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Thursday 27 February, 2020

Nat Bank of Canada

Interim Financial Statements Q1 2020 (Part 2)

RNS Number : 3982E
National Bank of Canada
27 February 2020
 

 

National Bank of Canada

February 27, 2020

Regulatory Announcement (Part 2)

Q1 2020 Results 

National Bank of Canada (the "Bank") announces publication of its First Quarter 2020 Report to Shareholders. The First Quarter Results have been uploaded to the National Storage Mechanism and will shortly be available at www.morningstar.co.uk/uk/nsm 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 First Quarter 2020 Report to Shareholders, please click on the following link:

http://www.rns-pdf.londonstockexchange.com/rns/3982E_1-2020-2-27.pdf

 

Interim Condensed Consolidated

Financial Statements

(unaudited)

 

 

 

Consolidated Balance Sheets

39

 

Consolidated Statements of Income

40

 

Consolidated Statements of Comprehensive Income

41

 

Consolidated Statements of Changes in Equity

42

 

Consolidated Statements of Cash Flows

43

 

Notes to the Interim Condensed Consolidated Financial Statements

44

 

 

Consolidated Balance Sheets

(unaudited) (millions of Canadian dollars)

 

 

 

 

 

As at January 31, 2020

 

As at October 31, 2019

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Cash and deposits with financial institutions

 

 

 

12,454

 

13,698

 

 

 

 

 

 

 

 

 

Securities  (Notes 4, 5 and 6)

 

 

 

 

 

 

 

At fair value through profit or loss

 

 

 

73,151

 

61,823

 

At fair value through other comprehensive income

 

 

 

9,488

 

10,648

 

At amortized cost

 

 

 

9,660

 

9,755

 

 

 

 

 

 

92,299

 

82,226

 

 

 

 

 

 

 

 

 

 

Securities purchased under reverse repurchase agreements

 

 

 

 

 

 

 

 

and securities borrowed

 

 

 

11,689

 

17,723

 

 

 

 

 

 

 

 

 

 

Loans  (Note 7)

 

 

 

 

 

 

 

Residential mortgage

 

 

 

58,497

 

57,171

 

Personal

 

 

 

36,845

 

36,944

 

Credit card

 

 

 

2,255

 

2,322

 

Business and government

 

 

 

52,376

 

50,599

 

 

 

 

 

 

149,973

 

147,036

 

Customers' liability under acceptances

 

 

6,871

 

6,893

 

Allowances for credit losses

 

 

 

(693)

 

(678)

 

 

 

 

 

 

156,151

 

153,251

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Derivative financial instruments

 

 

 

8,965

 

8,129

 

Investments in associates and joint ventures

 

 

387

 

385

 

Premises and equipment (Note 2)

 

 

 

1,155

 

490

 

Goodwill

 

 

 

1,413

 

1,412

 

Intangible assets

 

 

 

1,420

 

1,406

 

Other assets  (Note 9)

 

 

 

3,258

 

2,738

 

 

 

 

 

 

16,598

 

14,560

 

 

 

 

 

 

289,191

 

281,458

 

 

 

 

 

 

 

 

 

 

Liabilities and equity

 

 

 

 

 

 

 

Deposits (Notes 5 and 10)

 

 

 

197,504

 

189,566

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Acceptances

 

 

 

6,871

 

6,893

 

Obligations related to securities sold short

 

 

 

12,263

 

12,849

 

Obligations related to securities sold under repurchase agreements

 

 

 

 

 

 

 

 

and securities loaned

 

 

 

22,054

 

21,900

 

Derivative financial instruments

 

 

 

6,982

 

6,852

 

Liabilities related to transferred receivables  (Notes 5 and 8)

 

 

 

20,824

 

21,312

 

Other liabilities  (Note 11)

 

 

 

6,498

 

6,177

 

 

 

 

 

 

75,492

 

75,983

 

 

 

 

 

 

 

 

 

 

Subordinated debt

 

 

 

774

 

773

 

 

 

 

 

 

 

 

 

 

Equity 

 

 

 

 

 

 

 

Equity attributable to the Bank's shareholders (Notes 12 and 14)

 

 

 

 

 

 

 

Preferred shares

 

 

 

2,450

 

2,450

 

Common shares

 

 

 

3,028

 

2,949

 

Contributed surplus

 

 

 

44

 

51

 

Retained earnings

 

 

 

9,556

 

9,312

 

Accumulated other comprehensive income

 

 

 

(7)

 

16

 

 

 

 

 

 

15,071

 

14,778

 

Non-controlling interests

 

 

 

350

 

358

 

 

 

 

 

 

15,421

 

15,136

 

 

 

 

 

 

289,191

 

281,458

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

 

 

Consolidated Statements of Income

(unaudited) (millions of Canadian dollars)

 

 

 

 

Quarter ended January 31

 

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

Loans

 

1,648

 

1,604

 

Securities at fair value through profit or loss

 

280

 

232

 

Securities at fair value through other comprehensive income

 

55

 

37

 

Securities at amortized cost

 

59

 

53

 

Deposits with financial institutions

 

32

 

70

 

 

 

 

2,074

 

1,996

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

Deposits

 

890

 

840

 

Liabilities related to transferred receivables 

 

106

 

106

 

Subordinated debt

 

6

 

6

 

Other

 

142

 

181

 

 

 

 

1,144

 

1,133

 

Net interest income (1)

 

930

 

863

 

 

 

 

 

 

 

 

Non-interest income

 

 

 

 

 

Underwriting and advisory fees

 

86

 

61

 

Securities brokerage commissions

 

48

 

44

 

Mutual fund revenues

 

120

 

106

 

Trust service revenues

 

166

 

147

 

Credit fees

 

110

 

102

 

Card revenues

 

39

 

41

 

Deposit and payment service charges

 

68

 

68

 

Trading revenues (losses)

 

225

 

228

 

Gains (losses) on non-trading securities, net

 

30

 

32

 

Insurance revenues, net

 

36

 

34

 

Foreign exchange revenues, other than trading

 

24

 

24

 

Share in the net income of associates and joint ventures

 

10

 

8

 

Other

 

31

 

41

 

 

 

 

993

 

936

 

Total revenues

 

1,923

 

1,799

 

Provisions for credit losses   (Note 7)

 

89

 

88

 

 

 

 

1,834

 

1,711

 

 

 

 

 

 

 

 

Non-interest expenses

 

 

 

 

 

Compensation and employee benefits

 

660

 

616

 

Occupancy

 

66

 

62

 

Technology

 

169

 

161

 

Communications

 

16

 

16

 

Professional fees

 

59

 

62

 

Other

 

121

 

109

 

 

 

 

1,091

 

1,026

 

Income before income taxes 

 

743

 

685

 

Income taxes

 

133

 

133

 

Net income

 

610

 

552

 

 

 

 

 

 

 

 

Net income attributable to

 

 

 

 

 

Preferred shareholders

 

29

 

29

 

Common shareholders

 

565

 

507

 

Bank shareholders

 

594

 

536

 

Non-controlling interests

 

16

 

16

 

 

 

 

610

 

552

 

 

 

 

 

 

 

 

Earnings per share (dollars) (Note 16)

 

 

 

 

 

 

Basic

 

1.69

 

1.51

 

 

Diluted

 

1.67

 

1.50

 

Dividends per common share (dollars) (Note 12)

 

0.71

 

0.65

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

(1)  Net interest income includes dividend income. For additional information, see Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2019.

