 

98,107



Customers' liability under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




acceptances

98

 

39

 

 

 

 

 

 

 

 

137



Allowances for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,295)

 

(1,295)







15,631

 

7,964

 

9,519

 

9,374

 

10,067

 

42,207

 

75,815

 

22,410

 

46,562

 

239,549


Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



Derivative financial instruments

1,756

 

1,247

 

1,198

 

580

 

437

 

1,979

 

1,272

 

1,999

 

 

10,468



Investments in associates and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




joint ventures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

38

 

38



Premises and equipment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,830

 

1,830



Goodwill

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,521

 

1,521



Intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,227

 

1,227



Other assets(1)

3,014

 

190

 

384

 

726

 

1,143

 

874

 

348

 

54

 

1,924

 

8,657







4,770

 

1,437

 

1,582

 

1,306

 

1,580

 

2,853

 

1,620

 

2,053

 

6,540

 

23,741







46,377

 

14,407

 

14,307

 

12,444

 

15,567

 

56,107

 

101,599

 

41,205

 

151,920

 

453,933


 

(1)       Amounts collectible on demand are considered to have no specified maturity.

 

(millions of Canadian dollars)















As at July 31, 2024







1 month                                                                                                                                                                                                                or less


Over 1                                                                                                                                                                                                                   month to                                                                                                                                                                                                               3 months


Over 3                                                                                                                                                                                                                    months to                                                                                                                                                                                                            6 months


Over 6                                                                                                                                                                                                        months to                                                                                                                                                                                                                 9 months


Over 9                                                                                                                                                                                                           months to                                                                                                                                                                                                                 12 months


Over 1                                                                                                                                                                                                                year to                                                                                                                                                                                                                         2 years


Over 2                                                                                                                                                                                                          years to                                                                                                                                                                                                                   5 years


Over 5                                                                                                                                                                                                           years


No

specified

 maturity


Total


Liabilities and equity

 

 

 

 

 

 

 














Deposits(1)(2)

 

 

 

 

 

 

 















Personal

3,807

 

4,195

 

5,499

 

4,733

 

4,850


7,699

 

14,772

 

6,143

 

42,488

 

94,186

 


Business and government

33,141

 

11,044

 

15,209

 

16,561

 

6,567

 

7,452

 

31,354

 

6,164

 

93,423

 

220,915

 


Deposit-taking institutions

1,202

 

55

 

367

 

174

 

1,177

 

 

11

 

31

 

2,469

 

5,486

 






38,150

 

15,294

 

21,075

 

21,468

 

12,594


15,151


46,137


12,338


138,380


320,587


Other




Acceptances

98

39

 

 

 

 

137



Obligations related

 




to securities sold short(3)

3

511

1,115

430

263

838

 

2,407

 

3,215

 

3,192

 

11,974



Obligations related to

 




securities sold under

 




repurchase agreements and

 




securities loaned

25,147

2,568

1,036

3,452

891

 

 

 

8,687

 

41,781



Derivative financial

 

 

 

 

 

 

 

 

 




instruments

1,512

1,362

1,838

1,698

406

1,535

 

5,624

 

3,707

 

 

17,682



Liabilities related to transferred

 

 

 

 

 

 

 

 

 




receivables(4)

583

1,610

1,124

1,415

3,508

 

8,657

 

10,138

 

 

27,035



Securitization - Credit card(5)

49

 

 

 

 

49



Lease liabilities(5)

7

13

19

18

18

72

 

177

 

153

 

 

477



Other liabilities - Other items(1)(5)

1,612

191

94

155

35

162

 

77

 

82

 

5,387

 

7,795







28,379

5,267

5,761

6,877

2,137

7,006

16,942

17,295

17,266

106,930


Subordinated debt

1,254

1,254

 

Equity

25,162

25,162





 

 

66,529

20,561

26,836

28,345

14,731

22,157

63,079

30,887

180,808

453,933


Off-balance-sheet commitments



 

Letters of guarantee and



 


documentary letters of credit

118

562

4,189

1,469

807

1,944

 

209

 

21

 

 

9,319


 

Credit card receivables(6)

 

 

 

 

 

 

10,322

 

10,322


 

Backstop liquidity and credit

 


 


enhancement facilities(7)

15

5,552

15

 

 

 

4,591

 

10,173


 

Commitments to extend credit(8)

4,044

11,999

9,937

5,305

5,542

5,313

 

3,949

 

91

 

52,338

 

98,518


 

Obligations related to:

 

 

 

 

 

 

 

 

 


 

 

Lease commitments(9)

1

1

1

1

5

 

5

 

 

 

14




Other contracts(10)

9

 

18

 

24

 

12


12

 

48

 

254

 

10

 

143

 

530


 

(1)       Amounts payable upon demand or notice are considered to have no specified maturity.

(2)       The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(3)       Amounts are disclosed according to the remaining contractual maturity of the underlying security.

(4)       These amounts mainly include liabilities related to the securitization of mortgage loans.

(5)       The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(6)       These amounts are unconditionally revocable at the Bank's discretion at any time.

(7)       In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(8)       These amounts include $48.3 billion that is unconditionally revocable at the Bank's discretion at any time.

(9)       These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(10)    These amounts include $27 million in contractual commitments related to the portion of the head office building under construction.

 

(millions of Canadian dollars)















As at October 31, 2023(1)







1 month                                                                                                                                                                                                             or less


Over 1                                                                                                                                                                                                       month to                                                                                                                                                                                                             3 months


Over 3 months to 6 months


Over 6 months to 9 months


Over 9 months to 12 months


Over 1                                                                                                                                                                                                             year to                                                                                                                                                                                                                 2 years


Over 2                                                                                                                                                                                                           years to                                                                                                                                                                                                               5 years


Over 5 years


No                                                                                                                                                                                                        specified                                                                                                                                                                                                      maturity


Total


Assets





















Cash and deposits

 

 

 

 

 

 

 















with financial institutions

25,374


448


354


50


216





8,792


35,234


Securities






















At fair value through























profit or loss

694


258


1,663


1,758


2,260


3,667


10,823


12,813


66,058


99,994



At fair value through























other comprehensive income

3


30


154


224


426


538


4,548


2,660


659


9,242



At amortized cost

4


158


508


338


1,399


4,110


4,713


1,352



12,582







701


446


2,325


2,320


4,085


8,315


20,084


16,825


66,717


121,818


Securities purchased under






















reverse repurchase






















agreements and






















securities borrowed

2,275


1,641


716


72


416


693




5,447


11,260


Loans(2)






















Residential mortgage

1,409


1,250


1,990


3,126


2,990


15,339


51,112


9,089


542


86,847



Personal

613


637


1,060


1,271


1,396


6,258


15,656


5,713


13,754


46,358



Credit card

















2,603


2,603



Business and government

21,406


4,262


4,007


3,204


2,783


6,695


11,322


5,414


25,099


84,192



Customers' liability under























acceptances

6,191


373


50


13







6,627



Allowances for credit losses

















(1,184)


(1,184)







29,619


6,522


7,107


7,614


7,169


28,292


78,090


20,216


40,814


225,443


Other






















Derivative financial instruments

2,040


1,982


1,367


1,197


611


1,696


2,399


6,224



17,516



Investments in associates and























joint ventures

















49


49



Premises and equipment

















1,592


1,592



Goodwill

















1,521


1,521



Intangible assets

















1,256


1,256



Other assets(2)

2,639


774


166


1,206


547


598


252


115


1,491


7,788







4,679


2,756


1,533


2,403


1,158


2,294


2,651


6,339


5,909


29,722







62,648


11,813


12,035


12,459


13,044


39,594


100,825


43,380


127,679


423,477


 

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

(2)       Amounts collectible on demand are considered to have no specified maturity.

 

(millions of Canadian dollars)















As at October 31, 2023(1)







1 month                                                                                                                                                                                                             or less


Over 1                                                                                                                                                                                                                   month to                                                                                                                                                                                                            3 months


Over 3                                                                                                                                                                                                                    months to                                                                                                                                                                                                          6 months


Over 6                                                                                                                                                                                                      months to                                                                                                                                                                                                       9 months


Over 9                                                                                                                                                                                                         months to                                                                                                                                                                                                         12 months


Over 1                                                                                                                                                                                                            year to                                                                                                                                                                                                               2 years


Over 2                                                                                                                                                                                                         years to                                                                                                                                                                                                             5 years


Over 5                                                                                                                                                                                                                  years


No                                                                                                                                                                                                         specified                                                                                                                                                                                               maturity


Total


Liabilities and equity

 

 

 

 

 

 

 














Deposits(2)(3)

 

 

 

 

 

 

 















Personal

4,648


3,722


4,491


6,056


5,145


8,398


11,635


4,164


39,624


87,883



Business and government

32,642


10,044


17,495


4,271


3,498


9,127


15,768


5,058


99,425


197,328



Deposit-taking institutions

646


408


32


109


18


8


15


33


1,693


2,962







37,936


14,174


22,018


10,436


8,661


17,533


27,418


9,255


140,742


288,173


Other




Acceptances

6,191

373

50

13



6,627



Obligations related





to securities sold short(4)