 

Consolidated Statements of Comprehensive Income

(unaudited) (millions of Canadian dollars)

 

 

 

 

 

 

Quarter ended January 31

 

 

 

2020

 

2019

 

Net income

 

610

 

552

 

Other comprehensive income, net of income taxes

 

 

 

 

 

 

Items that may be subsequently reclassified to net income

 

 

 

 

 

 

 

Net foreign currency translation adjustments

 

 

 

 

 

 

 

 

Net unrealized foreign currency translation gains (losses) on investments in foreign operations

 

13

 

(8)

 

 

 

 

Impact of hedging net foreign currency translation gains (losses)

 

(6)

 

1

 

 

 

 

 

7

 

(7)

 

 

 

Net change in debt securities at fair value through other comprehensive income

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on debt securities at fair value through other comprehensive income

 

23

 

8

 

 

 

 

Net (gains) losses on debt securities at fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

reclassified to net income

 

(11)

 

(10)

 

 

 

 

 

 

 

12

 

(2)

 

 

 

Net change in cash flow hedges

 

 

 

 

 

 

 

 

Net gains (losses) on derivative financial instruments designated as cash flow hedges

 

(38)

 

(94)

 

 

 

 

Net (gains) losses on designated derivative financial instruments reclassified to net income

 

(3)

 

(9)

 

 

 

 

 

 

 

(41)

 

(103)

 

 

 

Share in the other comprehensive income of associates and joint ventures

 

 

1

 

 

Items that will not be subsequently reclassified to net income

 

 

 

 

 

 

 

Remeasurements of pension plans and other post-employment benefit plans

 

(63)

 

(52)

 

 

 

Net gains (losses) on equity securities designated at fair value through other comprehensive income

 

11

 

(6)

 

 

 

Net fair value change attributable to the credit risk on financial liabilities designated

 

 

 

 

 

 

 

 

at fair value through profit or loss

 

(31)

 

53

 

 

 

 

 

 

 

(83)

 

(5)

 

Total other comprehensive income, net of income taxes

 

(105)

 

(116)

 

Comprehensive income

 

505

 

436

 

Comprehensive income attributable to

 

 

 

 

 

 

Bank shareholders

 

488

 

421

 

 

Non-controlling interests

 

17

 

15

 

 

 

 

505

 

436

 

 

Income Taxes - Other Comprehensive Income

 

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

 

 

 

 

Quarter ended January 31

 

 

 

2020

 

2019

 

Net foreign currency translation adjustments

 

 

 

 

 

 

Net unrealized foreign currency translation gains (losses) on investments in foreign operations

 

 

3

 

 

Impact of hedging net foreign currency translation gains (losses)

 

(2)

 

 

 

 

 

 

 

(2)

 

3

 

Net change in debt securities at fair value through other comprehensive income

 

 

 

 

 

 

Net unrealized gains (losses) on debt securities at fair value through other comprehensive income

 

8

 

3

 

 

Net (gains) losses on debt securities at fair value through other comprehensive income

 

 

 

 

 

 

 

reclassified to net income

 

(4)

 

(4)

 

 

 

 

 

 

4

 

(1)

 

Net change in cash flow hedges

 

 

 

 

 

 

Net gains (losses) on derivative financial instruments designated as cash flow hedges

 

(14)

 

(34)

 

 

Net (gains) losses on designated derivative financial instruments reclassified to net income

 

(1)

 

(3)

 

 

 

 

 

 

(15)

 

(37)

 

Share in the other comprehensive income of associates and joint ventures

 

 

 

Remeasurements of pension plans and other post-employment benefit plans

 

(22)

 

(19)

 

 

 

 

 

 

 

Net gains (losses) on equity securities designated at fair value through other comprehensive income

5

 

(2)

 

Net fair value change attributable to the credit risk on financial liabilities designated at

 

 

 

 

 

 

fair value through profit or loss

 

(12)

 

19

 

 

 

(42)

 

(37)

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. 

 

Consolidated Statements of Changes in Equity

(unaudited) (millions of Canadian dollars)

 

 

 

 

Quarter ended January 31

 

 

 

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

Preferred shares at beginning and at end

 

 

 

 

2,450

 

2,450

 

 

 

 

 

 

 

 

 

 

 

Common shares at beginning (Note 12)

 

 

 

 

2,949

 

2,822

 

Issuances of common shares pursuant to the Stock Option Plan

 

 

 

 

79

 

23

 

Repurchases of common shares for cancellation

 

 

 

 

 

(9)

 

Impact of shares purchased or sold for trading

 

 

 

 

 

44

 

Common shares at end

 

 

 

 

3,028

 

2,880

 

 

 

 

 

 

 

 

 

 

 

Contributed surplus at beginning

 

 

 

 

51

 

57

 

Stock option expense  (Note 14)

 

 

 

 

2

 

3

 

Stock options exercised

 

 

 

 

(9)

 

(3)

 

Other

 

 

 

 

 

(4)

 

Contributed surplus at end

 

 

 

 

44

 

53

 

 

 

 

 

 

 

 

 

 

 

Retained earnings at beginning

 

 

 

 

9,312

 

8,472

 

Impact of adopting IFRS 15 on November 1, 2018

 

 

 

 

 

(4)

 

Net income attributable to the Bank's shareholders

 

 

 

 

594

 

536

 

Dividends on preferred shares (Note 12)

 

 

 

 

(29)

 

(29)

 

Dividends on common shares (Note 12)

 

 

 

 

(238)

 

(218)

 

Premium paid on common shares repurchased for cancellation

 

 

 

 

 

(51)

 

Remeasurements of pension plans and other post-employment benefit plans

 

 

 

 

(63)

 

(52)

 

Net gains (losses) on equity securities designated at fair value through other comprehensive income

 

 

 

 

11

 

(6)

 

Net fair value change attributable to the credit risk on financial liabilities

 

 

 

 

 

 

 

 

 

designated at fair value through profit or loss

 

 

 

 

(31)

 

53

 

Impact of a financial liability resulting from put options written to non-controlling interests

 

 

 

 

 

(4)

 

Other

 

 

 

 

 

(2)

 

Retained earnings at end

 

 

 

 

9,556

 

8,695

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income at beginning

 

 

 

 

16

 

175

 

Net foreign currency translation adjustments

 

 

 

 

6

 

(6)

 

Net change in unrealized gains (losses) on debt securities at fair value through other comprehensive income

 

 

 

 

12

 

(2)

 

Net change in gains (losses) on cash flow hedges

 

 

 

(41)

 

(103)

 

Share in the other comprehensive income of associates and joint ventures

 

 

 

 

 

1

 

Accumulated other comprehensive income at end

 

 

 

 

 

(7)

 

65

 

Equity attributable to the Bank's shareholders

 

 

 

 

15,071

 

14,143

 

 

 

 

 

 

 

 

 

 

Non-controlling interests at beginning

 

 

 

 

358

 

379

 

Net income attributable to non-controlling interests

 

 

 

 

16

 

16

 

Other comprehensive income attributable to non-controlling interests

 

 

 

 

1

 

(1)

 

Distributions to non-controlling interests

 

 

 

 

(25)

 

(22)

 

Non-controlling interests at end

 

 

 

 

350

 

372

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

15,421

 

14,515

 

 

 

Accumulated Other Comprehensive Income 

 

 

As at January 31, 2020

 

As at January 31, 2019

 

Accumulated other comprehensive income

 

 

 

 

 

Net foreign currency translation adjustments

 

14

 

8

 

Net unrealized gains (losses) on debt securities at fair value through other comprehensive income

 

26

 

11

 

Net gains (losses) on instruments designated as cash flow hedges

 

(47)

 

48

 

Share in the other comprehensive income of associates and joint ventures

 

 

(2)

 

 

 

(7)

 

65

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements. 