35

155

129

73

76

347

2,332

4,123

6,390

13,660



Obligations related to





securities sold under





repurchase agreements and





securities loaned

23,041

2,719

1,040

3,467

274


7,806


38,347



Derivative financial









instruments

1,912

2,697

1,186

1,086

467

2,415


3,068


7,057



19,888



Liabilities related to transferred









receivables(5)

1,760

829

2,142

618

3,915


8,678


7,092



25,034



Securitization - Credit card(6)

48



48



Lease liabilities(6)

9

28

25

24

23

83


197

128


517



Other liabilities - Other items(2)(6)

1,417

306

174

7

27

37


58


105


4,720


6,851







32,605

8,038

3,433

6,812

1,211

7,119

14,333

18,505

18,916

110,972


Subordinated debt

748

748


Equity

23,584

23,584





 

 

70,541

22,212

25,451

17,248

9,872

24,652

41,751

28,508

183,242

423,477


Off-balance-sheet commitments





















 

Letters of guarantee and





















 


documentary letters of credit

89

1,287

1,975

2,185

1,490

1,165


255


50



8,496


 

Credit card receivables(7)




9,802


9,802


 

Backstop liquidity and credit





 


enhancement facilities(8)

15

5,552

15




4,519


10,101


 

Commitments to extend credit(9)

3,186

10,675

8,445

7,562

4,316

4,579


3,312


39


48,592


90,706


 

Obligations related to:







 


Lease commitments(10)

1

1

1

2

2

6


7


1



21


 


Other contracts(11)

11

22

34

33

36

46


138


13


127


460


 

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

(2)       Amounts payable upon demand or notice are considered to have no specified maturity.

(3)       The Deposits item is presented in greater detail than it is on the Consolidated Balance Sheet.

(4)       Amounts are disclosed according to the remaining contractual maturity of the underlying security.

(5)       These amounts mainly include liabilities related to the securitization of mortgage loans.

(6)       The Other liabilities item is presented in greater detail than it is on the Consolidated Balance Sheet.

(7)       These amounts are unconditionally revocable at the Bank's discretion at any time.

(8)       In the event of payment on one of the backstop liquidity facilities, the Bank will receive as collateral government bonds in an amount up to $5.6 billion.

(9)       These amounts include $46.7 billion that is unconditionally revocable at the Bank's discretion at any time.

(10)    These amounts include leases for which the underlying asset is of low value and leases other than for real estate of less than one year.

(11)    These amounts include $0.1 billion in contractual commitments related to the portion of the head office building under construction.

 

Regulatory Compliance Risk

 

As part of the transition related to the interest rate benchmark reform, in Canada, publication of CDOR (Canadian Dollar Offered Rate) was discontinued on June 28, 2024 and was replaced by the CORRA (Canadian Overnight Repo Rate Average) rate. A forward-looking rate, the 1-month and 3-month Term CORRA has also been available for certain financial products since September 5, 2023. As at July 31, 2024, the transition project was progressing according to schedule. For additional information, see Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023.

 

Environmental and Social Risk

 

Environmental and social risk is the possibility that environmental and social matters would result in a financial loss for the Bank or affect its business activities. For additional information on the ways the Bank addresses and mitigates these risks, see the Environmental and Social Risk section on pages 105 and 106 of the Bank's 2023 Annual Report.

 

Regulatory Developments

On March 13, 2024, the Canadian Sustainability Standards Board (CSSB) published its first set of proposed Canadian Sustainability Disclosure Standards (CSDS) in the form of exposure drafts. CSDS 1 General Requirements for Disclosure of Sustainability-related Financial Information and CSDS 2 Climate-related Disclosures are aligned with IFRS S1 and S2 but propose a later effective date and extend transition relief for certain disclosure requirements. CSDS will be applicable to D-SIBs at the end of fiscal 2026, and transitional relief measures will postpone certain disclosure requirements to the end of fiscal 2028. Disclosure under CSDS will be on a voluntary basis until mandated by the Canadian Securities Administrators (CSA).

 

On March 20, 2024, OSFI published a new version of guideline B-15 Climate Risk Management, the required disclosures of which more closely align with those of the International Sustainability Standards Board's final version of IFRS S2 Climate-related Disclosures standard. Most of the B-15 disclosure requirements will take effect for D-SIBs at the end of fiscal 2024, while other disclosure requirements will take effect in fiscal 2025 or later. At the same time, OSFI also released new Climate Risk Returns that will collect standardized data on emissions and exposures. The data collected by OSFI will support its climate risk supervisory activities.

 

The Bank is currently assessing the impact of the B-15 guideline and has an ongoing project to meet the requirements by the effective date. The Bank continues to monitor any updates and future developments.

 


Risk Disclosures

 

One of the purposes of the 2023 Annual Report, the Report to Shareholders - Third Quarter 2024, and the related supplementary information documents is to provide transparent, high-quality risk disclosures in accordance with the recommendations made by the Financial Stability Board's EDTF group. The following table lists the references where users can find information that responds to the EDTF's 32 recommendations.

 











Pages


 

 

 

 

 

2023

Annual Report

 

Report to

Shareholders(1)

 

Supplementary

Regulatory Capital

and Pillar 3 Disclosure(1)

 

General









1


Location of risk disclosures


12


46








Management's Discussion and Analysis


53 to 106, 119 and 121 to 123


24 to 45








Consolidated Financial Statements


Notes 1, 7, 16, 23 and 29


Notes 7 and 14








Supplementary Financial Information






22 to 32(2)






Supplementary Regulatory Capital and Pillar 3 Disclosure






5 to 59



2


Risk terminology and risk measures


62 to 106







3


Top and emerging risks


24 and 67 to 73


12, 30 to 45





4


New key regulatory ratios


54 to 57, 91 and 95 to 98


24, 25, 35 and 37 to 40




Risk governance and risk management









5


Risk management organization, processes and key functions


65 to 85, 91 to 93 and 98







6


Risk management culture


62 and 63







7


Key risks by business segment, risk management

  and risk appetite


61 to 63 and 67







8


Stress testing


53, 63, 79, 89, 90 and 93






Capital adequacy and risk-weighted assets (RWA)









9


Minimum Pillar 1 capital requirements


54 to 57


24 and 25





10


Reconciliation of the accounting balance sheet to












the regulatory balance sheet






11 to 17, 20 and 21



11


Movements in regulatory capital


59


27





12


Capital planning


53 to 61







13


RWA by business segment and by risk type


61




7



14


Capital requirements by risk and the RWA calculation method


74 to 78




7



15


Banking book credit risk






7



16


Movements in RWA by risk type


60


 28


7



17


Assessment of credit risk model performance


66, 75 to 78 and 84




41


Liquidity









18


Liquidity management and components of the liquidity buffer


91 to 98


35 to 40




Funding









19


Summary of encumbered and unencumbered assets


94 and 95


37





20


Residual contractual maturities of balance sheet items and












off-balance-sheet commitments


224 to 228


41 to 44





21


Funding strategy and funding sources


98 to 100


40




Market risk









22


Linkage of market risk measures to balance sheet


86 and 87


32 and 33





23


Market risk factors


84 to 90, 212 and 213


32 to 35





24


VaR: Assumptions, limitations and validation procedures


88







25


Stress tests, stressed VaR and backtesting


84 to 90






Credit risk









26


Credit risk exposures


83 and 173 to 184


31 and 70 to 81


22 to 50 and 22 to 30(2)



27


Policies for identifying impaired loans


80, 81, 147 and 148







28


Movements in impaired loans and allowances for credit losses

119, 122, 123 and 173 to 184


70 to 81


27 to 30(2)



29


Counterparty credit risk relating to derivative transactions


80 to 82 and 192 to 195




42 to 50, 31(2) and 32(2)



30


Credit risk mitigation


77 to 82, 170 and 178




24, 28, 29 and 48 to 58


Other risks









31


Other risks: Governance, measurement and management


72 to 74 and 100 to 106







32


Publicly known risk events


24, 100 and 101


12, 30 and 45




 

(1)       Third quarter 2024.

(2)       These pages are included in the document entitled Supplementary Financial Information - Third Quarter 2024.


Accounting Policies and Financial Disclosure

 

Accounting Policies and Critical Accounting Estimates

 

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 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. The unaudited interim condensed consolidated financial statements for the quarter and nine-month period ended July 31, 2024 were prepared in accordance with IAS 34 - Interim Financial Reporting using the same accounting policies as those described in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023, except for the changes described in Note 2 to the unaudited interim condensed consolidated financial statements, which have been applied since November 1, 2023 upon the adoption of IFRS 17 - Insurance Contracts.