 

 

 

 

 

Consolidated Statements of Cash Flows

(unaudited) (millions of Canadian dollars)

 

 

 

 

Quarter ended January 31

 

 

 

2020

 

2019

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

610

 

552

 

Adjustments for

 

 

 

 

 

 

Provisions for credit losses

 

89

 

88

 

 

Amortization of premises and equipment including right-of-use assets

 

48

 

27

 

 

Amortization of intangible assets

 

61

 

56

 

 

Deferred taxes

 

24

 

8

 

 

Losses (gains) on sales of non-trading securities, net

 

(30)

 

(32)

 

 

Share in the net income of associates and joint ventures

 

(10)

 

(8)

 

 

Stock option expense

 

2

 

3

 

Change in operating assets and liabilities

 

 

 

 

 

 

Securities at fair value through profit or loss

 

(11,328)

 

(3,594)

 

 

Securities purchased under reverse repurchase agreements and securities borrowed

 

6,034

 

2,997

 

 

Loans and acceptances, net of securitization

 

(3,503)

 

(1,506)

 

 

Deposits

 

7,938

 

2,100

 

 

Obligations related to securities sold short

 

(586)

 

(2,474)

 

 

Obligations related to securities sold under repurchase agreements and securities loaned

 

154

 

1,313

 

 

Derivative financial instruments, net

 

(706)

 

1,666

 

 

Interest and dividends receivable and interest payable

 

20

 

(80)

 

 

Current tax assets and liabilities

 

(117)

 

(67)

 

 

Other items

 

(780)

 

145

 

 

 

 

 

(2,080)

 

1,194

 

Cash flows from financing activities

 

 

 

 

 

Issuances of common shares (including the impact of shares purchased for trading)

 

70

 

64

 

Repurchases of common shares for cancellation

 

 

(60)

 

Repayments of lease liabilities

 

(21)

 

 

Dividends paid

 

(495)

 

(241)

 

Distributions to non-controlling interests

 

(25)

 

(22)

 

 

 

 

 

(471)

 

(259)

 

Cash flows from investing activities

 

 

 

 

 

Purchases of non-trading securities

 

(1,545)

 

(3,726)

 

Maturities of non-trading securities

 

445

 

187

 

Sales of non-trading securities

 

2,436

 

2,278

 

Net change in premises and equipment

 

(53)

 

(31)

 

Net change in intangible assets

 

(75)

 

(75)

 

 

 

 

 

1,208

 

(1,367)

 

Impact of currency rate movements on cash and cash equivalents

99

 

29

 

Increase (decrease) in cash and cash equivalents

 

(1,244)

 

(403)

 

Cash and cash equivalents at beginning

 

13,698

 

12,756

 

Cash and cash equivalents at end (1)

 

12,454

 

12,353

 

Supplementary information about cash flows from operating activities

 

 

 

 

 

Interest paid

 

1,171

 

1,212

 

Interest and dividends received

 

2,121

 

1,995

 

Income taxes paid

 

185

 

76

 

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

 

 

(1)  This item is the equivalent of Consolidated Balance Sheet item Cash and deposits with financial institutions. It includes an amount of $4.1 billion as at January 31, 2020 ($4.1 billion as at October 31, 2019) for which there are restrictions.

Notes to the Interim Condensed Consolidated Financial Statements

(unaudited) (millions of Canadian dollars)

 

 

 

 

 

 

 

 

 

 

 

Note 1

Basis of Presentation

44

 

Note 10

Deposits

62

 

 

Note 2

Accounting Policy Changes

44

 

Note 11

Other Liabilities

62

 

 

Note 3

Future Accounting Policy Changes

46

 

Note 12

Share Capital

63

 

 

Note 4

Fair Value of Financial Instruments

47

 

Note 13

Capital Disclosure

64

 

 

Note 5

Financial Instruments Designated at Fair Value Through

 

 

Note 14

Share-Based Payments

64

 

 

 

Profit or Loss

52

 

Note 15

Employee Benefits - Pension Plans and Other

 

 

 

Note 6

Securities

53

 

 

 Post-Employment Benefits

65

 

 

Note 7

Loans and Allowances for Credit Losses

54

 

Note 16

Earnings Per Share

65

 

 

Note 8

Financial Assets Transferred But Not Derecognized

61

 

Note 17

Contingent Liabilities

66

 

 

Note 9

Other Assets

62

 

Note 18

Segment Disclosures

67

 

 


 

Note 1 - Basis of Presentation

 

On February 26, 2020, the Board of Directors authorized the publication of the Bank's unaudited interim condensed consolidated financial statements (the consolidated financial statements) for the quarter ended January 31, 2020.

 

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

 

These consolidated financial statements were prepared in accordance with IAS 34 - Interim Financial Reporting and using the same accounting policies as those described in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2019, except for the changes described in Note 2 to these consolidated financial statements, which have been applied since November 1, 2019 following the Bank's adoption of IFRS 16 - Leases as well as its early adoption of amendments to IFRS 7 and IAS 39 arising from the interest rate benchmark reform.

 

As permitted by the transitional provisions of IFRS 16, the Bank elected to apply IFRS 16 using the modified retrospective basis, with no restatement of comparative periods. Note 2 to these consolidated financial statements presents the impacts of IFRS 16 adoption on the Bank's Consolidated Balance Sheet as at November 1, 2019 and additional information on adoption of IFRS 16. Since interim consolidated financial statements do not include all the annual financial statement disclosures required under IFRS, they should be read in conjunction with the audited annual consolidated financial statements and accompanying notes for the year ended October 31, 2019.

 

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


 

Note 2 - Accounting Policy Changes

 

The Bank adopted the following new and amended standards on November 1, 2019.

 

IFRS 16 - Leases

IFRS 16 introduces a single on-balance-sheet accounting model for lessees. As for lessors, IFRS 16 substantially carries forward the lessor accounting in the previous accounting standard, with the distinction between operating leases and finance leases being retained. Changes in accounting policies resulting from the adoption of IFRS 16 on November 1, 2019 are described hereafter.

 

At the inception date of a contract, the Bank assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. When the Bank is a lessee, it recognizes a right-of-use asset and a corresponding lease liability at the lease commencement date except for short-term leases (defined as leases with terms of 12 months or less) other than real estate leases and leases for which the underlying asset is of low value. For such leases, the Bank recognizes the lease payments as a non-interest expense on a straight-line basis over the lease term. As a practical expedient, the Bank elected for real estate leases not to separate non-lease components from lease components and instead account for them as a single lease component.

 

 

Right-of-use assets

Right-of-use assets are initially measured at cost, and subsequently measured at cost less accumulated depreciation and impairment losses, and adjusted for certain remeasurements of lease liabilities. The cost of a right-of-use asset comprises the amount of the initial measurement of the lease liability, any lease payments made at or before the commencement date, any initial direct costs incurred when entering into the lease, and an estimate of costs to dismantle the asset or restore the site, less any lease incentives received. Right-of-use assets are depreciated over the lesser of the lease term and the useful life of the asset.

 

Right-of-use assets are presented in Premises and equipment on the Consolidated Balance Sheet. The depreciation expense and impairment losses, if any, are recorded in Non-interest expenses in the Consolidated Statement of Income.

 

Lease liabilities

The lease liability is initially measured at the present value of future lease payments net of lease incentives not yet received. The present value of lease payments is determined using the Bank's incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest method. In determining the lease term, the Bank considers all the facts and circumstances that create an economic incentive to exercise an extension option or not to exercise a termination option. The lease term determined by the Bank comprises the non-cancellable period of lease contracts, the periods covered by an option to extend the lease if the Bank is reasonably certain to exercise that option, and the periods covered by an option to terminate the lease if the Bank is reasonably certain not to exercise that option. The Bank reassesses the lease term if a significant event or change in circumstances occurs and that is within its control. The Bank applies judgment to determine the lease term when the lease includes extension and termination options.

 

Lease liabilities are presented in Other liabilities on the Consolidated Balance Sheet, and the interest expense is presented in the Interest expense - Other item of the Consolidated Statement of Income.

 

Impact of IFRS 16 adoption

On November 1, 2019, the Bank adopted IFRS 16. As a result, the Bank recognized right-of-use assets of $648 million ($668 million reduced by provisions for onerous lease contracts of $20 million previously recorded in Other liabilities - Other items as at October 31, 2019) and lease liabilities of $668 million.