 

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 accounting policies are considered critical given their importance to the presentation of the Bank's financial position and operating results and require subjective and complex judgments and estimates on matters that are inherently uncertain. Any change in these judgments and estimates could have a significant impact on the Bank's consolidated financial statements. The critical accounting estimates are the same as those described on pages 107 to 112 of the 2023 Annual Report.

 

The geopolitical landscape (notably, the Russia-Ukraine war and the clashes between Israel and Hamas), inflation, climate change, and high interest rates continue to create uncertainty. Some of the Bank's accounting policies, such as measurement of expected credit losses (ECLs), require particularly complex judgments and estimates. See Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2023 for a summary of the most significant estimation processes used to prepare the consolidated financial statements in accordance with IFRS and for the valuation techniques used to determine the carrying values and fair values of assets and liabilities. The uncertainty regarding certain key inputs used in measuring ECLs is described in Note 7 to these unaudited interim condensed consolidated financial statements.

 

Future Accounting Policy Changes

 

The Bank closely monitors both new accounting standards and amendments to existing accounting standards issued by the IASB. The following standards have been issued but are not yet effective. The Bank is currently assessing the impact of applying these standards on its consolidated financial statements.

 

Effective Date - November 1, 2026

Amendments to the Classification and Measurement of Financial Instruments

In May 2024, the IASB published Amendments to the Classification and Measurement of Financial Instruments, which affects certain provisions of IFRS 9 - Financial Instruments and IFRS 7 - Financial Instruments: Disclosures. Specifically, the amendments apply to the derecognition of financial liabilities settled through electronic transfer, to the classification of certain financial assets, to the disclosures regarding equity instruments designated at fair value through other comprehensive income, and to contractual terms that could change the timing or amount of contractual cash flows. These amendments must be applied retrospectively for annual periods beginning on or after January 1, 2026. Earlier application is permitted.

 

Effective Date - November 1, 2027

IFRS 18 - Presentation and Disclosure in Financial Statements

In April 2024, the IASB issued a new accounting standard, IFRS 18 - Presentation and Disclosure in Financial Statements (IFRS 18). This new standard replaces the current IAS 1 accounting standard that covers the presentation of financial statements. IFRS 18 presents a new accounting framework that will improve how information is communicated in financial statements, in particular performance-related information in the consolidated income statement, and that will introduce limited changes to the consolidated statement of cash flows and the consolidated balance sheet. IFRS 18 must be applied retrospectively for annual periods beginning on or after January 1, 2027. Earlier application is permitted.

 

Financial Disclosure

 

During the third quarter of 2024, no changes were made to the policies, procedures, and other processes that comprise the Bank's internal control over financial reporting that had or could reasonably have a significant impact on the internal control over financial reporting.

 

 

Quarterly Financial Information

 

(millions of Canadian dollars,























except per share amounts)






2024

 




 



2023(1)


2022


2023(1)

 

2022






Q3


Q2


Q1

 

Q4

 

Q3

 

Q2

 

Q1


Q4


Total

 

Total


Total revenues

 

2,996


2,750


2,710

 

2,560

 

2,490

 

2,446


2,562


2,334


10,058


9,652


Net income

 

1,033


906


922

 

751

 

830

 

832


876

 

738


3,289


3,383


Earnings per share ($)

 

 





 


 


 




 


 






Basic


2.92


2.56


2.61

 

2.11

 

2.35

 

2.37


2.49

 

2.10


9.33


9.72



Diluted


2.89


2.54


2.59

 

2.09

 

2.33

 

2.34


2.47

 

2.08


9.24


9.61


Dividends per common share ($)

 

1.10


1.06


1.06

 

1.02

 

1.02

 

0.97


0.97

 

0.92


3.98


3.58


Return on common

 

 





 


 


 




 







 

shareholders' equity (%)(2)

 

18.4


16.9


17.1

 

14.1

 

16.1

 

17.2


17.9


15.3


16.3


18.8


Total assets

 

453,933


441,690


433,927

 

423,477

 

425,936

 

417,614


418,287


403,740


 




Net impaired loans excluding POCI loans(2)

 

959


864


677

 

606

 

537

 

477


476


479


 




Per common share ($)

 

 





 


 


 




 


 






Book value(2)


64.64


62.28


61.18

 

60.40

 

58.53

 

57.45


55.76

 

55.24







Share price


 





 


 


 




 









High


118.17


114.68


103.38

 

103.58

 

103.28

 

103.45


99.95

 

94.37








Low


106.21


101.24


86.50

 

84.97

 

94.62

 

92.67


91.02

 

83.12






 

(1)       For the fiscal 2023 comparative figures, certain amounts have been adjusted to reflect accounting policy changes arising from the adoption of IFRS 17. For additional information, see Note 2 to the consolidated financial statements.

(2)       See the Glossary section on pages 49 to 52 for details on the composition of these measures.

 


Glossary

 

 


Acceptances

Acceptances and the customers' liability under acceptances constitute a guarantee of payment by a bank and can be traded in the money market. The Bank earns a "stamping fee" for providing this guarantee.

 

Allowances for credit losses

Allowances for credit losses represent management's unbiased estimate of expected credit losses as at the balance sheet date. These allowances are primarily related to loans and off-balance-sheet items such as loan commitments and financial guarantees.

 

Assets under administration

Assets in respect of which a financial institution provides administrative services on behalf of the clients who own the assets. Such services include custodial services, collection of investment income, settlement of purchase and sale transactions, and record-keeping. Assets under administration are not reported on the balance sheet of the institution offering such services.

 

Assets under management

Assets managed by a financial institution and that are beneficially owned by clients. Management services are more comprehensive than administrative services and include selecting investments or offering investment advice. Assets under management, which may also be administered by the financial institution, are not reported on the balance sheet of the institution offering such services.

 

Available TLAC

Available TLAC includes total capital as well as certain senior unsecured debt subject to the federal government's bail-in regulations that satisfy all of the eligibility criteria in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

 

Average interest-bearing assets

Average interest-bearing assets include interest-bearing deposits with financial institutions and certain cash items, securities, securities purchased under reverse repurchase agreements and securities borrowed, and loans, while excluding customers' liability under acceptances and other assets. The average is calculated based on the daily balances for the period.

 

Average interest-bearing assets, non-trading

Average interest-bearing assets, non-trading, include interest-bearing deposits with financial institutions and certain cash items, securities purchased under reverse repurchase agreements and securities borrowed, and loans, while excluding other assets and assets related to trading activities. The average is calculated based on the daily balances for the period.


Average volumes

Average volumes represent the average of the daily balances for the period of the consolidated balance sheet items.

 

Basic earnings per share

Basic earnings per share is calculated by dividing net income attributable to common shareholders by the weighted average basic number of common shares outstanding.

 

Basis point (bps)

Unit of measure equal to one one-hundredth of a percentage point (0.01%).

 

Book value of a common share

The book value of a common share is calculated by dividing common shareholders' equity by the number of common shares on a given date.

 

Common Equity Tier 1 (CET1) capital ratio

CET1 capital consists of common shareholders' equity less goodwill, intangible assets, and other capital deductions. The CET1 capital ratio is calculated by dividing total CET1 capital by the corresponding risk-weighted assets.

 

Compound annual growth rate (CAGR)

CAGR is a rate of growth that shows, for a period exceeding one year, the annual change as though the growth had been constant throughout the period.

 

Derivative financial instruments

Derivative financial instruments are financial contracts whose value is derived from an underlying interest rate, exchange rate, equity price, commodity price, credit instrument or index. Examples of derivatives include swaps, options, forward rate agreements, and futures. The notional amount of the derivative is the contract amount used as a reference point to calculate the payments to be exchanged between the two parties, and the notional amount itself is generally not exchanged by the parties.

 

Diluted 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.

 

Dividend payout ratio

The dividend payout ratio represents the dividends of common shares (per share amount) expressed as a percentage of basic earnings per share.



Economic capital

Economic capital is the internal measure used by the Bank to determine the capital required for its solvency and to pursue its business operations. Economic capital takes into consideration the credit, market, operational, business and other risks to which the Bank is exposed as well as the risk diversification effect among them and among the business segments. Economic capital thus helps the Bank to determine the capital required to protect itself against such risks and ensure its long-term viability.

 

Efficiency ratio

The efficiency ratio represents non-interest expenses expressed as a percentage of total revenues. It measures the efficiency of the Bank's operations.

 

Fair value

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

 

Gross impaired loans as a percentage of total loans and acceptances

This measure represents gross impaired loans expressed as a percentage of the balance of loans and acceptances.

 

Gross impaired loans excluding POCI loans

Gross impaired loans excluding POCI loans are all loans classified in Stage 3 of the expected credit loss model excluding POCI loans.

 

Gross impaired loans excluding POCI loans as a percentage of total loans and acceptances

This measure represents gross impaired loans excluding POCI loans expressed as a percentage of the balance of loans and acceptances.

 

Hedging

The purpose of a hedging transaction is to modify the Bank's exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging instrument.