 

On transition, for leases previously classified as operating leases, lease liabilities were measured at the present value of the remaining lease payments and discounted using the Bank's incremental borrowing rate as at November 1, 2019. The Bank's weighted average incremental borrowing rate on the total lease liability as at November 1, 2019 was 2.77%. Right-of-use assets were measured at an amount equal to the lease liability and reduced by the amount of the provisions for onerous contracts recorded as at October 31, 2019.

 

The Bank used the following practical expedients when applying IFRS 16 to leases previously classified as operating leases. The Bank:

 

• excluded initial direct costs from the measurement of the right-of-use assets at the date of initial application;

• relied on previous assessments of whether or not a lease is an onerous contract;

• did not separate lease components and non-lease components and treated them as a single lease component;

• applied the recognition exemption to leases for which the lease term ends within 12 months of the transition date and to leases for which the underlying asset is of low value; and

• elected not to apply IFRS 16 to leases of intangible assets.

 

The following table presents a reconciliation of the Bank's operating lease commitments as at October 31, 2019 to the lease liabilities recognized as at November 1, 2019.

 

 

 

 

 

 

Operating lease commitments as at October 31, 2019

 

691

 

Extension and termination options reasonably certain to be exercised

 

70

 

Impact of discounting using the Bank's incremental borrowing rate as at November 1, 2019

 

(93)

 

Lease liabilities recognized as at November 1, 2019

 

668

 

 

As at January 31, 2020, the amount of the right-of-use assets presented in Premises andequipment was $636 million and the amount of lease liabilities presented in Other liabilities was $659 million. For the quarter ended January 31, 2020, the Bank recognized a $24 million depreciation expense on right-of-use assets in Non-interest expenses - Occupancy and a $5 million interest expense on lease liabilities in Interest expense - Other.

Note 2 - Accounting Policy Changes (cont.)

 

Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

In September 2019, in response to uncertainty arising from the phasing-out of benchmark interest rates such as interbank offered rates (IBORs), the IASB issued amendments to its new and former financial instrument standards, IFRS 9 - Financial Instruments and IAS 39 - Financial Instruments: Recognition and Measurement as well as to the related standard on disclosures, IFRS 7 - Financial Instruments: Disclosure. On November 1, 2019, the Bank early adopted the amendments to IFRS 7 and IAS 39. When the Bank had adopted IFRS 9 on November 1, 2017, it had made an accounting policy choice to continue applying the IAS 39 hedge accounting requirements.

 

The amendments to IAS 39 provide temporary relief from applying specific hedge accounting requirements to all hedging relationships directly affected by interest rate benchmark reform. A hedging relationship is affected by interest rate benchmark reform if the reform gives rise to uncertainties about (a) the interest rate benchmark (contractually or non-contractually specified) designated as a hedged risk; and/or (b) the timing or the amount of interest rate benchmark-based cash flows of the hedged item or of the hedging instrument. The amendments modify specific hedge accounting requirements so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark is not altered as a result of the interest rate benchmark reform, thereby allowing hedge accounting to continue during the period of uncertainty prior to the transition to alternative benchmark rates. Mandatory application of the amendments ends at the earlier of the following: when the uncertainty arising from interest rate benchmark reform is no longer present and when the hedging relationship is discontinued.

 

For the Bank, the effective date of these amendments is November 1, 2020. However, early adoption is permitted. For additional information, see Note 17 to the audited annual consolidated financial statements for the year ended October 31, 2019. 


 

Note 3 - Future Accounting Policy Changes

 

The Bank closely monitors both new accounting standards and amendments to existing accounting standards issued by the IASB. The Bank is currently assessing how adoption of new and amended IASB accounting standards will impact its consolidated financial statements. Aside from the adoption of IFRS 16 on November 1, 2019 and the early adoption of the amendments to IFRS 7 and IAS 39 arising from the interest rate benchmark reform, there have been no significant updates to the future accounting policy changes disclosed in Note 2 to the audited annual consolidated financial statements for the year ended October 31, 2019.

 

Note 4 - Fair Value of Financial Instruments

 

Fair Value and Carrying Value of Financial Instruments by Category

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at January 31, 2020

 

 

 

 

 

 

Carrying value and fair value

 

Carrying value

 

 

Fair

value

 

Total carrying value

Total

fair

value

 

 

 

 

 

 

Financial instruments classified as at fair value through profit or loss

 

Financial instruments designated at fair value through profit or loss

 

Debt securities classified as at fair value through other comprehensive income

 

Equity securities designated at fair value through other comprehensive income

 

Financial instruments at amortized cost, net

 

 

Financial instruments at amortized cost, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and deposits with financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

institutions

 

 

 

 

 

12,454

 

 

12,454

 

12,454

12,454

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

 

69,928

 

3,223

 

8,873

 

615

 

9,660

 

 

9,750

 

92,299

92,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities purchased under reverse

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and securities borrowed

 

 

 

 

 

11,689

 

 

11,689

 

11,689

11,689

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and acceptances, net of allowances

 

7,109

 

 

 

 

149,042

 

 

150,028

 

156,151

157,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

8,965

 

 

 

 

 

 

 

8,965

8,965

 

 

Other assets

 

 

 

 

 

1,577

 

 

1,577

 

1,577

1,577

 

 

 

 

 

 

8,965

 

 

 

 

 

 

 

8,965

8,965

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,228

 

 

 

 

 

186,276

(1)

 

186,810

 

197,504

198,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acceptances

 

 

 

 

 

 

 

6,871

 

 

6,871

 

6,871

6,871

 

 

Obligations related to securities sold short

 

12,263

 

 

 

 

 

 

 

 

 

12,263

12,263

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations related to securities sold under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

repurchase agreements and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

securities loaned

 

 

 

 

 

 

 

22,054

 

 

22,054

 

22,054

22,054

 

 

Derivative financial instruments

 

6,982

 

 

 

 

 

 

 

 

 

6,982

6,982

 

 

Liabilities related to transferred receivables

 

 

7,755

 

 

 

 

 

13,069

 

 

13,200

 

20,824

20,955

 

 

Other liabilities

 

 

 

 

 

 

 

3,254

 

 

3,256

 

3,254

3,256

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt

 

 

 

 

 

 

 

774

 

 

776

 

774

776

 

 

(1)  Includes embedded derivative financial instruments.

 

 

 

Note 4 - Fair Value of Financial Instruments (cont.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at October 31, 2019

 

 

 

 

 

 

Carrying value and fair value

 

Carrying value

 

 

Fair

value

 

Total carrying value

Total

fair

value

 

 

 

 

 

 

Financial instruments classified as at fair value through profit or loss

 

Financial instruments designated at fair value through profit or loss

 

Debt securities classified as at fair value through other comprehensive income

 

Equity securities designated at fair value through other comprehensive income

 

Financial instruments at amortized cost, net

 

 

Financial instruments at amortized cost, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and deposits with financial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

institutions

 

 

 

 

 

13,698

 

 

13,698

 

13,698

13,698

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities

 

58,556

 

3,267

 

10,026

 

622

 

9,755

 

 

9,824

 

82,226

82,295

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities purchased under reverse

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

repurchase agreements

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

and securities borrowed

 

 

87

 

 

 

17,636

 

 

17,636

 

17,723

17,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans and acceptances, net of allowances

 

6,798

 

 

 

 

146,453

 

 

147,051

 

153,251

153,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

8,129

 

 

 

 

 

 

 

8,129

8,129

 

 

Other assets

 

 

 

 

 

1,193

 

 

1,193

 

1,193

1,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,203

 

 

 

 

 

178,363

(1)

 

178,861

 

189,566

190,064

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acceptances

 

 

 

 

 

 

 

6,893

 

 

6,893

 

6,893

6,893

 

 

Obligations related to securities sold short

 

12,849

 

 

 

 

 

 

 

 

 

12,849

12,849

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligations related to securities sold under

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

repurchase agreements and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

securities loaned

 

 

 

 

 

 

 

21,900

 

 

21,900

 

21,900

21,900

 

 

Derivative financial instruments

 

6,852

 

 

 

 

 

 

 

 

 

6,852

6,852

 

 

Liabilities related to transferred receivables

 

 

8,215

 

 

 

 

 

13,097

 

 

13,186

 

21,312

21,401

 

 

Other liabilities

 

24

 

 

 

 

 

 

3,018

 

 

3,019

 

3,042

3,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated debt

 

 

 

 

 

 

 

773

 

 

765

 

773

765

 

 

(1)  Includes embedded derivative financial instruments.