 

Impaired loans

The Bank considers a financial asset, other than a credit card receivable, to be credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred or when contractual payments are 90 days past due. Credit card receivables are considered credit-impaired and are fully written off at the earlier of the following dates: when a notice of bankruptcy is received, a settlement proposal is made, or contractual payments are 180 days past due.

 

Leverage ratio

The leverage ratio is calculated by dividing Tier 1 capital by total exposure. Total exposure is defined as the sum of on-balance-sheet assets (including derivative financial instrument exposures and securities financing transaction exposures) and off-balance-sheet items.

 

Liquidity coverage ratio (LCR)

The LCR is a measure designed to ensure that the Bank has sufficient high-quality liquid assets to cover net cash outflows given a severe, 30‑day liquidity crisis.


Loans and acceptances

Loans and acceptances represent the sum of loans and of the customers' liability under acceptances.

 

Loan-to-value ratio

The loan-to-value ratio is calculated according to the total facility amount for residential mortgages and home equity lines of credit divided by the value of the related residential property.

 

Master netting agreement

Legal agreement between two parties that have multiple derivative contracts with each other that provides for the net settlement of all contracts through a single payment, in the event of default, insolvency or bankruptcy.

 

Net impaired loans

Net impaired loans are gross impaired loans presented net of allowances for credit losses on Stage 3 loan amounts drawn.

 

Net impaired loans as a percentage of total loans and acceptances

This measure represents net impaired loans as a percentage of the balance of loans and acceptances.

 

Net impaired loans excluding POCI loans

Net impaired loans excluding POCI loans are gross impaired loans excluding POCI loans presented net of allowances for credit losses on amounts drawn on Stage 3 loans granted by the Bank.

 

Net interest income from trading activities

Net interest income from trading activities comprises dividends related to financial assets and liabilities associated with trading activities, net of interest expenses and interest income related to the financing of these financial assets and liabilities.

 

Net interest income, non-trading

Net interest income, non-trading, comprises revenues related to financial assets and liabilities associated with non-trading activities, net of interest expenses and interest income related to the financing of these financial assets and liabilities.

 

Net interest margin

Net interest margin is calculated by dividing net interest income by average interest-bearing assets.

 

Net stable funding ratio (NSFR)

The NSFR ratio is a measure that helps guarantee that the Bank is maintaining a stable funding profile to reduce the risk of funding stress.

 

Net write-offs as a percentage of average loans and acceptances

This measure represents the net write-offs (net of recoveries) expressed as a percentage of average loans and acceptances.



Non-interest income related to trading activities

Non-interest income related to trading activities consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, certain commission income, other trading activity revenues, and any applicable transaction costs.

 

Office of the Superintendent of Financial Institutions (Canada) (OSFI)

The mandate of OSFI is to regulate and supervise financial institutions and private pension plans subject to federal oversight, to help minimize undue losses to depositors and policyholders and, thereby, to contribute to public confidence in the Canadian financial system.

 

Operating leverage

Operating leverage is the difference between the growth rate for total revenues and the growth rate for non-interest expenses.

 

Provisioning rate

This measure represents the allowances for credit losses on impaired loans expressed as a percentage of gross impaired loans.

 

Provisioning rate excluding POCI loans

This measure represents the allowances for credit losses on impaired loans excluding POCI loans expressed as a percentage of gross impaired loans excluding POCI loans.

 

Provisions for credit losses

Amount charged to income necessary to bring the allowances for credit losses to a level deemed appropriate by management and is comprised of provisions for credit losses on impaired and non-impaired financial assets.

 

Provisions for credit losses as a percentage of average loans and acceptances

This measure represents the provisions for credit losses expressed as a percentage of average loans and acceptances.

 

Provisions for credit losses on impaired loans as a percentage of average loans and acceptances

This measure represents the provisions for credit losses on impaired loans expressed as a percentage of average loans and acceptances.

 

Provisions for credit losses on impaired loans excluding POCI loans

Amount charged to income necessary to bring the allowances for credit losses to a level deemed appropriate by management and is comprised of provisions for credit losses on impaired financial assets excluding POCI loans.

 

Provisions for credit losses on impaired loans excluding POCI loans as a percentage of average loans and acceptances or provisions for credit losses on impaired loans excluding POCI loans ratio

This measure represents the provisions for credit losses on impaired loans excluding POCI loans expressed as a percentage of average loans and acceptances.

 


Return on average assets

Return on average assets represents net income expressed as a percentage of average assets.