 

Establishing Fair Value

 

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

 

Unadjusted quoted prices in active markets provide the best evidence of fair value. When there is no quoted price in an active market, the Bank applies other valuation techniques that maximize the use of relevant observable inputs and that minimize the use of unobservable inputs. Such valuation techniques include the following: using information available from recent market transactions, referring to the current fair value of a comparable financial instrument, applying discounted cash flow analysis, applying option pricing models, or relying on any other valuation technique that is commonly used by market participants and has proven to yield reliable estimates. Judgment is required when applying many of the valuation techniques. The Bank's valuation was based on its assessment of the conditions prevailing as at January 31, 2020 and may change in the future. Furthermore, there may be valuation uncertainty resulting from the choice of valuation model used.

 

Fair value is established in accordance with a rigorous control framework. The Bank has policies and procedures that govern the process for determining fair value. The Bank's valuation governance structure has remained largely unchanged from that described in Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2019. The valuation techniques used to determine the fair value of financial assets and liabilities are also described in this note, and no significant changes have been made to the valuation techniques.

Financial Instruments Recorded at Fair Value on the Consolidated Balance Sheet

 

Hierarchy of Fair Value Measurements

IFRS establishes a fair value measurement hierarchy that classifies the inputs used in financial instrument fair value measurement techniques according to three levels. This fair value hierarchy requires observable market inputs to be used whenever such inputs exist. According to the hierarchy, the highest level of inputs are unadjusted quoted prices in active markets for identical instruments and the lowest level of inputs are unobservable inputs. If inputs from different levels of the hierarchy are used, the financial instrument is classified in the same level as the lowest level input that is significant to the fair value measurement. For additional information, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2019.

 

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

 

During the quarter ended January 31, 2020, $7 million in securities classified as at fair value through profit or loss were transferred from Level 2 to Level 1 resulting from changing market conditions ($34 million in securities classified as at fair value through profit or loss and $1 million in obligations related to securities sold short during the quarter ended January 31, 2019). Also during the quarter ended January 31, 2020, $2 million in securities classified as at fair value through profit or loss were transferred from Level 1 to Level 2 ($3 million in securities classified as at fair value through profit or loss and $1 million in obligations related to securities sold short during the quarter ended January 31, 2019). During the quarters ended January 31, 2020 and 2019, financial instruments were transferred to (or from) Level 3 due to changes in the availability of observable market inputs resulting from changing market conditions.

 

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

 

 

 

 

 

 

 

 

 

As at January 31, 2020

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total financial assets/liabilities at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

 

 

 

At fair value through profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian government

 

2,505

 

7,107

 

 

9,612

 

 

 

 

 

Canadian provincial and municipal governments

 

 

6,288

 

 

6,288

 

 

 

 

 

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

 

4,198

 

105

 

 

4,303

 

 

 

 

Other debt securities

 

 

2,459

 

37

 

2,496

 

 

 

 

Equity securities

 

49,596

 

390

 

466

 

50,452

 

 

 

 

 

 

 

56,299

 

16,349

 

503

 

73,151

 

 

 

At fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian government

 

183

 

4,134

 

 

4,317

 

 

 

 

 

Canadian provincial and municipal governments

 

 

1,517

 

 

1,517

 

 

 

 

 

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

 

2,718

 

76

 

 

2,794

 

 

 

 

Other debt securities

 

 

245

 

 

245

 

 

 

 

Equity securities

 

35

 

218

 

362

 

615

 

 

 

 

 

 

 

2,936

 

6,190

 

362

 

9,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

6,748

 

361

 

7,109

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

226

 

8,717

 

22

 

8,965

 

 

 

59,461

 

38,004

 

1,248

 

98,713

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,427

 

4

 

11,431

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Obligations related to securities sold short

 

8,185

 

4,078

 

 

12,263

 

 

 

Derivative financial instruments

 

158

 

6,807

 

17

 

6,982

 

 

 

Liabilities related to transferred receivables

 

 

7,755

 

 

7,755

 

 

 

8,343

 

30,067

 

21

 

38,431

 

Note 4 - Fair Value of Financial Instruments (cont.)

 

 

 

 

 

 

 

 

 

As at October 31, 2019

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total financial

assets/liabilities

at fair value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

 

 

 

At fair value through profit or loss

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian government

 

2,102

 

8,321

 

 

10,423

 

 

 

 

 

Canadian provincial and municipal governments

 

 

6,762

 

 

6,762

 

 

 

 

 

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

 

1,770

 

90

 

 

1,860

 

 

 

 

Other debt securities

 

 

2,666

 

27

 

2,693

 

 

 

 

Equity securities

 

38,836

 

818

 

431

 

40,085

 

 

 

 

 

 

 

42,708

 

18,657

 

458

 

61,823

 

 

 

At fair value through other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian government

 

196

 

4,236

 

 

4,432

 

 

 

 

 

Canadian provincial and municipal governments

 

 

1,674

 

 

1,674

 

 

 

 

 

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

 

3,471

 

75

 

 

3,546

 

 

 

 

Other debt securities

 

 

374

 

 

374

 

 

 

 

Equity securities

 

53

 

207

 

362

 

622

 

 

 

 

 

 

 

3,720

 

6,566

 

362

 

10,648

 

 

Securities purchased under reverse repurchase agreements and

 

 

 

 

 

 

 

 

 

 

 

securities borrowed

 

 

87

 

 

87

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

 

6,438

 

360

 

6,798

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Derivative financial instruments

 

179

 

7,924

 

26

 

8,129

 

 

 

 

 

 

46,607

 

39,672

 

1,206

 

87,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

Deposits

 

 

11,383

 

 

11,383

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Obligations related to securities sold short

 

8,352

 

4,497

 

 

12,849

 

 

 

Derivative financial instruments

 

156

 

6,674

 

22

 

6,852

 

 

 

Liabilities related to transferred receivables

 

 

8,215

 

 

8,215

 

 

 

Other liabilities

 

 

24

 

 

24

 

 

 

 

 

 

8,508

 

30,793

 

22

 

39,323

 

 

Financial Instruments Classified in Level 3

 

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

 

For a description of the valuation techniques and significant unobservable inputs used in determining the fair value of financial instruments classified in Level 3, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2019. For the quarter ended January 31, 2020, no significant change was made to the valuation techniques and significant unobservable inputs used in determining fair value.

 

Sensitivity Analysis of Financial Instruments Classified in Level 3

The Bank performs sensitivity analyses on the fair value measurements of financial instruments classified in Level 3, substituting unobservable inputs with one or more reasonably possible alternative assumptions. For additional information on how a change in an unobservable input might affect the fair value measurements of Level 3 financial instruments, see Note 3 to the audited annual consolidated financial statements for the year ended October 31, 2019. For the quarter ended January 31, 2020, there were no significant changes in the sensitivity analyses of Level 3 financial instruments.

 

 

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

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

 

 

 

 

 

 

 

 

 

Quarter ended January 31, 2020

 

 

 

 

Securities

at fair value

through profit

or loss

 

Securities

at fair value

through other

comprehensive

income

 

Loans

 

Derivative

financial

instruments(1)

 

Deposits

 

Fair value as at October 31, 2019

 

458

 

362

 

360

 

4

 

 

Total realized and unrealized gains (losses) included in Net income(2)

 

40

 

 

3

 

2

 

 

Total realized and unrealized gains (losses) included in

 

 

 

 

 

 

 

 

 

 

 

 

 Other comprehensive income

 

 

 

 

 

 

Purchases

 

10

 

 

 

 

 

Sales

 

(5)

 

 

 

 

 

Issuances

 

 

 

1

 

 

 

Settlements and other

 

 

 

(3)

 

1

 

 

Financial instruments transferred into Level 3

 

 

 

 

 

(4)

 

Financial instruments transferred out of Level 3

 

 

 

 

(2)

 

 

Fair value as at January 31, 2020

 

503

 

362

 

361

 

5

 

(4)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

to financial assets and financial liabilities held as at January 31, 2020(3)

 

39

 

 

3

 

2

 

 


 

 

 

 

 

 

 

 

 

Quarter ended January 31, 2019

 

 

 

 

Securities

at fair value

through profit

or loss

 

Securities

at fair value

through other

comprehensive

income

 

Loans

 

Derivative

financial

instruments(1)

 

Deposits

 

Fair value as at October 31, 2018

 

313

 

233

 

386

 

(7)

 

(11)

 

Total realized and unrealized gains (losses) included in Net income(4)

 

22

 

 

 

4

 

1

 

Total realized and unrealized gains (losses) included in

 

 

 

 

 

 

 

 

 

 

 

 

 Other comprehensive income

 

 

 

 

 

 

Purchases

 

24

 

 

 

 

 

Sales

 

(34)

 

 

 

 

 

Issuances

 

 

 

2

 

 

 

Settlements and other

 

 

 

(19)

 

2

 

 

Financial instruments transferred into Level 3

 

 

 

 

(10)

 

 

Financial instruments transferred out of Level 3

 

 

 

 

6

 

3

 

Fair value as at January 31, 2019

 

325

 

233

 

369

 

(5)

 

(7)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

to financial assets and financial liabilities held as at January 31, 2019(5)

 

16

 

 

 

4

 

1

 

 

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

(2)  Total gains (losses) included in Non-interest income was a gain of $45 million.

(3)  Total unrealized gains (losses) included in Non-interest income was an unrealized gain of $44 million.

(4)  Total gains (losses) included in Non-interest income was a gain of $27 million.

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

 

Note 5 - Financial Instruments Designated at Fair Value Through Profit or Loss

 

The Bank chose to designate certain financial instruments at fair value through profit or loss according to the criteria presented in Note 1 to the audited annual consolidated financial statements for the year ended October 31, 2019. Consistent with its risk management strategy and under the fair value option, which permits the designation if it eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring financial assets and liabilities or recognizing gains and losses thereon on different bases, the Bank designated at fair value through profit or loss certain securities, certain securities purchased under reverse repurchase agreements, and certain liabilities related to transferred receivables. The fair value of liabilities related to transferred receivables does not include credit risk, as the holders of these liabilities are not exposed to the Bank's credit risk. The Bank also designated certain deposits that include embedded derivative financial instruments at fair value through profit or loss.

 

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

 

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

 

 

 

Carrying

value as at

January 31, 2020

 

Unrealized

gains (losses) for

the quarter ended

January 31, 2020

 

Unrealized

gains (losses) since

the initial recognition

of the instrument

 

Financial assets designated at fair value through profit or loss

 

 

 

 

 

 

 

 

Securities

 

3,223

 

13

 

39

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

 

 

 

 

Deposits(1)(2)

 

11,228

 

(165)

 

(320)

 

 

Liabilities related to transferred receivables

 

7,755

 

(15)

 

(90)

 

.

 

18,983

 

(180)

 

(410)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carrying

value as at

January 31, 2019

 

Unrealized

gains (losses) for

the quarter ended

January 31, 2019

 

Unrealized

gains (losses) since

the initial recognition

of the instrument

 

 

Financial assets designated at fair value through profit or loss

 

 

 

 

 

 

 

 

 

Securities

 

3,478

 

52

 

(20)

 

 

 

Securities purchased under reverse repurchase agreements

 

441

 

 

 

 

 

 

3,919

 

52

 

(20)

 

 

Financial liabilities designated at fair value through profit or loss

 

 

 

 

 

 

 

 

 

Deposits(1)(2)

 

9,787

 

(217)

 

361

 

 

 

Liabilities related to transferred receivables

 

6,742

 

(103)

 

(15)

 

 

 

 

16,529

 

(320)

 

346

 

 

                  

 

(1)  For the quarter ended January 31, 2020, the change in the fair value of deposits designated at fair value through profit or loss attributable to credit risk, and recorded in Other comprehensive income, resulted in a loss of $43 million ($72 million gain for the quarter ended January 31, 2019).

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

Note 6 - Securities

 

Credit Quality

 

As at January 31, 2020 and as at October 31, 2019, securities at fair value through other comprehensive income and securities at amortized cost are classified in Stage 1, with their credit quality falling mainly in the "Excellent" category according to the Bank's internal risk-rating categories. For additional information on the reconciliation of allowances for credit losses, see Note 7 to these consolidated financial statements.

 

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

 

 

 

As at January 31, 2020

 

 

 

 

Amortized

cost

 

Gross unrealized gains

 

Gross unrealized losses

 

Carrying

value(1)

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

Canadian government

 

4,282

 

36

 

(1)

 

4,317

 

 

Canadian provincial and municipal governments

 

1,452

 

65

 

 

1,517

 

 

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

 

2,766

 

28

 

 

2,794

 

Other debt securities

 

231

 

14

 

 

245

 

Equity securities

 

625

 

6

 

(16)

 

615

 

 

 

9,356

 

149

 

(17)

 

9,488

 

 

 

 

As at October 31, 2019

 

 

 

 

Amortized

cost

 

Gross unrealized gains

 

Gross unrealized losses

 

Carrying

value(1)

 

 

 

 

 

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

 

 

 

 

 

Canadian government

 

4,411

 

26

 

(5)

 

4,432

 

 

Canadian provincial and municipal governments

 

1,614

 

60

 

 

1,674

 

 

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

 

3,521

 

25

 

 

3,546

 

Other debt securities

 

364

 

11

 

(1)

 

374

 

Equity securities

 

649

 

2

 

(29)

 

622

 

 

 

10,559

 

124

 

(35)

 

10,648

 

 

(1)  The allowances for credit losses on securities at fair value through other comprehensive income, representing a negligible amount as at January 31, 2020 and October 31, 2019, are reported in Other comprehensive income. For additional information, see Note 7 to these consolidated financial statements.

 

Equity Securities Designated at Fair Value Through Other Comprehensive Income

The Bank designated certain equity securities, the business objective of which is to generate dividend income, at fair value through other comprehensive income without subsequent reclassification of gains and losses to net income.

 

During the quarter ended January 31, 2020, an amount of $4 million in dividend income was recognized for these investments ($2 million for the quarter ended January 31, 2019), including negligible amounts for investments that were sold during the quarters ended January 31, 2020 and 2019.

 

 

 

 

 

Quarter ended January 31, 2020

 

Quarter ended January 31, 2019

 

 

 

 

 

Equity securities of private companies

 

Equity securities of

public companies

 

Total

 

Equity securities of private companies

 

Equity securities of

public companies

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value at the beginning

 

362

 

260

 

622

 

233

 

118

 

351

 

 

Change in fair value

 

 

16

 

16

 

 

( 8)

 

( 8)

 

 

Designated at fair value through

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

other comprehensive income

 

 

31

 

31

 

 

26

 

26

 

 

Sales(1)

 

 

(54)

 

(54)

 

 

(16)

 

(16)

 

Fair value at the end

 

362

 

253

 

615

 

233

 

120

 

353

 

 

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

 

Note 6 - Securities (cont.)