 

Return on common shareholders' equity (ROE)

ROE represents net income attributable to common shareholders expressed as a percentage of average equity attributable to common shareholders. It is a general measure of the Bank's efficiency in using equity.

 

Risk-weighted assets

Assets are risk weighted according to the guidelines established by OSFI. In the Standardized calculation approach, risk factors are applied directly to the face value of certain assets in order to reflect comparable risk levels. In the Advanced Internal Ratings-Based (AIRB) Approach, risk-weighted assets are derived from the Bank's internal models, which represent the Bank's own assessment of the risks it incurs. In the Foundation Internal Ratings-Based (FIRB) Approach, the Bank can use its own estimate of probability of default but must rely on OSFI estimates for the loss given default and exposure at default risk parameters. Off-balance-sheet instruments are converted to balance sheet (or credit) equivalents by adjusting the notional values before applying the appropriate risk-weighting factors.

 

Securities purchased under reverse repurchase agreements

Securities purchased by the Bank from a client pursuant to an agreement under which the securities will be resold to the same client on a specified date and at a specified price. Such an agreement is a form of short-term collateralized lending.

 

Securities sold under repurchase agreements

Financial obligations related to securities sold pursuant to an agreement under which the securities will be repurchased on a specified date and at a specified price. Such an agreement is a form of short-term funding.

 

Stressed VaR (SVaR)

SVaR is a statistical measure of risk that replicates the VaR calculation method but uses, instead of a two-year history of risk factor changes, a 12‑month data period corresponding to a continuous period of significant financial stress that is relevant in terms of the Bank's portfolios.

 

Structured entity

A structured entity is an entity created to accomplish a narrow and well-defined objective and is designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate solely to administrative tasks and the relevant activities are directed by means of contractual arrangements.

 

Taxable equivalent basis

Taxable equivalent basis is a calculation method that consists of grossing up certain revenues taxed at lower rates (notably dividends) by the income tax to a level that would make it comparable to revenues from taxable sources in Canada. The Bank uses the taxable equivalent basis to calculate net interest income, non-interest income and income taxes.



Tier 1 capital ratio

Tier 1 capital ratio consists of Common Equity Tier 1 capital and Additional Tier 1 instruments, namely, qualifying non-cumulative preferred shares and the eligible amount of innovative instruments. The Tier 1 capital ratio is calculated by dividing Tier 1 capital, less regulatory adjustments, by the corresponding risk-weighted assets.

 

TLAC leverage ratio

The TLAC leverage ratio is an independent risk measure that is calculated by dividing available TLAC by total exposure, as set out in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

 

TLAC ratio

The TLAC ratio is a measure used to assess whether a non-viable Domestic Systemically Important Bank (D-SIB) has sufficient loss-absorbing capacity to support its recapitalization. It is calculated by dividing available TLAC by risk weighted assets, as set out in OSFI's Total Loss Absorbing Capacity (TLAC) Guideline.

 

Total capital ratio

Total capital is the sum of Tier 1 and Tier 2 capital. Tier 2 capital consists of the eligible portion of subordinated debt and certain allowances for credit losses. The Total capital ratio is calculated by dividing Total capital, less regulatory adjustments, by the corresponding risk-weighted assets.

 

Total shareholder return (TSR)

TSR represents the average total return on an investment in the Bank's common shares. The return includes changes in share price and assumes that the dividends received were reinvested in additional common shares of the Bank.


Trading activity revenues

Trading activity revenues consist of the net interest income and the non-interest income related to trading activities. Net interest income comprises dividends related to financial assets and liabilities associated with trading activities, and some interest income related to the financing of these financial assets and liabilities net of interest expenses and interest income related to the financing of these financial assets and liabilities. Non-interest income consists of realized and unrealized gains and losses as well as interest income on securities measured at fair value through profit or loss, income from held-for-trading derivative financial instruments, changes in the fair value of loans at fair value through profit or loss, changes in the fair value of financial instruments designated at fair value through profit or loss, realized and unrealized gains and losses as well as interest expense on obligations related to securities sold short, certain commission income, other trading activity revenues, and any applicable transaction costs.

 

Value-at-Risk (VaR)

VaR is a statistical measure of risk that is used to quantify market risks across products, per types of risks, and aggregate risk on a portfolio basis. VaR is defined as the maximum loss at a specific confidence level over a certain horizon under normal market conditions. The VaR method has the advantage of providing a uniform measurement of financial instrument-related market risks based on a single statistical confidence level and time horizon.

 


 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
UK 100

Latest directors dealings