 

Securities at Amortized Cost

 

 

As at January 31, 2020

 

As at October 31, 2019

 

 

 

 

 

 

 

Securities issued or guaranteed by

 

 

 

 

 

Canadian government

5,193

 

5,248

 

 

Canadian provincial and municipal governments

1,819

 

1,788

 

 

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

60

 

139

 

Other debt securities

2,589

 

2,581

 

Gross carrying value

9,661

 

9,756

 

Allowances for credit losses

1

 

1

 

Carrying value

9,660

 

9,755

 

 

Gains (Losses) on Disposals of Securities at Amortized Cost

 

During the quarter ended January 31, 2020, the Bank did not dispose of any securities measured at amortized cost. During the quarter ended January 31, 2019, the Bank had disposed of certain debt securities measured at amortized cost. The carrying value of these securities upon disposal was $166 million, and the Bank had recognized gains of a negligible amount in Non-interest income - Gains (losses) on non-trading securities, net in the Consolidated Statement of Income.

 

 

Note 7 - Loans and Allowances for Credit Losses

 

Determining and Measuring Expected Credit Losses (ECL)

 

Determining Expected Credit Losses

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

 

Stage 1

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

 

Stage 2

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

 

Stage 3

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

 

POCI

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

 

For additional information, see Note 7 to the audited annual consolidated financial statements for the year ended October 31, 2019.

 

Credit Quality of Loans

 

The following tables present the gross carrying amounts of loans as at January 31, 2020 and October 31, 2019, according to credit quality and ECL impairment stage of each loan category at amortized cost, and according to credit quality for loans at fair value through profit or loss. For additional information on credit quality according to the Advanced Internal Rating-Based (AIRB) categories, see the Internal Default Risk Ratings table on page 69 in the Credit Risk section of the 2019 Annual Report.

 

 

 

 

 

 

 

 

 

 

 

 

As at January 31, 2020

 

 

 

 

Non-impaired loans

 

Impaired loans

 

Loans at fair value

through profit or loss(1)

 

Total

 

 

 

 

Stage 1

 

Stage 2

 

Stage 3

 

POCI

 

 

 

Residential mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

21,781

 

2

 

 

 

 

21,783

 

 

Good

 

15,929

 

13

 

 

 

 

15,942

 

 

Satisfactory

 

7,667

 

584

 

 

 

 

8,251

 

 

Special mention

 

283

 

453

 

 

 

 

736

 

 

Substandard

 

84

 

264

 

 

 

 

348

 

 

Default

 

 

 

122

 

 

 

122

 

AIRB approach

 

45,744

 

1,316

 

122

 

 

 

47,182

 

Standardized approach

 

4,185

 

17

 

32

 

508

 

6,573

 

11,315

 

Gross carrying amount

 

49,929

 

1,333

 

154

 

508

 

6,573

 

58,497

 

Allowances for credit losses(2)

 

41

 

12

 

25

 

(52)

 

 

26

 

Carrying amount

 

49,888

 

1,321

 

129

 

560

 

6,573

 

58,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

13,633

 

7

 

 

 

 

13,640

 

 

Good

 

10,565

 

300

 

 

 

 

10,865

 

 

Satisfactory

 

5,030

 

1,590

 

 

 

 

6,620

 

 

Special mention

 

386

 

695

 

 

 

 

1,081

 

 

Substandard

 

88

 

207

 

 

 

 

295

 

 

Default

 

 

 

136

 

 

 

136

 

AIRB approach

 

29,702

 

2,799

 

136

 

 

 

32,637

 

Standardized approach

 

3,594

 

77

 

21

 

516

 

 

4,208

 

Gross carrying amount

 

33,296

 

2,876

 

157

 

516

 

 

36,845

 

Allowances for credit losses(2)

 

59

 

103

 

73

 

(6)

 

 

229

 

Carrying amount

 

33,237

 

2,773

 

84

 

522

 

 

36,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit card

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

332

 

 

 

 

 

332

 

 

Good

 

324

 

 

 

 

 

324

 

 

Satisfactory

 

761

 

19

 

 

 

 

780

 

 

Special mention

 

413

 

245

 

 

 

 

658

 

 

Substandard

 

22

 

106

 

 

 

 

128

 

 

Default

 

 

 

 

 

 

 

AIRB approach

 

1,852

 

370

 

 

 

 

2,222

 

Standardized approach

 

33

 

 

 

 

 

33

 

Gross carrying amount

 

1,885

 

370

 

 

 

 

2,255

 

Allowances for credit losses(2)

 

26

 

104

 

 

 

 

130

 

Carrying amount

 

1,859

 

266

 

 

 

 

2,125

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business and government(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

4,810

 

 

 

 

145

 

4,955

 

 

Good

 

23,480

 

4

 

 

 

161

 

23,645

 

 

Satisfactory

 

22,727

 

1,291

 

 

 

72

 

24,090

 

 

Special mention

 

56

 

1,204

 

 

 

 

1,260

 

 

Substandard

 

11

 

187

 

 

 

 

198

 

 

Default

 

 

 

283

 

 

 

283

 

AIRB approach

 

51,084

 

2,686

 

283

 

 

378

 

54,431

 

Standardized approach

 

4,575

 

 

83

 

 

158

 

4,816

 

Gross carrying amount

 

55,659

 

2,686

 

366

 

 

536

 

59,247

 

Allowances for credit losses(2)

 

62

 

103

 

143

 

 

 

308

 

Carrying amount

 

55,597

 

2,583

 

223

 

 

536

 

58,939

 

Total loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

140,769

 

7,265

 

677

 

1,024

 

7,109

 

156,844

 

Allowances for credit losses(2)

 

188

 

322

 

241

 

(58)

 

 

693

 

Carrying amount

 

140,581

 

6,943

 

436

 

1,082

 

7,109

 

156,151

 

 

(1)  Not subject to expected credit losses.

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

(3)  Includes customers' liability under acceptances.

 

 

Note 7 - Loans and Allowances for Credit Losses (cont.)

 

 

 

 

 

 

 

 

 

 

 

As at October 31, 2019

 

 

 

 

Non-impaired loans

 

Impaired loans

 

Loans at fair value

through profit or loss(1)

 

Total

 

 

 

 

Stage 1

 

Stage 2

 

Stage 3

 

POCI

 

 

 

Residential mortgage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

21,840

 

 

 

 

 

21,840

 

 

Good

 

14,375

 

11

 

 

 

 

14,386

 

 

Satisfactory

 

8,178

 

674

 

 

 

 

8,852

 

 

Special mention

 

413

 

497

 

 

 

 

910

 

 

Substandard

 

101

 

248

 

 

 

 

349

 

 

Default

 

 

 

117

 

 

 

117

 

AIRB approach

 

44,907

 

1,430

 

117

 

 

 

46,454

 

Standardized approach

 

3,686

 

19

 

27

 

553

 

6,432

 

10,717

 

Gross carrying amount

 

48,593

 

1,449

 

144

 

553

 

6,432

 

57,171

 

Allowances for credit losses(2)

 

37

 

12

 

25

 

(53)

 

 

21

 

Carrying amount

 

48,556

 

1,437

 

119

 

606

 

6,432

 

57,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personal

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

14,331

 

 

 

 

 

14,331

 

 

Good

 

10,119

 

206

 

 

 

 

10,325

 

 

Satisfactory

 

4,973

 

1,477

 

 

 

 

6,450

 

 

Special mention

 

416

 

711

 

 

 

 

1,127

 

 

Substandard

 

109

 

199

 

 

 

 

308

 

 

Default

 

 

 

139

 

 

 

139

 

AIRB approach

 

29,948

 

2,593

 

139

 

 

 

32,680

 

Standardized approach

 

3,545

 

83

 

23

 

613

 

 

4,264

 

Gross carrying amount

 

33,493

 

2,676

 

162

 

613

 

 

36,944

 

Allowances for credit losses(2)

 

64

 

103

 

69

 

(4)

 

 

232

 

Carrying amount

 

33,429

 

2,573

 

93

 

617

 

 

36,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit card

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

370

 

 

 

 

 

370

 

 

Good

 

316

 

 

 

 

 

316

 

 

Satisfactory

 

786

 

20

 

 

 

 

806

 

 

Special mention

 

421

 

241

 

 

 

 

662

 

 

Substandard

 

22

 

112

 

 

 

 

134

 

 

Default

 

 

 

 

 

 

 

AIRB approach

 

1,915

 

373

 

 

 

 

2,288

 

Standardized approach

 

34

 

 

 

 

 

34

 

Gross carrying amount

 

1,949

 

373

 

 

 

 

2,322

 

Allowances for credit losses(2)

 

26

 

102

 

 

 

 

128

 

Carrying amount

 

1,923

 

271

 

 

 

 

2,194

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Business and government(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

 

4,783

 

 

 

 

112

 

4,895

 

 

Good

 

22,951

 

4

 

 

 

53

 

23,008

 

 

Satisfactory

 

22,367

 

1,346

 

 

 

72

 

23,785

 

 

Special mention

 

87

 

1,131

 

 

 

 

1,218

 

 

Substandard

 

45

 

255

 

 

 

 

300

 

 

Default

 

 

 

306

 

 

 

306

 

AIRB approach

 

50,233

 

2,736

 

306

 

 

237

 

53,512

 

Standardized approach

 

3,779

 

 

72

 

 

129

 

3,980

 

Gross carrying amount

 

54,012

 

2,736

 

378

 

 

366

 

57,492

 

Allowances for credit losses(2)

 

58

 

99

 

140

 

 

 

297

 

Carrying amount

 

53,954

 

2,637

 

238

 

 

366

 

57,195

 

Total loans

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross carrying amount

 

138,047

 

7,234

 

684

 

1,166

 

6,798

 

153,929

 

Allowances for credit losses(2)

 

185

 

316

 

234

 

(57)

 

 

678

 

Carrying amount

 

137,862

 

6,918

 

450

 

1,223

 

6,798

 

153,251

 

 

(1)  Not subject to expected credit losses.

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

(3)  Includes customers' liability under acceptances.

 

 

The following table presents the credit risk exposures of off-balance-sheet commitments as at January 31, 2020 and October 31, 2019 according to credit quality and ECL impairment stage.

 

 

 

 

 

As at January 31, 2020

 

 

 

 

 

As at October 31, 2019

 

 

 

Stage 1

 

Stage 2

 

Stage 3

 

Total

 

Stage 1

 

Stage 2

 

Stage 3

 

Total

 

Off-balance-sheet commitments(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

12,038

 

5

 

 

12,043

 

12,088

 

2

 

 

12,090

 

 

Good

3,914

 

74

 

 

3,988

 

3,585

 

51

 

 

3,636

 

 

Satisfactory

1,307

 

179

 

 

1,486

 

1,328

 

180

 

 

1,508

 

 

Special mention

104

 

68

 

 

172

 

114

 

82

 

 

196

 

 

Substandard

4

 

18

 

 

22

 

5

 

19

 

 

24

 

 

Default

 

 

3

 

3

 

 

 

4

 

4

 

Non-retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Excellent

9,718

 

 

 

9,718

 

10,050

 

 

 

10,050

 

 

Good

15,282

 

 

 

15,282

 

14,640

 

1

 

 

14,641

 

 

Satisfactory

7,001

 

450

 

 

7,451

 

6,165

 

513

 

 

6,678

 

 

Special mention

15

 

146

 

 

161

 

17

 

161

 

 

178

 

 

Substandard

1

 

29

 

 

30

 

167

 

29

 

 

196

 

Default

13

 

13

16

 

16

AIRB approach

49,384

 

969

 

16

 

50,369

 

48,159

 

1,038

 

20

 

49,217

 

Standardized approach

7,408

3

 

7,411

6,154

1

 

6,155

Total exposure

56,792

 

969

 

19

 

57,780

 

54,313

 

1,038

 

21

 

55,372

 

Allowances for credit losses

53

20

 

73

53

20

1

 

74

Total exposure, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 of allowances

56,739

 

949

 

19

 

57,707

 

54,260

 

1,018

 

20

 

55,298

 

 

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

 

Loans Past Due But Not Impaired(1)

 

 

 

 

As at January 31, 2020

 

 

 

 

 

As at October 31, 2019

 

 

 

 

Residential

mortgage

 

Personal

 

Credit card

 

Business and

government(2)

 

Residential

mortgage

 

Personal

 

Credit card

 

Business and

government(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Past due but not impaired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31 to 60 days

 

92

 

73

 

27

 

39

 

92

 

82

 

27

 

31

 

 

61 to 90 days

 

31

 

34

 

15

 

11

 

34

 

34

 

13

 

21

 

 

Over 90 days(3)

 

 

 

33

 

 

 

 

28

 

 

 

 

123

 

107

 

75

 

50

 

126

 

116

 

68

 

52

 

 

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

(2)  Includes customers' liability under acceptances.

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

 

Impaired Loans

 

 

 

 

As at January 31, 2020

 

As at October 31, 2019

 

 

 

Gross

 

Allowances for

credit losses

 

Net

 

Gross

 

Allowances for

credit losses

 

Net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans - Stage 3

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

154

 

25

 

129

 

144

 

25

 

119

 

 

Personal

157

 

73

 

84

 

162

 

69

 

93

 

 

Credit card(1)

 

 

 

 

 

 

 

Business and government(2)

366

 

143

 

223

 

378

 

140

 

238

 

 

677

 

241

 

436

 

684

 

234

 

450

 

POCI loans

1,024

 

(58)

 

1,082

 

1,166

 

(57)

 

1,223

 

 

 

1,701

 

183

 

1,518

 

1,850

 

177

 

1,673

 

 

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

(2)  Includes customers' liability under acceptances.

 

Note 7 - Loans and Allowances for Credit Losses (cont.)

 

Allowances for Credit Losses

 

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

 

 

 

 

 

 

 

 

 

 

 

Quarter ended January 31, 2020

 

 

 

Allowances for

credit losses as at

October 31, 2019

 

Provisions for

credit losses

 

Write-offs(1)

 

Disposals

 

Recoveries

and other

 

Allowances for

credit losses as

at January 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

Cash and deposits with financial institutions(2)(3)

2

 

 

 

 

 

2

 

Securities(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

At fair value through other comprehensive income(4)

 

 

 

 

 

 

 

At amortized cost(2)

1

 

 

 

 

 

1

 

Securities purchased under reverse repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

agreements and securities borrowed(2)(3)

 

 

 

 

 

 

Loans(5)

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential mortgage

21

 

7

 

(2)

 

 

 

26

 

 

Personal

232

 

26

 

(35)

 

 

6

 

229

 

 

Credit card

128

 

26

 

(27)

 

 

3

 

130

 

 

Business and government

268

 

27

 

(21)

 

 

1

 

275

 

 

Customers' liability under acceptances

29

 

4

 

 

 

 

33

 

 

 

678

 

90

 

(85)

 

 

10

 

693

 

Other assets(2)(3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Off-balance-sheet commitments(6)

 

 

 

 

 

 

 

 

 

 

 

 

Letters of guarantee and documentary letters of credit

6

 

 

 

 

 

6

 

Undrawn commitments

66

 

(1)

 

 

 

 

65

 

Backstop liquidity and credit enhancement facilities

2

 

 

 

 

 

2

 

 

 

74

 

(1)